<PAGE> 1
As filed with the Securities and Exchange Commission on , 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PARAGON CORPORATE HOLDINGS INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 5008 34-1845312
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
<TABLE>
<S> <C> <C> <C>
A.B. DICK COMPANY DELAWARE 5084 04-3892065
CURTIS INDUSTRIES, INC. DELAWARE 5098 13-3583725
ITEK GRAPHIX CORP. DELAWARE 5084 04-2893064
CURTIS SUB, INC. DELAWARE 5098 34-1737529
</TABLE>
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<TABLE>
<S> <C> <C>
Paragon Corporate Holdings Inc. A.B. Dick Company Curtis Industries, Inc.
5700 WEST TOUHY AVENUE 5700 WEST TOUHY AVENUE 6140 PARKLAND BOULEVARD
NILES, ILLINOIS 60714 NILES, ILLINOIS 60714 MAYFIELD HEIGHTS, OHIO 44124
(847) 779-2500 (847) 779-1900 (440) 446-9700
Itek Graphix Corp. Curtis Sub, Inc.
5700 WEST TOUHY AVENUE 6140 PARKLAND BOULEVARD
NILES, ILLINOIS 60714 MAYFIELD HEIGHTS, OHIO 44124
(847) 779-1900 (440) 446-9700
</TABLE>
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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GERALD J. MCCONNELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PARAGON CORPORATE HOLDINGS INC.
5700 WEST TOUHY DRIVE
NILES, ILLINOIS 60714
(847) 779-2500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
JEFFREY J. MARGULIES, ESQ.
SQUIRE, SANDERS & DEMPSEY L.L.P.
4900 KEY TOWER, 127 PUBLIC SQUARE
CLEVELAND, OHIO 44114-1304
(216) 479-8500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED NOTE PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 5/8% Series B Senior Notes due
2008(2)............................ $115,000,000 100% $115,000,000 $33,925
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</TABLE>
(1) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(f).
(2) A.B. Dick Company, Curtis Industries, Inc., Itek Graphix Corp. and Curtis
Sub, Inc. will guarantee the payment of the 9 5/8% Series B Senior Notes due
2008. Pursuant to Rule 457(n), no separate filing fee is required for the
guarantees.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
PROSPECTUS
, 1998
PARAGON CORPORATE HOLDINGS INC.
OFFER TO EXCHANGE
9 5/8% SERIES B SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 5/8% SERIES A SENIOR NOTES DUE 2008
(ALL SENIOR NOTES GUARANTEED BY THE SUBSIDIARY GUARANTORS)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Paragon Corporate Holdings Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange its 9 5/8% Series B Senior Notes due 2008 (the
"Series B Notes") for an equal principal amount of its 9 5/8% Series A Senior
Notes due 2008 (the "Series A Notes"), of which $115 million principal amount is
outstanding (the "Exchange Offer"). The Series B Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement (as defined) of which this Prospectus is a part. The
Series B Notes and the Series A Notes are collectively referred to herein as the
"Senior Notes."
Upon the terms and subject to the conditions set forth in this Prospectus
and the Letter of Transmittal, the Company will accept for exchange any and all
Series A Notes that are validly tendered and not withdrawn by 5:00 p.m., New
York City time, on , 1998, unless the Exchange Offer is
extended (the "Expiration Date"). Tenders of Series A Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Series A
Notes being tendered for exchange. Series A Notes may be tendered only in
integral multiples of $1,000. See "The Exchange Offer."
The Series B Notes will evidence the same debt as the Series A Notes for
which they are exchanged, and will be entitled to the benefits of the same
indenture, dated as of April 1, 1998 (the "Indenture"), among the Company, the
Subsidiary Guarantors (as defined) and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"). The form and terms of the Series B
Notes are the same as the form and terms of the Series A Notes, except that the
Series B Notes have been registered under the Securities Act and the holders of
the Series B Notes will not be entitled to the benefit of certain registration
and exchange rights granted to the holders of the Series A Notes under the
Registration Rights Agreement (as defined), which rights will terminate upon the
consummation of the Exchange Offer. See "The Exchange Offer" and "Description of
Senior Notes."
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES
B NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
(Continued from previous page)
The Series B Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all current and future unsecured
senior indebtedness (as defined) of the Company and senior to all subordinated
indebtedness of the Company. The Company's obligations under the Series B Notes
will be jointly and severally guaranteed by each direct and indirect Subsidiary
(as defined) of the Company (other than Foreign Subsidiaries (as defined))
existing on the closing date of the Exchange Offer and by certain other
Subsidiaries of the Company formed or acquired thereafter. The Subsidiary
Guarantees (as defined) will be senior unsecured obligations of the Subsidiary
Guarantors and will rank pari passu in right of payment with all current and
future unsecured senior indebtedness of the Subsidiary Guarantors and senior to
all subordinated indebtedness of the Subsidiary Guarantors. The Subsidiary
Guarantees will be limited as described herein. See "Description of Senior
Notes -- Subsidiary Guarantees." The Company and certain of the Company's
Subsidiaries are parties to the New Credit Agreement (as defined) and all
obligations thereunder are secured by a first priority lien on accounts
receivable and inventory of such Subsidiaries. The New Credit Agreement provides
for up to $32.0 million of revolving credit borrowings. On a pro forma basis, as
of December 31, 1997, after giving effect to the Series A Notes Offering (as
defined) and the application of the net proceeds therefrom, the aggregate
principal amount of secured indebtedness of the Company, secured indebtedness of
the Subsidiary Guarantors and indebtedness and other liabilities (including
trade payables) of the Company's Foreign Subsidiaries which would have
effectively ranked senior to the Senior Notes would have been approximately $3.9
million. The Indenture permits the Company and its Subsidiaries to incur
additional indebtedness, including secured indebtedness, subject to certain
limitations. See "Description of Senior Notes."
The Series B Notes will bear interest at the same rate and on the same
terms as the Series A Notes. Accordingly, interest on the Series B Notes will be
payable semiannually in cash in arrears on April 1 and October 1 of each year,
commencing October 1, 1998, accruing from April 1, 1998 (which was the date of
issuance of the Series A Notes) at the rate of 9 5/8% per annum, and the Series
B Notes will mature on April 1, 2008. Holders of Series A Notes whose Series A
Notes are accepted for exchange will be deemed to have waived the right to
receive any payment in respect of interest on the Series A Notes accrued up
until the date of the issuance of the Series B Notes. Because the Series B Notes
will bear interest from the issue date of the Series A Notes, such waiver will
not result in the loss of interest income to such holders.
The Series B Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after April 1, 2003 at the redemption prices
set forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined), if any, thereon to the date of redemption. In addition, at any time
prior to April 1, 2001, the Company may, on any one or more occasions, redeem up
to 33 1/3% of the aggregate principal amount of the Senior Notes originally
issued with the net cash proceeds of one or more offerings of common stock of
the Company at a redemption price equal to 109.625% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption; provided, that at least 66 2/3% of the
aggregate principal amount of the Senior Notes originally issued remains
outstanding immediately after the occurrence of any such redemption. Upon the
occurrence of a Change of Control (as defined), each holder of Series B Notes
will have the right to require the Company to repurchase all or any part of such
holder's Series B Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. See "Description of Senior Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Series B Notes issued pursuant to this
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act or (ii) a broker-dealer that purchases such Series B Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the holder is acquiring
the Series B Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of
2
<PAGE> 4
the Series B Notes. See Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(available June 5, 1991) and Exxon Capital Holdings Corporation, SEC No-Action
Letter (available May 13, 1988). Holders of Series A Notes wishing to accept the
Exchange Offer must represent to the Company, as required by the Registration
Rights Agreement, that such conditions have been met. The Company believes that
none of the registered holders of the Series A Notes is an affiliate (as such
term is defined in Rule 405 under the Securities Act) of the Company. Each
broker-dealer that receives Series B Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Series B Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Series B Notes
received in exchange for Series A Notes where such Series A Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed to make this Prospectus (as it may be amended
or supplemented) available to any broker-dealer for use in connection with any
such resale for a period of 120 days after the consummation of the Exchange
Offer. See "Plan of Distribution" and "The Exchange Offer -- Resale of the
Series B Notes."
There is no public market for the Senior Notes. The Company does not intend
to list the Series B Notes on any national securities exchange or to apply for
quotation of the Series B Notes through the National Association of Securities
Dealers Automated Quotation System. There can be no assurance that an active
public market for the Series B Notes will develop. If a market for the Series B
Notes should develop, the market value of the Series B Notes will depend on a
variety of factors and the Series B Notes could trade at a discount from their
principal amount. See "Risk Factors -- Absence of Established Public Market."
The Company will not receive any proceeds from this Exchange Offer. The
Company has agreed to bear the expenses of this Exchange Offer. No underwriter
is being used in connection with this Exchange Offer.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
The Series B Notes will be available initially only in book-entry form. The
Company expects that the Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of one or more fully registered global notes which
will be deposited with, or on behalf of, DTC (as defined) and registered in its
name or in the name of Cede & Co., its nominee. Beneficial interests in the
global notes representing the Series B Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. After the initial issuance of such global notes, Series B Notes in
certificated form will be issued in exchange for the global notes only as set
forth in the Indenture. See "Description of Senior Notes -- Book Entry; Delivery
and Form."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains statements which constitute forward-looking
statements. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company, primarily with respect to the future operating performance of the
Company or related industry developments. Prospective purchasers of the Series B
Notes are cautioned that any such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and that actual
results may differ from those described in the forward-looking statements as a
result of various factors, many of which are beyond the control of the Company.
The information contained in this Prospectus, including without limitation the
information set forth under the captions "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
identifies important factors that could cause such differences.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Series B Notes offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company, and the Series B Notes offered hereby, reference is made
to the Registration Statement. Statements contained in this Prospectus as to the
contents of certain documents filed as exhibits to the Registration Statement
are not necessarily complete and, in each case, are qualified by reference to
the copy of the document so filed. The Registration Statement can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661-2511 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material may be obtained
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material also can be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System, which is publicly available through
the Commission's Web site (http://www.sec.gov).
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed that,
whether or not required by the rules and regulations of the Commission, so long
as any Senior Notes are outstanding, the Company shall furnish to the registered
holders of Senior Notes copies of (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) within the
time periods that would have been applicable had the Company been subject to
such rules and regulations and make such information available to securities
analysts and prospective investors upon request. The Company has agreed further
that, for so long as any Senior Notes remain outstanding, it shall furnish to
the holders of the Senior Notes, to securities analysts, and to prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act. The Company also will furnish to
each registered holder of the Senior Notes such other reports as may be required
by applicable law.
The principal executive offices of the Company are located at 5700 West
Touhy Avenue, Niles, Illinois 60714 (telephone: (847) 779-2500). The principal
executive offices of A.B. Dick are located at 570 West Touhy Avenue, Niles,
Illinois 60714 (telephone: (847) 779-1900). The principal executive offices of
Curtis Industries, Inc. are located at 6140 Parkland Boulevard, Mayfield
Heights, Ohio 44124 (telephone: (440) 446-9700). The principal executive offices
of Curtis Sub, Inc. are located at 6140 Parkland Boulevard, Mayfield Heights,
Ohio 44124 (telephone (440) 446-9700). The principal executive offices of Itek
Graphix Corp. are located at 570 West Touhy Avenue, Niles, Illinois 60714
(telephone: (847) 779-1900).
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Holders of the Series A Notes are urged to read
this Prospectus in its entirety before exchanging their Series A Notes for
Series B Notes. The Company is a holding company, the principal assets of which
consist of the capital stock of its direct subsidiaries, A.B. Dick Company
("A.B. Dick") and Curtis Industries, Inc. ("Curtis"). See "The Company." Unless
the context indicates or otherwise requires, in this Prospectus, pro forma
income statement and other financial information for the period ended December
31, 1997 gives effect to (i) the Series A Notes Offering and the application of
the net proceeds therefrom and (ii) the Curtis Acquisition (as defined) as if
such transactions had taken place on January 1, 1997, and pro forma balance
sheet financial information as of December 31, 1997 gives effect to the Series A
Notes Offering and the application of the net proceeds therefrom as if such
transactions had taken place on December 31, 1997. The historical 1997 income
statement and other financial information for the Company refer to the 49-week
period ended December 31, 1997.
THE COMPANY
The Company, through its two wholly-owned subsidiaries, is engaged in (i)
the distribution of automotive and industrial supplies (the "distribution
business") and (ii) the manufacture and distribution of printing equipment and
supplies. The Company's distribution business supplies consumable, high margin,
multiple-purpose products used in the automotive and industrial markets, with an
increasing focus on providing value-added logistics services. The distribution
business supplies a wide range of products including (i) automotive security
products, including key cutting equipment and key blanks, and non-model specific
automotive parts and (ii) maintenance, repair and operating ("MRO") supplies,
including fasteners, connectors, chemicals and tools. The Company's printing
equipment and supplies business is a leading manufacturer and marketer of
printing products for the global quick print and small commercial graphics
markets. The Company's printing equipment and supplies include (i) pre-press
equipment, including imagers, cameras and digital platemakers, (ii) offset
printing equipment, from duplicators to two-color portrait presses, (iii) other
equipment, including post-press equipment and digital duplicators and (iv)
supplies and replacement parts for pre-press and offset printers, including
inks, plates and plate chemistry materials. Approximately 46% of the Company's
pro forma 1997 net revenue was attributable to the sale of supplies,
after-market repair services (primarily under annual contracts) and replacement
parts to its installed printing equipment customer base. For the fiscal year
ended December 31, 1997, the Company generated pro forma net revenue and EBITDA
(as defined) of $267.4 million and $22.2 million, respectively. Of the Company's
pro forma 1997 net revenue, approximately 30.3% was attributable to the
distribution business and approximately 69.7% was attributable to the printing
equipment and supplies business.
Automotive and Industrial Supplies Distribution. The Company's distribution
business supplies approximately 29,000 stock-keeping units ("SKUs"), which it
purchases from approximately 750 suppliers and then typically repackages in
smaller quantities more compatible with the needs of its customers. The Company
generally markets its products under its proprietary brand names, Curtis(R) and
Mechanics Choice(R), which the Company believes enjoy wide industry recognition.
The Company's distribution business sells its products to approximately 55,000
customers principally through its network of over 600 sales representatives who
use state-of-the-industry information systems to meet their customers' needs.
Customers of the Company's distribution business include Hertz Corporation, the
fleet operations of Pepsi-Cola Company and Continental Airlines, Inc.,
independent auto dealerships and industrial accounts throughout the United
States, Canada and the United Kingdom.
The Company's distribution business is able to generate high margins by
offering certain value-added inventory management services in connection with
the sale of its products. The Company's sales representatives proactively
monitor inventory levels and assist in bin restocking and labelling at many of
its customers' facilities to ensure adequate supplies are maintained, and to
provide technical assistance to customers. The vast majority of the products
that the Company supplies have low unit costs and, although used by customers to
support their operations, are typically not on a bill of materials. The
Company's products represent a
5
<PAGE> 7
relatively small part of the total cost of its customers' operations; however,
the lack of availability of such products when needed, immediately and on site,
can have a high impact on its customers' operations. The Company consistently
maintains a level of inventory such that, on average, 96% to 98% of a customer's
order is in stock at the location from which products are normally sent to that
customer at the time the order is entered ("fill rate"). The Company thereby
reduces its customers' total procurement costs, improves their operational
up-time, and enables them to focus on their core businesses. The Company's
distribution business' extensive product line allows customers to reduce the
administrative burden of dealing with many suppliers for their product needs.
The Company is also able to provide large corporations with consistent pricing
and service across multiple operating locations through facilities and sales
representatives located strategically throughout the United States.
Printing Equipment and Supplies. The Company's printing equipment and
supplies business can be classified into four broad categories: (i) pre-press
equipment, (ii) offset presses, (iii) other related equipment and (iv) supplies,
after-market repair services and replacement parts. The printing equipment and
supplies business serves exclusively the market for small print equipment
(defined as equipment suitable for printing up to 11" x 17" finished stock). The
Company also provides significant after-market service that maintains much of
the large installed base of the Company's printing equipment operated by its
customers. The Company's printing equipment and supplies business manufactures
its own products, which are principally sold under the A.B. Dick(R) and Itek
Graphix(R) labels, and distributes certain products manufactured by third
parties. The Company's printing equipment and supplies products are marketed to
commercial, franchise and independent print shops, in-plant print shops and
governmental and educational institutions in the U.S. through a network of 25
branches and approximately 100 independent distributors. In addition, the
printing equipment and supplies business sells a full line of products through
its subsidiaries in Canada, the United Kingdom, the Netherlands and Belgium, and
through a network of independent dealers in other countries. Customers for
printing supplies include franchisees of national quick print chains, such as
Alphagraphics(R), Sir Speedy(R) and Kwik Kopy(R), independent quick print and
small commercial shops, and check printers.
The Company believes that it offers its customers reliable, flexible
printing systems well-suited to their needs. The majority of the customers of
the printing equipment and supplies business are relatively small quick print
shops, specializing in items such as business cards, sales materials and headed
stationery. Because these customers have a limited amount of equipment, the
Company believes they value the high degree of reliability and flexibility that
the Company's products can provide. In addition, the Company believes its
products are highly competitive from a cost standpoint on projects of the scope
that its customers undertake. The Company believes its products offer greater
flexibility and superior print quality as compared to alternative printing
technologies, particularly for the high speed, long print runs typically
required by its customers.
COMPETITIVE STRENGTHS
The Company believes its two businesses maintain strong competitive
positions in their respective markets as a result of a number of factors,
including:
- - Substantial Installed Equipment Base. The Company estimates that it currently
sells products to approximately 75% of all U.S. auto dealers. A large
proportion of these products consists of key cutting equipment, which creates
a natural market for the sale of the Company's key blanks and a base from
which to increase sales of other consumable products distributed by the
Company. Similarly, the Company estimates, based on industry sources, that in
1997 it had an approximately 40% market share in the offset press equipment
market that it serves. The Company attributes its leading market position not
only to the reputation of its products for quality and flexibility, but also
to the substantial base of installed equipment built up over A.B. Dick's
114-year history, which the Company believes provides a significant
competitive advantage in marketing its supplies and after-market service.
- - Breadth of Product Line and Extensive Distribution Network. The distribution
business carries approximately 29,000 SKUs, which it sources from
approximately 750 different suppliers, which the Company believes is greater
than many of its smaller, regional competitors. The printing equipment and
supplies
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<PAGE> 8
business carries a complete range of pre-press and offset press equipment and
supplies and replacement parts, as well as equipment service, thereby offering
its customers one-stop shopping. Both businesses distribute their products
through dedicated sales organizations and distribution networks that have
long-standing relationships with their customers. The Company believes its
breadth of supplier relationships, the depth of its product offerings and its
sales relationships with its customers provide it with a significant advantage
relative to potential competitors.
- - Commitment to Customer Service. The Company believes that a key to its
continued success in its market is its total commitment to customer service.
This commitment is evidenced in the printing equipment and supplies business
by, among other things, (i) generally providing next-day delivery for its
printing supplies, (ii) offering service contracts for its installed base of
printing equipment and (iii) offering its customers flexible, non-recourse
financing options for the purchase of its printing equipment. In its
distribution business, the Company's commitment to customer service is
evidenced by, among other things, (i) providing a range of on-site inventory
management services through its extensive sales force in the field, (ii)
maintaining a fill rate in the range of 96% to 98% and generally shipping its
products within a day after an order is received and (iii) providing customers
computerized access for technical information, catalog and order capabilities.
- - Broad Customer Base. The Company's automotive and industrial distribution
products are sold to more than 55,000 customers and its printing products to
more than 10,000 customers, with no one customer accounting for more than 2%
of the Company's 1997 pro forma net revenue. The Company believes that this
diversity in its client base minimizes its reliance on any one customer.
- - Experienced, Proven Management Team. The Company's senior management has an
average of approximately 19 years of relevant industry experience. In addition
to their relevant industry experience, these managers have extensive
experience in acquiring and integrating businesses, as well as growing
revenues and reducing costs in businesses they have acquired and managed.
BUSINESS STRATEGY
The Company seeks to grow sales and profitability through the successful
implementation of its business strategy, the key elements of which include:
- - Increase Penetration of Existing Customers. The Company's primary strategy to
grow net revenue and profitability in the distribution business is to obtain
incremental sales from existing customers. For example, the Company seeks to
leverage its relationships with the approximately 75% of all U.S. auto dealers
it currently serves to increase the percentage of these auto dealers' total
supply needs provided by the Company. The Company believes that new marketing
efforts, including its recently commenced "Dealer One Source" program, which
offers incentive-based pricing in exchange for volume commitments, offer
potential for significant growth for the Company's distribution business.
- - Expand Customer Base. The Company believes there are substantial opportunities
for both the distribution business and the printing equipment and supplies
business to expand their existing customer bases. The total United States
market for MRO supplies of the categories of industrial products sold by the
Company is estimated to be in excess of $30 billion annually. The Company
intends to focus on this market, in which it currently has only a small
presence, through acquisitions, strategic alliances with other distributors
and direct selling efforts. In addition, the printing equipment and supplies
business plans to leverage its nationwide network of service technicians to
offer customers an integrated equipment service capability for equipment not
manufactured or currently serviced by the Company.
- - Make Focused Acquisitions. The Company seeks to grow by making acquisitions
that (i) enhance its distribution capabilities, (ii) grow its customer base
and (iii) broaden its product range. The distribution business operates in a
large, fragmented industry characterized by multiple channels of distribution.
The Company believes that approximately 85% of the 25,000 industrial
distributors in the U.S. have sales of less than $5 million and that
acquisitions of small suppliers of industrial products provide an attractive
opportunity for expanding the Company's customer base in existing markets with
minimal customer
7
<PAGE> 9
overlap. Likewise, the Company believes that opportunities exist to broaden
the printing equipment and supplies business' product range, especially in the
area of digital pre-press technology, to further grow its distribution network
and to increase its share of the commercial printing market. There can be no
assurance that the Company will be able to identify desirable acquisition
candidates or will be successful in consummating any acquisition on terms
favorable to the Company, if at all. See "Risk Factors -- Risks Attendant to
Acquisition Strategy."
The Company's senior management has a track record of improving the results of
acquired companies. For example, Curtis' current management team, which joined
Curtis in 1992, has grown the net revenue of Curtis at a compound annual rate
of 4.5% from $65.1 million in 1992 to $81.1 million in 1997. During the same
period, EBITDA has increased at a compound annual rate of 20.3%, from $3.3
million in 1992 to $8.3 million in 1997. Such improvements have been made
through significant operating expense reductions resulting from factors such
as improved labor efficiency and customer relations, investments in
technology, improved vendor relationships and more effective asset utilization
and management practices, as well as increased access to capital.
- - Exploit Operating Leverage. The Company has designed the processing systems
and facilities of its distribution business to handle a large number of low
dollar-value transactions. Consequently, the Company believes that it would be
able to handle substantially increased sales of its existing SKUs without a
commensurate increase in operating costs. In addition, since the distribution
business' sales are characterized by a relatively large number of orders (in
excess of 450,000 in 1997) with an average order size of approximately $170,
the Company believes that with an increase in the average order size, it could
further enhance its operating margins.
* * *
The principal executive offices of the Company are located at 5700 West
Touhy Avenue, Niles, Illinois 60714 (telephone: (847) 779-2500). The principal
executive offices of A.B. Dick are located at 570 West Touhy Avenue, Niles,
Illinois 60714 (telephone: (847) 779-1900). The principal executive offices of
Curtis Industries, Inc. are located at 6140 Parkland Boulevard, Mayfield
Heights, Ohio 44124 (telephone: (440) 446-9700). The principal executive offices
of Curtis Sub, Inc. are located at 6140 Parkland Boulevard, Mayfield Heights,
Ohio 44124 (telephone (440) 446-9700). The principal executive offices of Itek
Graphix Corp. are located at 570 West Touhy Avenue, Niles, Illinois 60714
(telephone: (847) 779-1900).
8
<PAGE> 10
THE EXCHANGE OFFER
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000
principal amount of Series B Notes for each
$1,000 principal amount of Series A Notes
validly tendered pursuant to the Exchange
Offer. As of the date hereof, there is $115
million aggregate principal amount of Series A
Notes outstanding. The Company will issue the
Series B Notes to tendering holders of Series A
Notes promptly after the Expiration Date. See
"The Exchange Offer -- Background" and
" -- General."
REGISTRATION RIGHTS
AGREEMENT..................... The Series A Notes were issued and sold by the
Company to Donaldson, Lufkin & Jenrette
Securities Corporation and CIBC Oppenheimer
Corp., the initial purchasers of the Series A
Notes (the "Initial Purchasers"), on April 1,
1998 pursuant to a Purchase Agreement (the
"Purchase Agreement") dated as of March 27,
1998 by and among the Company, the Subsidiary
Guarantors and the Initial Purchasers (the
"Series A Notes Offering"). Pursuant to the
Purchase Agreement, the Company, the Subsidiary
Guarantors and the Initial Purchasers entered
into a Registration Rights Agreement dated as
of April 1, 1998 (the "Registration Rights
Agreement") which grants the holders of the
Series A Notes registration and exchange
rights, certain of which terminate upon the
consummation of the Exchange Offer. The
Exchange Offer is intended to satisfy certain
obligations of the Company and the Subsidiary
Guarantors under the Registration Rights
Agreement. See "The Exchange Offer" and
"Description of Senior Notes -- Registration
Rights; Liquidated Damages."
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended. See "The Exchange
Offer -- Expiration Date; Delay, Extension,
Amendment, and Termination."
ACCRUED INTEREST ON THE SERIES
B NOTES AND SERIES A NOTES.... The Series B Notes will bear interest from
April 1, 1998. Holders of Series A Notes whose
Series A Notes are accepted for exchange will
be deemed to have waived the right to receive
any interest accrued on such Series A Notes.
See "The Exchange Offer -- Interest on the
Series B Notes."
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to certain
customary conditions which may be waived by the
Company. The conditions are limited and relate
in general to proceedings which have been
instituted or laws which have been adopted that
might impair the ability of the Company to
proceed with the Exchange Offer. As of the date
of this Prospectus, none of these events has
occurred, and the Company believes their
occurrence to be unlikely. The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Series A Notes being
tendered for exchange. See "The Exchange
Offer -- Conditions."
9
<PAGE> 11
PROCEDURES FOR TENDERING
SERIES A NOTES................ Each holder of Series A Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Series A
Notes to be exchanged and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein and
therein by 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer -- Procedures for Tendering." By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, (i) it is not an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company, (ii) it is not
engaged in, and does not intend to engage in,
and has no arrangement or understanding with
any person to participate in, a distribution of
the Series B Notes, and (iii) it is acquiring
the Series B Notes in the ordinary course of
business. See "The Exchange Offer -- Procedures
for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Series A Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender
the Series A Notes on such beneficial owner's
behalf. See "The Exchange Offer -- Procedures
for Tendering."
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Series A Notes who wish to tender
their Series A Notes and whose Series A Notes
are not immediately available or who cannot
deliver their Series A Notes and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal
to the Exchange Agent prior to the Expiration
Date may tender their Series A Notes according
to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery
Procedures."
ACCEPTANCE OF SERIES A NOTES
AND DELIVERY OF SERIES B
NOTES....................... Subject to the satisfaction or waiver of the
conditions of the Exchange Offer, the Company
will accept for exchange any and all Series A
Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Series B
Notes issued pursuant to the Exchange Offer
will be delivered on the earliest practicable
date after the Expiration Date. See "The
Exchange Offer -- General."
WITHDRAWAL RIGHTS............. Tenders of Series A Notes may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS.............. For a discussion of certain federal income tax
considerations relating to the exchange of the
Series B Notes for the Series A Notes, see
"Certain Federal Income Tax Considerations."
10
<PAGE> 12
EXCHANGE AGENT................ Norwest Bank Minnesota, National Association is
serving as the exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
See "The Exchange Offer -- Exchange Agent."
THE SERIES B NOTES
The Series B Notes will be obligations of the Company evidencing the same
indebtedness as the Series A Notes for which they are exchanged, and will be
entitled to the benefit of the same Indenture. The form and terms of the Series
B Notes are the same as the form and terms of the Series A Notes, except that
the Series B Notes have been registered under the Securities Act and the holders
of the Series B Notes will not be entitled to the benefit of certain
registration and exchange rights granted to the holders of the Series A Notes
under the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. See "The Exchange Offer" and "Description of
Senior Notes."
MATURITY DATE................. April 1, 2008.
INTEREST...................... The Series B Notes will bear interest at a rate
of 9 5/8% per annum, payable semiannually in
cash in arrears on each April 1 and October 1,
commencing October 1, 1998. See "The Exchange
Offer -- Interest on the Series B Notes" and
"Description of Senior Notes -- Principal,
Maturity and Interest."
OPTIONAL REDEMPTION........... The Series B Notes will be redeemable at the
option of the Company, in whole or in part, at
any time on or after April 1, 2003, in cash at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
redemption. In addition, at any time prior to
April 1, 2001, the Company may, on any one or
more occasions, redeem up to 33 1/3% of the
aggregate principal amount of the Series B
Notes originally issued with the net cash
proceeds of one or more offerings of common
stock of the Company at a redemption price
equal to 109.625% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date
of redemption; provided, that at least 66 2/3%
of the aggregate principal amount of the Series
B Notes originally issued remains outstanding
immediately after the occurrence of any such
redemption. See "Description of Series B
Notes -- Optional Redemption."
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control,
each holder of Series B Notes will have the
right to require the Company to repurchase all
or any part of such holder's Series B Notes at
an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. See
"Description of Senior Notes -- Repurchase at
the Option of Holders -- Change of Control."
SUBSIDIARY GUARANTEES......... The Company's obligations under the Series B
Notes will be jointly and severally guaranteed
by each direct and indirect Subsidiary of the
Company (other than Foreign Subsidiaries)
existing on the closing date of the Exchange
Offer and by certain other Subsidiaries of the
Company formed or acquired thereafter
(collectively, the "Subsidiary Guarantors").
The Subsidiary Guarantors' liability
11
<PAGE> 13
under the Subsidiary Guarantees will be limited
as described herein and the Subsidiary
Guarantees will be automatically released in
connection with certain Asset Sales (as
defined) and dispositions. See "Description of
Senior Notes -- Subsidiary Guarantees."
RANKING....................... The Series B Notes will be senior unsecured
obligations of the Company and will rank pari
passu in right of payment with all current and
future unsecured senior indebtedness of the
Company and senior to all subordinated
indebtedness of the Company. The Subsidiary
Guarantees will be senior unsecured obligations
of the Subsidiary Guarantors and will rank pari
passu in right of payment with all current and
future unsecured senior indebtedness of the
Subsidiary Guarantors and senior to all
subordinated indebtedness of the Subsidiary
Guarantors. The Company and certain of its
Subsidiaries are parties to the New Credit
Agreement, and all obligations thereunder are
secured by a first priority lien on the
accounts receivable and inventory of such
Subsidiaries. The New Credit Agreement provides
for up to $32.0 million of revolving credit
borrowings. On a pro forma basis, as of
December 31, 1997, after giving effect to the
Series A Notes Offering and the application of
the net proceeds therefrom, the aggregate
principal amount of secured indebtedness of the
Company, secured indebtedness of the Subsidiary
Guarantors and indebtedness and other
liabilities (including trade payables) of the
Company's Foreign Subsidiaries which would have
effectively ranked senior to the Senior Notes
would have been approximately $3.9 million. The
Indenture will permit the Company and its
Subsidiaries (including the Company's Foreign
Subsidiaries) to incur additional indebtedness,
including secured indebtedness, subject to
certain limitations.
CERTAIN COVENANTS............. The Indenture governing the Senior Notes
contains certain covenants that, among other
things, limit the ability of the Company and
its Subsidiaries (i) to pay dividends and make
other Restricted Payments (as defined) or
investments, (ii) to incur additional
indebtedness and issue preferred stock, (iii)
to enter into sale and leaseback transactions
with Affiliates (as defined), (iv) to merge or
consolidate with any other entity, (v) to
transfer all or substantially all of their
assets and (vi) to incur certain liens. In
addition, under certain circumstances, the
Company will be required to offer to purchase
Senior Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase with the
proceeds of certain Asset Sales. See
"Description of Senior Notes -- Certain
Covenants."
RESALES....................... Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that the Series B Notes issued pursuant to this
Exchange Offer in exchange for Series A Notes
may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i)
a broker-dealer that purchases such Series B
Notes directly from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a
person that is an
12
<PAGE> 14
affiliate of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that the holder is acquiring the
Series B Notes in the ordinary course of its
business and is not participating, and had no
arrangement or understanding with any person to
participate, in the distribution of the Series
B Notes. See Morgan Stanley & Co. Incorporated,
SEC No-Action Letter (available June 5, 1991)
and Exxon Capital Holdings Corporation, SEC
No-Action Letter (available May 13, 1988). Each
broker-dealer that receives the Series B Notes
for its own account in exchange for the Series
A Notes, where such Series A Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Series B Notes. The Company has
agreed to make this Prospectus (as it may be
amended or supplemented) available to any
broker-dealer for use in connection with any
such resale for a period of 120 days after
consummation of the Exchange Offer. See "The
Exchange Offer -- Resale of the Series B Notes"
and "Plan of Distribution."
RISK FACTORS
For a discussion of certain factors that should be considered by holders of
the Series A Notes and by prospective investors in connection with an investment
in the Series B Notes, see "Risk Factors."
13
<PAGE> 15
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table presents summary unaudited pro forma consolidated
financial data of the Company. The unaudited pro forma consolidated financial
data give effect to the Series A Notes Offering, the application of the net
proceeds therefrom and the Curtis Acquisition as if such transactions had taken
place on January 1, 1997, with respect to the Income Statement and Other Data,
and give effect to the Series A Notes Offering and the application of the net
proceeds therefrom as if such transactions had taken place on December 31, 1997,
with respect to the Balance Sheet Data. The pro forma data do not purport to
represent what the consolidated results of operations or consolidated financial
position of the Company would have been had the Series A Notes Offering, the
application of the net proceeds therefrom and the Curtis Acquisition actually
occurred at the beginning of the relevant period, and do not purport to project
the consolidated financial position or the consolidated results of operations of
the Company for the current year or any future date or period. The summary
financial data set forth below should be read in conjunction with "Selected
Historical Financial Data," "Unaudited Pro Forma Consolidated Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements of the Company,
A.B. Dick and Curtis and the related notes thereto (the "Consolidated Financial
Statements") included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 17, 1997
THROUGH
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C>
INCOME STATEMENT DATA:
Net revenue............................................... $267,419
Gross profit.............................................. 106,627
Operating income.......................................... 16,494
Total interest expense.................................... 11,652
Net income................................................ 4,633
OTHER DATA:
EBITDA(1)................................................. $ 22,239
Depreciation and amortization............................. 4,345
Capital expenditures...................................... 4,402
Cash interest expense(2).................................. 11,169
Ratio of EBITDA to cash interest expense(3)............... 2.0x
Ratio of net debt to EBITDA(1)(3)......................... 3.5
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $ 37,885
Total assets.............................................. 172,642
Long-term debt, including current portion................. 116,182
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, miscellaneous income (expenses) and for 1997 excludes $1.4
million of acquisition costs incurred in connection with the Curtis
Acquisition. EBITDA gives effect, on a pro forma basis, to $1.2 million in
management fees to be paid pursuant to the Management Agreement (as
defined). See "Related Transactions -- Management Agreement." EBITDA should
not be considered as an alternative to cash provided by operations as a
measure of liquidity, or to net income as a measure of profitability. EBITDA
and related ratios have been included because the Company uses them as one
means of analyzing its ability to service its debt, the Company's lenders
use them for the purpose of analyzing the Company's performance with respect
to the New Credit Agreement and the Indenture and the Company understands
that they are used by certain investors as one measure of a company's
historical ability to service debt. Not all companies calculate EBITDA in
the same fashion and therefore EBITDA as presented may not be comparable to
other similarly titled measures of other companies.
(2) Cash interest expense excludes non-cash amortization of deferred financing
costs.
(3) Net debt represents total debt, net of cash, cash equivalents and short-term
investments as of December 31, 1997 on an as adjusted basis.
14
<PAGE> 16
RISK FACTORS
Holders of the Series A Notes and prospective purchasers of the Series B
Notes should consider carefully the risk factors set forth below, as well as the
other information set forth in this Prospectus.
LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company has substantial indebtedness and significant debt service
obligations. As of December 31, 1997, on a pro forma basis after giving effect
to the Series A Notes Offering and the application of the net proceeds
therefrom, the Company would have had total long-term indebtedness, including
current maturities, of $116.2 million and a stockholder's deficit of $3.5
million. The Indenture permits the Company and its Subsidiaries to incur
additional indebtedness, including secured indebtedness, subject to certain
limitations. The New Credit Agreement provides for up to $32.0 million of
revolving credit borrowings. See "Capitalization" and "Description of Senior
Notes -- Certain Covenants." For the period ended December 31, 1997, on a pro
forma basis, after giving effect to the Series A Notes Offering, the application
of the net proceeds therefrom and the Curtis Acquisition, the Company would have
had a ratio of earnings to fixed charges of 1.4 to 1.
The Company's high degree of leverage could have important consequences to
the holders of the Series B Notes including, without limitation, (i) a
substantial portion of the Company's cash provided from operations will be
committed to the payment of debt service and will not be available to the
Company for other purposes, (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or
acquisitions may be limited and (iii) the Company's levels of indebtedness may
limit the Company's flexibility in reacting to changes in its business
environment. See "Description of New Credit Agreement" and "Description of
Senior Notes."
The Company's ability to pay principal and interest on the Series B Notes
and to satisfy its other debt obligations will depend upon the future operating
performance of its Subsidiaries, which will be affected by prevailing economic
conditions in the markets they serve and financial, business and other factors,
certain of which are beyond their control, as well as the availability of
borrowings under the New Credit Agreement or successor facilities. The Company
may be required to refinance all or a portion of its existing indebtedness at or
prior to maturity, including the Series B Notes, or sell assets or seek to raise
additional equity capital. No assurance can be given that any such debt or
equity financing will be available to the Company on acceptable terms, if at
all.
HOLDING COMPANY STRUCTURE; RANK OF SERIES B NOTES
The Company is a holding company that conducts all of its operations
exclusively through its Subsidiaries. The Company's only significant assets are
the capital stock of its wholly-owned Subsidiaries, A.B. Dick and Curtis. As a
holding company, the Company is dependent on dividends or other distributions of
funds from its Subsidiaries to meet the Company's debt service and other
obligations, including its obligations under the Series B Notes. The New Credit
Agreement and all obligations thereunder are secured by a first priority lien on
all accounts receivable and inventory of the Company's Subsidiaries and thus the
Series B Notes will be effectively subordinated to all indebtedness under the
New Credit Agreement. See "Description of New Credit Agreement." The Company's
obligations under the Series B Notes will be jointly and severally guaranteed by
the Subsidiary Guarantors. The Series B Notes will not, subject to certain
exceptions, be guaranteed by the Company's Foreign Subsidiaries and will be
effectively subordinated to all current and future indebtedness and other
liabilities (including trade payables) of such Foreign Subsidiaries. The
Indenture restricts, but does not prohibit, the incurrence of indebtedness by
Foreign Subsidiaries.
As of December 31, 1997, on a pro forma basis after giving effect to the
Series A Notes Offering and the application of the net proceeds therefrom, the
aggregate principal amount of secured indebtedness of the Company, secured
indebtedness of the Subsidiary Guarantors and indebtedness and other liabilities
(including trade payables) of the Company's Foreign Subsidiaries which would
have effectively ranked senior to the Series B Notes would have been
approximately $3.9 million. In addition, on a pro forma basis as of December 31,
1997, the Company would have had aggregate undrawn availability under the New
Credit
15
<PAGE> 17
Agreement of approximately $32.0 million which, if drawn, would be fully secured
and would, therefore, effectively rank senior to the Senior Notes.
CYCLICAL INDUSTRY CUSTOMER BASE
Many of the end users of the Company's products typically experience
cyclical fluctuations in revenues and earnings. Such fluctuations will from time
to time adversely affect the demand for certain of the Company's products, and
general recessionary or slow economic growth conditions would likely have an
adverse effect on the Company's revenues. No assurance can be given that the
Company will not experience declining revenues in the future.
EFFECT OF NEW TECHNOLOGIES IN THE PRINTING INDUSTRY
The pre-press and offset printing markets generally have been subject to
rapid technological change in recent years. For example, the commercialization
of digital pre-press technology by the Company and certain of its competitors
has substantially reduced the demand for optical pre-press equipment of the type
supplied by the Company. If the Company does not succeed in introducing products
that incorporate new technologies, its results of operations and financial
condition may be negatively impacted in the future.
RISKS RELATED TO THE AUTOMOTIVE INDUSTRY
The security products segment of the automotive industry is currently
undergoing significant technological change. High security digital locking
systems have met with widespread acceptance in Europe and are beginning to do so
in the United States and Canada. If the Company does not succeed in introducing
products which incorporate these new technologies, its results of operations and
financial condition may be negatively impacted in the future. In addition, in
recent years the automobile dealership business has undergone substantial
consolidation in the United States. The Company cannot predict the effect this
consolidation, or any continuation of this consolidation, will have on its
results of operations and financial condition.
CONTROL BY SOLE STOCKHOLDER
The Company is a wholly-owned subsidiary of NES Group, Inc., the capital
stock of which is beneficially owned by Robert J. Tomsich. As a result of his
control of NES Group, Inc., Mr. Tomsich will be able to control the election of
directors of the Company and to determine the corporate and management policies
of the Company, including decisions relating to any mergers or acquisitions of
the Company, sales of all or substantially all of the Company's assets and other
significant corporate transactions, which transactions may result in a Change of
Control under the Indenture governing the Senior Notes. The Company's board of
directors is expected to be comprised entirely of designees of NES Group, Inc.
See "Sole Stockholder."
DEPENDENCE UPON MANAGEMENT PERSONNEL
The Company's success depends to a significant extent upon its management
personnel as well as the management personnel of its operating subsidiaries. The
loss of the services of certain of such personnel could have a material adverse
effect upon a particular operating subsidiary or the Company, or both. Certain
officers of the Company are parties to employment and/or severance arrangements
with operating subsidiaries of the Company. See "Management -- Employment,
Severance and Bonus Agreements." The Company will be dependent on NESCO, Inc.,
an affiliate of the Company, for certain management oversight services. NESCO,
Inc. also provides management oversight services for certain affiliates of the
Company. See "Related Transactions -- Management Agreement."
INTERNATIONAL OPERATIONS; LIMITATIONS ON SUBSIDIARY GUARANTEES
The Company has significant operations in foreign countries. During the
year ended December 31, 1997, $77.6 million of the Company's pro forma net
revenue was attributable to customers outside the United States, representing
approximately 29.0% of the Company's total pro forma net revenue during the
period.
The dollar value of the Company's foreign sales and earnings varies with
currency exchange rate fluctuations. Changes in currency exchange rates could
have an adverse effect upon the Company's results of operations, which in turn
could adversely affect the Company's ability to meet its interest and principal
obligations on its indebtedness, including the Series B Notes. Furthermore,
international manufacturing and
16
<PAGE> 18
sales are subject to other inherent risks including labor unrest, political and
economic instability, restrictions on transfer of funds, export duties and
quotas, domestic and foreign customs and tariffs, current and changing
regulatory environments and difficulty in obtaining distribution and support.
There can be no assurance that these factors will not have a material adverse
effect on the Company's international operations or sales or upon its financial
condition and results of operations.
In addition, the cost of printing equipment and supplies manufactured by
third parties outside the United States and purchased by the Company for resale
varies with currency exchange rate fluctuations, primarily with respect to the
Japanese yen.
The Company's Foreign Subsidiaries are not guarantors of the Company's
obligations under the Senior Notes. In 1997, the Company's Foreign Subsidiaries
accounted for 19.2% of the Company's pro forma net revenue.
RISKS ATTENDANT TO ACQUISITION STRATEGY
The Company regularly considers the acquisition of other companies engaged
in related businesses. At any given time, the Company may be in various stages
of considering such opportunities. Such acquisitions are subject to the
negotiation of definitive agreements and to conditions typical in acquisition
transactions, certain of which conditions may be beyond the Company's control.
There is no assurance that the Company will be able to identify desirable
acquisition candidates or will be successful in entering into any definitive
agreements with respect to desirable acquisitions. Moreover, even if definitive
agreements are entered into, there is no assurance that any future acquisition
will thereafter be completed or, if completed, that the anticipated benefits of
the acquisition will be realized. The process of integrating acquired operations
into the Company's operations may result in unforeseen operating difficulties,
may absorb significant management attention and may require significant
financial resources that would otherwise be available for the ongoing
development or expansion of the Company's existing operations. Future
acquisitions by the Company could result in the incurrence of additional debt
and contingent liabilities, which could have a material adverse effect on the
Company's financial condition and results of operations.
NO OPERATING HISTORY ON A COMBINED BASIS; LIMITED COMPARABILITY OF HISTORICAL
FINANCIAL INFORMATION
The Company has no prior history of operating A.B. Dick and Curtis on a
combined basis. The Company's prospects should be considered in light of the
numerous risks commonly encountered in business acquisitions. The pro forma
financial statements presented elsewhere in this Prospectus may not necessarily
be indicative of the results that would have been attained had the Company
operated on a combined basis for such periods.
In connection with the A.B. Dick Acquisition, the Company eliminated
certain positions and costs that had impacted the historical financial results
of A.B. Dick. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- A.B. Dick." Accordingly, the historical financial
statements of A.B. Dick may not necessarily be indicative of the results that
would have been attained had A.B. Dick been a subsidiary of the Company during
the historical years presented.
YEAR 2000 ISSUES
The Company is currently engaged in a process of evaluating the actions
necessary in order to ensure that its computer systems will be able to function
without disruption with respect to the application of dating systems in the Year
2000. The assessment includes the Company's information systems as well as
digital controls embedded into items such as elevators and fax machines. There
can be no assurance that the Company will be able to complete whatever remedial
actions may be required to successfully operate its computer systems in the Year
2000 by the time necessary to avoid dating systems problems or that the cost of
doing so will not be material. In addition, disruptions with respect to the
computer systems of the Company's vendors or customers, which systems are
outside the control of the Company, could operate so as to negatively affect the
Company's ability to obtain necessary materials or products or to sell to or
service its customers. Disruptions of the Company's computer systems, or the
computer systems of the Company's vendors or customers, as well as the cost of
avoiding such disruption, could have a material adverse effect upon the
Company's financial condition and results of operations.
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COMPETITION
The Company's products are sold in highly competitive markets. The Company
competes throughout the world with a significant number of companies of varying
sizes in a wide variety of markets, on the basis of service, quality, price,
reliability, availability and timing. A number of the Company's competitors have
financial and other resources that are substantially greater than those of the
Company. Competitive pressures could cause the Company to lose market share or
could result in significant price erosion, either of which could have a material
adverse effect upon the Company's results of operations.
PURCHASE OF SERIES B NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, each holder of Series B Notes will have the right
to require the Company to purchase all or any part of such holder's Series B
Notes at an offer price of 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase. The source of funds for any such purchase would be the Company's
available cash or cash generated from other sources, including borrowings, sales
of assets, sales of equity or funds provided by a new controlling person. The
New Credit Agreement prohibits the payment of dividends to the Company for
purposes of purchasing Series B Notes upon a Change of Control. A Change of
Control would likely constitute an event of default under the New Credit
Agreement that would permit the lenders to accelerate the debt under such New
Credit Agreement. In such event, the Company would likely attempt to refinance
the indebtedness outstanding under the New Credit Agreement and the Series B
Notes. There can be no assurance that sufficient funds will be available at the
time of any Change of Control to make any required purchases of Series B Notes
tendered and to repay indebtedness under the New Credit Agreement. See
"Description of New Credit Agreement" and "Description of Senior
Notes -- Repurchase at the Option of Holders -- Change of Control."
ABSENCE OF ESTABLISHED PUBLIC MARKET
There is no established public market for the Series A Notes. The Series B
Notes will constitute a new issue of securities for which there is no
established trading market. The Company does not intend to list the Series B
Notes on any national securities exchange or to seek the admission of the Series
B Notes for quotation through the National Association of Securities Dealers
Automated Quotation System. Although the Initial Purchasers have advised the
Company that they currently intend to make a market in the Senior Notes, they
are not obligated to do so and may discontinue such market making activity at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Series B Notes, the ability of
the holders of the Series B Notes to sell their Series B Notes, or the price at
which such holders would be able to sell their Series B Notes. Future trading
prices of the Series B Notes will depend on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities.
To the extent that Series A Notes are tendered and accepted in the Exchange
Offer, any trading market for untendered and tendered but unaccepted Series A
Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A Notes were sold pursuant to an exemption from the registration
requirements of the Securities Act and their transfer is subject to certain
restrictions under the Securities Act. In general, Series A Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holders of Series A Notes who do not exchange
their Series A Notes for Series B Notes pursuant to the Exchange Offer will
continue to be subject to such restrictions on transfer of the Series A Notes.
The Company currently does not anticipate that it will register the Series A
Notes under the Securities Act.
The Series B Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of such Series A Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Series A Notes desiring to tender such Series A
Notes in exchange for Series B Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders
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of Series A Notes for exchange. Series A Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
addition, any holder of Series A Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Series B Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives Series B Notes for its own account in exchange for Series A
Notes, where such Series A Notes were acquired by such broker-dealer as a result
of market-making activities or any other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Series B
Notes. See "Plan of Distribution." To the extent that Series A Notes are
tendered and accepted in the Exchange Offer, any trading market for untendered
and tendered but unaccepted Series A Notes could be adversely affected. See "The
Exchange Offer -- Consequences of Failure to Exchange."
FRAUDULENT TRANSFER CONSIDERATIONS
Under federal or state fraudulent transfer laws, if a court were to find
that, at the time any of the Senior Notes or Subsidiary Guarantees were issued,
the Company or a Subsidiary Guarantor, as the case may be, (i) issued such
Senior Notes or Subsidiary Guarantee with the intent of hindering, delaying or
defrauding current or future creditors or (ii) (A) received less than fair
consideration or reasonably equivalent value for incurring the indebtedness
represented by such Senior Notes or Subsidiary Guarantee, and (B) (1) was
insolvent or was rendered insolvent by reason of the issuance of such Senior
Notes or Subsidiary Guarantee, (2) was engaged, or about to engage, in a
business or transaction for which its assets were unreasonably small or (3)
intended to incur, or believed (or should have believed) it would incur, debts
beyond its ability to pay as such debts mature (as all of the foregoing terms
are defined in or interpreted under such fraudulent transfer statutes), such
court could avoid all or a portion of the Company's or a Subsidiary Guarantor's
obligations to the holders of Senior Notes, subordinate the Company's or a
Subsidiary Guarantor's obligations to the holders of the Senior Notes to other
existing and future indebtedness of the Company or such Subsidiary Guarantor, as
the case may be, the effect of which would be to entitle such other creditors to
be paid in full before any payment could be made on the Senior Notes, and take
other action detrimental to the holders of the Senior Notes, including in
certain circumstances, invalidating the Senior Notes. In that event, there would
be no assurance that any repayment on the Senior Notes would ever be recovered
by the holders of the Senior Notes.
The definition of insolvency for purposes of the foregoing considerations
varies among jurisdictions depending upon the federal or state law that is being
applied in any such proceeding. However, the Company or a Subsidiary Guarantor
generally would be considered insolvent at the time it incurs the indebtedness
constituting any of the Senior Notes or any Subsidiary Guarantee, as the case
may be, if (i) the fair market value (or fair saleable value) of its assets is
less than the amount required to pay its total existing debts and liabilities
(including the probable liability on contingent liabilities) as they become
absolute or matured or (ii) it is incurring debts beyond its ability to pay as
such debts mature. There can be no assurance as to what standard a court would
apply in order to determine whether the Company or a Subsidiary Guarantor was
"insolvent" as of the date any of the Senior Notes or Subsidiary Guarantees were
issued, or that, regardless of the method of valuation, a court would not
determine that the Company or a Subsidiary Guarantor was insolvent on that date.
Nor can there be any assurance that a court would not determine, regardless of
whether the Company or a Subsidiary Guarantor was insolvent on the date any
Senior Note or Subsidiary Guarantee was issued, that the payments constituted
fraudulent transfers on another ground. To the extent that proceeds from the
sale of the Senior Notes are used to make a distribution to the stockholder of
the Company on account of the ownership of capital stock, a court may find that
the Company or a Subsidiary Guarantor did not receive fair consideration or
reasonably equivalent value for the incurrence of the indebtedness represented
by such Senior Notes or any related Subsidiary Guarantee, as the case may be.
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THE COMPANY
The Company is a holding company organized in September 1996 under the
Delaware General Corporation Law. Its principal assets consist of all of the
capital stock of A.B. Dick and Curtis, each of which is a Delaware corporation.
The Company acquired all of the capital stock of A.B. Dick from GEC
Incorporated on January 17, 1997 for approximately $6.0 million (the "A.B. Dick
Acquisition"). As part of the A.B. Dick Acquisition, A.B. Dick transferred to
GEC Incorporated $19.5 million of domestic accounts receivable, which were
remitted to GEC Incorporated as collected by A.B. Dick after the closing of the
A.B. Dick Acquisition. The Company incurred $6.0 million of indebtedness in
connection with the A.B. Dick Acquisition, which indebtedness was discharged
with a portion of the net proceeds of the Series A Notes Offering. In connection
with the A.B. Dick Acquisition, the Company also agreed to pay to GEC
Incorporated 50% of all gross proceeds received from the sale, rental or lease
of any inventory relating to the Century 3500 series of printing presses, up to
a maximum amount of approximately $5.4 million. As of March 31, 1998, the
Company had paid GEC Incorporated approximately $2.2 million under this
arrangement. GEC Incorporated has agreed to fully indemnify the Company against
costs and liabilities in connection with certain claims that are pending or may
be brought against A.B. Dick and arise out of events occurring prior to the
closing of the A.B. Dick Acquisition. See "Business -- Legal Proceedings." A.B.
Dick is a manufacturer and marketer of printing products for the global quick
print and small commercial graphics markets.
The Company acquired all of the capital stock of Curtis from Noel Group,
Inc. and certain other shareholders on December 5, 1997 for approximately $22.2
million (the "Curtis Acquisition"). Curtis had approximately $29.2 million of
indebtedness at the time of the consummation of the Curtis Acquisition, which
indebtedness was assumed by the Company. The Company incurred $15.7 million of
indebtedness in connection with the Curtis Acquisition, which indebtedness was
discharged with a portion of the net proceeds of the Series A Notes Offering.
Curtis supplies consumable, high margin, multiple-purpose products used in the
automotive and industrial markets, with an increasing focus on providing
value-added logistics services.
NES Group, Inc., the sole stockholder of the Company, is a Cleveland,
Ohio-based holding company with subsidiaries engaged in the manufacture and sale
of industrial products, equipment and machinery, the provision of engineering,
industrial and computer personnel services and the development and management of
real estate.
The Company's principal executive offices are located at 5700 West Touhy
Avenue, Niles, Illinois 60714 and its telephone number is (847) 779-2500.
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THE EXCHANGE OFFER
BACKGROUND
Upon the respective terms and conditions of the Indenture and the Purchase
Agreement, the Series A Notes were issued and sold by the Company to the Initial
Purchasers on April 1, 1998 (the "Series A Issue Date"). Thereafter, the Series
A Notes were resold by the Initial Purchasers to certain purchasers in reliance
upon one or more exemptions from the registration requirements of the Securities
Act. Pursuant to the Registration Rights Agreement entered into by the Company,
the Subsidiary Guarantors and the Initial Purchasers as a condition to the
obligations of the Initial Purchasers under the Purchase Agreement, the Company
and the Subsidiary Guarantors agreed that, unless the Exchange Offer is not
permitted by applicable law, they would (i) cause to be filed with the
Commission, on or prior to 60 days after the Series A Issue Date, a Registration
Statement under the Securities Act relating to the Series B Notes, (ii) use
their reasonable best efforts to cause the Registration Statement to become
effective at the earliest possible time, but in no event later than 150 days
after the Series A Issue Date and (iii) upon effectiveness of the Registration
Statement, commence the Exchange Offer, maintain the effectiveness of the
Registration Statement for at least 20 business days (or a longer period if
required by law) and deliver to the Exchange Agent Series B Notes in the same
aggregate principal amount as the Series A Notes that were tendered by the
holders thereof pursuant to the Exchange Offer. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Registration Statement of which this
Prospectus is a part is intended to satisfy certain of the obligations of the
Company and the Subsidiary Guarantors under the Registration Rights Agreement
and the Purchase Agreement.
GENERAL
This Prospectus, together with the Letter of Transmittal, is being sent to
all beneficial owners of Series A Notes who are known to the Company as of the
date hereof. Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal, the Company will
accept all Series A Notes properly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of Series B Notes in exchange for each $1,000 principal amount
of outstanding Series A Notes accepted in the Exchange Offer. Holders may tender
some or all of their Series A Notes pursuant to the Exchange Offer, but Series A
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Series B Notes are the same as the form and terms
of the Series A Notes, except that the Series B Notes have been registered under
the Securities Act and holders of the Series B Notes will not be entitled to
certain registration and exchange rights granted to the holders of the Series A
Notes under the Registration Rights Agreement, which rights will terminate upon
the consummation of the Exchange Offer. The Series B Notes will evidence the
same debt as the Series A Notes for which they are exchanged and will be issued
under, and be entitled to the benefits of, the Indenture, which also authorized
the issuance of the Series A Notes, such that both series will be treated as a
single class of debt securities under the Indenture.
As of the date of this Prospectus, $115 million aggregate principal amount
of the Series A Notes are outstanding and registered in the name of Cede & Co.,
as nominee for the Depository Trust Company ("DTC"). Only a registered holder of
the Series A Notes, as reflected on the records of the Trustee under the
Indenture, or such holder's legal representative or attorney-in-fact (including
any beneficial owner of Series A Notes that obtains a properly completed bond
power and proxy from the registered holder of such Series A Notes), may
participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Series A Notes entitled to participate in
the Exchange Offer.
Holders of the Series A Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
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The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Series A Notes for the purposes of receiving the Series B Notes from
the Company and delivering Series B Notes to such holders. If any tendered
Series A Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Series A Notes are withdrawn or are
submitted for a greater principal amount than the holders desire to exchange,
such unaccepted, withdrawn or non-exchanged Series A Notes will be returned
without expense to the tendering holder thereof (or, in the case of Series A
Notes tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described below, such Series A
Notes will be credited to an account maintained with DTC) as promptly as
practicable after the Expiration Date.
Holders of Series A Notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below in connection with
the Exchange Offer. See " -- Fees and Expenses."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer pursuant to the
Registration Rights Agreement. No underwriter is being used in connection with
the Exchange Offer.
EXPIRATION DATE; DELAY, EXTENSION, AMENDMENT AND TERMINATION
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series A Notes, (ii) to extend the Exchange Offer, (iii) to amend
the terms of the Exchange Offer or (iv) to terminate the Exchange Offer.
However, in all cases, the Exchange Offer will remain open for at least 20
business days and, in the event the Company decreases the percentage of Series A
Notes being sought, the Exchange Offer will remain open for at least ten
business days from the date notice of such decrease is first published or sent
or given to the holders of the Series A Notes. Any delay, extension, amendment
or termination will be followed as promptly as practicable by oral or written
notice to the Exchange Agent and a public announcement thereof. In the case of
an extension, such public announcement shall include disclosure of the
approximate number of Series A Notes deposited to date and shall be made prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company may
choose to make a public announcement of any extension, amendment or termination
of the Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones News Service.
INTEREST ON THE SERIES B NOTES
The Series B Notes will bear interest from April 1, 1998, payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1998,
at the rate of 9 5/8% per annum. Holders of Series A Notes whose Series A Notes
are accepted for exchange will receive interest, as interest on the Series B
Notes, accrued from the Series A Issue Date and will be deemed to have waived
the right to receive interest accrued on the Series A Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder of Series A Notes must properly
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent. In addition, either (i) certificates for such Series A Notes
must be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) a timely confirmation of a book-entry transfer (a "Book-Entry
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Confirmation") of such Series A Notes, if such procedure is available, into the
Exchange Agent's account at DTC pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below.
The tender by a holder of Series A Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO
THE EXCHANGE AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Series A Notes, either make appropriate arrangements to register
ownership of the Series A Notes in such owner's name or obtain a properly
completed bond power from the registered holder and a proxy which authorizes
such owner to tender the Series A Notes on behalf of the registered holder, in
each case signed by the registered holder as the name of such registered holder
appears on the Series A Notes. The transfer of record ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (an "Eligible Institution") unless the Series A Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or other acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority so to act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Series A Notes.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Series A Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Series A
Notes not properly tendered or any Series A Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
presently intends to notify holders of defects or irregularities with respect to
tenders of Series A Notes, neither the Company, the Exchange Agent nor any other
person shall be under any duty to give such notification, nor shall any of them
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incur any liability for failure to give such notification. Tenders of Series A
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Series A Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder by the Exchange
Agent to the tendering holders of Series A Notes, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration Date.
While the Company has no present plan to acquire any Series A Notes which
have not been tendered in the Exchange Offer or to file a registration statement
to permit resales of Series A Notes which are not tendered pursuant to the
Exchange Offer, subject to the terms of the Indenture, the Company reserves the
right in its sole discretion to (i) purchase or make offers for any Series A
Notes that remain outstanding subsequent to the Expiration Date and (ii) to the
extent permitted by applicable law, terminate the Exchange Offer and purchase
Series A Notes in the open market, in privately negotiated transactions or
otherwise. The term of any such purchases or offers will differ from the terms
of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) it is not an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company, (ii) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes, and (iii) it is acquiring
the Series B Notes in the ordinary course of business.
Each broker-dealer that receives Series B Notes for its own account in
exchange for Series A Notes, where such Series A Notes were acquired by such
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Series B Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Series B Notes received in
exchange for Series A Notes where such Series A Notes were acquired by such
broker-dealer as result of market-making activities or other trading activities.
The Company has agreed that, for a period of 120 days after the consummation of
the Exchange Offer, it will make this Prospectus, as it may be amended or
supplemented from time to time, available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (a) whose Series A
Notes are not immediately available or (b) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(i) the tender is made through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the
Series A Notes, the certificate number or numbers of such Series A
Notes and the principal amount of Series A Notes tendered, stating
that the tender is being made thereby, and guaranteeing that, within
three business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Series A Notes to be tendered in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within three business days after the Expiration Date.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for exchange.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Series A Notes),
(iii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Series A Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Series A Notes register the
transfer of such Series A Notes into the name of the Depositor withdrawing the
tender and (iv) specify the name in which any such Series A Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Series A Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Series B
Notes will be issued with respect thereto unless the Series A Notes so withdrawn
are validly retendered. Properly withdrawn Series A Notes may be retendered by
following one of the procedures described above under " -- Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
The Exchange Offer is subject to certain customary conditions which may be
waived by the Company. The conditions are limited and relate in general to
proceedings which have been instituted or laws which have been adopted that
might impair the ability of the Company to proceed with the Exchange Offer.
Notwithstanding any other term of the Exchange Offer, if the Exchange Offer
violates applicable law, rule or regulation or an applicable interpretation of
the staff of the Commission, (i) the Company will not be required to accept for
exchange, or exchange Series B Notes for, any Series A Notes not theretofore
accepted for exchange and (ii) the Company may delay accepting any Series A
Notes, amend the terms of the Exchange Offer, or extend or terminate the
Exchange Offer, as provided herein. All conditions (other than certain necessary
government approvals, if any, required to consummate the offer) must be
satisfied or waived prior to the Expiration Date. See "Expiration Date; Delay,
Extension, Amendment and Termination."
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or the Letter of Transmittal and
deliveries of completed Letters of Transmittal with tendered Series A Notes
should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0069
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55479-0113 (612) 667-9764
</TABLE>
25
<PAGE> 27
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telephone or facsimile.
The Company will not make any payments to brokers, dealers, or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of Transmittal
and related documents to the beneficial owners of the Series A Notes, and in
handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including registration fees, fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and expenses, and printing costs, will be
paid by the Company and are estimated in the aggregate to be approximately
$200,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Series A Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of Series A Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Series A
Notes are urged to consult their financial and tax advisors prior to determining
whether or not to tender their Series A Notes.
Series A Notes which are not exchanged for the Series B Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to a person whom the seller reasonably believes is
a qualified institutional buyer (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, (ii) in a
transaction meeting the requirements of Rule 144 under the Securities Act, (iii)
in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S
under the Securities Act, (iv) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act that, prior to such transfer, furnishes the trustee a signed letter
containing certain representations and agreements relating to the transfer of
the Senior Notes and, if such transfer is in respect of an aggregate principal
amount of Senior Notes less than $250,000, an opinion of counsel, (v) in
accordance with another exemption from the registration requirements of the
Securities Act, (vi) to the Company or (vii) pursuant to an effective
registration statement and, in each case, in accordance with any applicable
securities laws of any state of the United States.
RESALE OF THE SERIES B NOTES
With respect to the Series B Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer that
purchases such Series B Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges the Series A Notes for the Series B
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement with any person to participate, in
the distribution of the Series B Notes, will be allowed to resell the Series B
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Series B Notes a prospectus that
satisfies the requirements of
26
<PAGE> 28
Section 10 of the Securities Act. However, if any holder acquires the Series B
Notes in the Exchange Offer for the purpose of distributing or participating in
the distribution of the Series B Notes or is a broker-dealer, such holder cannot
rely on the position of the staff of the Commission enumerated in certain
no-action letters issued to third parties and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives Series B Notes for its own account
in exchange for Series A Notes, where such Series A Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Series B Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Series B Notes
received in exchange for Series A Notes where such Series A Notes were acquired
by such broker-dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Company has agreed to make
this Prospectus, as it may be amended or supplemented from time to time,
available to broker-dealers for use in connection with any resale for a period
of 120 days after consummation of the Exchange Offer. See "Plan of
Distribution."
ACCOUNTING TREATMENT
The Company will not recognize any gain or loss for accounting purposes
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Series B Notes.
27
<PAGE> 29
CAPITALIZATION
The following table sets forth the (i) actual consolidated cash and
capitalization of the Company at December 31, 1997 and (ii) the consolidated
cash and capitalization of the Company at December 31, 1997 as adjusted to give
effect to the Series A Notes Offering and the application of the net proceeds
therefrom, as if the same had occurred as of such date. The table should be read
in conjunction with the Unaudited Pro Forma Consolidated Financial Statements of
the Company and the related notes thereto and the Consolidated Financial
Statements included elsewhere in this Prospectus. See "Selected Historical
Financial Data," "Unaudited Pro Forma Consolidated Financial Statements" and the
Consolidated Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DEC. 31, 1997
---------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
Cash, cash equivalents and short term investments........... $ 7,459 $ 37,885
======= ========
Long-term obligations (including current portion):
9 5/8% Senior Notes offered hereby........................ $ -- $115,000
New Credit Agreement(1)................................... -- 0
Promissory note payable to GEC(2)......................... 6,000 --
Promissory notes payable to former Curtis
shareholders(3)........................................ 15,700 --
Curtis term loan.......................................... 12,000 --
Curtis revolving credit agreement......................... 12,085 --
Curtis subordinated debentures............................ 9,189 --
A.B. Dick revolving credit agreement...................... 14,000 --
Note payable to Lander (4)................................ 460 --
Capital lease obligations................................. 1,182 1,182
------- --------
Total long-term obligations............................ 70,616 116,182
Total stockholder's equity (deficit)................... 7,131 (3,468)
------- --------
Total capitalization........................................ $77,747 $112,714
======= ========
</TABLE>
- ---------------
(1) As of the closing of the Series A Notes Offering, $32.0 million was
available for borrowing under the New Credit Agreement.
(2) Promissory note issued to GEC Incorporated in connection with the A.B. Dick
Acquisition. The note was paid in full from the net proceeds of the Series A
Notes Offering.
(3) Promissory notes issued to Curtis shareholders in connection with the Curtis
Acquisition. The notes were paid in full from the net proceeds of the Series
A Notes Offering.
(4) The note payable to Lander Enterprises Co. L.P. was issued by Curtis in
connection with a $0.5 million build-out allowance for Curtis' corporate
headquarters and was paid in full from the net proceeds of the Series A
Notes Offering. See "Related Transactions -- Curtis Office Lease."
28
<PAGE> 30
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents: (i) unaudited historical consolidated
financial data of A.B Dick for the two years ended March 31, 1994 and 1995,
which have been derived from unaudited consolidated financial statements of A.B.
Dick; (ii) historical consolidated financial data of A.B. Dick for the year
ended March 31, 1996 and for the period from April 1, 1996 through January 16,
1997, which have been derived from the audited consolidated financial statements
of A.B. Dick; (iii) historical consolidated financial data of the Company for
the period from January 17, 1997 through December 31, 1997 which have been
derived from the audited consolidated financial statements of the Company; and
(iv) historical consolidated financial data of Curtis for each of the four years
during the period ended December 28, 1996 and for the eleven month period ended
December 5, 1997, which have been derived from the audited consolidated
financial statements of Curtis. In the opinion of management, the unaudited
financial data of A.B. Dick for the two years ended March 31, 1994 and 1995
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of such data. The information presented below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
as described elsewhere herein.
29
<PAGE> 31
<TABLE>
<CAPTION>
A.B. DICK THE COMPANY
-------------------------------------------- -----------
APRIL 1, JAN. 17,
1996 1997
FISCAL YEAR ENDED MARCH 31, THROUGH THROUGH
-------------------------------- JAN. 16, DEC. 31,
1994 1995 1996 1997 1997
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue....................... $273,888 $245,755 $215,363 $157,414 $193,216
Cost of revenue................... 193,509 174,013 152,837 115,058 129,651
-------- -------- -------- -------- --------
Gross profit...................... 80,379 71,742 62,526 42,356 63,565
Sales and marketing expenses...... 41,779 36,661 32,500 23,574 26,386
General and administrative
expenses........................ 24,597 24,080 24,272 15,248 17,603
Pension credit(1)................. (4,512) (6,596) (5,057) (7,013)
Research and development.......... 7,371 7,708 7,923 4,111 3,755
Depreciation and
amortization.................... 9,385 7,856 8,922 7,053 1,481
Management fee.................... 1,941
Acquisition costs(2).............. 1,400
-------- -------- -------- -------- --------
Operating income (loss)........... 1,759 2,033 (6,034) (617) 10,999
Interest income................... 747 1,585 1,620 998 789
Interest expense.................. (134) (162) (205) (2,598)
Other income (expense)............ (374) (807) (887) (631) 139
-------- -------- -------- -------- --------
Income before income taxes........ 2,132 2,677 (5,463) (455) 9,329
Foreign income taxes.............. 714 613 941 651 775
-------- -------- -------- -------- --------
Net income (loss)................. $ 1,418 $ 2,064 $ (6,404) $ (1,106) $ 8,554
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(3)......................... $ 6,632 $ 3,293 $ (2,169) $ (577) $ 13,880
Cash provided by operating
activities...................... N/A N/A 8,523 7,481 15,085
Cash used in investing
activities...................... N/A N/A (5,528) (3,960) (28,684)
Cash provided by (used in)
financing activities............ N/A N/A (4,468) (26,479) 15,253
Depreciation and amortization..... 9,385 7,856 8,922 7,053 1,481
Capital expenditures.............. 2,783 3,277 5,528 3,960 1,860
Ratio of earnings to fixed
charges(4)...................... 2.2x 3.2x -- -- 3.8x
</TABLE>
<TABLE>
<CAPTION>
A.B. DICK THE COMPANY
-------------------------------- -----------------------
AS OF MARCH 31, AS OF AS OF
-------------------------------- JAN. 17, DEC. 31,
1994 1995 1996 1997 1997
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short
term investments................ $ 28,018 $ 27,039 $ 25,912 $ 8,280 $ 7,459
Total assets...................... 140,857 132,837 116,561 58,041 138,075
Long-term debt, including current
portion......................... 1,619 2,298 2,007 8,016 70,616
Stockholders' equity.............. 97,081 90,151 77,138 48 7,131
</TABLE>
- ---------------
(1) A.B. Dick (Predecessor) maintained a defined benefit pension plan (the
"Plan") for its manufacturing employees. The Plan was significantly
overfunded as of March 31, 1993 and, accordingly, in accordance with FASB
Statement No. 87, "Employers' Accounting for Pensions," pension credits were
recognized for each of the three years in the period ended March 31, 1996
and for the period from April 1, 1996 through January 16, 1997. In
connection with the sale of A.B. Dick on January 16, 1997, GEC Incorporated
assumed all obligations existing under the Plan.
(2) Represents nonrecurring compensation awards granted to certain executives in
connection with the Curtis acquisition.
30
<PAGE> 32
(3) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, miscellaneous income (expenses), pension credit and for 1997
excludes $1,400 of acquisition costs incurred in connection with the Curtis
acquisition. EBITDA should not be considered as an alternative to cash
provided by operations as a measure of liquidity, or to net income as a
measure of profitability. EBITDA and related ratios have been included
because the Company uses them as one means of analyzing its ability to
service its debt, the Company's lenders use them for the purpose of
analyzing the Company's performance with respect the New Credit Agreement
and the Indenture and the Company understands that they are used by certain
investors as one measure of a company's historical ability to service debt.
Not all companies calculate EBITDA in the same fashion and therefore EBITDA
as presented may not be comparable to other similarly titled measures of
other companies.
(4) Earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and one-third of the rent expense from operating leases, which
management believes is a reasonable approximation of an interest factor.
Earnings were inadequate to cover fixed charges in the fiscal year ended
March 31, 1996 and the period from April 1, 1996 through January 16, 1997 by
$5,463 and $455, respectively.
31
<PAGE> 33
<TABLE>
<CAPTION>
CURTIS
------------------------------------------------------------------------
FISCAL YEAR ENDED ELEVEN MONTHS
------------------------------------------------------- ENDED
JANUARY 1, DECEMBER 31, DECEMBER 30, DECEMBER 28, DECEMBER 5,
1994 1994 1995 1996 1997
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................... $ 65,594 $ 66,614 $ 68,842 $ 77,072 $ 74,203
Cost of revenue................ 24,555 25,843 26,886 31,175 31,141
-------- -------- -------- -------- --------
Gross profit................... 41,039 40,771 41,956 45,897 43,062
Direct selling expenses........ 15,697 15,239 16,685 17,713 16,199
Selling, general and
administrative expenses...... 20,930 19,345 18,451 21,201 19,274
Depreciation and
amortization................. 2,906 2,528 2,460 2,053 1,624
Nonrecurring charges(1)........ 2,215 1,707
-------- -------- -------- -------- --------
Operating income from
continuing
operations................... 1,506 1,444 2,653 4,930 5,965
Interest expense, net.......... 3,285 3,621 3,678 3,687 3,511
Other expense, net............. 13 83
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before income
tax.......................... (1,779) (2,177) (1,025) 1,230 2,371
Foreign income taxes........... 65 123 15 63 50
-------- -------- -------- -------- --------
Income (loss) from
continuing operations........ $ (1,844) $ (2,300) $ (1,040) $ 1,167 $ 2,321
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)...................... $ 4,412 $ 6,187 $ 6,820 $ 6,983 $ 7,589
Cash provided by operating
activities................... N/A N/A 919 3,336 4,031
Cash provided by (used in)
investing activities......... N/A N/A 7,630 (7,943) (2,542)
Cash provided by (used in)
financing activities......... N/A N/A (9,929) 3,466 (500)
Depreciation and
amortization................. 2,906 2,528 2,460 2,053 1,624
Capital expenditures........... 2,016 1,018 743 3,120 2,542
Ratio of earnings to fixed
charges(3)................... -- -- -- 1.3x 1.6x
</TABLE>
<TABLE>
<CAPTION>
CURTIS
------------------------------------------------------------------------
AS OF AS OF AS OF AS OF AS OF
JANUARY 1, DECEMBER 31, DECEMBER 30, DECEMBER 28, DECEMBER 5,
1994 1994 1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short term investments....... $ 959 $ 1,021 $ 1,207 $ 715 $ 1,680
Total assets................... 42,274 41,757 28,468 34,504 33,633
Long-term debt, including
current portion.............. 31,665 33,835 24,226 28,038 27,870
Redeemable preferred stock..... 23,024 24,507 25,991 27,475 28,856
Stockholders' (deficit)........ (29,271) (34,396) (38,358) (38,530) (37,614)
</TABLE>
- ---------------
(1) Nonrecurring charges in 1994 include $1,500 to reflect a postretirement
liability for UAW employees as the result of a strike settlement and $715
for costs incurred in a business combination that was not completed.
Nonrecurring charges in 1995 include $732 related to severance and other
benefit costs and the write-down of an intangible asset to net realizable
value in connection with the shutdown of manufacturing operations and $975
related to a payroll tax assessment.
(2) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, other income (expense), and excludes nonrecurring charges of
$2,215 in 1994 and $1,707 in 1995. EBITDA should not be considered as an
alternative to cash provided by operations as a measure of liquidity, or to
net income as a measure of profitability. EBITDA and related ratios have
been included because the Company uses them as one means of analyzing its
ability to service its debt, the Company's lenders use them for the purpose
of analyzing the Company's performance with respect to the New Credit
Agreement and the
32
<PAGE> 34
Indenture and the Company understands they are used by certain investors as
one measure of a company's historical ability to service debt. Not all
companies calculate EBITDA in the same fashion and therefore EBITDA as
presented may not be comparable to other similarly titled measures of other
companies.
(3) Earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and one-third of the rent expense from operating leases, which
management believes is a reasonable approximation of an interest factor.
Earnings were inadequate to cover fixed charges in the fiscal years ended
January 1, 1994, December 31, 1994 and December 30, 1995 by $1,779, $2,177
and $1,025, respectively.
33
<PAGE> 35
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements are
based upon the historical Consolidated Financial Statements included elsewhere
in this Prospectus.
The Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1997 is
adjusted to give effect to (i) the Series A Notes Offering and (ii) the
application of the net proceeds therefrom as if such transactions had taken
place on December 31, 1997. The Unaudited Pro Forma Consolidated Statement of
Income for the year ended December 31, 1997 is adjusted to give effect to (i)
the Series A Notes Offering, (ii) the application of the net proceeds therefrom
and (iii) the acquisition of Curtis as if such transactions had occurred on
January 1, 1997.
The unaudited pro forma adjustments are based on available information and
certain assumptions which management believes are factually supportable. The
Unaudited Pro Forma Consolidated Financial Statements do not purport to
represent what the Company's consolidated results of operations or consolidated
financial position would have been had the transactions described above actually
occurred on the dates presented. In addition, the Unaudited Pro Forma
Consolidated Financial Statements do not purport to project the Company's
consolidated results of operations or the consolidated financial position for
the current year or any future date or period.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the historical Consolidated Financial Statements included
elsewhere in this Prospectus.
34
<PAGE> 36
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------------------
THE OFFERING AS
COMPANY ADJUSTMENTS(1) ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 3,283 $ 30,426(a) $ 33,709
Short-term investments................................ 4,176 4,176
Accounts receivable, net.............................. 37,821 37,821
Inventories........................................... 48,068 48,068
Prepaid assets........................................ 1,535 1,535
-------- -------- --------
Total current assets............................... 94,883 30,426 125,309
Property, plant and equipment, net...................... 9,998 9,998
Goodwill................................................ 32,072 32,072
Other assets............................................ 1,122 4,500(b) 5,263
(359)(c)
-------- -------- --------
$138,075 $ 34,567 $172,642
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable...................................... $ 14,143 $ -- $ 14,143
Accrued expenses...................................... 28,599 (400)(c) 28,199
Deferred service revenue.............................. 6,960 6,960
Amounts to GEC........................................ 945 945
Restructuring and severance reserves.................. 3,121 3,121
Current maturities of capital lease obligations....... 746 746
Current maturities of long-term debt.................. 2,749 (2,749)(d)
-------- -------- --------
Total current liabilities.......................... 57,263 (3,149) 54,114
Long-term debt, less current maturities:
9 5/8% Senior Notes.................................. 115,000(e) 115,000
Revolving credit agreements........................... 26,084 (26,084)(d)
Notes payable to former shareholders.................. 20,700 (20,700)(d)
Term loan............................................. 10,286 (10,286)(d)
Subordinated debentures............................... 9,189 (9,189)(d)
Capital lease obligations............................. 436 436
Other notes........................................... 426 (426)(d)
-------- -------- --------
67,121 48,315 115,436
Retirement obligations.................................. 3,451 3,451
Other long-term liabilities............................. 3,109 3,109
-------- -------- --------
Total liabilities.................................. 130,944 45,166 176,110
-------- -------- --------
Total stockholder's equity (deficit).................... 7,131 (10,000)(f) (3,468)
(359)(c)
(640)(c)
400(c)
-------- -------- --------
$138,075 $ 34,567 $172,642
======== ======== ========
</TABLE>
35
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
(1) Adjustments to reflect the Series A Notes Offering:
(a) Represents the excess of the cash proceeds received from the Series A
Notes Offering.
(b) Represents estimated capitalized financing costs associated with the
Series A Notes Offering.
(c) Represents write-off of $359 in capitalized financing costs and early
termination charge of $640 associated with the termination of the
existing A.B. Dick revolving credit agreement, offset by $400 reduction
in accrued dividend for stockholders' income taxes.
(d) Represents repayment of existing indebtedness with a portion of the net
proceeds of the Series A Notes Offering.
(e) Represents the gross proceeds of the Series A Notes Offering.
(f) Represents payment of a dividend to the sole stockholder of the
Company.
36
<PAGE> 38
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------------------------
ACQUISITION PRO FORMA OFFERING
THE ADJUSTMENTS FOR ADJUSTMENTS PRO
COMPANY CURTIS (1) ACQUISITION (2) FORMA
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Equipment............... $ 64,620 $ -- $ -- $64,620 $ -- $ 64,620
Service................. 27,808 27,808 27,808
Repair parts............ 15,976 15,976 15,976
Supplies................ 77,911 77,911 77,911
Automotive and
industrial............ 6,901 74,203 81,104 81,104
-------- ------- ------- ------- -------- --------
Total net revenue......... 193,216 74,203 267,419 267,419
Cost of revenue:
Equipment............... 46,559 46,559 46,559
Service................. 20,596 20,596 20,596
Repair parts............ 6,695 6,695 6,695
Supplies................ 52,967 52,967 52,967
Automotive and
industrial............ 2,834 31,141 33,975 33,975
-------- ------- ------- ------- -------- --------
Total cost of revenue..... 129,651 31,141 160,792 160,792
-------- ------- ------- ------- -------- --------
Gross profit.............. 63,565 43,062 106,627 106,627
Costs and expenses:
Sales and marketing
expenses.............. 26,386 16,199 42,585 42,585
General and
administrative
expenses.............. 17,603 19,274 36,877 36,877
Research and
development........... 3,755 3,755 3,755
Depreciation and
amortization.......... 1,481 1,624 1,240(a) 4,345 4,345
Management fee.......... 1,941 1,941 (770)(a) 1,171
Acquisition costs....... 1,400 1,400 1,400
-------- ------- ------- ------- -------- --------
Total costs and
expenses................ 52,566 37,097 1,240 90,903 (770) 90,133
Operating income.......... 10,999 5,965 (1,240) 15,724 770 16,494
Interest income........... 789 (229)(b) 560 560
Interest expense.......... (2,598) (3,511) (706)(c) (6,815) (4,837)(b) (11,652)
Other income (expense).... 139 (83) 56 56
-------- ------- ------- ------- -------- --------
Income before income
taxes................... 9,329 2,371 (2,175) 9,525 (4,067) 5,458
Foreign income taxes...... 775 50 825 825
-------- ------- ------- ------- -------- --------
Net income................ $ 8,554 $ 2,321 $(2,175) $ 8,700 $ (4,067) $ 4,633
======== ======= ======= ======= ======== ========
OTHER DATA:
EBITDA(3)............... $ 13,880 $ 7,589 $ -- $21,469 $ 770 $ 22,239
Depreciation and
amortization.......... 1,481 1,624 1,240 4,345 4,345
Capital expenditures.... 1,860 2,542 4,402 4,402
Total interest
expense............... 11,652
Cash interest
expense(4)............ 11,169
Ratio of EBITDA to cash
interest expense...... 2.0x
Ratio of net debt to
EBITDA(5)............. 3.5
Ratio of earnings to
fixed charges(6)...... 1.4
</TABLE>
37
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
(1) Adjustments to reflect the Curtis Acquisition:
(a) Reflects increased depreciation expense of $264 related to the write-up
of property, plant and equipment acquired in the acquisition and
increased amortization expense of $976 related to goodwill incurred in
connection with the acquisition. The goodwill is being amortized over
30 years.
(b) Represents the reduction in interest income due to the use of $2,500 in
short-term investments to partially fund the Curtis Acquisition.
(c) Represents the assumed change in interest expense related to the
acquisition which was calculated as follows:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT INTEREST
OF DEBT EXPENSE
<S> <C> <C>
Curtis Seller Notes, interest at 7%......................... $15,700 $1,007
Borrowing on Line of Credit, interest at 9.25%.............. 4,000 339
Reduction of interest expense due to refinancing of Senior
Subordinated Notes (12% interest rate) with new Term Loan
(9.156% interest rate).................................... 12,000 (313)
Elimination of amortization of original issue discount on
Subordinated Notes........................................ (327)
------
$ 706
======
</TABLE>
(2) Adjustments to reflect the Series A Notes Offering:
(a) To reflect the reduction in the management fees owed to NESCO, Inc.
Management fees are limited to 5% of EBITDA based upon the terms of the
Indenture governing the Senior Notes.
(b) To reflect the interest expense on a pro forma basis at the following
rates:
<TABLE>
<CAPTION>
INTEREST
EXPENSE
<S> <C>
Historical interest expense................................. $ 6,109
Curtis acquisition interest expense......................... 706
-------
Pro forma interest expense after Curtis acquisition......... $ 6,815
=======
9 5/8% Senior Notes......................................... $11,069
Other, at an assumed blended rate of 8.5%................... 100
-------
Cash interest expense..................................... 11,169
Amortization of financing fees.............................. 450
Amortization of letter of credit fees....................... 33
-------
Total pro forma interest expense............................ $11,652
-------
Pro forma interest adjustment............................... $ 4,837
=======
</TABLE>
(3) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, miscellaneous income (expenses) and for 1997 excludes $1,400
of acquisition costs incurred in connection with the Curtis acquisition.
EBITDA gives effect, on a pro forma basis, to $1,171 in management fees to
be paid pursuant to the Management Agreement. EBITDA should not be
considered as an alternative to cash provided by operations as a measure of
liquidity, or to net income as a measure of profitability. EBITDA and
related ratios have been included because the Company uses them as one means
of analyzing its ability to service its debt, the Company's lenders use them
for the purpose of analyzing the Company's performance with respect to the
New Credit Agreement and the Indenture and the Company understands that they
are used by certain investors as one measure of a company's historical
ability to service
38
<PAGE> 40
debt. Not all companies calculate EBITDA in the same fashion and therefore
EBITDA as presented may not be comparable to other similarly titled measures
of other companies.
(4) Cash interest expense excludes amortization of deferred financing costs.
(5) Net debt represents total debt, net of cash and cash equivalents and
short-term investments as of December 31, 1997 on an as adjusted basis.
(6) Earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and the portion of rental expense that is representative of interest
expense.
39
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company, through its two wholly-owned subsidiaries, is engaged in (i)
the distribution of automotive and industrial supplies and (ii) the manufacture
and distribution of printing equipment and supplies. The Company's distribution
business supplies consumable, high margin, multiple-purpose products used in the
automotive and industrial markets, with an increasing focus on providing
value-added logistics services. The Company's printing equipment and supplies
business is a leading manufacturer and marketer of printing products for the
global quick print and small commercial graphics markets.
The Company's distribution business generally markets its products under
its proprietary brand names, Curtis(R) and Mechanics Choice(R). The Company
acquired the Mechanics Choice(R) business in May 1996 from Avnet, Inc.,
resulting in an expansion of the Company's MRO product line and sales force. In
1996, the Company also introduced the PC+ code cutter, which can generate keys
on a computerized basis from code numbers. The Company believes the PC+ code
cutter has strengthened the Company's market share in sales to U.S. auto dealers
due to, among other things, its competitive price and product quality. The
Company's distribution products are sold to approximately 55,000 customers in
the automotive and industrial markets. The automotive market consists of
passenger car, truck and recreational vehicle dealers, business and government
entities performing internal automotive maintenance, rental car companies and
independent sales and service establishments. The industrial market is comprised
of businesses engaged in in-plant maintenance and repair, private fleet
maintenance and off-road equipment maintenance. A number of automotive and
industrial customers are classified by the Company as "national accounts," which
are multiple-location customers with centralized purchasing authority.
The Company's printing equipment and supplies business can be classified
into four broad categories: (i) pre-press equipment, (ii) offset presses, (iii)
other related equipment and (iv) supplies, after-market repair services and
replacement parts. The printing equipment and supplies business manufactures its
own products, which are principally sold under the A.B. Dick(R) and Itek
Graphix(R) labels, and also distributes products manufactured by third parties.
The Company also provides after-market maintenance and repair services for much
of the large installed base of its printing equipment operated by its customers.
The Company's printing equipment and supplies business principally serves the
small print equipment market. The Company's printing equipment and supplies
products are marketed to commercial, franchise and independent print shops,
in-plant print shops and governmental and educational institutions through
direct marketing by employees of the Company, as well as through the Company's
network of independent dealers and distributors.
CURTIS
RESULTS OF OPERATIONS
The following table sets forth, on a comparative basis, certain income
statement data as a percentage of net revenue for the 1995 and 1996 fiscal
years, the eleven months ended December 5, 1997, and the 1997 fiscal year.
Income statement data for the period ended December 5, 1997 has been included in
the table because
40
<PAGE> 42
the Company acquired all of the capital stock of Curtis on such date. For
comparative purposes, unaudited income statement data for the full year ended
December 31, 1997 have also been included in the table.
<TABLE>
<CAPTION>
PERIOD ENDED
------------------------------------------------------------
DECEMBER 30, DECEMBER 28, DECEMBER 5, DECEMBER 31,
1995 1996 1997(1) 1997
<S> <C> <C> <C> <C>
Net revenue............................. 100.0% 100.0% 100.0% 100.0%
Cost of revenue......................... 39.1% 40.4% 42.0% 41.9%
Gross profit............................ 60.9% 59.6% 58.0% 58.1%
Total expenses.......................... 57.1%(2) 53.2% 50.0% 50.4%
Operating income........................ 3.9% 6.4% 8.0% 7.7%
EBITDA(3)............................... 9.9% 9.1% 10.2% 10.2%
</TABLE>
- ---------------
(1) The period ended December 5, 1997 represents an eleven-month period.
(2) Includes nonrecurring charges of $1.7 million.
(3) EBITDA represents earnings before interest, income taxes, depreciation,
amortization and miscellaneous income (expense).
Eleven months ended December 5, 1997 versus fiscal year ended December 28, 1996
Net Revenue. Net revenue decreased $2.9 million, or 3.8%, to $74.2 million
for the eleven-month period ended December 5, 1997, from $77.1 million in fiscal
year 1996. For the full year, net revenue increased $4.0 million, or 5.2%. This
resulted from an increase of $7.2 million in net revenue attributable to a full
year of sales relating to the Mechanics Choice(R) business that was acquired by
Curtis in May 1996 as well as increased sales to national accounts and of key
code cutting equipment, offset by a decrease of $3.2 million in net revenue
attributable primarily to the impact of the elimination of certain sales
representatives subsequent to the Mechanics Choice(R) acquisition.
Gross Profit. Gross profit decreased $2.8 million, or 6.1%, to $43.1
million for the eleven-month period ended December 5, 1997 from $45.9 million in
fiscal year 1996. This decrease was primarily attributable to a decrease of
gross margin to 58.0% in the eleven-month period ended December 5, 1997 from
59.6% in fiscal year 1996. This decline is primarily attributable to an increase
in sales to national accounts and to increased Mechanics Choice(R) and PC+ code
cutter sales, all of which have slightly lower gross margins.
Total Expenses. Total expenses decreased $3.9 million, or 9.5%, to $37.1
million for the eleven-month period ended December 5, 1997, from $41.0 million
in fiscal year 1996. For the full year, expenses decreased to 50.4% of sales
from 53.2% of sales in fiscal year 1996. An increase in direct selling costs to
support the additional Mechanics Choice(R) sales were more than offset by the
decrease in sales and overhead costs related to the elimination of redundant
sales representatives.
EBITDA. As a result of the above factors, EBITDA increased $0.6 million,
or 8.6%, to $7.6 million for the eleven-month period ended December 5, 1997 from
$7.0 million in fiscal year 1996. For the full year, EBITDA increased by $1.3
million, or 18.6% to $8.3 million from $7.0 million in fiscal year 1996.
Fiscal year ended December 28, 1996 versus fiscal year ended December 30, 1995
Net Revenue. Net revenue increased $8.2 million, or 12.1%, to $77.1
million in 1996 from $68.8 million in 1995. This increase was attributable to
the addition of the Mechanics Choice(R) business and to increased sales of key
code cutting equipment. Sales under the Mechanics Choice(R) name accounted for
an additional $8.3 million in revenue and sales of key code cutting equipment
contributed an additional $1.3 million. This increase in revenue was offset by
the elimination of redundant sales representatives and the related attrition of
such sales representatives' customer base.
Gross Profit. Gross profit increased $3.9 million, or 9.3%, to $45.9
million in 1996 from $42.0 million in 1995. This increase was primarily
attributable to the impact of additional sales related to the Mechanics
41
<PAGE> 43
Choice(R) acquisition. Gross margin decreased to 59.6% in 1996 from 60.9% in
1995. The decline in gross margins was attributable to lower margins in the
Mechanics Choice(R) business, whose customer base had a greater concentration of
large accounts which are generally more price sensitive.
Total Expenses. Total expenses increased $1.7 million, or 4.3%, to $41.0
million in 1996 from $39.3 million in 1995. Of this increase, $2.5 million
represents increased selling and distribution costs related to the Mechanics
Choice(R) business. Total expenses as a percent of sales declined to 53.2% in
1996 from 57.1% in 1995 as a result of enhanced operating efficiency in
connection with greater product volumes obtained as a result of the Mechanics
Choice(R) acquisition and nonrecurring charges relating to the shut down of
certain manufacturing operations and settlement of certain tax matters.
EBITDA. As a result of the above factors, EBITDA increased $0.2 million,
or 2.9%, to $7.0 million in 1996 from $6.8 million in 1995.
A.B. DICK
RESULTS OF OPERATIONS
The Company believes that the historical financial information of A.B. Dick
for the periods prior to January 17, 1997, the date on which A.B. Dick was
acquired by the Company (the "Acquisition Date"), is not comparable in certain
respects with the financial data of A.B. Dick subsequent to such date. Prior to
the Acquisition Date, A.B. Dick maintained a defined benefit pension plan for
its manufacturing employees. This plan was overfunded as of March 31, 1995 and,
therefore, in accordance with FASB Statement No. 87, "Employers' Accounting for
Pensions," pension credits were recognized for the fiscal year ended March 31,
1996 and for the period from April 1, 1996 through January 16, 1997. In
connection with the sale of A.B. Dick on January 16, 1997, GEC Incorporated
assumed all existing obligations under this plan. Prior to the Acquisition Date,
A.B. Dick also provided post-retirement health care benefits to certain
retirees. Net periodic post-retirement benefits costs of approximately $4.7
million for the fiscal year ended March 31, 1996 and approximately $3.5 million
for the period from April 1, 1996 through January 16, 1997 were allocated to
A.B. Dick by GEC Incorporated based upon actuarial valuations in accordance with
FASB Statement No. 106, "Employers' Accounting for Post-retirement Benefits
Other Than Pensions." In connection with the sale of A.B. Dick on January 16,
1997, GEC Incorporated assumed all existing obligations under the
post-retirement health care benefits plan.
Subsequent to the Acquisition Date, the Company implemented a plan to
enhance the operating results and profitability of A.B. Dick. The principal
elements of this plan included the targeted reduction of approximately 160
employees, or 12.8% of the A.B. Dick workforce as of the Acquisition Date, which
the Company believes, based on historical levels of salaries and related
expenses, has the effect of reducing total costs and expenses by approximately
$6.3 million on an annual basis. In addition, the Company will terminate A.B.
Dick's occupancy of its existing 909,000 square foot facility by December 31,
1998 and intends to move to three leased facilities with an aggregate of
approximately 300,000 square feet. See Note A of Notes to Consolidated Financial
Statements of Paragon Corporate Holdings Inc. and A.B. Dick Company (The
Predecessor Company). These cost savings are based upon assumptions believed to
be reasonable by management of the Company and may be subject to adjustment.
During the periods presented, A.B. Dick sold a line of photocopiers
manufactured by Konica and provided service, repair parts and supplies related
thereto. In 1993, A.B. Dick determined that, due to the relatively low levels of
profitability attributable to such sales, it would discontinue equipment sales
of this product line. Total revenues attributable to Konica-related products
were approximately $27.5 million in the fiscal year ended March 31, 1995. For
the forty-nine week period ended December 31, 1997, revenues attributable to
such sales were approximately $6.3 million.
The following table sets forth, on a comparative basis, certain income
statement data for A.B. Dick and the Company for the periods ended March 31,
1996, January 16, 1997 and December 31, 1997. The data
42
<PAGE> 44
presented for A.B. Dick for the 49-week periods have been computed from the
audited financial statements of A.B. Dick and the Company.
<TABLE>
<CAPTION>
THE
A.B. DICK COMPANY
----------------------- ------------
52 42 49
WEEKS WEEKS WEEKS A.B. DICK 49-WEEK BASIS ENDED
ENDED ENDED ENDED ----------------------------------
MARCH 31, JANUARY 16, DECEMBER 31, MARCH 31, % OF JANUARY 16,
1996 1997 1997 1996 REVENUE 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Equipment.............. $ 77,628 $ 54,178 $ 64,620 $ 73,149 36.0% $ 63,208
Service................ 35,735 26,222 27,808 33,673 16.6% 30,592
Repair Parts........... 16,944 12,671 15,976 15,966 7.9% 14,783
Supplies............... 85,056 64,343 77,911 80,149 39.5% 75,067
Curtis................. -- 6,901 --
Net revenue.......... 215,363 157,414 193,216 202,938 100.0% 183,650
Equipment.............. 58,278 44,560 46,559 54,916 75.1% 51,987
Service................ 28,526 21,734 20,596 26,880 79.8% 25,356
Repair Parts........... 7,346 5,672 6,695 6,922 43.4% 6,617
Supplies............... 58,687 43,092 52,967 55,301 69.0% 50,274
Curtis................. -- 2,834 --
-------- -------- -------- -------- ------ --------
Cost of revenue...... 152,837 115,058 129,651 144,019 71.0% 134,234
-------- -------- -------- -------- ------ --------
Gross Profit........... 62,526 42,356 63,565 58,919 29.0% 49,416
Sales and marketing
expenses............. 32,500 23,574 26,386 30,625 15.1% 27,503
General and
administrative
expenses............. 24,272 15,248 17,603 22,872 11.4% 17,789
Pension credit......... (5,057) (7,013) -- (4,765) (2.3)% (8,182)
Research and
development.......... 7,923 4,111 3,755 7,466 3.7% 4,796
Depreciation and
amortization......... 8,922 7,053 1,481 8,407 4.1% 8,229
Management fee......... -- 1,941 --
Acquisition costs...... -- 1,400 --
-------- -------- -------- -------- ------ --------
Total expenses....... 68,560 42,973 52,566 64,605 31.8% 50,135
-------- -------- -------- -------- ------ --------
Operating income....... $ (6,034) $ (617) $ 10,999 $ (5,686) (2.8)% $ (719)
======== ======== ======== ======== ====== ========
EBITDA(1).............. $ (2,169) $ (577) $ 13,880 $ (2,044) (1.0)% $ (672)
======== ======== ======== ======== ====== ========
<CAPTION>
A.B. DICK 49-WEEK BASIS ENDED
--------------------------------
% OF DECEMBER 31, % OF
REVENUE 1997 REVENUE
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment.............. 34.4% $ 64,620 34.7%
Service................ 16.7% 27,808 14.9%
Repair Parts........... 8.0% 15,976 8.6%
Supplies............... 40.9% 77,911 41.8%
Curtis................. -- -- --
Net revenue.......... 100.0% 186,315 100.0%
Equipment.............. 82.2% 46,559 72.1%
Service................ 82.9% 20,596 74.1%
Repair Parts........... 44.8% 6,695 41.9%
Supplies............... 67.0% 52,967 68.0%
Curtis................. -- -- --
------ -------- ------
Cost of revenue...... 73.1% 126,817 68.1%
------ -------- ------
Gross Profit........... 26.9% 59,498 31.9%
Sales and marketing
expenses............. 15.0% 24,729 13.3%
General and
administrative
expenses............. 9.7% 15,830 8.5%
Pension credit......... (4.5)% -- 0.0%
Research and
development.......... 2.6% 3,755 2.0%
Depreciation and
amortization......... 4.5% 1,210 0.6%
Management fee......... -- 1,870 1.0%
Acquisition costs...... -- -- --
------ -------- ------
Total expenses....... 27.3% 47,394 25.4%
------ -------- ------
Operating income....... (0.4)% $ 12,104 6.5%
====== ======== ======
EBITDA(1).............. (0.4)% $ 13,314 7.1%
====== ======== ======
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, miscellaneous income (expenses), pension credit, and for the
49 weeks ended December 31, 1997 excludes $1,400 of acquisition costs
incurred in connection with the Curtis Acquisition.
The Company's forty-nine week period ended December 31, 1997 versus A.B. Dick's
forty-two week period ended January 16, 1997.
Net Revenue. Net revenue increased $35.8 million, or 22.7%, to $193.2
million for the 49 weeks ended December 31, 1997, from $157.4 million for the 42
weeks ended January 16, 1997. The $35.8 million increase in net revenue includes
$6.9 million representing one month's revenue for Curtis.
On a 49-week basis, excluding the results of Curtis, net revenue increased
$2.7 million, or 1.5%, primarily due to an increase of $1.4 million, or 2.2%, in
equipment sales resulting from the introduction of new digital pre-press and
post-press products, partially offset by a decline in sales of optical pre-press
equipment and a loss of market share in the digital duplicator market. In
addition, service revenue decreased $2.8 million, or 9.1%, due to the impact of
the discontinuation of the Company's line of Konica copier equipment and a trend
among customers to switch from preventative maintenance service contracts to
purchased service calls. Repair parts revenue increased $1.2 million, or 8.1%,
primarily due to an increase in repair parts sales on such purchased service
calls. Supplies revenue increased $2.8 million, or 3.8%, primarily due to
management's increased focus on the supplies business, including special
promotions and an incentive program for supplies sales.
43
<PAGE> 45
Gross Profit. Gross profit increased $21.2 million, or 50.0%, to $63.6
million for the 49 weeks ended December 31, 1997, from $42.4 million for the 42
weeks ended January 16, 1997. This increase includes $4.1 million relating to
one month's operation of Curtis.
On a 49-week basis, gross profit improved to 31.9% of net revenue in 1997
from 26.9% in 1996. This improvement was attributable to an improvement in gross
margins on equipment sales to 27.9% in 1997 from 17.8% in 1996, primarily due to
enhanced efficiency in manufacturing, head count reductions, the strength of the
United States dollar relative to the Japanese yen and changes in product mix.
Gross margins on service improved to 25.9% in 1997 from 17.1% in 1996 primarily
due to the elimination of personnel. Gross margins on repair parts and supplies
as a percent of net revenue were relatively constant between periods.
Total Expenses. Total expenses increased $9.6 million, or 22.3%, to $52.6
million for the 49 weeks ended December 31, 1997, from $43.0 million for the 42
weeks ended January 16, 1997. This $9.6 million increase was attributable to the
elimination of a $7.0 million pension plan credit, the inclusion of $3.7 million
of expenses relating to one month's operations of Curtis, a $1.9 million
management fee, $1.4 million of expenses relating to the Company's acquisition
of Curtis and an increase of $1.4 million in general operating expenses,
partially offset by a decrease in depreciation and amortization of $5.6 million.
On a 49-week basis, expenses decreased to 25.4% of net revenue in 1997 from
27.3% in 1996. This decrease was attributable primarily to reductions of $2.1
million in administrative head count, $1.5 million of facility costs and $4.7
million in retiree medical benefits, offset by elimination of a pension credit
in the amount of $8.2 million. Expenses in 1997 include a management fee of $1.9
million.
EBITDA. As a result of the above factors, EBITDA improved by $14.5
million, to $13.9 million for the 49 weeks ended December 31, 1997, from $(0.6)
million for the 42 weeks ended January 16, 1997.
Forty-two weeks ended January 16, 1997 versus fifty-two weeks ended March 31,
1996
Net Revenue. Net revenue decreased $57.9 million, or 26.9%, to $157.4
million for the 42 weeks ended January 16, 1997 from $215.4 million for the 52
weeks ended March 31, 1996. Of the $57.9 million decrease in net revenue, $41.4
million was due to the difference in the time periods.
On a 49-week basis, the remainder of the decrease in revenue was
attributable primarily to the delayed introduction of a new offset press and a
decline in Konica copier sales. Further, post-press sales fell because the
Company discontinued sales of a collator/sorter line and had not yet secured a
replacement product line. Service revenue decreased $3.1 million, or 9.1%, and
repair parts revenue decreased $1.2 million, or 7.4%, primarily due to the
decline in copier sales. Supplies revenue decreased $5.1 million, or 6.3% due to
de-emphasized sales efforts and the decline in copier sales.
Gross Profit. Gross profit decreased $20.1 million, or 32.2%, to $42.4
million for the 42 weeks ended January 16, 1997, from $62.5 million for the 52
weeks ended March 31, 1996. $12.0 million of this decrease was due to the
difference in the time periods.
On a 49-week basis, gross margin decreased to 26.9% in 1997 from 29.0% in
1996 due to a decrease in gross margins for equipment sales from 24.9% in 1997
to 17.8% in 1996 primarily attributable to the impact of a new extended warranty
program offered to support certain lines of equipment. Gross margins for
service, repair parts and supplies were relatively constant between years.
Total Expenses. Total expenses decreased $25.6 million, or 37.3%, to $43.0
million for the 42 weeks ended January 16, 1997 from $68.6 million for the 52
weeks ended March 31, 1996. The $25.6 million decrease in expenses includes
$13.2 million due to the difference in the time periods. On a 49-week basis,
expenses decreased 22.4% primarily due to elimination of personnel and an
increase in pension plan credit of $3.4 million.
EBITDA. EBITDA as a result of the changes discussed above improved by $1.6
million, to $(0.6) million for the 42 weeks ended January 16, 1997, from $(2.2)
million for the 52 weeks ended March 31, 1996.
44
<PAGE> 46
LIQUIDITY AND CAPITAL RESOURCES
CURTIS
The liquidity needs of Curtis historically have been primarily for working
capital and capital expenditures. Curtis' primary sources of liquidity have been
funds provided by operations, a revolving line of credit and lease financing.
A.B. DICK
Prior to the Acquisition Date, A.B. Dick's capital needs were satisfied by
net cash provided by operations. Pursuant to the A.B. Dick Acquisition, A.B.
Dick transferred to GEC Incorporated $19.5 million of domestic accounts
receivable, which were remitted to GEC Incorporated as collected by A.B. Dick
after the closing the A.B. Dick Acquisition. As a result, the Company drew down
approximately $18.5 million from its revolving credit facility to meet its
working capital needs during the 49-week period ended December 31, 1997.
THE COMPANY
The net proceeds of the Series A Notes Offering were approximately $110.5
million, after deducting approximately $4.5 million to pay fees and expenses
incurred in connection with the Series A Notes Offering. The Company utilized
the net proceeds (i) to refinance substantially all of the Company's existing
indebtedness in the aggregate amount of approximately $71.1 million and (ii) to
fund a dividend to the sole stockholder of the Company of $10.0 million. The
Company expects the remaining net proceeds of the Series A Notes Offering, in an
amount of approximately $29.4 million, to be used for general corporate
purposes, including future acquisitions. Net cash provided by the Series A Notes
Offering together with the availability under the New Credit Agreement is
expected to provide sufficient funds to finance the Company's operational needs
and acquisition strategy.
The Company has substantial indebtedness and significant debt service
obligations. As of December 31, 1997, on a pro forma basis after giving effect
to the Series A Notes Offering and the application of the proceeds therefrom,
the Company would have had total long-term indebtedness, including current
maturities, of $116.2 million and a stockholder's deficit of $3.5 million. The
Indenture will permit the Company and its Subsidiaries to incur additional
indebtedness, including secured indebtedness, subject to certain limitations.
The New Credit Agreement provides for up to $32.0 million of revolving credit
borrowings. See "Capitalization," "Description of Senior Notes--Certain
Covenants" and "Description of New Credit Agreement." For the period ended
December 31, 1997, on a pro forma basis, after giving effect to the Series A
Notes Offering, the application of the net proceeds therefrom and the Curtis
Acquisition, the Company would have had a ratio of earnings to fixed charges of
1.4 to 1. The Company's high degree of leverage could have important
consequences to the holders of the Series B Notes including, without limitation,
the following: (i) a substantial portion of the Company's cash provided from
operations will be committed to the payment of debt service and will not be
available to the Company for other purposes; (ii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures or acquisitions may be limited; and (iii) the Company's level of
indebtedness may limit the Company's flexibility in reacting to changes in its
business environment. See "Risk Factors--Leverage and Debt Service Requirements"
and "Description of New Credit Agreement."
The Company's primary capital requirements (excluding acquisitions) consist
of capital expenditures and debt service. The Company estimates that
approximately $7.3 million is required in 1998 for the maintenance and
improvement of its facilities, including $3.1 million in one-time expenses
related to A.B. Dick's relocation to new facilities. The Company believes that
the cost of maintaining its facilities is approximately $4.2 million on an
annual basis. On a pro forma basis, after giving effect to the Offering and the
application of the net proceeds therefrom, the Company would have had total
interest expense in 1997 of approximately $11.7 million.
The Company's principal source of cash to fund debt service and capital
requirements is cash generated from operating activities. Upon consummation of
the Exchange Offer, the Company expects to have approximately $29.5 million of
availability under the New Credit Agreement (see "Description of New Credit
Agreement") and approximately $27.0 million in cash, cash equivalents and
short-term investments.
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YEAR 2000 ISSUES
The Company is currently engaged in a process of evaluating the actions
necessary in order to ensure that its computer systems will be able to function
without disruption with respect to the application of dating systems in the Year
2000. The assessment includes the Company's information systems as well as
digital controls embedded into items such as elevators and fax machines. There
can be no assurance that the Company will be able to complete whatever remedial
actions may be required to successfully operate its computer systems in the Year
2000 by the time necessary to avoid dating systems problems or that the cost of
doing so will not be material. In addition, disruptions with respect to the
computer systems of the Company's vendors or customers, which systems are
outside the control of the Company, could operate so as to negatively affect the
Company's ability to obtain necessary materials or products or to sell to or
service its customers. Disruptions of the Company's computer systems, or the
computer systems of the Company's vendors or customers, as well as the cost of
avoiding such disruption, could have a material adverse effect upon the
Company's financial condition and results of operations.
BUSINESS
The Company, through its two wholly-owned subsidiaries, is engaged in (i)
the distribution of automotive and industrial supplies and (ii) the manufacture
and distribution of printing equipment and supplies. The Company's distribution
business supplies consumable, high margin, multiple-purpose products used in the
automotive and industrial markets, with an increasing focus on providing
value-added logistics services. The distribution business supplies a wide range
of products including (i) automotive security products, including key cutting
equipment and key blanks, and non-model specific automotive parts and (ii) MRO
supplies, including fasteners, connectors, chemicals and tools. The Company's
printing equipment and supplies business is a leading manufacturer and marketer
of printing products for the global quick print and small commercial graphics
markets. The Company's printing equipment and supplies include (i) pre-press
equipment, including imagers, cameras and digital platemakers, (ii) offset
printing equipment, from duplicators to two-color portrait presses, (iii) other
equipment, including post-press equipment and digital duplicators and (iv)
supplies and replacement parts for pre-press and offset printers, including
inks, plates and plate chemistry materials. Approximately 46% of the Company's
pro forma 1997 net revenue were attributable to the sale of supplies,
after-market repair services (primarily under annual contracts) and replacement
parts to its installed printing equipment customer base. For the fiscal year
ended December 31, 1997, the Company generated pro forma net revenue and EBITDA
of $267.4 million and $22.2 million, respectively. Of the Company's pro forma
1997 net revenue, approximately 30.3% was attributable to the distribution
business and approximately 69.7% was attributable to the printing equipment and
supplies business.
Automotive and Industrial Supplies Distribution. The Company's
distribution business supplies approximately 29,000 SKUs, which it purchases
from approximately 750 suppliers and then typically repackages in smaller
quantities more compatible with the needs of its customers. The Company
generally markets its products under its proprietary brand names, Curtis(R) and
Mechanics Choice(R), which the Company believes enjoy wide industry recognition.
The Company's distribution business sells its products to approximately 55,000
customers principally through its network of over 600 sales representatives who
use state-of-the-industry information systems to meet their customers' needs.
Customers of the Company's distribution business include Hertz Corporation, the
fleet operations of Pepsi-Cola Company and Continental Airlines, Inc.,
independent auto dealerships and industrial accounts throughout the United
States, Canada and the United Kingdom.
The Company's distribution business is able to generate high margins by
offering certain value-added inventory management services in connection with
the sale of its products. The Company's sales representatives proactively
monitor inventory levels and assist in bin restocking and labelling at many of
its customers' facilities to ensure adequate supplies are maintained, and to
provide technical assistance to customers. The vast majority of the products
that the Company supplies have low unit costs and, although used by customers to
support their operations, are typically not on a bill of materials. The
Company's products represent a relatively small part of the total cost of its
customers' operations; however, the lack of availability of such
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products when needed, immediately and on site, can have a high impact on its
customers' operations. The Company consistently maintains an average fill rate
of 96% to 98%. The Company thereby reduces its customers' total procurement
costs, improves their operational up-time, and enables them to focus on their
core businesses. The Company's distribution business' extensive product line
allows customers to reduce the administrative burden of dealing with many
suppliers for their product needs. The Company is also able to provide large
corporations with consistent pricing and service across multiple operating
locations through facilities and sales representatives located strategically
throughout the United States.
Printing Equipment and Supplies. The Company's printing equipment and
supplies business can be classified into four broad categories: (i) pre-press
equipment, (ii) offset presses, (iii) other related equipment and (iv) supplies,
after-market repair services and replacement parts. The printing equipment and
supplies business serves exclusively the market for small print equipment
(defined as equipment suitable for printing up to 11" x 17" finished stock). The
Company also provides significant after-market service that maintains much of
the large installed base of the Company's printing equipment operated by its
customers. The Company's printing equipment and supplies business manufactures
its own products, which are principally sold under the A.B. Dick(R) and Itek
Graphix(R) labels, and distributes certain products manufactured by third
parties. The Company's printing equipment and supplies products are marketed to
commercial, franchise and independent print shops, in-plant print shops and
governmental and educational institutions in the U.S. through a network of 25
branches and approximately 100 independent distributors. In addition, the
printing equipment and supplies business sells a full line of products through
its subsidiaries in Canada, the United Kingdom, the Netherlands and Belgium, and
through a network of independent dealers in other countries. Customers for
printing supplies include franchisees of national quick print chains, such as
Alphagraphics(R), Sir Speedy(R) and Kwik Kopy(R), independent quick print and
small commercial shops, and check printers.
The Company believes that it offers its customers reliable, flexible
printing systems well-suited to their needs. The majority of the customers of
the printing equipment and supplies business are relatively small quick print
shops, specializing in items such as business cards, sales materials and headed
stationery. Because these customers have a limited amount of equipment, the
Company believes they value the high degree of reliability and flexibility that
the Company's products can provide. In addition, the Company believes its
products are highly competitive from a cost standpoint on projects of the scope
that its customers undertake. The Company believes its products offer greater
flexibility and superior print quality as compared to alternative printing
technologies, particularly for the high speed, long print runs typically
required by its customers.
COMPETITIVE STRENGTHS
The Company believes its two businesses maintain strong competitive
positions in their respective markets as a result of a number of factors,
including:
- - Substantial Installed Equipment Base. The Company estimates that it currently
sells products to approximately 75% of all U.S. auto dealers. A large
proportion of these products consists of key cutting equipment, which creates
a natural market for the sale of the Company's key blanks and a base from
which to increase sales of other consumable products distributed by the
Company. Similarly, the Company estimates, based on industry sources, that in
1997 it had an approximately 40% market share in the offset press equipment
market that it serves. The Company attributes its leading market position not
only to the reputation of its products for quality and flexibility, but also
to the substantial base of installed equipment built up over A.B. Dick's
114-year history, which the Company believes provides a significant
competitive advantage in marketing its supplies and after-market service.
- - Breadth of Product Line and Extensive Distribution Network. The distribution
business carries approximately 29,000 SKUs, which it sources from
approximately 750 different suppliers, which the Company believes is greater
than many of its smaller, regional competitors. The printing equipment and
supplies business carries a complete range of pre-press and offset press
equipment and supplies and replacement parts, as well as equipment service,
thereby offering its customers one-stop shopping. Both businesses distribute
their products through dedicated sales organizations and distribution networks
having long-
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standing relationships with their customers. The Company believes its breadth
of supplier relationships, the depth of its product offerings and its sales
relationships with its customers provide it with a significant advantage
relative to potential competitors.
- - Commitment to Customer Service. The Company believes that a key to its
continued success in its market is its total commitment to customer service.
This commitment is evidenced in the printing equipment and supplies business
by, among other things, (i) generally providing next-day delivery for its
printing supplies, (ii) offering service contracts for its installed base of
printing equipment and (iii) offering its customers flexible, non-recourse
financing options for the purchase of its printing equipment. In its
distribution business, the Company's commitment to customer service is
evidenced by, among other things, (i) providing a range of on-site inventory
management services through its extensive sales force in the field, (ii)
maintaining a fill rate in the range of 96% to 98% and generally shipping its
products within a day after an order is received and (iii) providing customers
computerized access for technical information, catalog and order capabilities.
- - Broad Customer Base. The Company's automotive and industrial distribution
products are sold to more than 55,000 customers and its printing products to
more than 10,000 customers, with no one customer accounting for more than 2%
of the Company's 1997 pro forma net revenue. The Company believes that this
diversity in its client base minimizes its reliance on any one customer.
- - Experienced, Proven Management Team. The Company's senior management have an
average of approximately 19 years of relevant industry experience. In addition
to their relevant industry experience, these managers have extensive
experience in acquiring and integrating businesses, as well as growing
revenues and reducing costs in businesses they have acquired and managed.
BUSINESS STRATEGY
The Company seeks to grow sales and profitability through the successful
implementation of its business strategy, the key elements of which include:
- - Increase Penetration of Existing Customers. The Company's primary strategy to
grow net revenue and profitability in the distribution business is to obtain
incremental revenues from existing customers. For example, the Company seeks
to leverage its relationships with the approximately 75% of all U.S. auto
dealers it currently serves to increase the percentage of these auto dealers'
total supply needs provided by the Company. The Company believes that new
marketing efforts, including its recently commenced "Dealer One Source"
program, which offers incentive-based pricing in exchange for volume
commitments, offer potential for significant growth for the Company's
distribution business.
- - Expand Customer Base. The Company believes there are substantial
opportunities for both the distribution business and the printing equipment
and supplies business to expand their existing customer bases. The total
United States market for MRO supplies of the categories of industrial products
sold by the Company is estimated to be in excess of $30 billion annually. The
Company intends to focus on this market, in which it currently has only a
small presence, through acquisitions, strategic alliances with other
distributors and direct selling efforts. In addition, the printing equipment
and supplies business plans to leverage its nationwide network of service
technicians to offer customers an integrated equipment service capability for
equipment not manufactured or currently serviced by the Company.
- - Make Focused Acquisitions. The Company seeks to grow by making acquisitions
that (i) enhance its distribution capabilities, (ii) grow its customer base
and (iii) broaden its product range. The distribution business operates in a
large, fragmented industry characterized by multiple channels of distribution.
The Company believes that approximately 85% of the 25,000 industrial
distributors in the U.S. have sales of less than $5 million and that
acquisitions of small suppliers of industrial products provide an attractive
opportunity for expanding the Company's customer base in existing markets with
minimal customer overlap. Likewise, the Company believes that opportunities
exist to broaden the printing equipment and supplies business' product range,
especially in the area of digital pre-press technology, to further grow its
distribution network and to increase its share of the commercial printing
market. There can be no
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assurance that the Company will be able to identify desirable acquisition
candidates or will be successful in consummating any acquisition on terms
favorable to the Company, if at all. See "Risk Factors--Risks Attendant to
Acquisition Strategy."
The Company's senior management has a track record of improving the results of
acquired companies. For example, Curtis' current management team, which joined
Curtis in 1992, has grown the net revenue of Curtis at a compound annual rate
of 4.5% from $65.1 million in 1992 to $81.1 million in 1997. During the same
period, EBITDA has increased at a compound annual rate of 20.3%, from $3.3
million in 1992 to $8.3 million in 1997. Such improvements have been made
through significant operating expense reductions resulting from factors such
as improved labor efficiency and customer relations, investments in
technology, improved vendor relationships and more effective asset
utilization and management practices, as well as increased access to capital.
- - Exploit Operating Leverage. The Company has designed the processing systems
and facilities of its distribution business to handle a large number of low
dollar-value transactions. Consequently, the Company believes that it would be
able to handle substantially increased sales of its existing SKUs without a
commensurate increase in operating costs. In addition, since the distribution
business' sales are characterized by a relatively large number of orders (in
excess of 450,000 in 1997) with an average order size of approximately $170,
the Company believes that with an increase in the average order size, it could
further enhance its operating margins.
INDUSTRY OVERVIEW
AUTOMOTIVE AND INDUSTRIAL SUPPLIES DISTRIBUTION
Automotive. With more than $675 billion in 1996 sales, automotive
retailing is the third largest domestic industry group in the United States. The
industry is highly fragmented and largely privately held with approximately
21,000 automobile dealerships representing more than 48,000 franchises.
Manufacturers originally established franchised dealer networks for the
distribution of their vehicles as single-dealership, single-owner operations. In
the 1970's, dealers began to add foreign franchises and the phenomenon of the
multi-franchise automobile dealer, or "megadealer," emerged, prompting both
significant acquisition activity and the consolidation activities of the 1980s.
The easing of restrictions against megadealers combined with continual
competitive pressures upon smaller dealerships has led to further consolidation
of the industry. Although significant consolidation has taken place since its
inception, the industry today remains highly fragmented, with the largest 100
dealer groups generating less than 11% of total revenues and controlling
approximately 5% of all franchised dealerships.
Industrial. The Company operates in a large, fragmented industry
characterized by multiple channels of distribution. The total United States
market for MRO supplies of the categories of industrial products sold by the
Company is estimated to be in excess of $30 billion annually. The Company
believes that approximately 25,000 distributors, substantially all of which have
annual sales of less than $5 million, supply approximately 75% of the market.
The distribution channels in the industrial products market include retail
outlets, small distributorships, national, regional and local distributors,
direct mail suppliers, large warehouse stores and manufacturers' own sales
forces.
PRINTING EQUIPMENT AND SUPPLIES
According to industry sources, the size of the total U.S. printing and
publishing industry in 1995 was approximately $224 billion. The three markets in
which the Company offers products, the quick print sector, the small commercial
print sector and in-plant printers, accounted for approximately $10 billion, $49
billion and $16 billion of this total, respectively. Since 1987, the dollar
volume of total shipments of U.S. printing equipment and graphic arts supplies
have grown at compound annual rates of approximately 2.4% and 2.7%,
respectively.
The quick print market is comprised primarily of approximately 14,500 print
shops, including independent shops and franchisees of chains such as
Alphagraphic(R), Sir Speedy(R) and Kwik Kopy(R). These shops are
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typically privately owned and offer a range of printing services to primarily
walk-in customers including the printing of business cards, headed stationery
and advertising flyers as well as duplicating, binding and photocopying
services. According to industry sources, the average annual revenue per quick
print outlet for franchised quick service printers was approximately $469,000 in
1997. Because their relatively small size precludes a wide range of equipment,
the Company believes that quick print operators seek to purchase equipment which
is both reliable and flexible in terms of paper sizes. The Company further
believes that, because the majority of such shops' work is on a walk-in basis,
it is crucial that consumable supplies are readily available by next-day
delivery.
The small commercial print market comprises approximately 24,000
operations, defined as establishments with fewer than 20 employees. These shops
typically target small businesses, offer a wider range of printing services and
are able to process longer-order runs. An increasing focus of small commercial
shops is sophisticated color printing using process color technology, which
provides a truer, crisper image than traditional spot color technology. The
in-plant market comprises approximately 11,000 in-house printing operations of
corporations. This market has increasingly adopted the use of distributed
digital technology, such as the Xerox Docutech(R) system, for smaller jobs and
has tended to outsource larger jobs to full-service printers.
The pre-press and offset printing markets have generally been subject to
rapid technological change in recent years. The commercialization of digital
pre-press technology by the Company and certain of its competitors has
substantially reduced the demand for optical pre-press equipment of the type
supplied by the Company. The Company believes that digital printing and other
competitive printing technologies have certain limitations that render them less
attractive to the Company's core quick print market. These factors include: (i)
the relatively high price of digital relative to offset, both in terms of
initial investment in equipment and price per copy over longer runs; (ii) the
lack of flexibility in terms of paper size and the inability of digital printers
to offer simultaneous printing of both sides of a piece of paper; and (iii) the
inherently lower print quality offered by digital presses, especially where
color work is involved. In a 1996 study prepared for the National Printing
Equipment Suppliers Association, digital printing press penetration of quick
print printers was projected to be less than one percent in the year 2000.
PRODUCTS AND MARKETS
The Company, through its subsidiaries, engages in two primary business: (i)
automotive and industrial distribution and (ii) printing equipment and supplies.
AUTOMOTIVE AND INDUSTRIAL SUPPLIES DISTRIBUTION
The Company conducts its distribution business through its wholly-owned
subsidiary Curtis, through which it distributes approximately 29,000 SKUs
primarily to the automotive and industrial markets. These products can be
divided into eight product categories:
Security Products, consisting of key blanks, key duplicating machines,
computerized and manual key code cutters, key transponder cloning devices,
padlocks, combination locks and key accessories.
Fasteners, such as bolts, nuts, screws, washers and rivets for light-duty
to heavy-duty applications.
Automotive Parts, including non-model specific automotive parts such as
wheel weights, fuses, lamps, bulbs, cables, clamps and small parts kits.
Shop supplies, such as work gloves, brushes, wipes and tapes.
Chemicals, comprised of solvents, lubricants, cleaners, adhesives and
sealants designed for vehicle and industrial maintenance.
Electrical connectors, together with wire products, adaptors and terminals.
Tools, including disposable tools such as saw blades, abrasives, taps and
dies, cutting tools, welding products and drill bits, as well as standard tools
such as screwdrivers, pliers and wrenches.
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Fittings, including brass hydraulic fittings, hoses and crimping equipment.
Approximately one-third of the Company's distribution business consists of
the sale of security products. The Company distributes a wide variety of key
duplicating machines, which copy keys, and computerized and manual key code
cutters, which generate keys from code numbers. In addition, the Company sells
key transponder cloning devices, which permit copies to be made of keys that
have advanced anti-theft features. The Company believes it is the largest
distributor of key code cutting equipment in the markets that it serves. The
Company estimates that it sells products to approximately 75% of the automotive
dealerships in the U.S., with a large proportion of such products consisting of
key cutting equipment. The Company seeks to use this high penetration and strong
market position to expand sales of its other products to these auto dealers.
The Company distributes these products through a sales force of
approximately 600 sales representatives. The majority of products supplied by
the Company are relatively low-priced and consumable. Products are frequently
purchased from suppliers in bulk and repackaged into smaller quantities
depending upon the needs of the customer. The Company's sales force works
closely with customers to develop an efficient inventory management system, in
many cases making regular on-site visits to proactively monitor inventory
levels, assist in bin restocking and labelling, and provide technical
assistance. The Company thereby reduces its customers' total procurement costs,
improves their operational up-time and enables its customers to focus on their
core businesses.
The Company's distribution products are sold to over 55,000 customers in
the automotive and industrial markets. The automotive market consists of
passenger car, truck and recreational vehicle dealers, business and government
entities performing internal automotive maintenance, rental car companies and
independent sales and service establishments. Franchised new car dealers
represent the most significant customer segment, as approximately 16,000 of the
21,000 automobile dealers in the United States are customers of the Company. The
industrial market is comprised of entities engaged in in-plant maintenance and
repair, private fleet maintenance and off-road vehicle maintenance and
equipment.
The Company's distribution business uses state-of-the-industry technology
to improve customer service and reduce its operating costs through more
effective buying practices and order fulfillment operations. The distribution
business operates a fully-integrated, real-time information system that includes
warehouse operations, inventory management, distribution scheduling and all
aspects of financial control and reporting. In addition, sales representatives
utilize laptop computers to provide order entry and daily updated account
management capability. The Company has developed a proprietary software package,
CuFLink(R), which permits larger customers to access customized daily account
management information. The Company also has established Internet access for
technical information and intends to offer full catalog and order capabilities
during the course of 1998.
PRINTING EQUIPMENT AND SUPPLIES
The Company conducts its printing equipment and supplies business through
its wholly-owned subsidiary A.B. Dick. The Company sells printing equipment,
supplies and service to the global quick print and small commercial printing
markets. The Company manufactures pre-press and offset press equipment. The
Company also offers after-market service and replacement parts and a complete
line of supplies to the pre-press and offset press markets, including film,
plates, inks and solutions. The Company also manufactures supplies, such as inks
and solutions, for itself and for third parties to be sold under private labels.
In addition to its own manufactured products, the Company acts as a distributor
for imaging products manufactured by other companies, including digital
duplicators, digital color copiers and certain high-end offset presses.
Pre-press Equipment. Pre-press equipment is used to prepare materials for
the printing process, generally by transferring images onto sensitive plates
either on a computer network or from an optically scanned original. The plate is
then placed in an offset or digital printing press and used to reproduce the
image onto paper, cardboard or other print media. The Company's line of
pre-press equipment includes digital platemakers, optical platemakers and
cameras.
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Digital platemakers are used to transfer images to a polyester plate
through a computer network. In 1995, the Company introduced its first digital
platemaker, the Digital Platemaster 2000 ("DPM 2000"). The DPM 2000 combines all
the steps in traditional optical platemaking into one machine and produces
plates up to a size of 16.5" x 21.7". The DPM 2000 includes a network connection
that allows files to be transferred from an IBM-compatible PC or Macintosh work
station and converted to a digital format. The DPM 2000 also is offered with a
scanner to convert hard copy originals to digital files, thereby providing
customers the flexibility to handle digital files while retaining the ability to
handle hard copy originals. Since its introduction, sales of the DPM 2000 have
grown to become a significant percentage of the Company's total pre-press
equipment sales. The DPM 2000 won the Graphic Arts Technical Foundation
Intertech Award for technical excellence in 1996.
Although not considered to be a core product segment, the Company continues
to sell equipment, supplies and service to its substantial installed base of
optical processors. The Company also produces camera processors, which have
plate imaging capabilities that allow the operator to adjust the size and
graphic content of the sensitized images.
Offset Presses. Offset printing is an indirect printing method in which an
image from an inked plate is printed onto a smooth rubber cylinder that in turn
offsets, or prints, the inked impression onto a sheet of paper. The Company
offers 15 types of offset printing presses, ranging from entry-level presses
that are designed primarily to print text, to presses capable of producing
high-quality, multi-color printing. Offset presses currently can produce higher
quality reproductions than competing technologies, such as color laser printers
and copiers, at a lower cost per copy for the longer run lengths typically
required by its customers. Offset presses also offer greater flexibility than
competing technologies with respect to the media upon which images can be
transferred. In addition to traditional media such as letter and legal size
paper, the Company's presses are used for small size printing applications such
as business cards, brochures and advertising flyers. The Company believes it has
a market share of approximately 40% of 1997 sales for presses capable of
printing 11" x 17" or smaller output.
Other Equipment. In order to complete its product line, the Company
distributes products manufactured by other companies, including presses, digital
duplicators and post-press equipment, in addition to its own manufactured
products. The Company distributes digital duplicators manufactured by Ricoh
Company Ltd. sold under the A.B. Dick(R) name. Digital duplicators are intended
to fill the gap between copy machines and offset printing for customers with
high copy volume requirements and limited budgets such as schools and government
institutions. These digital duplicators are packaged like a copier with similar
touch button controls and are capable of producing 120 pages per minute for a
significantly lower cost per page than high-speed copiers. The Company
distributes a Minolta-brand digital color copier/printer that is capable of
high-quality process color laser printing. This Minolta unit addresses
customers' needs for low-volume color printing and layout proofs. The Company
also distributes presses manufactured by Ryobi Limited and sold under the A.B.
Dick(R) name that are capable of satisfying a wide range of quality color
printing requirements. In addition, the Company offers a line of post-press
equipment such as automated folders and collators. The collators are
manufactured by third parties and distributed by the Company. This equipment can
be connected to the Company's offset presses to create a complete printing
system.
Supplies. The Company provides a diverse line of over 2,000 SKUs to
operators of the equipment it supplies and to other camera and platemaker
operators. The Company offers approximately 40 plates and plate imaging system
supplies for direct image platemakers, including paper and film-based silver
emulsion and electrostatic plate materials. These supplies are compatible with
most printing equipment regardless of the manufacturer. The Company also offers
a complete line of metal plates and associated processing chemistry. In
addition, the Company offers supplies for offset printing, including a variety
of black ink, special application inks, color inks, and various other ink
supplies. The Company believes it is the largest manufacturer and supplier of
magnetic inks to the check printing industry and that it is a significant
supplier of plate material to Deluxe Corporation and a significant supplier of
inks and plates to other major check printers in the United States and Canada.
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The Company manufactures a significant portion of its inks and solutions.
It also sells ink to other companies to be resold under their private labels.
The Company operates a 40-person telemarketing group for its printing
supplies business, which identifies new customers, services existing customers
and makes outbound sales calls. The Company also maintains a separate customer
service group of 29 persons to respond to customer calls and take orders.
Service and Parts. The Company provides after-market service and
replacement parts for the Company's pre-press and offset press equipment and for
pre-press and offset press equipment manufactured by other companies. The
Company employs approximately 350 service technicians and managers who are
located in cities in the U.S., Canada, the United Kingdom, the Netherlands and
Belgium. Much of the Company's service business is provided pursuant to
maintenance agreements.
Markets and Distribution. The Company's printing products are marketed to
commercial, franchise and independent print shops, in-plant print shops and
government and educational institutions through a highly-developed domestic and
international distribution network. In the United States, this network consists
of 25 branches and approximately 100 independent distributors. Internationally,
this network includes wholly-owned foreign subsidiaries in Canada, the United
Kingdom, the Netherlands and Belgium and a network of independent distributors
in other countries.
In 1997, approximately 60% of the Company's U.S. printing equipment and
supplies business sales were made through direct marketing efforts and sales by
employees of the Company. The remaining 40% of sales were made through the
Company's network of independent dealers and distributors. In 1997, the
Company's non-U.S. sales were approximately 80% direct sales and 20% indirect
sales through independent distributors. A significant portion of the Company's
printing equipment sales are made through third-party financing arranged by, but
non-recourse to, the Company.
An important factor in the printing supplies market is on-time delivery of
supplies to customers. The Company believes its ability to distribute these
printing supplies rapidly from its various distribution centers and independent
dealer locations allows it to remain competitive in this market. Most supplies
are delivered to customers through commercial overnight delivery services within
one day after a customer places an order.
No single customer accounts for more than 2% of the Company's sales.
COMPETITION
The Company faces strong competition throughout the world in all of its
product lines. The various markets in which the Company competes are fragmented
into a large number of competitors, which include large manufacturers and
distributors as well as a large number of regional distributors and local
suppliers. In addition, a number of the Company's competitors have financial and
other resources that are substantially greater than those of the Company.
The Company's distribution business competes with OEMs and other national
distributors, as well as a large number of regional and local distributors.
Because of the similarity of product types, competitive advantage among national
distributors is determined primarily by sales representative performance and
reliability, product presentation, product quality, order fill rate, breadth of
product line, speed of delivery and, to a lesser extent, price. Regional and
local distributors also compete with the Company on the basis of these factors,
but price and delivery timing are more important factors at this level.
The Company's printing equipment and supplies business competes, with
respect to its manufactured products, against a number of other manufacturers of
pre-press equipment and offset presses and with resellers of used presses,
primarily on the basis of quality and price. Some of these competitors have
significantly greater financial and other resources than the Company. The
Company's pre-press and offset press equipment also competes, to a limited
extent, with alternate technologies such as color laser printers, copiers and
other duplicating equipment. In addition, in the markets for supplies, service
and parts, the Company competes against a wide variety of national, regional and
local distributors of graphic arts and printing supplies and related services,
primarily on the basis of availability and service.
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SUPPLIERS
All materials used by the Company's printing equipment and supplies
business to manufacture products are readily available in the marketplace, and
the Company is not dependent upon any single supplier for any materials
essential to the manufacture of any of these products. The Company has been able
to obtain an adequate supply of raw materials and no shortage of raw materials
is currently anticipated.
The Company's distribution business distributes products from a large and
diverse supply base. In 1997, based on the Company's pro forma sales, no single
supplier accounted for more than 5% of the Company's supply of products.
FACILITIES
The Company conducts its operations through the following primary
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE OWNED/
LOCATION FOOTAGE PRINCIPAL FUNCTION LEASED
<S> <C> <C> <C>
UNITED STATES:
Niles, Illinois 909,000 Headquarters; administration; Leased(1)
manufacturing; warehouse
Rochester, New York 194,000 Manufacturing Leased(2)
Shelbyville, Kentucky 100,000 Warehouse; packaging plant Owned
Atlanta, Georgia 60,000 Warehouse Leased(3)
Sparks, Nevada 50,000 Warehouse Owned
Mayfield Heights, Ohio 34,000 Administration Leased(4)
CANADA:
Rexdale, Ontario 67,000 Administration; warehouse Owned
Mississauga, Ontario 38,000 Administration; warehouse Leased(5)
UNITED KINGDOM:
Brentford 26,000 Administration; warehouse Leased(6)
Andover 15,000 Administration; warehouse Leased(7)
BELGIUM:
Brussels 11,000 Administration; warehouse Leased(8)
THE NETHERLANDS:
Maarssen 25,000 Administration; warehouse Leased(9)
</TABLE>
- ---------------
(1) Expires in January 1999. The Company intends to move from its Niles,
Illinois location prior to the end of the lease term to three facilities in
Niles, Illinois containing an aggregate of approximately 300,000 square
feet. The Company has entered into leases for two of these facilities,
containing approximately 54,000 and 155,000 square feet, respectively, which
leases expire in January 2008 and July 2003, respectively. The Company is in
the process of identifying an appropriate third facility.
(2) Expires in April 2007.
(3) Expires in February 2000.
(4) Expires in November 2006.
(5) Expires in August 2001.
(6) Expires in September 2003.
(7) Expires in November 2012.
(8) Expires in December 2004.
(9) Expires April 2003.
The Company believes that all of its property and equipment is in a
condition appropriate for its operations and that it has sufficient capacity to
meet its current operational needs.
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<PAGE> 56
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,100 employees,
approximately 1,600 of whom were located in the United States. The Company
believes its relations with its employees are good. The Company's employees are
not subject to collective bargaining agreements.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The Company is subject to a variety of environmental standards imposed by
federal, state, local and foreign environmental laws and regulations. The
Company also is subject to the federal Occupational Health and Safety Act and
similar foreign and state laws. The Company periodically reviews its procedures
and policies for compliance with environmental and health and safety laws and
regulations and believes that it is in substantial compliance with all such
material laws and regulations applicable to its operations. Historically, the
costs of compliance with environmental, health and safety requirements have not
been material to the Company's Subsidiaries.
LEGAL PROCEEDINGS
On April 30, 1997, four former and current distributors of A.B. Dick filed
a suit against A.B. Dick alleging, among other things, breach of distributorship
contracts and unfair and deceptive trade practices. The plaintiffs have
requested that the case be given class action status with respect to all A.B.
Dick distributors engaged under distributorship contracts during the four-year
period ended on April 30, 1997. The Company intends to vigorously defend this
case although there can be no assurance as to the eventual outcome.
GEC Incorporated has agreed to fully indemnify the Company against all
costs and liabilities in connection with any litigation that is pending or may
be brought against A.B. Dick and arises out of events occurring prior to the
closing of the A.B. Dick Acquisition, including the case mentioned in the
previous paragraph, for all amounts in excess of $250,000 up to an aggregate
liability of $15,000,000.
In addition, both A.B. Dick and Curtis are parties to routine litigation
incidental to their businesses, some of which is covered by insurance. The
Company does not believe that any such pending litigation will have a material
adverse effect upon its results of operations or financial condition.
SOLE STOCKHOLDER
The Company is a wholly owned subsidiary of NES Group, Inc., all of the
capital stock of which is beneficially owned by Robert J. Tomsich.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
<S> <C> <C>
Gerald J. McConnell............... 56 President and Chief Executive Officer
A. Keith Drewett.................. 51 Vice President
Frank J. Rzicznek................. 55 Chief Financial Officer and Secretary
Maurice P. Andrien................ 56 President and Chief Executive Officer of Curtis
John H. Fountain.................. 34 Chairman of the Board
Donald F. Hastings................ 69 Director
John J. Kahl, Jr.................. 57 Director
John R. Tomsich................... 31 Director
Robert J. Tomsich................. 67 Director
James W. Wert..................... 51 Director
</TABLE>
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<PAGE> 57
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
MR. MCCONNELL has served as President and Chief Executive Officer of the
Company since March 1998. Mr. McConnell has served as President and Chief
Executive Officer of A.B. Dick since 1995. Prior to joining A.B. Dick, Mr.
McConnell served as the President and Chief Executive Officer of American Paper
Group, Inc., a specialty envelope manufacturing company, from March 1995 to
December 1995, and as Chief Executive Officer of MAN Roland Inc., a printing
press manufacturer, from 1990 to 1995.
MR. DREWETT has served as Vice President of the Company since March 1998.
Mr. Drewett has served as President--Automotive and Industrial Division of
Curtis since May 1992 and Senior Vice President of Curtis since May 1997.
MR. RZICZNEK has served as Chief Financial Officer and Secretary of the
Company since March 1998 and as Vice President--Finance and Assistant Secretary
from November 1996 to March 1998. Mr. Rzicznek has served as Vice
President-Finance of NESCO, Inc. since November 1985.
MR. ANDRIEN has served as President and Chief Executive Officer of Curtis
since 1992.
MR. FOUNTAIN has served as Chairman of the Board of Directors of the
Company since March 1998. Mr. Fountain served as Secretary and Treasurer of the
Company from its inception in September 1996 through March 1998, as Vice
President from November 1996 to present, and as director since January 1997. Mr.
Fountain has been a Vice President of NESCO, Inc. since 1993. Mr. Fountain is
the son-in-law of Mr. Robert Tomsich.
MR. HASTINGS has served as a Director of the Company since March 1998. Mr.
Hastings served as Chairman of Lincoln Electric Company, a welding products
manufacturer, from 1992 through 1997, and Chief Executive Officer of Lincoln
Electric Company from 1992 through 1996. Mr. Hastings also serves as a director
of Continental Global Group, Inc.
MR. KAHL, JR. has served as a Director of the Company since March 1998. Mr.
Kahl is Chairman and Chief Executive Officer of Manco, Inc., a manufacturer of
pressure sensitive tapes for household and automotive repairs, mailing and
shipping supplies, weatherstripping and related home energy products, and
labels. Mr. Kahl also serves as a director of Applied Industrial Technologies
Inc. and Royal Appliance Mfg. Co.
MR. JOHN TOMSICH has served as a Director of the Company since January 1997
and served as a Vice President of the Company since its inception through March
1998. In addition, Mr. John Tomsich has served as Vice President of NESCO, Inc.
since 1995 and in various other management positions with NESCO, Inc. since
1990. Mr. John Tomsich also serves as director of Continental Global Group, Inc.
Mr. John Tomsich is the son of Mr. Robert Tomsich.
MR. ROBERT TOMSICH has served as a Director of the Company since its
inception and served as President of the Company from its inception to March
1998. In addition, Mr. Robert Tomsich has served as President and a Director of
NESCO, Inc. (including predecessors of NESCO, Inc.) since 1956. Mr. Robert
Tomsich also serves as director of Continental Global Group, Inc. Mr. Robert
Tomsich is the father of Mr. John Tomsich and the father-in-law of Mr. Fountain.
MR. WERT has served as a Director of the Company from January to April 1997
and since March 1998. Prior to his service with the Company, Mr. Wert held a
variety of executive management positions with KeyCorp, a financial services
company based in Cleveland, Ohio, and KeyCorp's predecessor, Society
Corporation. Mr. Wert served as Senior Executive Vice President and Chief
Investment Officer of KeyCorp from 1995 to 1996. Prior to that time, he served
as Senior Executive Vice President and Chief Financial Officer of KeyCorp for
two years and Vice Chairman, Director and Chief Financial Officer of Society
Corporation for four years. Mr. Wert also serves as a director of Continental
Global Group, Inc. and as Chairman of the Executive and Compensation Committees
of the Board of Directors, of Park-Ohio Industries, Inc.
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<PAGE> 58
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and the other most highly compensated
officers of the Company having total annual salary and bonus in excess of
$100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
NAME AND PERIOD OTHER ANNUAL
PRINCIPAL POSITION ENDED SALARY BONUS COMPENSATION(1)
<S> <C> <C> <C> <C>
Gerald J. McConnell, December 31, 1997 $259,135(2) $125,000 $ 18,952
President and January 17, 1997 222,115(3) -- 140,011(4)
Chief Executive Officer March 31, 1996 84,615(5) -- 6,182
A. Keith Drewett, December 31, 1997 $160,000 $ 42,560 $ 12,472
Vice President December 31, 1996 160,000 32,480 11,361
December 31, 1995 150,000 30,000 10,640
Maurice P. Andrien, Jr. December 31, 1997 $245,000 $ 93,100 $ 10,811
President and Chief December 31, 1996 245,000 105,350 10,482
Executive Officer of
Curtis December 31, 1995 235,000 75,000 6,300
</TABLE>
- ---------------
(1) Amounts shown for the year and period ended December 31, 1997 reflect
contributions made by A.B. Dick or Curtis on behalf of the named executives
under the applicable 401(k) plan, life insurance premiums paid, car payments
and miscellaneous payments made on behalf of the named executives, as
follows:
<TABLE>
<CAPTION>
MR. MCCONNELL MR. DREWETT MR. ANDRIEN
<S> <C> <C> <C>
401(k) Plan........................................... $ 2,665 $ 2,954 $ 2,954
Life Insurance Premiums............................... 1,927 2,893 7,857
Car Payments and Miscellaneous........................ 14,360 6,625 --
------- ------- -------
$18,942 $12,472 $10,811
======= ======= =======
</TABLE>
(2) Reflects 49-week period from January 17, 1997 to December 31, 1997 at annual
salary of $275,000.
(3) Reflects 42-week period from April 1, 1996 to January 16, 1997 at annual
salary of $275,000.
(4) Includes $125,000 payment made on behalf of A.B. Dick, GEC Incorporated and
General Electric Company, p.1.c. for the settlement and release of certain
compensation claims relating to the sale of A.B. Dick to the Company.
(5) Reflects 16-week period from December 1, 1995 to March 31, 1996 at annual
salary of $275,000.
DIRECTOR COMPENSATION
Each director of the Company not employed by the Company or any entity
affiliated with the Company is entitled to receive $25,000 per year for serving
as a director of the Company. In addition, the Company will reimburse such
directors for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors.
EMPLOYMENT, SEVERANCE AND BONUS AGREEMENTS
On November 10, 1995, A.B. Dick entered into a letter agreement with Gerald
J. McConnell providing for Mr. McConnell's employment as President and Chief
Executive Officer of A.B. Dick. The agreement is for a five-year term ending on
December 3, 2000 and provides for an annual base salary of not less than
$275,000. Mr. McConnell's current base salary is $302,500. The agreement also
provides for an annual bonus of up to 25% of Mr. McConnell's salary if the
Company achieves certain financial performance goals. If Mr. McConnell's
employment is terminated for any reason other than for cause or as a result of
permanent total disability, A.B. Dick is required to pay Mr. McConnell his base
salary for twelve months from the date of termination and Mr. McConnell has no
duty to mitigate by seeking other employment. Under the agreement, Mr. McConnell
is not permitted to compete against A.B. Dick or any of its subsidiaries for a
period of twelve months following the termination or expiration of the
agreement.
On February 28, 1996, Curtis entered into a Severance and Non-Competition
Agreement with Maurice P. Andrien, Jr. The agreement provides that if Mr.
Andrien is terminated for reasons other than death,
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<PAGE> 59
disability or cause, Curtis will be required to pay his salary for twelve months
after such termination, to pay any bonuses earned prior to such termination, and
to continue his participation in all employee benefit plans for such twelve
month period or until he receives equivalent coverage and benefits from a
subsequent employer. The agreement also provides that in the event Mr. Andrien
is terminated for any reason other than for cause within two years following a
change in control, Mr. Andrien will be entitled to payment of his salary for a
period of twenty-four months, payment of any bonuses earned prior to such
termination and continued participation in all employee benefit plans for
twenty-four months or until he receives equivalent coverage and benefits from a
subsequent employer. The agreement precludes Mr. Andrien from competing with
Curtis or soliciting or employing any employee, officer or agent of Curtis for
twelve months following termination of employment with Curtis. The Company and
Mr. Andrien have agreed that Mr. Andrien's employment with the Company will
terminate effective May 31, 1998, at which time he will be entitled to receive
the benefits provided for under this agreement.
On February 28, 1996, Curtis entered into a Severance and Non-Competition
Agreement with A. Keith Drewett. The agreement provides that if Mr. Drewett is
terminated for reasons other than death, disability or cause, Curtis will be
required to pay his salary for twelve months after such termination, to pay any
bonuses earned prior to such termination, and to continue his participation in
all employee benefit plans for such twelve month period or until he receives
equivalent coverage and benefits from a subsequent employer. The agreement also
provides that in the event Mr. Drewett is terminated for any reason other than
for cause within two years following a change in control, Mr. Drewett will be
entitled to payment of his salary for a period of twenty-four months, payment of
any bonuses earned prior to such termination and continued participation in all
employee benefit plans for twenty-four months or until he receives equivalent
coverage and benefits from a subsequent employer. The agreement precludes Mr.
Drewett from competing with Curtis or soliciting or employing any employee,
officer or agent of Curtis for twelve months following termination of employment
with Curtis. Mr. Drewett is entitled to termination benefits under this
agreement if he terminates his employment for any reason during the thirty day
period following the first anniversary of a change of control. The Curtis
Acquisition triggered such right to benefits under this agreement.
In connection with the Curtis Acquisition, Mr. Andrien and Curtis also
entered into a Bonus Award Agreement on December 6, 1997. The agreement requires
Curtis to pay Mr. Andrien quarterly payments of $10,920 through September 3,
1999, followed by a payment of $634,920 on December 3, 1999. The Company
guaranteed the payment of all amounts payable to Mr. Andrien under the Bonus
Award Agreement. In March 1998, Curtis paid all amounts due or that would become
due in the future under the Bonus Award Agreement.
In connection with the Curtis Acquisition, Mr. Drewett and Curtis also
entered into a Bonus Award Agreement on December 6, 1997. The agreement requires
Curtis to pay Mr. Drewett quarterly payments of $5,915 through September 3,
1999, followed by a payment of $343,915 on December 3, 1999. The Company
guaranteed the payment of all amounts payable to Mr. Drewett under the Bonus
Award Agreement. In March 1998, Curtis paid all amounts due or that would become
due in the future under the Bonus Award Agreement.
RELATED TRANSACTIONS
COMMON OWNERSHIP
The Company is a Delaware corporation formed in September, 1996. All of the
outstanding capital stock of the Company is beneficially owned by NES Group,
Inc., which is beneficially owned by Robert J. Tomsich. Mr. Tomsich also
beneficially owns all the outstanding capital stock of NESCO, Inc., which has
entered into a management agreement with the Company as described below.
As referenced under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
in this Prospectus, the Company used a portion of the proceeds of the Series A
Notes Offering to fund a dividend. As the Company's sole stockholder, NES Group,
Inc. was the recipient of such dividend.
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<PAGE> 60
TAX PAYMENT AGREEMENT
The Company and the Subsidiary Guarantors have entered into a tax payment
agreement with NES Group, Inc. providing for monthly payments by each entity to
NES Group, Inc. in an amount equal to the greater of (i) the total federal,
state, local and, under certain circumstances, foreign income tax liability
attributable to such entity's operations for the monthly period, determined on
an annualized basis, and (ii) one-twelfth the total federal, state, local and,
under certain circumstances, foreign income tax liability attributable to such
entity's operations for the year. The tax rates applied to such income are to be
based on the maximum individual federal, state, local and foreign income tax
rates imposed by Section 1 of the Internal Revenue Code of 1986, as amended, and
by the equivalent provisions of state, local and foreign income tax laws. These
tax payments will not recognize any future carry-forward or carry-back tax
benefits to the Company and the Subsidiary Guarantors. Future direct and
indirect Subsidiaries of the Company also will become parties to the tax payment
agreement.
MANAGEMENT AGREEMENT
The Company and NESCO, Inc. have entered into a management agreement (the
"Management Agreement"), the material terms of which are summarized below. Under
the Management Agreement, NESCO, Inc. has agreed to provide general management
oversight services on a regular basis for the benefit of the Company, in regard
to business activities involving financial results, legal issues and long-term
planning relative to current operations and acquisitions. Business development
services will include assistance in identifying and acquiring potential
acquisition candidates, including negotiations and contractual preparations in
connection therewith. Financial planning will include assistance in developing
banking relationships and monitoring cash investments through professional money
management accounts. Under the terms of the Management Agreement, the Company
has agreed to pay NESCO, Inc. a management fee for such services equal to 5% of
the Company's earnings before interest and estimated taxes, depreciation,
amortization and other expense (income) (which fee would have been $1.2 million
on a pro forma basis for 1997). Prior to entering into the Management Agreement,
the management fee was 1.0% of net revenue. The management fee will be payable
in monthly installments. The Management Agreement will remain in effect until
terminated by either party upon not less than 60 days' written notice prior to
an anniversary date of the Management Agreement.
The Company will also separately employ, as required, independent auditors,
outside legal counsel and other consulting services. Such services will be paid
directly by the Company.
CURTIS OFFICE LEASE
Lander Enterprises Co. L.P., an affiliate of the Company ("Lander"), and
Curtis have entered into a lease agreement (the "Lease") for Curtis'
headquarters in Mayfield Heights, Ohio. The initial term of the Lease expires on
September 22, 2006, and Curtis has the option to renew for two additional
five-year terms. Curtis is obligated to pay Lander monthly rent of $37,333
during the first three years of the Lease term, $44,800 during years four
through seven and $53,200 during years eight through ten. Rent for any renewal
term shall be equal to 95% of fair market rent at the time of renewal. Curtis
has a right of first refusal on any additional space that becomes available for
lease in the building during the Lease term and has an option to lease
additional space in the building commencing in the sixth year of the Lease. At
the end of the fifth year of the Lease, Curtis will receive a credit of $5.00
per square foot to complete any refurbishing Curtis deems necessary or
desirable. Lander has furnished Curtis with a cash allowance of $0.5 million to
fund build-out costs, repayable in 120 equal monthly installments of $6,552. The
Company believes this transaction is on terms that are no less favorable than
those that would have been obtained in a comparable transaction with an
unrelated person. The remaining balance of the promissory note evidencing the
cash allowance was discharged with the proceeds of the Series A Notes Offering.
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<PAGE> 61
A.B. DICK OFFICE LEASE
Par Realty Ltd., L.P., an affiliate of the Company ("Par"), and A.B. Dick
have entered into a lease agreement (the "A.B. Dick Lease") for A.B. Dick's new
headquarters in Niles, Illinois. The initial term of the A.B. Dick Lease extends
for ten years from the date A.B. Dick takes possession of the premises, which is
anticipated to be on or before August 1, 1998. A.B. Dick has the option to
extend the term for one additional five-year period at the expiration of the
initial term. The monthly rent payable by A.B. Dick to Par under the A.B. Dick
Lease is approximately $29,000, which will increase 3% per year commencing with
the second lease year. The Company believes this transaction is on terms that
are no less favorable than those that would have been obtained in a comparable
transaction with an unrelated person.
DESCRIPTION OF NEW CREDIT AGREEMENT
The Company and Key Corporate Capital Inc. ("Key") are parties to a credit
facility and security agreement dated as of April 1, 1998, pursuant to which Key
has provided the Company a revolving line of credit equal to $32.0 million (the
"New Credit Agreement"). The availability under the New Credit Agreement is
equal to the sum of (i) 85% of the eligible Curtis accounts receivable, plus 80%
of the eligible A.B. Dick accounts receivable, plus (ii) 60% of the eligible
Curtis inventory (capped at $6.4 million), plus 60% of the eligible A.B. Dick
inventory (capped at $9.6 million), less (iii) reserves and outstanding letters
of credit. The New Credit Agreement is guaranteed by Curtis and A.B. Dick
pursuant to separate credit guaranty agreements with Key. The New Credit
Agreement is secured by liens on accounts receivable and inventory of Curtis and
A.B. Dick, pursuant to separate security agreements between Key and each of
Curtis and A.B. Dick. The New Credit Agreement contains certain financial and
other covenants which, among other things, establish minimum consolidated EBITDA
and consolidated fixed charge ratios. The New Credit Agreement will be fully
revolving until its final maturity in 2003. The New Credit Agreement bears
interest at a rate determined according to a sliding scale under which the rate
adjusts based upon the Company's performance. The New Credit Agreement bears
interest at an initial rate equal to (i) Key's prime rate plus 75 basis points,
or (ii) LIBOR plus 275 basis points, at the option of the Company.
DESCRIPTION OF SENIOR NOTES
GENERAL
The Series A Notes were, and the Series B Notes will be, issued pursuant to
the Indenture. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior Notes
are subject to all such terms, and Holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture and the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. The definitions of certain terms used in the following summary are
set forth below under "-- Certain Definitions." For purposes of this summary,
the term "Company" refers only to Paragon Corporate Holdings Inc. and not to any
of its Subsidiaries.
The Series A Notes are, and the Series B Notes will be, senior unsecured
obligations of the Company and will rank pari passu in right of payment with all
current and future unsecured senior Indebtedness of the Company and senior to
all subordinated Indebtedness of the Company. The Company is party to the New
Credit Agreement, and all borrowings under the New Credit Agreement are secured
by a lien on all accounts receivable and inventory of Curtis and A.B. Dick. The
Indenture permits additional borrowings under the New Credit Agreement.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Senior Notes. The
Company's obligations under the Series A Notes are, and the Series B Notes will
be, jointly and severally guaranteed (the "Subsidiary Guarantees") by each
direct and indirect Subsidiary of the
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<PAGE> 62
Company (other than Foreign Subsidiaries) (each such Person, a "Subsidiary
Guarantor" and, collectively, the "Subsidiary Guarantors"). The Subsidiary
Guarantees are senior unsecured obligations of the Subsidiary Guarantors and
rank pari passu in right of payment with all current and future unsecured senior
Indebtedness of the Subsidiary Guarantors and senior to all subordinated
Indebtedness of the Subsidiary Guarantors. However, the Series A Notes are, and
the Series B Notes will be, effectively subordinated to all Indebtedness and
other liabilities and commitments (including trade payables and lease
obligations) of each Foreign Subsidiary of the Company. Other than as provided
by the terms of the covenant described under the caption "-- Certain
Covenants -- Additional Subsidiary Guarantees," Curtis Industries of Canada,
Ltd., Curtis U.K., Ltd., Curtis Italy, A.B. Dick, S.A., A.B. Dick Company of
Canada, Ltd. and A.B. Dick-Itek Limited and any other Foreign Subsidiary formed
or acquired after the date of the Indenture will not guarantee the Company's
obligations under the Senior Notes. Any right of the Company to receive assets
of any such Foreign Subsidiary upon the latter's liquidation or reorganization
(and the consequent right of the Holders of the Senior Notes to participate in
those assets) will be effectively subordinated to the claims of that Foreign
Subsidiary's creditors. On a pro forma basis, as of December 31, 1997, after
giving effect to the Series A Notes Offering and the application of the net
proceeds therefrom, the aggregate principal amount of secured indebtedness of
the Company, secured indebtedness of the Subsidiary Guarantors and indebtedness
and other liabilities (including trade payables) of the Company's Foreign
Subsidiaries which would have effectively ranked senior to the Senior Notes
would have been approximately $3.9 million. The Indenture permits the Company
and its Subsidiaries to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. See "Risk Factors -- Holding
Company Structure; Ranking of Series B Notes."
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will be limited in aggregate principal amount to $150.0
million and will mature on April 1, 2008. An aggregate of $115.0 million in
principal amount of Senior Notes were issued pursuant to the Series A Notes
Offering, and an aggregate of $35.0 million in principal amount of Senior Notes
may be issued in the future (subject to the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock"). Interest on the Senior Notes will accrue at the rate of 9 5/8% per
annum and will be payable semiannually in arrears on April 1 and October 1,
commencing on October 1, 1998, to Holders of record on the immediately preceding
March 15 and September 15. Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest and Liquidated Damages, if any, on the Senior Notes will be payable
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of interest
and Liquidated Damages, if any, may be made by check mailed to the Holders of
the Senior Notes at their respective addresses set forth in the register of
Holders of Senior Notes; provided that all payments of principal, premium,
interest and Liquidated Damages, if any, with respect to Senior Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Series B Notes will be issued in
denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's obligations under the Series A Notes are, and Series B Notes
will be, jointly and severally guaranteed on a senior basis by each direct and
indirect Subsidiary of the Company (other than Foreign Subsidiaries). The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are
limited so as not to constitute a fraudulent conveyance under applicable law.
See "Risk Factors -- Fraudulent Transfer Considerations."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless, other than with respect to a merger between a
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Subsidiary Guarantor and another Subsidiary Guarantor or a merger between a
Subsidiary Guarantor and the Company, (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation or
merger (if other than such Subsidiary Guarantor) assumes all the obligations of
such Subsidiary Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Senior Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Repurchase at Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
The Senior Notes will not be redeemable at the Company's option prior to
April 1, 2003. Thereafter, the Senior Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 104.8125%
2004........................................................ 103.2083%
2005........................................................ 101.6042%
2006 and thereafter......................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2001, the Company may on
any one or more occasions redeem up to an aggregate of 33 1/3% of the original
aggregate principal amount of Senior Notes at a redemption price of 109.625% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of an
offering of common stock of the Company; provided that at least 66 2/3% of the
aggregate principal amount of Senior Notes originally issued remain outstanding
immediately after the occurrence of such redemption; and provided, further, that
such redemption shall occur within 60 days of the date of the closing of such
offering.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Senior Note shall state the portion of
the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Senior Note. Senior
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Notes called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Senior Notes or portions
of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (the "Change of Control Payment"). Within ten days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Senior Notes
as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a Series B Note equal in principal
amount to any unpurchased portion of the Senior Notes surrendered, if any;
provided that each such Series B Note will be in a principal amount of $1,000 or
an integral multiple thereof. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Senior Notes to require that the
Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any to "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principal or his Related Parties (as defined
below), (ii) the adoption of a plan relating to the liquidation or dissolution
of the Company, (iii) the consummation of the first transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as defined above),
directly or indirectly, of more of the Voting Stock of the Company (measured by
voting power
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<PAGE> 65
rather than number of shares) than is at the time "beneficially owned" (as
defined above) by the Principal and his Related Parties in the aggregate or (iv)
the first day on which a majority of the members of the Board of Directors of
the Company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Senior Notes to require the Company
to repurchase such Senior Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of the Principal or a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"Principal" means Robert J. Tomsich.
"Related Party" with respect to the Principal means (A) any 80% (or more)
owned Subsidiary, or spouse or immediate family member (in the case of an
individual) of the Principal; or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately preceding
clause (A); or (C) the estate of the Principal until such estate is distributed
pursuant to his will or applicable state law.
The New Credit Agreement currently prohibits the Company from repurchasing
any Senior Notes, and also provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future Credit
Facilities or other agreements relating to Indebtedness to which the Company
becomes a party may contain similar restrictions and provisions. In the event a
Change of Control occurs at a time when the Company is prohibited from
purchasing Senior Notes, the Company could seek the consent of the lenders under
the New Credit Agreement or such future agreements relating to Indebtedness to
the purchase of Senior Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company did not obtain such a consent or repay
such borrowings, the Company would remain prohibited from purchasing the Senior
Notes. In such case, the Company's failure to purchase tendered Senior Notes
would constitute an Event of Default under the Indenture. In addition, the
Company's ability to pay cash to the Holders of Senior Notes upon a repurchase
may be limited by the Company's then existing financial resources. See "Risk
Factors--Purchase of Series B Notes Upon a Change of Control."
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (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 (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or such
Subsidiary's Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets pursuant (except with respect to assumptions of trade payables)
to a customary novation agreement that releases the Company or such Subsidiary
from further liability and (y) any securities, notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this clause (ii).
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<PAGE> 66
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the New Credit Agreement or (b) to an investment in a
Permitted Business through the making of a capital expenditure or the
acquisition of other assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
be required to make an offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Senior Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
The New Credit Agreement currently prohibits the Company from repurchasing
any Senior Notes. Any future Credit Facilities or other agreements relating to
Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event an Asset Sale Offer is required to be
made at a time when the Company is prohibited from purchasing Senior Notes, the
Company could seek the consent of the lenders under the New Credit Agreement or
such future agreements relating to Indebtedness to the purchase of Senior Notes
or could attempt to refinance the borrowings that contain such prohibition. If
the Company did not obtain such a consent or repay such borrowings, the Company
would remain prohibited from purchasing the Senior Notes. In such case, the
Company's failure to purchase tendered Senior Notes would constitute an Event of
Default under the Indenture.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any of
its Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Senior Notes or the Subsidiary Guarantees, except a payment
of interest or principal at Stated Maturity; (iv) pay fees pursuant to, or make
any other distribution in respect of, the Management Agreement; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed
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Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries on or
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii), (iii), (v) or (vi) of the next succeeding paragraph and
excluding any Restricted Payment made on the date of the Indenture directly
by the Company with the proceeds of the Series A Notes Offering, is less
than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company since the date of the Indenture as a
capital contribution to its common equity capital or from the issue or sale
of Equity Interests of the Company (other than Disqualified Stock) or from
the issuance or sale of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase
or other acquisition of subordinated Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) payments by the Company or any Subsidiary of
the Company, directly or indirectly, to NES Group, Inc. to satisfy tax
obligations, in accordance with the Tax Payment Agreement as in effect on the
date of the Indenture; provided that such amounts do not exceed the amounts
that, without recognizing any tax loss carryforwards or carrybacks or other tax
attributes, such as alternative minimum tax carryforwards, would otherwise be
due and owing if the Company and its Subsidiaries were an independent,
individual taxpayer; and (vi) so long as no Default or Event of Default has
occurred and is continuing or would occur as a result thereof, the payment of
fees pursuant to the Management Agreement, as in effect on the date of the
Indenture; provided that the amount of fees paid pursuant to the Management
Agreement in any calendar year shall not exceed an amount equal to five percent
of the Company's earnings before interest, taxes, depreciation, amortization and
miscellaneous expense (income).
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
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upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company or a Subsidiary Guarantor may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for the Company'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
or such Disqualified Stock is issued would have been at least 2 to 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, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Indenture will also provide that the Company and any Subsidiary
Guarantor will not incur any Indebtedness (other than Existing Indebtedness)
that is contractually subordinated in right of payment to any other Indebtedness
of the Company or such Subsidiary Guarantor, respectively, unless such
Indebtedness is also contractually subordinated in right of payment to the
Senior Notes or the Subsidiary Guarantee of such Subsidiary Guarantor,
respectively, on substantially identical terms; provided, however, that no
Indebtedness of the Company or any Subsidiary Guarantor shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company or such Subsidiary Guarantor, respectively, solely by virtue of being
unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company or any Subsidiary Guarantor of
Indebtedness under Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and its Subsidiaries thereunder) outstanding under all Credit Facilities
after giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to the greater of (x) $32.0 million and (y) the Borrowing
Base;
(ii) the incurrence by any Foreign Subsidiary of Indebtedness under
Foreign Credit Facilities; provided that the aggregate principal amount of
all Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of Foreign Subsidiaries
thereunder) outstanding under all Foreign Credit Facilities after giving
effect to such incurrence, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (ii), does not exceed an amount equal to the
greater of (x) $8.0 million and (y) the Foreign Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Senior Notes and the Subsidiary Guarantees,
respectively;
(v) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, sale and leaseback
transactions, mortgage financings, purchase money obligations, capital
expenditures or similar financing transactions, in each case incurred for
the purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Subsidiary, in each case with respect to
the respective properties, assets and rights of the Company or such
Subsidiary as of the date of the Indenture, in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all
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Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (v), not to exceed
$10.0 million;
(vi) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace any Indebtedness (other than
intercompany Indebtedness and Indebtedness incurred under Credit
Facilities) that was permitted by the Indenture to be incurred;
(vii) the incurrence by the Company or any of the Subsidiary
Guarantors of intercompany Indebtedness between or among the Company and
any Subsidiaries that are Subsidiary Guarantors; provided, however, that
(i) if the Company or a Subsidiary Guarantor is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Senior Notes
and the Subsidiary Guarantees, respectively, and (ii) (A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Subsidiary
Guarantor and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Subsidiary Guarantor shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be, that was not permitted
by this clause (vii);
(viii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations;
(ix) the guarantee by the Company or any of the Subsidiary Guarantors
of Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant; and
(x) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (x), not to exceed $10.0
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant; provided, in each case, that the amount thereof is
included in Fixed Charges of the Company as accrued.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company and any Subsidiary Guarantor may enter into a sale and
leaseback transaction if (i) the Company or such Subsidiary Guarantor could have
(a) (1) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in clause (i) of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," or (2) incurred Indebtedness pursuant to clause (v) of the second
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
"--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company or the applicable Subsidiary
Guarantor applies
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the proceeds of such transaction in compliance with, the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset Sales."
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except for Permitted Liens, unless the Senior Notes and the Subsidiary
Guarantees are secured on an equal and ratable basis (or senior basis where such
Liens secure subordinated debt) with the obligations so secured until such time
as such obligations are no longer secured by a Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i) (a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture, the Senior Notes and the Subsidiary Guarantees,
(c) applicable law, (d) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired; provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (e) by
reason of customary non-assignment provisions in leases or contracts entered
into in the ordinary course of business and consistent with past practices, (f)
mortgages or other purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (g) Permitted Refinancing
Indebtedness; provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (h) any agreement for the sale of a Subsidiary that restricts
distributions by that Subsidiary pending its sale, (i) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "-- Liens" that limits the right of the debtor
to dispose of the assets securing such Indebtedness, (j) provisions with respect
to the disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary course of
business and (k) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company 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
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have 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 Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Senior Notes and the
Indenture
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pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; (iv) except in the case of a merger of the Company with or into a Wholly
Owned Subsidiary of the Company, the Company or the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) 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 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 the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" and (v) each Subsidiary Guarantor, unless it is the other party to the
transactions described above, shall have by supplemental indenture confirmed
that its Subsidiary Guarantee shall apply to the Company's or the surviving
Person's obligations under the Indenture and the Senior Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (A) any employment
agreement entered into by the Company or any of its Subsidiaries in the ordinary
course of business and consistent with the past practice of the Company or such
Subsidiary, (B) transactions between or among the Company and/or its
Subsidiaries, (C) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "--Restricted Payments" and (D)
the payment by the Company or its Subsidiaries of reasonable and customary fees
to members of their respective Boards of Directors, in each case, shall not be
deemed Affiliate Transactions.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Subsidiaries shall
after the date of the Indenture, (i) transfer or cause to be transferred in one
or a series of transactions (whether or not related), any assets, businesses,
divisions, real property or equipment having an aggregate fair market value (as
determined in good faith by the Board of Directors) in excess of $1.0 million to
any Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary
Guarantor; (ii) acquire or create another Subsidiary (other than a Foreign
Subsidiary); or (iii) any Subsidiary of the Company, that is not a Subsidiary
Guarantor, guarantees any Indebtedness of the Company other than the Senior
Notes, or pledges any of its assets to secure any Indebtedness of the Company
other than the Senior Notes, then the Company will cause such Subsidiary to (A)
execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall unconditionally Guarantee all of the Company's obligations
under the Senior Notes on the terms set forth in such supplemental indenture and
(B) deliver to the Trustee an opinion of counsel reasonably satisfactory to the
Trustee that such supplemental indenture has been duly executed and delivered by
such Subsidiary.
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BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Senior Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
The Indenture provides that, from and after the earlier of the effective
date of the Exchange Offer Registration Statement and the effective date of the
Shelf Registration Statement, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Senior Notes remain outstanding, it
will furnish to the Holders, to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Senior Notes; (ii) default in
payment when due of the principal of or premium, if any, on the Senior Notes;
(iii) failure by the Company or any Subsidiary to comply with the provisions
described under the captions "-- Repurchase at the Option of Holders -- Change
of Control;" "-- Repurchase at the Option of Holders -- Asset Sales;"
"-- Certain Covenants -- Restricted Payments;" "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock;" or
"-- Certain Covenants -- Merger, Consolidation, or Sale of Assets;" (iv) failure
by the Company or any Subsidiary for 60 days after notice to comply with any of
its other agreements in the Indenture or the Senior Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (A) (i) is
caused by a failure to pay any principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and (B)
in each case, the principal amount of any such Indebtedness as to which a
Payment Default shall have occurred, together with the principal amount of any
other such Indebtedness under which
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there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any
of its Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed within 60 days after
their entry; (vii) certain events of bankruptcy or insolvency with respect to
the Company, any of its Significant Subsidiaries or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary; and (viii) the
termination of the Subsidiary Guarantee of any Subsidiary Guarantor for any
reason not permitted by the Indenture or the denial of any Person acting on
behalf of any Subsidiary Guarantor of its obligations under any such Subsidiary
Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Senior Notes pursuant to
the optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes. If an Event of Default occurs prior
to April 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to April 1, 2003, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Senior Notes,
the Indenture, the Subsidiary Guarantees or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Holder of Senior
Notes by accepting a Senior Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option, and the Subsidiary Guarantors may, at the
option of their respective Boards of Directors and at any time, elect to have
all of their respective obligations discharged with respect to the outstanding
Senior Notes and Subsidiary Guarantees ("Legal Defeasance") except for (i) the
rights of Holders of outstanding Senior Notes to receive payments in respect of
the principal of, premium, if any, and
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interest and Liquidated Damages on such Senior Notes when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect to
the Senior Notes concerning issuing temporary Senior Notes, registration of
Senior Notes, mutilated, destroyed, lost or stolen Senior Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company and the
obligations of the Subsidiary Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Senior Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of the outstanding Senior
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Senior Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Senior Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note selected for redemption.
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Also, the Company is not required to transfer or exchange any Senior Note for a
period of 15 days before a selection of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Senior Notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and any existing default or compliance with any provision of
the Indenture, the Senior Notes or the Subsidiary Guarantees may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for Senior
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Senior Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium or
Liquidated Damages, if any, or interest on the Senior Notes (except a rescission
of acceleration of the Senior Notes by the Holders of at least a majority in
aggregate principal amount of the Senior Notes and a waiver of the payment
default that resulted from such acceleration), (v) make any Senior Note payable
in money other than that stated in the Senior Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Senior Notes to receive payments of principal of or premium or
Liquidated Damages, if any, or interest on the Senior Notes, (vii) waive a
redemption payment with respect to any Senior Note (other than a payment
required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture, the
Senior Notes or the Subsidiary Guarantees to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes, to provide for the assumption of the
Company's obligations to Holders of Senior Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's assets, to
make any change that would provide any additional rights or benefits to the
Holders of Senior Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act or to allow any Subsidiary Guarantor to guarantee
the Senior Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company or any Subsidiary Guarantor, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior
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Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
BOOK-ENTRY; DELIVERY AND FORM
The Series A Notes initially have been, and the Series B Notes initially
will be, represented by one or more Senior Notes in registered, global form
without interest coupons (collectively, the "Global Note"). The Global Note will
be deposited upon issuance with the Trustee as custodian for DTC, in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Senior
Notes in certificated form except in the limited circumstances described below.
See "-- Exchange of Book-Entry Notes for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Note will not be entitled to receive physical delivery of Certificated
Notes (as defined below).
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Note) will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Notice to Investors." In addition,
transfers of beneficial interests in the Global Note will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants,
which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Senior
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
Investors in the Rule 144A Global Note may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interests in a
Global Note may be subject to the procedures and requirements of DTC. The laws
of some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Note to pledge such interests to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
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EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE SENIOR NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY
OF SENIOR NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED
OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee have treated, and will continue to treat, the persons in whose names the
Senior Notes, including the Global Note, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Note, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Note or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants. DTC has advised the Company that its current practice,
upon receipt of any payment in respect of securities such as the Senior Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Senior
Notes will be governed by standing instructions and customary practices and will
be the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Senior Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Interests in the Global Note trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. See "-- Same Day Settlement and
Payment." Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Senior Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global Note
and only in respect of such portion of the aggregate principal amount of the
Senior Notes as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Senior Notes, DTC
reserves the right to exchange the Global Note for legended Senior Notes in
certificated form, and to distribute such Senior Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Rule 144A Global Note among Participants in DTC, it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Senior Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Note and
the Company thereupon fails to appoint a successor depositary or (y) has ceased
to be a clearing agency registered under the Exchange Act, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the issuance
of the Certificated Notes or (iii) there shall have occurred and be continuing a
Default or Event of Default with respect to the Senior Notes. In addition,
beneficial interests in
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the Global Note may be exchanged for Certificated Notes upon request but only
upon prior written notice given to the Trustee by or on behalf of DTC in
accordance with the Indenture. In all cases, Certificated Notes delivered in
exchange for the Global Note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary (in accordance with its customary procedures).
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Senior Notes issued in certificated form may not be exchanged for
beneficial interests in the Global Note unless the transferor first delivers to
the Trustee a written certificate (in the form provided in the Indenture) to the
effect that such transfer will comply with the appropriate transfer restrictions
applicable to such Senior Notes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Senior Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Senior Notes in certificated form, the Company will make all payments
of principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. The Senior Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Senior Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any Certificated Notes will also be settled in
immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the Series A Notes Offering, the Company, the Subsidiary
Guarantors and the Initial Purchasers entered into the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company and the
Subsidiary Guarantors agreed to file with the Commission the Exchange Offer
Registration Statement, of which this Prospectus is a part, on the appropriate
form under the Securities Act with respect to the Series B Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer Series B Notes pursuant to the Exchange Offer in exchange for Series A
Notes. If (i) the Company is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any Holder of a Senior Note notifies the Company prior to the 20th day following
consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Series B Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a broker-dealer and owns Series A Notes acquired directly from
the Company or an affiliate of the Company, the Company and the Subsidiary
Guarantors will file with the Commission a Shelf Registration Statement to cover
resales of the Series A Notes by the Holders thereof who satisfy certain
conditions relating to the provision of information in connection with the Shelf
Registration Statement. The Company and the Subsidiary Guarantors will use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission.
The Registration Rights Agreement provides that (i) the Company and the
Subsidiary Guarantors will file the Exchange Offer Registration Statement with
the Commission on or prior to 60 days after the Closing Date, (ii) the Company
and the Subsidiary Guarantors will use their reasonable best efforts to have the
Exchange Offer Registration Statement declared effective by the Commission on or
prior to 150 days after the Closing Date, (iii) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its reasonable best efforts to issue on or
prior to 30
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business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Series B Notes in exchange for all
Series A Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company and the
Subsidiary Guarantors will use their reasonable best efforts to file the Shelf
Registration Statement with the Commission on or prior to 30 days after such
filing obligation arises and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 150 days after such obligation
arises. If (a) the Company and the Subsidiary Guarantors fail to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Company and the Subsidiary Guarantors fail to consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement, or (d) the Shelf Registration Statement
or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Senior Notes held by such Holder. The amount
of the Liquidated Damages will increase by an additional $.05 per week per
$1,000 principal amount of Senior Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.50 per week per $1,000 principal amount of Senior
Notes. All accrued Liquidated Damages will be paid by the Company on each
Damages Payment Date to the Global Note Holder by wire transfer of immediately
available funds or by federal funds check and to Holders of Certificated
Securities by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Holders of Series A Notes will be required to make certain representations
to the Company and the Subsidiary Guarantors (as described in the Registration
Rights Agreement) in order to participate in the Exchange Offer and will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Series A Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set forth
above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that,
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control; provided, further, that in the case of a joint venture,
partnership, association or other business arrangement with any Person entered
into in the ordinary course of business, neither such Person nor the joint
venture, partnership, association or business arrangement shall be deemed to be
an Affiliate by reason of the preceding proviso.
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"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Repurchase at the Option of
Holders -- Change of Control" and/or the provisions described above under the
caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and
not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by
the Company or any of its Subsidiaries of Equity Interests of any of the
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments" and (iv)
dispositions of obsolete equipment, in each case, will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
85% of the face amount of all accounts receivable owned by the Company and its
Subsidiaries (other than Foreign Subsidiaries) as of such date that are not more
than 60 days past due, and (b) 65% of the book value of all inventory owned by
the Company and its Subsidiaries (other than Foreign Subsidiaries) as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any lender party to the New
Credit Agreement or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) through (v) above.
Notwithstanding the foregoing, up to 40% of the Cash Equivalents of the kinds
described in clauses (ii),
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(iii) and (v) above at any one time held by the Company or any Restricted
Subsidiary of the Company may be invested in securities, certificates of
deposit, eurodollar time deposits, bankers' acceptances and commercial paper
having maturities of not more than one year after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, less (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Subsidiary
Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Credit Facilities" means, with respect to the Company or any of its
Subsidiaries (other than Foreign Subsidiaries), one or more debt facilities
(including, without limitation, the New Credit Agreement) or other
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debt securities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities outstanding on the date on which Senior Notes are first issued
and authenticated under the Indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (i) of the definition
of Permitted Indebtedness.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Senior Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $1.2 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Agreement) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made
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by the Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Foreign Borrowing Base" means, as of any date, the amount equal to the sum
of (a) 85% of the face amount of all accounts receivable owned by Foreign
Subsidiaries of the Company as of such date that are not more than 60 days past
due, and (b) 65% of the book value of all inventory owned by Foreign
Subsidiaries of the Company as of such date, all calculated on a consolidated
basis and in accordance with generally accepted accounting principles. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Foreign Borrowing Base.
"Foreign Credit Facilities" means, with respect to the Company or any of
its Foreign Subsidiaries, one or more debt facilities or other debt securities
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, terms loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Foreign Credit Facilities outstanding on the date on which Senior Notes are
first issued and authenticated under the Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (ii) of
the definition of Permitted Indebtedness.
"Foreign Subsidiary" means any Subsidiary of the Company, more than 80% of
the sales, earnings or assets (determined on a consolidated basis) of which are
located or derived from operations outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (iii) agreements entered into for the purpose of fixing or hedging the
risks associated with fluctuations in foreign currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade
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payable, if and to the extent any of the foregoing Indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"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).
"Management Agreement" means that certain Management Agreement between
NESCO, Inc. and the Company as in effect on the date of the Indenture.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Credit Agreement" means that certain New Credit Agreement, as in
effect on the date of the Indenture, by and among the Company, the Subsidiary
Guarantors and the lenders party thereto, providing for up to $32.0 million of
revolving credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time (together with any amendment,
83
<PAGE> 85
modification, renewal, refunding, replacement or refinancing to or of any of the
foregoing, including, without limitation, any agreement modifying the maturity
or amortization schedule of or refinancing or refunding all or any portion of
Indebtedness thereunder or increasing the amount that may be borrowed under such
agreement or any successor agreement, whether or not among the same parties.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Businesses" means the manufacture, sale or distribution of
equipment, parts, supplies or other goods or the provision of services relating
to industrial, automotive, graphic arts, printing, and reasonably related
businesses.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor that is
engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person, if as a
result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of
the Company that is a Subsidiary Guarantor that is engaged in a Permitted
Business or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is
a Subsidiary Guarantor; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales;" (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) any Investment by a Foreign Subsidiary
of the Company in any other Foreign Subsidiary of the Company; and (g) any
Investment in any Person principally engaged in a Permitted Business having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (g) that are at the time
outstanding, not to exceed $20.0 million.
"Permitted Liens" means (i) Liens on assets securing Indebtedness under
Credit Facilities and Foreign Credit Facilities that was permitted by the terms
of the Indenture to be incurred; (ii) Liens securing Indebtedness incurred
pursuant to (A) the Fixed Charge Coverage Ratio test set forth under the first
paragraph of the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" or (B)
paragraph (ix) of the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock"
provided that, in either case, such Indebtedness ranks, by its terms, pari passu
with the Senior Notes; (iii) Liens in favor of the Company; (iv) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Subsidiary of the Company; provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company; (v) Liens on property existing at
the time of acquisition thereof by the Company or any Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (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 to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of the covenant entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (viii) Liens existing on the date of the Indenture; (ix)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; and (xi) Liens arising by reason of (1) any
84
<PAGE> 86
attachment, judgment, decree or order of any court, so long as such Lien is
being contested in good faith and is either adequately bonded or execution
thereon has been stayed pending appeal or review, and any appropriate legal
proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been fully terminated or
the period within which such proceedings may be initiated shall not have
expired; (2) security for payment of workers' compensation or other insurance;
(3) security for the performance of tenders, bids, leases and contracts (other
than contracts for the payment of money); (4) operation of law in favor of
carriers, warehousemen, landlords, mechanics, materialmen, laborers, employees
or suppliers, incurred in the ordinary course of business for sums which are not
yet delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof; (5) any interest
or title of a lessor under any lease; and (6) easements, rights-of-way, zoning
and similar covenants and restrictions and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount and which do not
in any case materially interfere with the ordinary course of business of the
Company or any of its Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries (other than intercompany
Indebtedness); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the Holders of Senior Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
85
<PAGE> 87
"Subsidiary Guarantor" means each of (i) A.B. Dick and Curtis and (ii) any
other Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Tax Payment Agreement" means that certain Tax Payment Agreement among NES
Group, Inc., the Company, A.B. Dick, Curtis, Itek Graphix Corp. and Curtis Sub,
Inc. as in effect on the date of the Indenture.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Squire, Sanders & Dempsey L.L.P., counsel to the Company,
the following describes the material federal income tax consequences expected to
result to holders whose Series A Notes are exchanged for Series B Notes in the
Exchange Offer. Such opinion is based on the tax laws of the United States in
effect on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. There can be no assurance that the Internal Revenue Service ("Service")
will not take a contrary view, and no ruling from the Service has been or will
be sought. The laws and interpretations thereof on which such opinion is based
are subject to change and any such change could apply retroactively.
The exchange of Series A Notes for Series B Notes pursuant to the Exchange
Offer will not be a taxable event to either the Company or the holders of the
Series A Notes for federal income tax purposes. A holder's holding period for
Series B Notes will include the holding period for Series A Notes. HOLDERS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES OF EXCHANGING SERIES A NOTES FOR SERIES B NOTES.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Series A Notes that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities (other than Series A Notes acquired directly from the Company or any
affiliate of the Company) may exchange such Series A Notes for Series B Notes
pursuant to the Exchange Offer; provided, that each broker-dealer that receives
Series B Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such broker-dealer as a result of market-making
or other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Series B Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Series B Notes received in exchange for Series A
Notes where such Series A Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 120 days after consummation of the Exchange Offer, it will make this
Prospectus, as it may be amended or supplemented from time to time, available to
any broker-dealer for use in connection with any such resale. The Company will
not receive any proceeds from any sale of Series B Notes by broker-dealers or
any other holder of Series B Notes.
86
<PAGE> 88
Series B Notes received by broker-dealers for their own account pursuant to
the Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the Series B Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Series B Notes. Any
broker-dealer that resells Series B Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 120 days after consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer and to the Company's performance of, or
compliance with, the Registration Rights Agreement (other than commissions or
concessions of any brokers or dealers) and will indemnify the holders of the
Senior Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain matters will be passed upon for the Company by Squire, Sanders &
Dempsey L.L.P., Cleveland, Ohio.
EXPERTS
The consolidated financial statements of the Company as of January 17, 1997
and December 31, 1997 and for the period from January 17, 1997 through December
31, 1997, and of A.B. Dick for the fiscal year ended March 31, 1996 and for the
period from April 1, 1996 through January 16, 1997, and of Curtis as of December
28, 1996 and December 5, 1997 and for the fiscal years ended December 30, 1995
and December 28, 1996 and for the eleven-month period ended December 5, 1997,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
87
<PAGE> 89
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PARAGON CORPORATE HOLDINGS INC. AND A.B. DICK COMPANY
(THE PREDECESSOR COMPANY)
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets of Paragon Corporate Holdings
Inc. as of January 17, 1997 and December 31, 1997......... F-3
Consolidated Statements of Operations for A.B. Dick Company
for the fiscal year ended March 31, 1996 and for the
nine-month and sixteen-day period ended January 16, 1997
and for Paragon Corporate Holdings Inc. for the
eleven-month and fifteen-day period ended December 31,
1997...................................................... F-4
Consolidated Statements of Stockholders' Equity for A.B.
Dick Company for the fiscal year ended March 31, 1996 and
for the nine-month and sixteen-day period ended January
16, 1997 and for Paragon Corporate Holdings Inc. for the
eleven-month and fifteen-day period ended December 31,
1997...................................................... F-5
Consolidated Statements of Cash Flows for A.B. Dick Company
for the fiscal year ended March 31, 1996 and for the
nine-month and sixteen-day period ended January 16, 1997
and for Paragon Corporate Holdings Inc. for the
eleven-month and fifteen-day period ended December 31,
1997...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-22
Consolidated Balance Sheets as of December 28, 1996 and
December 5, 1997.......................................... F-23
Consolidated Statements of Operations for the fiscal years
ended December 30, 1995 and December 28, 1996 and for the
eleven-month period ended December 5, 1997................ F-24
Consolidated Statements of Stockholders' Deficit for the
fiscal years ended December 30, 1995 and December 28, 1996
and for the eleven-month period ended December 5, 1997.... F-25
Consolidated Statements of Cash Flows for the fiscal years
ended December 30, 1995 and December 28, 1996 and for the
eleven-month period ended December 5, 1997................ F-26
Notes to Consolidated Financial Statements.................. F-27
</TABLE>
F-1
<PAGE> 90
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Paragon Corporate Holdings Inc.
We have audited the accompanying consolidated balance sheets of Paragon
Corporate Holdings Inc. (see Note A) as of January 17, 1997 and December 31,
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for A.B. Dick Company (the Predecessor Company) for the
fiscal year ended March 31, 1996 and for the nine-month and sixteen-day period
ended January 16, 1997 and for Paragon Corporate Holdings Inc. for the
eleven-month and fifteen-day period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Paragon Corporate
Holdings Inc. at January 17, 1997 and December 31, 1997, and the consolidated
results of operations and cash flows for A.B. Dick Company (the Predecessor
Company) for the fiscal year ended March 31, 1996 and for the nine-month and
sixteen-day period ended January 16, 1997 and for Paragon Corporate Holdings
Inc. for the eleven-month and fifteen-day period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
February 27, 1998, except for Note J, as to
which the date is April 1, 1998
Cleveland, Ohio
F-2
<PAGE> 91
PARAGON CORPORATE HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 17, DECEMBER 31,
----------- ------------
1997 1997
DOLLARS IN THOUSANDS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,150 $ 3,283
Short-term investments.................................... 6,130 4,176
Accounts receivable, less allowance for doubtful accounts
of $100 at January 17 and $1,545 at December 31........ 7,411 37,821
Inventories............................................... 41,080 48,068
Other..................................................... 911 1,535
------- --------
Total current assets................................. 57,682 94,883
Property, plant and equipment, less accumulated
depreciation.............................................. 9,998
Goodwill.................................................... 32,072
Deferred charges............................................ 359 1,122
------- --------
$58,041 $138,075
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 7,491 $ 14,143
Accrued expenses.......................................... 19,955 28,599
Deferred service revenue.................................. 8,541 6,960
Due to GEC................................................ 3,381 945
Restructuring and severance reserves...................... 4,400 3,121
Current portion of long-term debt......................... 899 3,495
------- --------
Total current liabilities............................ 44,667 57,263
Long-term debt, less current portion........................ 7,117 67,121
Retirement obligations...................................... 3,451
Other long-term liabilities................................. 6,209 3,109
------- --------
57,993 130,944
Stockholders' equity:
Common stock, no par value, Authorized 2,000 shares of
Class A (voting) and 28,000 shares of Class B
(non-voting); issued and outstanding 1,000 shares of
Class A and 19,000 shares of Class B, at stated
value.................................................. 1 1
Paid-in capital........................................... 47 47
Retained earnings......................................... 7,604
Cumulative translation adjustment......................... (521)
------- --------
Total stockholders' equity........................... 48 7,131
------- --------
$58,041 $138,075
======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 92
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
A.B. DICK COMPANY PARAGON CORPORATE
--------------------------- HOLDINGS INC.
PERIOD FROM -----------------
FISCAL YEAR APRIL 1, 1996 PERIOD FROM
ENDED THROUGH JANUARY 17, 1997
MARCH 31, JANUARY 16, THROUGH
1996 1997 DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
NET REVENUE
Equipment............................................. $ 77,628 $ 54,178 $ 64,620
Service............................................... 35,735 26,222 27,808
Repair parts.......................................... 16,944 12,671 15,976
Supplies.............................................. 85,056 64,343 77,911
Automotive and industrial............................. 6,901
-------- -------- --------
Total revenue......................................... 215,363 157,414 193,216
COST OF REVENUE
Equipment............................................. 58,278 44,560 46,559
Service............................................... 28,526 21,734 20,596
Repair parts.......................................... 7,346 5,672 6,695
Supplies.............................................. 58,687 43,092 52,967
Automotive and industrial............................. 2,834
-------- -------- --------
Total cost of revenue................................. 152,837 115,058 129,651
-------- -------- --------
Gross profit.......................................... 62,526 42,356 63,565
COSTS AND EXPENSES
Sales and marketing expenses.......................... 32,500 23,574 26,386
General and administrative expenses................... 24,272 15,248 17,603
Pension credit........................................ (5,057) (7,013) --
Research and development.............................. 7,923 4,111 3,755
Depreciation and amortization......................... 8,922 7,053 1,481
Management fee........................................ 1,941
Acquisition costs..................................... 1,400
-------- -------- --------
68,560 42,973 52,566
-------- -------- --------
Operating income (loss)............................... (6,034) (617) 10,999
Interest income....................................... 1,620 998 789
Interest expense...................................... (162) (205) (2,598)
Other income (expense)................................ (887) (631) 139
-------- -------- --------
Income (loss) before income taxes..................... (5,463) (455) 9,329
Foreign income taxes.................................. 941 651 775
-------- -------- --------
Net income (loss)..................................... $ (6,404) $ (1,106) $ 8,554
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 93
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PAID- CUMULATIVE
COMMON IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
A.B. DICK COMPANY
Balance at April 1, 1995................. $1 $ -- $ 88,802 $ 1,348 $ 90,151
Net loss................................. (6,404) (6,404)
Cash distributions to GEC and
affiliates............................. (4,177) (4,177)
Other assets distributed to GEC.......... (2,778) (2,778)
Translation adjustments.................. 346 346
-- ---- -------- ------- --------
Balance at March 31, 1996................ 1 -- 75,443 1,694 77,138
Net loss................................. (1,106) (1,106)
Cash distributions to GEC and
affiliates............................. (26,307) (26,307)
Accounts receivable and other assets
distributed to GEC..................... (28,245) (28,245)
Translation adjustments.................. (903) (903)
-- ---- -------- ------- --------
BALANCE AT JANUARY 16, 1997.............. $1 $ -- $ 19,785 $ 791 $ 20,577
== ==== ======== ======= ========
PARAGON CORPORATE HOLDINGS INC.
Opening balance at January 17, 1997...... $1 $ 47 $ -- $ -- $ 48
Net income............................... 8,554 8,554
Accrued dividend for stockholders' income
taxes.................................. (950) (950)
Translation adjustments.................. (521) (521)
-- ---- -------- ------- --------
Balance at December 31, 1997............. $1 $ 47 $ 7,604 $ (521) $ 7,131
== ==== ======== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 94
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
A.B. DICK COMPANY PARAGON CORPORATE
--------------------------- HOLDINGS INC.
PERIOD FROM ------------------
FISCAL YEAR APRIL 1, 1996 PERIOD FROM
ENDED THROUGH JANUARY 17, 1997
MARCH 31, JANUARY 16, THROUGH
1996 1997 DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net income (loss).................................. $ (6,404) $ (1,106) $ 8,554
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 8,922 7,053 1,481
Pension credit.................................. (5,057) (7,013)
Retirement expense.............................. 1,990 1,577
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.... 2,764 4,857 (205)
(Increase) decrease in inventory.............. 8,442 (1,045) 6,029
(Increase) decrease in other assets........... 549 (383) (877)
Increase (decrease) in accounts payable....... (3,376) 1,460 1,193
Increase (decrease) in deferred service
revenue.................................... 813 (557) (1,581)
Increase (decrease) in other liabilities...... (120) 2,638 491
-------- --------- --------
Net cash provided by operating
activities............................ 8,523 7,481 15,085
Investing activities:
Accounts receivable used in connection with the
acquisition of A.B. Dick Company................ (19,489)
Acquisition of Curtis Industries Inc., less cash
acquired........................................ (4,910)
Purchases of property, plant and equipment......... (5,528) (3,960) (1,860)
Payments of acquisition liabilities................ (4,379)
Decrease in short-term investments................. 1,954
-------- --------- --------
Net cash used in investing activities...... (5,528) (3,960) (28,684)
Financing activities:
Borrowings on revolving credit lines............... 18,603
Cash distributions to GEC and affiliates........... (4,177) (26,307) (2,436)
Decrease in long-term borrowings................... (291) (172) (914)
-------- --------- --------
Net cash provided by (used in) financing
activities............................... (4,468) (26,479) 15,253
Effect of exchange rate changes on cash............ 346 (903) (521)
-------- --------- --------
Increase (decrease) in cash and cash equivalents..... (1,127) (23,861) 1,133
Cash and cash equivalents at beginning of period..... 27,039 25,912 2,150
-------- --------- --------
Cash and cash equivalents at end of period........... $ 25,912 $ 2,051 $ 3,283
======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 95
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
A. ORGANIZATION AND ACQUISITIONS
Paragon Corporate Holdings Inc. ("the Company") commenced operations on
January 17, 1997 through the acquisition on that date of the common stock of
A.B. Dick Company and its three wholly owned subsidiaries (collectively "A.B.
Dick" or "the Predecessor Company"), from General Electric Company Ltd. (GEC) in
return for an unsecured promissory note in the amount of $6,000. The Company is
a holding company with no assets or operations other than its investments in its
subsidiaries. The stockholders of the Company are affiliates of NES Group, Inc.
Subsequent to December 31, 1997, NES Group, Inc. became the sole stockholder of
the Company. A.B. Dick is engaged in the manufacture, sale, distribution and
service of offset presses, cameras and plate makers and related supplies for the
graphic arts and printing industry.
The consolidated balance sheet of the Company as of January 17, 1997
reflects the acquisition of A.B. Dick under the purchase method of accounting.
The purchase price was subject to a working capital adjustment which resulted in
the Company receiving $6,200 in cash from GEC offset by a $5,400 liability to
GEC payable over approximately two years. Under the terms of the stock purchase
agreement, A.B. Dick transferred to GEC $19,489 of domestic accounts receivable
(which was collected by A.B. Dick during 1997 and remitted to GEC) and the Niles
manufacturing and headquarters facilities, which had a carrying amount of
$3,500. GEC agreed to let the Company use these facilities until the Company
moves to new manufacturing, headquarters and distribution facilities during
1998. GEC also agreed to fund up to $1,500 in severance costs incurred in 1997
and to reimburse the Company in 1998 for moving costs up to $2,000. These
amounts have been reflected in the allocation of the purchase price.
Additional restructuring reserves of $6,000 were included in the purchase
price allocation in accordance with the Company's business plans to
substantially reorganize the A.B. Dick operations. These reserves represent
accruals for severance of administrative and operating employees ($1,600) and
occupancy costs ($4,400) to be incurred in 1997 and 1998 for idle manufacturing
and headquarters facilities prior to the relocation of operations in 1998.
Since the fair value of the net assets acquired exceeded the purchase price
by approximately $16,000, the historical book values of the acquired property,
plant and equipment ($12,900) have been recorded on the January 17, 1997 opening
balance sheet at zero. The remaining excess ($3,100) of fair value of net assets
acquired over purchase price has been classified as other long-term liabilities
and is being amortized into income over ten years.
On December 5, 1997, the Company acquired all the common stock of Curtis
Industries, Inc. ("Curtis"), a national distributor of products in the
automotive and industrial markets, for a purchase price of $22,290 composed
primarily of $6,500 in cash and $15,700 in seller notes. The acquisition was
accounted for under the purchase method of accounting and, accordingly, the
results of operations of Curtis are included in the consolidated financial
statements since the date of acquisition. Non-recurring compensation awards of
F-7
<PAGE> 96
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$1,400 were made to certain executives in connection with the Curtis
acquisition. The table below summarizes the allocation of the purchase price
based upon the fair value of the net assets acquired on December 5, 1997 and the
carrying values of the Curtis net assets as of:
<TABLE>
<CAPTION>
DECEMBER 5, DECEMBER 31,
-------- --------
1997 1997
<S> <C> <C>
Cash.................................................. $ 1,680 1,438
Accounts receivable................................... 10,716 10,179
Inventories........................................... 14,088 14,112
Property, plant and equipment......................... 8,448 8,795
Goodwill.............................................. 32,170 32,072
Other assets.......................................... 512 4,844
Accounts payable...................................... (5,459) (4,959)
Accrued expenses...................................... (7,228) (6,938)
Long-term debt........................................ (29,211) (33,809)
Retirement obligations................................ (3,426) (3,451)
-------- --------
$ 22,290 $ 22,283
======== ========
</TABLE>
The following unaudited pro forma results of operations assume the
acquisition of Curtis occurred on January 1, 1997. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of the results of operations which actually would have resulted had the
acquisition occurred on January 1, 1997:
<TABLE>
<S> <C>
Net revenues................................................ $267,419
Costs and expenses.......................................... 251,695
Operating income............................................ 15,724
Net income.................................................. 8,700
</TABLE>
B. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The 1997 consolidated financial statements of the Company include the
accounts of A.B. Dick and of Curtis since its acquisition on December 5, 1997.
Consolidated statements of operations, stockholder's equity and cash flows for
the fiscal year ended March 31, 1996 and for the nine-month and sixteen-day
period ended January 16, 1997 have been presented for A.B. Dick, the Predecessor
Company. All significant intercompany accounts and transactions have been
eliminated.
Cash Equivalents and Short-term Investments
The Company considers all highly liquid investments with maturities of
three months or less when purchased to be cash equivalents. The Company's
short-term investments are comprised primarily of certificates of deposit with
maturities in excess of three months.
Accounts Receivable
As set forth in the stock purchase agreement (see Note A), immediately
prior to closing, A.B. Dick transferred all accounts receivable from its
operations in the United States to GEC; therefore, the trade accounts receivable
balance on the January 17, 1997 opening balance sheet relates solely to the
operations of the wholly-owned, foreign subsidiaries of A.B. Dick.
F-8
<PAGE> 97
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Inventories
Domestic inventories, which represent approximately 80% of total
consolidated inventory, are determined on the last-in, first-out (LIFO) basis
and foreign inventories are determined on the first-in, first-out (FIFO) basis.
Where necessary, reserves are provided to value inventory at the lower of cost
or market.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, trade receivables and
payables approximates fair value because of the short maturity of these
instruments. Management believes the carrying amount of long-term debt
approximates fair value at December 31, 1997.
Property, Plant and Equipment
Property, plant and equipment are stated at cost (see Note A). Depreciation
is computed using the straight-line method based on the expected useful lives of
the assets, which are as follows:
<TABLE>
<S> <C>
Building and improvements..................... 15 to 40 years
Machinery and equipment....................... 3 to 18 years
Rental equipment.............................. 3 years
</TABLE>
Goodwill
Goodwill is being amortized on a straight-line basis over 30 years. The
ongoing value and remaining useful life of goodwill are subject to periodic
evaluation and the Company currently expects the carrying amounts to be fully
recoverable.
Deferred Charges
The Company deferred $539 in costs incurred to establish the A.B. Dick
credit facility as of January 17, 1997. These deferred charges are being
amortized over the 3 year term of the related debt.
Impairment of Long-lived Assets
When conditions are present that indicate a potential impairment in the
value of a long-lived asset, the Company evaluates such potential impairment by
comparing the aggregate of the estimated undiscounted future net cash flows
(including any salvage values) to be generated by an asset with the asset's
carrying value. No impairment has been recorded in the consolidated financial
statements.
Income Taxes
The Company and its domestic subsidiaries, A.B. Dick and Curtis, have
elected Subchapter S Corporation status for United States income tax purposes.
Accordingly, the Company's United States operations for 1997 are not subject to
income taxes as separate entities. The Company's United States income is
included in the income tax returns of the stockholders. As of December 31, 1997,
the Company accrued dividends totaling $950 for the payment of stockholders'
income taxes.
Prior to its acquisition by the Company, the operations of A.B. Dick were
subject to United States income taxes and included in the income tax returns of
its U.S. Parent. For financial reporting purposes, U.S. income tax expense was
allocated to A.B. Dick by its U.S. Parent on a separate return basis giving
effect to permanent differences which were not taxable or deductible for federal
income tax purposes. All deferred income taxes were recorded by the U.S. Parent,
as it was the U.S. Parent's policy not to allocate deferred
F-9
<PAGE> 98
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
income taxes to its subsidiaries. No U.S. income tax credits were allocated to
A.B. Dick by its U.S. Parent for the fiscal year ended March 31, 1996 or for the
nine-month and sixteen day period ended January 16, 1997.
The foreign subsidiaries of A.B. Dick and Curtis are subject to foreign
income taxes. Accordingly, deferred taxes have been provided for the expected
future tax consequences of temporary differences in the foreign subsidiaries
between the carrying amount and tax basis of assets and liabilities. Where the
Company has determined that it is more likely than not that deferred assets will
not be realized, a valuation allowance has been established.
Revenue Recognition
For the majority of its operations, the Company recognizes revenues upon
shipment of its equipment and products. A.B. Dick receives advance payments for
service contracts and recognizes income evenly over the contract term as service
is provided. Deferred revenues are recorded on the balance sheet related to
these advance payments.
Product Warranty
A.B. Dick's products (pre-press, press and post-press equipment, copiers,
repair parts and supplies) are subject to varying warranty periods. A reserve
for estimated future warranty obligations is included in accrued expenses based
on historical rates of warranty claims.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs for
the fiscal year ended March 31, 1996, the period from April 1, 1996 through
January 16, 1997 and the period from January 17,1997 through December 31, 1997
amounted to $3,736, $3,024 and $1,832, respectively.
Management Fee
Operations include management fees of one percent of sales charged by
Nesco, Inc., an affiliate of the stockholders of the Company, to provide
management, legal, financial, strategic planning, business development and other
services to the Company.
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiaries are
translated at the current exchange rates, while revenue and expenses are
translated at average rates prevailing during the year. The effects of exchange
rate fluctuations have been reported as a separate component of stockholders'
equity.
Use of Estimates
The presentation 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 any contingent assets or 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.
Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement 130, Reporting Comprehensive Income. Statement 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, adoption in 1998 will have no impact on the Company's net income or
F-10
<PAGE> 99
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
stockholders' equity. Statement 130 requires the Company's foreign currency
translation adjustments, which currently are reported in stockholders' equity,
to be included in other comprehensive income and the disclosure of total
comprehensive income.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued by the FASB. SFAS No. 131 establishes
standards for the way that public business enterprises report financial and
descriptive information about its reporting operating segments. The Company has
not determined the impact on the Company's financial statement disclosure. SFAS
No. 131 is effective for the Company's financial statements for the year ending
December 31, 1998.
C. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 17, DECEMBER 31,
----------- ------------
1997 1997
<S> <C> <C>
Raw materials and work in process........................... $13,073 $ 9,295
Finished goods.............................................. 28,007 39,363
LIFO reserve................................................ -- (590)
------- -------
$41,080 $48,068
======= =======
</TABLE>
Finished goods inventory at December 31, 1997 includes $14,112 related to
Curtis.
D. PROPERTY, PLANT AND EQUIPMENT
Property and equipment (see Note A) is summarized as follows:
<TABLE>
<CAPTION>
JANUARY 17, DECEMBER 31,
----------- ------------
1997 1997
<S> <C> <C>
Land........................................................ $ -- $ 330
Buildings and improvements.................................. -- 2,721
Machinery and equipment..................................... -- 6,687
Rental assets............................................... -- 570
------- -------
10,308
Less: Accumulated depreciation.............................. -- 310
------- -------
$ -- $ 9,998
======= =======
</TABLE>
F-11
<PAGE> 100
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. FINANCING ARRANGEMENTS
Long-term debt at January 17 and December 31, 1997 included the following:
<TABLE>
<CAPTION>
JANUARY 17, DECEMBER 31,
----------- ------------
1997 1997
<S> <C> <C>
Paragon:
Note payable to GEC, interest at 8%, annual payments of
$1,000................................................. $6,000 $ 6,000
Notes payable to former Curtis shareholders, interest at
7%, matures in December 1999........................... 15,700
Curtis:
Term loan, interest at prime plus .75%-1.50% or LIBOR plus
2.75%-3.50%; payable monthly through December 2004..... 12,000
Revolving credit agreement, interest at prime plus
.75%-1.50% or LIBOR plus 2.50%-3.25%, matures in
January 2001........................................... 12,085
Subordinated debentures maturing in February 2002;
interest at 13 1/8%.................................... 9,189
Note payable, interest at 10% due monthly through December
2006................................................... 460
Capital lease obligations................................. 75
A.B. Dick:
Revolving credit agreements, availability up to $32,000,
interest at prime plus .5% or adjusted LIBOR plus 2.5%,
matures in January 2000................................ 14,000
Capital lease obligations................................. 2,016 1,107
------ -------
Total debt.................................................. 8,016 70,616
Less: current portion....................................... 899 3,495
------ -------
Total long-term debt........................................ $7,117 $67,121
====== =======
</TABLE>
The aggregate maturities of the long-term debt for each of the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1998............................................. $ 3,495
1999............................................. 19,203
2000............................................. 16,793
2001............................................. 14,864
2002............................................. 11,927
Thereafter....................................... 4,334
-------
$70,616
=======
</TABLE>
As of December 31, 1997, Curtis had a $15,000 revolving credit agreement
subject to available collateral, as defined. At December 31, 1997, $2,915 was
available under the line of credit. A fee of 3/8% per annum is required on the
unused portion of the revolving credit commitment. Included in the revolving
credit is a provision for the issuance of letters of credit up to a maximum of
$2,000. At December 31, 1997, there were no letters of credit outstanding. The
revolving credit agreement is secured by substantially all of the assets of
Curtis and contains financial and other covenants, including, but not limited
to, maintenance of minimum levels of interest coverage, and other financial
ratios.
A.B. Dick has established two line of credit agreements with Congress
Financial Corporation (Congress) which total $32,000 in loans and letters of
credit ($14,100 outstanding at December 31, 1997). The collateral for the
revolving credit agreement includes eligible trade accounts receivable,
inventories and equipment. A.B.
F-12
<PAGE> 101
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Dick is also subject to certain compensating balance requirements ($3,800 of
short-term investments were held by Congress at December 31, 1997) and loan
covenants relating to financial reporting and lender approval of certain
transactions.
During the eleven-month and fifteen-day period ended December 31, 1997, the
Company paid interest of $1,242.
F. OPERATING LEASES
The Company leases certain facilities and equipment under operating leases
which generally provide that the Company pay the insurance, maintenance and
property taxes related to the leases. In the normal course of business, the
Company expects that, as leases expire, they will be renewed or replaced by
other leases. The leases generally provide for renewal options and various
escalation clauses.
As of December 31, 1997, minimum lease payments under non-cancelable
operating leases are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1998............................................. $ 3,454
1999............................................. 2,950
2000............................................. 2,393
2001............................................. 1,514
2002............................................. 1,355
Thereafter....................................... 3,308
-------
Total minimum lease payments....................... $14,974
=======
</TABLE>
The above lease commitments have not been reduced by aggregate minimum
sublease rentals of $636 due in the future under non-cancelable subleases.
The Company had $2,184, $2,296 and $2,226 of rental expense for the fiscal
year ended March 31, 1996, the period from April 1, 1996 through January 16,
1997 and the period from January 17, 1997 through December 31, 1997,
respectively.
G. GEOGRAPHIC AREA
The Company's principal operations are in the United States, but it also
maintains operating subsidiaries in Belgium, Canada and the United Kingdom.
Transfers between geographic areas are accounted for at market with
appropriate adjustments made to inventory carrying values in consolidation.
Identifiable assets represent assets that are used in the Company's operations
in each geographic area at year end.
F-13
<PAGE> 102
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's and its Predecessor's financial data by geographic area for
the fiscal year ended March 31, 1996, the period from April 1, 1996 through
January 16, 1997 and the period from January 17, 1997 through December 31, 1997
is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31, 1996
-------------------------------------
OPERATING
NET INCOME IDENTIFIABLE
REVENUE (LOSS) ASSETS
<S> <C> <C> <C>
Domestic.................................................... $176,846 $(7,277) $ 82,793
Foreign..................................................... 43,000 1,243 34,647
Elimination between geographic area......................... (4,483) -- (879)
-------- ------- --------
$215,363 $(6,034) $116,561
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM AS OF
APRIL 1, 1996 JANUARY
THROUGH 17,
JANUARY 16, 1997 1997
-------------------- ------------
OPERATING
NET INCOME IDENTIFIABLE
REVENUE (LOSS) ASSETS
<S> <C> <C> <C>
Domestic.................................................... $128,732 $(1,211) $52,975
Foreign..................................................... 32,633 594 14,339
Elimination between geographic area......................... (3,951) -- (9,273)
-------- ------- -------
$157,414 $ (617) $58,041
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM JANUARY 17, 1997
THROUGH DECEMBER 31, 1997
-----------------------------------
NET OPERATING IDENTIFIABLE
REVENUE INCOME ASSETS
<S> <C> <C> <C>
Domestic.................................................... $154,934 $ 8,863 $129,056
Foreign..................................................... 42,773 2,159 20,709
Elimination between geographic area......................... (4,491) (23) (11,690)
-------- ------- --------
$193,216 $10,999 $138,075
======== ======= ========
</TABLE>
H. CONTINGENCIES
On April 30, 1997, four former and current distributors of A.B. Dick filed
a suit against A.B. Dick, the Predecessor Company, alleging, among other things,
breach of distributorship contracts and unfair and deceptive trade practices.
The plaintiffs have requested that the case be given class action status with
respect to all A.B. Dick distributors engaged under distributorship contracts
during the four-year period ended on April 30, 1997. The Company intends to
vigorously defend this case although there can be no assurance as to the
eventual outcome.
GEC has agreed to fully indemnify the Company against all costs and
liabilities in connection with any litigation that is pending or may be brought
against A.B. Dick arising out of events occurring prior to the closing of the
A.B. Dick acquisition, including the case mentioned in the previous paragraph.
In addition, both A.B. Dick and Curtis are parties to routine litigation
incidental to their businesses, some of which is covered by insurance. The
Company does not believe that any such pending litigation will have a material
adverse effect upon its results of operations or financial condition.
F-14
<PAGE> 103
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I. EMPLOYEE BENEFIT PLANS
Effective March 1, 1997, the Company established a defined contribution
plan that includes an employee 401(k) contribution provision covering certain
employees of A.B. Dick. The plan provides for employee contributions ranging
from 1%-15% of employee's compensation, subject to statutory limitation, as well
as a matching Company contribution equal to 25% of the employee's contribution
but limited to 6% of compensation. The Company contribution for the period ended
December 31, 1997 was approximately $600.
The Predecessor Company maintained a defined benefit pension plan for its
manufacturing employees. The plan was overfunded at April 1, 1995 and April 1,
1996. Net periodic pension credits of $5,057 for the fiscal year ended March 31,
1996 and $7,013 for period from April 1, 1996 through January 16, 1997,
allocated to the Predecessor Company by GEC based upon actuarial valuations in
accordance with FASB Statement No. 87, "Employers' Accounting for Pensions,"
consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, JANUARY 17,
1996 1997
<S> <C> <C>
Service cost................................................ $ 3,768 $ 3,039
Interest cost on projected benefit obligation............... 10,450 9,245
Actual return on plan assets................................ (16,678) (16,075)
Net amortization and deferral............................... (2,607) (3,222)
-------- --------
Net pension (income)........................................ $ (5,057) $ (7,013)
======== ========
</TABLE>
In connection with the sale of the Predecessor Company on January 16, 1997,
GEC assumed all existing obligations relating to such benefits.
The Predecessor Company also provided postretirement health care benefits
to certain retirees. Net periodic benefit costs of $4,676 for the fiscal year
ended March 31, 1996 and $3,455 for the period from April 1, 1996 through
January 16, 1997, allocated to the Predecessor Company by GEC based on actuarial
valuations in accordance with FASB Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, JANUARY 17,
1996 1997
<S> <C> <C>
Service cost................................................ $ 804 $ 539
Interest cost............................................... 5,124 3,704
Amortization................................................ (1,252) (788)
------- ------
$ 4,676 $3,455
======= ======
</TABLE>
In connection with the sale of the Predecessor Company on January 16, 1997,
GEC assumed all obligations existing under the plan.
Curtis has deferred compensation agreements with certain former executives
which provide for payments of a fixed level of compensation on a monthly basis
from retirement until death. Curtis also maintains a Supplemental Executive
Retirement Plan in which one former executive participates.
Additionally, Curtis has a deferred compensation plan for the benefit of
sales representatives attaining specified sales goals. Curtis credits eligible
participant's accounts with a percentage of their annual earnings. The annual
amount credited to participant accounts vests at the rate of 5% per annum.
Eligible participants over the age of 55 vest at an accelerated rate.
Curtis also maintains a 401(k) retirement savings plan covering
substantially all employees. Contributions to the 401(k) plan are based upon a
percentage of each participant's compensation.
F-15
<PAGE> 104
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Curtis also maintains a defined benefit pension plan and provides
postretirement health care benefits to certain UAW manufacturing employees.
Pension plan benefits are based on years of service. As of December 31, 1997 the
actuarial present value of the pension's vested benefit obligation is $2,428 and
the projected benefit obligation in excess of the plan assets is $347. The
postretirement health care plan is unfunded. The actuarial present value of the
accumulated benefit ($1,406 at December 31, 1997) has been recorded as a
long-term liability.
J. SUBSEQUENT EVENT AND GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION
On April 1, 1998, the Company issued $115,000 of 9 5/8% Senior Notes due
2008. The proceeds from the offering were used to repay $69,400 of long-term
debt outstanding at December 31, 1997 and to pay a $10,000 dividend to the sole
stockholder of the Company. The remaining proceeds of approximately $30,000
after deducting expenses will be used for general corporate purposes, including
future acquisitions.
The Company's domestic subsidiaries, AB Dick and Curtis, both of which are
wholly owned, are the only guarantors of the Senior Notes. The guarantees are
full, unconditional and joint and several. Separate financial statements of
these guarantor subsidiaries are not presented as management has determined that
they would not be material to investors.
The Company's foreign subsidiaries are not guarantors of the Senior Notes.
Summarized consolidating financial information for the Company, the guarantor
subsidiaries, and the non-guarantor, foreign subsidiaries is as follows (in
thousands):
F-16
<PAGE> 105
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (DECEMBER 31,
1997):
Current assets:
Cash and cash equivalents..... $ 28 $ 1,173 $ 2,082 $ -- $ 3,283
Short-term investments........ 4,176 4,176
Accounts receivable, net...... -- 29,230 8,778 (187) 37,821
Inventories................... -- 39,494 8,496 78 48,068
Other current assets.......... -- 900 635 -- 1,535
------- -------- ------- -------- --------
Total current assets............ 4,204 70,797 19,991 (109) 94,883
Property, plant and equipment,
net........................... -- 9,351 647 -- 9,998
Goodwill........................ -- 32,008 64 -- 32,072
Investment in subsidiary........ 31,437 11,581 -- (43,018) --
Deferred charges................ 417 698 7 -- 1,122
Intercompany.................... -- 4,000 -- (4,000) --
------- -------- ------- -------- --------
Total assets.................... $36,058 $128,435 $20,709 $(47,127) $138,075
======= ======== ======= ======== ========
Current liabilities:
Trade accounts payable........ $ -- $ 11,475 $ 2,668 $ -- $ 14,143
Accrued expenses.............. 3,227 22,345 2,430 597 28,599
Deferred service revenue...... -- 5,903 1,057 -- 6,960
Due to GEC.................... -- 945 -- -- 945
Restructuring and severance
reserves................... -- 3,121 -- -- 3,121
Current portion of long-term
debt....................... 1,000 2,495 -- -- 3,495
Intercompany.................. 4,000 -- -- (4,000) --
------- -------- ------- -------- --------
Total current liabilities....... 8,227 46,284 6,155 (3,403) 57,263
Long-term debt, less current
portion....................... 20,700 46,421 -- -- 67,121
Retirement obligations.......... -- 3,414 37 -- 3,451
Other long-term liabilities..... -- -- -- 3,109 3,109
Intercompany.................... -- (1,155) 2,190 (1,035) --
Stockholder's equity............ 7,131 33,471 12,327 (45,798) 7,131
------- -------- ------- -------- --------
Total liabilities and
stockholder's equity.......... $36,058 $128,435 $20,709 $(47,127) $138,075
======= ======== ======= ======== ========
</TABLE>
F-17
<PAGE> 106
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
THE COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
12/31/97 INCOME STATEMENT DATA:
Net revenue........................... $ -- $154,934 $42,773 $ (4,491) $193,216
Costs of products sold................ -- 104,150 29,969 (4,468) 129,651
-------- -------- ------- -------- --------
Gross profit.......................... -- 50,784 12,804 (23) 63,565
Total operating expenses.............. 1,433 40,488 10,645 -- 52,566
-------- -------- ------- -------- --------
Operating income (loss)............... (1,433) 10,296 2,159 (23) 10,999
Interest income (expense), net........ 146 (2,079) 124 -- (1,809)
Miscellaneous, net.................... -- (36) 175 -- 139
-------- -------- ------- -------- --------
Income (loss) before foreign income
taxes............................... (1,287) 8,181 2,458 (23) 9,329
Foreign income taxes.................. -- -- 775 -- 775
-------- -------- ------- -------- --------
Net income (loss)..................... $ (1,287) $ 8,181 $ 1,683 $ (23) $ 8,554
======== ======== ======= ======== ========
12/31/97 CASH FLOW DATA:
Net cash provided by operating
activities:......................... $ 563 $ 12,668 $ 1,854 $ -- $ 15,085
Investing activities:
Accounts receivable used in
connection with the acquisition
of A.B. Dick..................... -- (19,489) -- (19,489)
Acquisition of Curtis............... (2,589) (3,076) 755 (4,910)
Purchases of property, plant and
equipment........................ -- (1,405) (455) (1,860)
Payments of acquisition
liabilities...................... -- (4,379) -- (4,379)
Decrease in short-term
investments...................... 1,954 -- -- 1,954
-------- -------- ------- -------- --------
Net cash provided by (used in)
investing activities................ (635) (28,349) 300 (28,684)
Financing activities:
Borrowings on revolving credit
lines............................ -- 18,603 -- 18,603
Cash distribution to GEC and
affiliates....................... -- (2,436) -- (2,436)
Decrease in long-term borrowings.... -- (914) -- (914)
-------- -------- ------- -------- --------
Net cash provided by financing
activities.......................... -- 15,253 -- 15,253
Effect of exchange rate on cash....... -- -- (521) (521)
-------- -------- ------- -------- --------
Increase (decrease) in cash and cash
equivalents......................... (72) (428) 1,633 1,133
Cash and cash equivalents at beginning
of period........................... 100 1,601 449 2,150
-------- -------- ------- -------- --------
Cash and cash equivalents at end of
period.............................. $ 28 $ 1,173 2,082 $ -- $ 3,283
======== ======== ======= ======== ========
</TABLE>
F-18
<PAGE> 107
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
THE COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA JANUARY 17, 1997:
Current assets:
Cash and cash equivalents............ $ 100 $ 1,601 $ 449 $ -- $ 2,150
Short-term investments............... 6,130 -- -- -- 6,130
Accounts receivable, net............. -- 710 6,701 -- 7,411
Inventories.......................... -- 35,241 6,774 (935) 41,080
Other current assets................. -- 496 415 -- 911
-------- -------- ------- -------- -------
Total current assets................... 6,230 38,048 14,339 (935) 57,682
Investment in subsidiary............... (172) 8,510 -- (8,338) --
Deferred charges....................... 359 -- -- 359
-------- -------- ------- -------- -------
Total assets........................... $ 6,058 $ 46,917 $14,339 $ (9,273) $58,041
======== ======== ======= ======== =======
Current liabilities:
Trade accounts payable............... $ -- $ 6,338 $ 1,153 $ -- $ 7,491
Accrued expenses..................... 10 17,422 2,523 -- 19,955
Deferred service revenue............. -- 7,323 1,218 -- 8,541
Due to GEC........................... -- 3,381 -- -- 3,381
Restructuring and severance
reserves.......................... -- 4,400 -- -- 4,400
Current portion of long-term debt.... -- 899 -- -- 899
-------- -------- ------- -------- -------
Total current liabilities.............. 10 39,763 4,894 -- 44,667
Long-term debt, less current portion... 6,000 1,117 -- -- 7,117
Other long-term liabilities............ -- 3,100 -- 3,109 6,209
Stockholder's equity................... 48 2,937 9,445 (12,382) 48
-------- -------- ------- -------- -------
Total liabilities and stockholder's
equity............................... $ 6,058 $ 46,917 $14,339 $ (9,273) $58,041
======== ======== ======= ======== =======
</TABLE>
F-19
<PAGE> 108
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
A.B. DICK COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARY SUBSIDIARIES ELIMINATIONS TOTAL
<S> <C> <C> <C> <C>
1/16/97 INCOME STATEMENT DATA:
Net revenue...................................... $128,732 $32,633 $ (3,951) $157,414
Costs of products sold........................... 95,948 23,061 (3,951) 115,058
-------- ------- -------- --------
Gross profit..................................... 32,784 9,572 -- 42,356
Total operating expenses......................... 33,995 8,978 -- 42,973
-------- ------- -------- --------
Operating income (loss).......................... (1,211) 594 -- (617)
Interest income.................................. 196 597 -- 793
Miscellaneous, net............................... (793) 162 -- (631)
-------- ------- -------- --------
Income (loss) before foreign income taxes........ (1,808) 1,353 -- (455)
Foreign income taxes............................. -- 651 -- 651
-------- ------- -------- --------
Net income (loss)................................ $ (1,808) $ 702 $ -- $ (1,106)
======== ======= ======== ========
1/16/97 CASH FLOW DATA:
Net cash provided by (used in) operating
activities:.................................... $ 8,342 $ (861) $ -- $ 7,481
Investing activities:
Purchases of property, plant and equipment..... (3,561) (399) (3,960)
Financing activities:
Cash distribution to GEC and affiliates........ (8,834) (17,473) (26,307)
Decrease in long-term borrowings............... (172) -- (172)
-------- ------- -------- --------
Net cash used in financing activities............ (9,006) (17,473) (26,479)
Effect of exchange rate on cash.................. -- (903) (903)
-------- ------- -------- --------
Decrease in cash and cash equivalents............ (4,225) (19,636) (23,861)
Cash and cash equivalents at beginning of
period......................................... 5,827 20,085 25,912
-------- ------- -------- --------
Cash and cash equivalents at end of period....... $ 1,602 $ 449 $ -- $ 2,051
======== ======= ======== ========
</TABLE>
F-20
<PAGE> 109
PARAGON CORPORATE HOLDINGS INC. AND
A.B. DICK COMPANY (THE PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
A.B. DICK COMBINED
GUARANTOR NON-GUARANTOR
SUBSIDIARY SUBSIDIARIES ELIMINATIONS TOTAL
<S> <C> <C> <C> <C>
3/31/96 INCOME STATEMENT DATA:
Net revenue...................................... $176,846 $43,000 $ (4,483) $215,363
Costs of products sold........................... 126,842 30,478 (4,483) 152,837
-------- ------- -------- --------
Gross profit..................................... 50,004 12,522 -- 62,526
Total operating expenses......................... 57,281 11,279 -- 68,560
-------- ------- -------- --------
Operating income (loss).......................... (7,277) 1,243 -- (6,034)
Interest income, net............................. 254 1,204 -- 1,458
Miscellaneous, net............................... (545) (342) -- (887)
-------- ------- -------- --------
Income (loss) before foreign income taxes........ (7,568) 2,105 -- (5,463)
Foreign income taxes............................. -- 941 -- 941
-------- ------- -------- --------
Net income (loss)................................ $ (7,568) $ 1,164 $ -- $ (6,404)
======== ======= ======== ========
3/31/96 CASH FLOW DATA:
Net cash provided by operating activities:....... $ 6,625 $ 1,898 $ -- $ 8,523
Investing activities:
Purchases of property, plant and equipment..... (5,148) (380) (5,528)
Financing activities:
Cash distribution to GEC and affiliates........ (2,700) (1,477) (4,177)
Decrease in long-term borrowings............... (291) -- (291)
-------- ------- -------- --------
Net cash used by investing financing
activities..................................... (2,991) (1,477) (4,468)
Effect of exchange rate on cash.................. -- 346 346
-------- ------- -------- --------
Increase (decrease) in cash and cash
equivalents.................................... (1,514) 387 (1,127)
Cash and cash equivalents at beginning of year... 7,341 19,698 27,039
-------- ------- -------- --------
Cash and cash equivalents at end of year......... $ 5,827 $20,085 $ -- $ 25,912
======== ======= ======== ========
</TABLE>
F-21
<PAGE> 110
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Curtis Industries, Inc.
We have audited the accompanying consolidated balance sheets of Curtis
Industries, Inc. as of December 28, 1996 and December 5, 1997, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the fiscal years ended December 30, 1995 and December 28, 1996 and the
eleven-month period ended December 5, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Curtis Industries,
Inc. at December 28, 1996 and December 5, 1997, and the consolidated results of
its operations and cash flows for the fiscal years ended December 30, 1995 and
December 28, 1996 and for the eleven-month period ended December 5, 1997, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
February 27, 1998
Cleveland, Ohio
F-22
<PAGE> 111
CURTIS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 5,
------------ ------------
1996 1997
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 715 $ 1,680
Accounts receivable, less allowance for doubtful accounts
of $716 and $545, respectively......................... 10,753 10,616
Inventories............................................... 13,158 10,565
Other current assets...................................... 761 453
-------- --------
Total current assets................................. 25,387 23,314
Property, plant and equipment:
Land...................................................... 267 267
Buildings and improvements................................ 2,423 2,463
Machinery and equipment................................... 6,672 7,655
Leased equipment.......................................... 1,341 2,751
-------- --------
10,703 13,136
Less accumulated depreciation............................. 5,730 6,992
-------- --------
4,973 6,144
Goodwill.................................................... 3,273 3,340
Other long-term assets...................................... 871 835
-------- --------
$ 34,504 $ 33,633
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 7,246 $ 5,459
Accrued expenses.......................................... 7,152 5,983
Current portion of long-term debt......................... 158 61
-------- --------
Total current liabilities............................ 14,556 11,503
Long-term debt, less current portion........................ 27,880 27,809
Retirement obligations...................................... 3,123 3,079
-------- --------
45,559 42,391
Redeemable convertible Series B preferred stock............. 27,475 28,856
Stockholders' deficit:
Common stock, voting, $.01 par value, authorized 500,000
shares, issued and outstanding 263,341 shares.......... 3 3
Series A convertible preferred stock...................... 11 11
Additional paid-in capital................................ 3,725 3,725
Cumulative translation adjustment......................... (481) (505)
Accumulated deficit....................................... (41,788) (40,848)
-------- --------
Total stockholders' deficit.......................... (38,530) (37,614)
-------- --------
$ 34,504 $ 33,633
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-23
<PAGE> 112
CURTIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 30, DECEMBER 28, DECEMBER 5,
----------------- ----------------- -------------------
1995 1996 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net revenue................................ $68,842 $77,072 $74,203
Cost of revenue............................ 26,886 31,175 31,141
------- ------- -------
Gross profit.......................... 41,956 45,897 43,062
Direct selling expenses.................... 16,685 17,713 16,199
Selling, general and administrative
expenses................................. 18,451 21,201 19,274
Depreciation and amortization.............. 2,460 2,053 1,624
Nonrecurring charges....................... 1,707
------- ------- -------
Operating income from continuing
operations............................... 2,653 4,930 5,965
Interest expense, net...................... 3,678 3,687 3,511
Other expense, net......................... 13 83
------- ------- -------
Income (loss) from continuing operations
before income taxes...................... (1,025) 1,230 2,371
Provision for foreign income taxes......... 15 63 50
------- ------- -------
Income (loss) from continuing operations... (1,040) 1,167 2,321
Loss from discontinued operations.......... (1,489)
------- ------- -------
Net income (loss)..................... $(2,529) $ 1,167 $ 2,321
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-24
<PAGE> 113
CURTIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
PREFERRED ADDITIONAL CUMULATIVE
COMMON STOCK PAID-IN TRANSLATION ACCUMULATED
STOCK SERIES A CAPITAL ADJUSTMENT DEFICIT TOTAL
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........ $3 $11 $3,687 $(639) $(37,458) $(34,396)
Net loss............................ (2,529) (2,529)
Issuance of restricted common
stock............................. 25 25
Currency translation adjustments.... 26 26
Dividends on Series B preferred
stock............................. (1,484) (1,484)
-- --- ------ ----- -------- --------
Balance at December 30, 1995........ 3 11 3,712 (613) (41,471) (38,358)
Net income.......................... 1,167 1,167
Issuance of restricted common
stock............................. 13 13
Currency translation adjustments.... 132 132
Dividends on Series B preferred
stock............................. (1,484) (1,484)
-- --- ------ ----- -------- --------
Balance at December 28, 1996........ 3 11 3,725 (481) (41,788) (38,530)
Net income.......................... 2,321 2,321
Currency translation adjustments.... (24) (24)
Dividends on Series B preferred
stock............................. (1,381) (1,381)
-- --- ------ ----- -------- --------
Balance at December 5, 1997......... $3 $11 $3,725 $(505) $(40,848) $(37,614)
== === ====== ===== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-25
<PAGE> 114
CURTIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL FISCAL ELEVEN MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 30, DECEMBER 28, DECEMBER 5,
----------------- ----------------- --------------
1995 1996 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $ (2,529) $ 1,167 $ 2,321
Adjustments to reconcile net income (loss) to
net cash provided by continuing operations:
Loss from discontinued operations............ 1,489
Depreciation and amortization................ 2,460 2,053 1,624
Original issue discount...................... 345 359 327
Write-down of leasehold interest............. 418
Changes in operating assets and liabilities:
Accounts receivable....................... (146) (2,025) 90
Inventories............................... 1,974 (329) 2,414
Accounts payable.......................... (254) 2,714 (1,787)
Accrued expenses.......................... (1,076) (1,913) (1,169)
Other, net................................ (1,762) 1,310 211
-------- -------- -------
Net cash provided by operating activities of
continuing operations........................ 919 3,336 4,031
INVESTING ACTIVITIES
Acquisition of Mechanics Choice................ (6,629)
Purchases of property, plant and equipment,
net.......................................... (743) (3,120) (2,542)
Net proceeds from sale of fixed assets......... 1,724 1,806
Net proceeds from sale of retail division...... 6,649
-------- -------- -------
Net cash provided by (used for) investing
activities................................... 7,630 (7,943) (2,542)
FINANCING ACTIVITIES
Borrowings of long-term debt................... 81,913 81,920 70,265
Repayments of long-term debt................... (91,267) (78,467) (70,765)
Repayment of shareholders' notes............... (600)
Issuance of restricted stock................... 25 13
-------- -------- -------
Net cash provided by (used for) financing
activities................................... (9,929) 3,466 (500)
Effect of exchange rate changes on cash........ 22 138 (24)
Cash provided by discontinued operations....... 1,544 511
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents.................................. 186 (492) 965
Cash and cash equivalents at beginning of
period....................................... 1,021 1,207 715
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 1,207 $ 715 $ 1,680
======== ======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-26
<PAGE> 115
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 5, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business and Presentation
Curtis Industries, Inc. ("the Company" or "Curtis") is a national
distributor of products in the automotive and industrial markets. Curtis
products are sold through a sales force of over 600 representatives throughout
the United States, Canada and the United Kingdom.
The Company was a majority owned subsidiary of Noel Group, Inc. until
December 5, 1997. On December 5, 1997 the Company was acquired by Paragon
Corporate Holdings Inc. ("Paragon") for $22,290. The consolidated balance sheet
of the Company as of December 5, 1997 was prepared prior to the sale to Paragon
and, accordingly, reflects the historical book values of the assets and
liabilities of the Company.
Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31.
Fiscal years 1995 and 1996 ended on December 30, 1995 and December 28, 1996,
respectively. The 1997 consolidated financial statements were prepared as of and
for the eleven-month period ended December 5, 1997, the date of the sale of the
Company to Paragon.
Inventories
Inventories, all of which are finished goods, are stated at the lower of
first-in, first-out (FIFO) cost or market.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, trade receivables and
payables approximates fair value because of the short maturity of these
instruments. Management believes that the carrying amount of long-term debt,
excluding unamortized original issue debt discount, approximates fair value.
Property, Plant and Equipment
Property, plant and equipment additions are recorded at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of
the respective assets. Useful lives are estimated at twenty years for buildings
and improvements and three to ten years for machinery and equipment. Maintenance
and repair costs are expensed as incurred.
Goodwill
Goodwill acquired in 1996 ($3,100) is amortized using the straight-line
method over a period of 20 years. All other acquired goodwill is being amortized
using the straight-line method over a period of 40 years. Accumulated
amortization at December 28, 1996 and December 5, 1997 was $163 and $323,
respectively. Management periodically evaluates the recoverability of goodwill
and measures the amount of impairment, if any, by assessing current and future
levels of income and cash flows as well as other factors, such as business
trends and prospects and market and economic conditions.
F-27
<PAGE> 116
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Income Taxes
Income taxes are accounted for under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates that will be in effect when the differences
are expected to reverse.
Postretirement Benefits
The costs of health care benefits for eligible retirees were accrued during
the years that the employees rendered their services. Actuarial gains and losses
are recognized when incurred.
Revenue Recognition
With the exception of equipment sold under operating leases, (see Note E),
revenue from sales is recognized when goods are shipped.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from those estimates.
Cash Flows
The Company considers all temporary cash investments which have original
maturities of three months or less to be cash equivalents. Net cash flows used
for operating activities for the fiscal years ended December 30, 1995, December
28, 1996 and for the eleven-month period ended December 5, 1997 include cash
payments for interest of $4,112, $3,389 and $3,086, respectively, and for income
taxes of $103 for the fiscal year ended December 30, 1995.
B. ACQUISITION
On May 13, 1996, the Company acquired certain assets of Mechanics Choice, a
distributor of industrial maintenance products, for approximately $6,600. The
acquisition of Mechanics Choice has been accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets acquired based
upon their estimated fair values. The excess of the purchase price over the
estimated fair value of net assets acquired amounted to approximately $3,100
which has been accounted for as goodwill. The following unaudited pro forma
income statement information for the Company is presented as though Mechanics
Choice was acquired on January 1, 1996:
<TABLE>
<S> <C>
Net revenue........................................... $81,958
Net income............................................ 1,635
</TABLE>
The unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of the operating
results that would have occurred had the acquisition actually occurred on
January 1, 1996.
F-28
<PAGE> 117
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. DISCONTINUED OPERATIONS
In July 1995 the Board of Directors of the Company approved a plan to sell
the retail division. Effective November 13, 1995, the division was sold and its
results of operations were reported as discontinued operations in the
consolidated statement of operations.
D. NONRECURRING CHARGES
In June 1995, the Company shut down its manufacturing operations and
recorded a one time charge of $732 for severance and other benefit costs, and
the write-down of an intangible asset to net realizable value.
Also, during 1995, the Company recorded a charge to operations of $975 in
connection with an assessment from the Internal Revenue Service (IRS) which
alleged that the Company's expense reimbursement policy for certain employees
did not meet the definition of an accountable plan. In 1997, the Company paid
the IRS $975 in full settlement of all IRS claims through December 31, 1996. The
expense reimbursement plan was changed effective January 1, 1997 to meet IRS
requirements.
E. EQUIPMENT LEASING
The Company is the lessor of equipment under noncancelable operating leases
for periods of three years. The cost of leased equipment is depreciated on a
straight-line basis over its estimated useful life. At December 5, 1997, the
approximate future minimum rental income under noncancelable operating leases is
as follows:
<TABLE>
<S> <C>
1998 $ 1,774
1999 1,223
2000 291
-------
$ 3,288
=======
</TABLE>
F. ACCRUED EXPENSES
Accrued expenses at December 28, 1996 and December 5, 1997 include the
following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Compensation and benefits................................ $2,421 $2,481
Taxes other than income.................................. 1,925 739
Interest................................................. 589 701
Other.................................................... 2,217 2,062
------ ------
$7,152 $5,983
====== ======
</TABLE>
F-29
<PAGE> 118
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
G. LONG-TERM DEBT
Long-term debt at December 28, 1996 and December 5, 1997 included the
following:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Senior debt:
Revolving line of credit due January 15, 1999. At the
Company's option, interest is charged at the LIBOR rate
(5.66% at December 28, 1996 and 5.97% at December 5,
1997) plus 3% or the lender's prime rate (8.25% at
December 28, 1996 and 8.5% at December 5, 1997) plus
1%. Interest is payable monthly........................ $ 7,898 $ 7,481
Senior secured subordinated notes, maturing on March 31,
1999. Interest payable quarterly at 12% per annum...... 12,000 12,000
Subordinated debentures, maturing on February 1, 2002.
Interest payable semiannually at 13-1/8% per annum..... 9,189 9,189
Other....................................................... 619 541
------- -------
27,706 29,211
Less:
Unamortized original issue debt discount.................. 1,668 1,341
Current portion........................................... 158 61
------- -------
$27,880 $27,809
======= =======
</TABLE>
As of December 5, 1997, the Company had a $15,000 revolving credit
agreement subject to available collateral, as defined. At December 5, 1997,
$7,200 was available under the line of credit. A fee of 3/8% per annum was
required on the unused portion of the revolving credit commitment. Included in
the revolving credit agreement was a provision for the issuance of letters of
credit up to a maximum of $2,000. At December 5, 1997, there were no letters of
credit outstanding.
The revolving credit agreement was secured by substantially all of the
assets of the Company and contained financial and other covenants, including,
but not limited to, maintenance of minimum levels of interest coverage,
inventory turns and other financial ratios.
In addition to any voluntary principal reduction on the senior secured
subordinated notes, prepayments are mandatory based on consolidated excess cash
flow, as defined. No mandatory prepayments were made in 1996 or for the
eleven-month period ended December 5, 1997. Unamortized original issue discount
on these notes at December 28, 1996 and December 5, 1997 was $126 and $89,
respectively.
The subordinated debentures, due February 1, 2002, are redeemable at the
option of the Company. Unamortized original issue discount on these notes at
December 28, 1996 and December 5, 1997 was $1,542 and $1,252, respectively.
Scheduled principal repayments of long-term debt at December 5, 1997 are as
follows:
<TABLE>
<S> <C>
Year ending December 31:
1998...................................................... $ 61
1999...................................................... 19,549
2000...................................................... 61
2001...................................................... 46
2002...................................................... 9,240
Thereafter................................................ 254
-------
$29,211
=======
</TABLE>
F-30
<PAGE> 119
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
H. PREFERRED STOCK
The number of shares and related amounts of the Company's two classes of
convertible Preferred Stock issued and outstanding at December 5, 1997 were as
follows:
<TABLE>
<S> <C>
Series A Preferred Stock, 1,619 shares...................... $ 11
Series B Preferred Stock, 211,930 shares.................... 28,856
-------
$28,867
=======
</TABLE>
The Series A Preferred Stock has a par value of .01 per share and a $6.18
liquidation preference per share. The Series B Preferred Stock has a par value
of $.01 per share and a $100 liquidation preference per share. The holders of
the Series A Preferred Stock are entitled to cumulative dividends at an annual
rate of $.309 per share, and the holders of the Series B Preferred Stock are
entitled to cumulative dividends at the annual rate of $7 per share.
The Company may redeem, at its option, at any time, shares of Series B
Preferred Stock, subject to the legal availability of funds (Optional
Redemption). The Company is required to redeem the shares of Series B Preferred
Stock on the following dates: December 31, 1997 and on July 15th in each
succeeding year through July 15, 2000, 20% of the maximum number of shares of
Series B Preferred Stock issued and outstanding at any time, and on July 15,
2001, all remaining outstanding shares (Mandatory Redemption). The redemption
price, whether an Optional Redemption or a Mandatory Redemption, is equal to
$100 per share, plus accrued and unpaid dividends, whether or not declared, to
the date of redemption.
If the Company fails to make any Mandatory Redemption, all holders of
Series B Preferred Stock then outstanding will begin to receive a special rate
of dividend in lieu of the $7 per share annual rate. This special rate is equal
to 10% of the total of $100 per share plus any unpaid dividends as of the
immediately preceding dividend payment date.
Each holder of Series A Preferred Stock may, at its option, convert all or
any of its Series A Preferred Stock into shares of Common Stock at the rate of
one share of Common Stock for each share of Series A Preferred Stock. Each
holder of Series B Preferred Stock may, between January 1 and January 15 of each
year beginning with 1997 and ending with 2001, elect to convert 20% of its
shares into shares of Common Stock. The number of shares of Common Stock to be
issued upon the conversion of each share of Series B Preferred Stock is equal to
(i) $100 per share of Series B Preferred Stock, plus the amount representing
accrued and unpaid dividends thereon, whether or not declared, to the Conversion
Date divided by (ii) the Share Value of the Company's common stock, as defined.
No such elections were made during the period.
Each holder of Series A Preferred Stock has one vote for each share. The
holders of a majority of the outstanding shares of Series B Preferred Stock have
the right to vote together as a single class for the election or removal of a
majority of the Board of Directors.
The amount shown as Series A and Series B Preferred Stock in the
accompanying consolidated balance sheets represents the liquidation preference
value and unpaid dividends for each series of Preferred Stock. The Series B
Preferred Stock included unpaid dividends of $6,280 and $7,661 at December 28,
1996 and December 5, 1997, respectively.
I. BENEFIT PLANS
Deferred compensation agreements were entered into with certain former
executives which provide for payment of a fixed level of compensation on a
monthly basis from retirement until death. The Company does not have any
deferred compensation agreements with any of its current executives at December
5, 1997. The Company also maintains a Supplemental Executive Retirement Plan in
which one former executive participates. Expense recognized for the Executive
Deferred Compensation and Supplemental Executive
F-31
<PAGE> 120
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Retirement Plans for the years ended December 30, 1995, December 28, 1996 and
for the eleven-month period ended December 5, 1997 was $145, $135 and $121,
respectively.
In 1996, the Company initiated a deferred compensation plan for the benefit
of sales representatives attaining specified sales goals. The Company credits
eligible participants with a percentage of their annual earnings. The annual
amount credited to participant accounts vests at the rate of 5% per annum.
Eligible participants over the age of 55 vest at an accelerated rate. Expense
under this plan for the year ended December 28, 1996 and for the eleven-month
period ended December 5, 1997 was $257 and $195, respectively.
The Company also maintains a 401(k) retirement savings plan covering
substantially all salaried and hourly employees. Company contributions to the
401(k) plan are based upon a percentage of each participant's compensation. The
expense under this plan for the years ended December 30, 1995, December 28, 1996
and for the eleven-month period ended December 5, 1997 was $336, $131 and $242,
respectively.
Liabilities recorded for the Company's outstanding contributions to these
plans were $280 at December 28, 1996 and $261 at December 5, 1997.
The Company also maintains a defined benefit pension plan for certain UAW
manufacturing employees. Pension plan benefits were based on years of service.
Net periodic pension expense for the years ended December 30, 1995, December 28,
1996 and for the eleven-month period ended December 5, 1997 consisted of the
following:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Service cost.............................................. $ 17
Interest cost on projected benefit obligation............. 139 $ 136 $132
Actual return on plan assets.............................. (138) (116) (99)
Net amortization and deferral............................. (32) (53) (58)
----- ----- ----
Net pension (income)...................................... $ (14) $ (33) $(25)
===== ===== ====
</TABLE>
In addition to the 1995 net pension income noted above, a $154 curtailment
loss was recorded as a result of the 1995 manufacturing shutdown (see Note D),
whereby employees covered by the UAW defined benefit plan were terminated. The
curtailment loss is included in the non-recurring charge in the consolidated
statements of operations.
The following table sets forth the funded status of the pension plan and
amounts recognized in the Company's consolidated balance sheets at December 28,
1996 and December 5, 1997 as follows:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation................................. $1,860 $1,842
====== ======
Projected and accumulated benefit obligation.............. $1,860 $1,842
Plan assets at fair value................................. 2,188 2,081
------ ------
Plan assets in excess of projected benefit obligation..... 328 239
Unrecognized net obligation............................... 411 525
------ ------
Prepaid pension cost........................................ $ 739 $ 764
====== ======
</TABLE>
Assumptions used in determining these amounts were as follows:
<TABLE>
<S> <C>
Method..................................................... Projected Unit Credit
Weighted average discount rate............................. 7.5%
Long-term rate of return on plan assets.................... 8%
</TABLE>
F-32
<PAGE> 121
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company also provides postretirement health care benefits to certain
UAW manufacturing employees. For the years ended December 30, 1995, December 28,
1996 and for the eleven-month period ended December 5, 1997, the Company's net
periodic postretirement healthcare benefit expense (income) consisted of the
following:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Service cost................................................ $ 7
Interest cost............................................... 201 $ 120 $109
Actuarial gain.............................................. (861) (119) (86)
----- ----- ----
Net postretirement benefit expense (income)................. $(653) $ 1 $ 23
===== ===== ====
</TABLE>
In June 1995, manufacturing operations were discontinued and only those
employees retired or eligible to retire prior to June 1995 remained eligible for
postretirement health benefits. The elimination of postretirement health care
benefits for active employees resulted in the recognition of a $468 curtailment
gain which is not reflected in the net postretirement benefit income for 1995.
The curtailment gain is included in the non-recurring charge in the consolidated
statement of income. The 1996 and 1997 actuarial gains are primarily the result
of favorable plan experience.
The postretirement health care plan is unfunded. The actuarial present
value of the accumulated benefit obligation ($1,528 at December 28, 1996 and
$1,406 at December 5, 1997) has been recorded as a long-term liability.
For measurement purposes, a 6.75% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1998; 6.00% for 1999 and 5.5%
for the year 2000 and thereafter. The health care trend rate has a significant
impact on the amounts reported. If the health care cost trend rate was increased
by 1%, the accumulated postretirement benefit obligation as of December 5, 1997
would have increased by 6%. The effect of this change on the interest cost for
1997 would be an increase of 7%.
J. LEASE COMMITMENTS
The Company leases certain facilities and equipment under noncancelable
operating leases with remaining terms through the year 2006. The aggregate
future rental obligations under leases are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1998...................................................... $ 815
1999...................................................... 818
2000...................................................... 776
2001...................................................... 707
2002...................................................... 602
Thereafter................................................ 3,044
------
$6,762
======
</TABLE>
Rent expense for operating leases for the years ended December 30, 1995,
December 28, 1996 and for the eleven-month period ended December 5, 1997 was
$549, $558 and $778, respectively.
K. GEOGRAPHIC AREA
The Company's principal operations are in the United States, but it also
maintains operations in Canada and the United Kingdom.
Transfers between geographic areas are accounted for at market with
appropriate adjustments made to inventory carrying values in consolidation.
Identifiable assets represent assets that are used in the Company's operations
in each geographic area at year end.
F-33
<PAGE> 122
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's financial data by geographic area for the years ended
December 30, 1995 and December 28, 1996 and for the eleven-month period ended
December 5, 1997 is as follows:
<TABLE>
<CAPTION>
1995
-----------------------------------
NET OPERATING IDENTIFIABLE
SALES INCOME ASSETS
<S> <C> <C> <C>
Domestic.............................................. $58,591 $3,150 $23,290
Foreign............................................... 10,578 (554) 4,739
Elimination between geographic area................... (327) 57 (55)
------- ------ -------
$68,842 $2,653 $27,974
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
1996
-----------------------------------
NET OPERATING IDENTIFIABLE
SALES INCOME ASSETS
<S> <C> <C> <C>
Domestic.............................................. $65,600 $4,837 $25,821
Foreign............................................... 11,792 102 5,424
Elimination between geographic area................... (320) (9) (14)
------- ------ -------
$77,072 $4,930 $31,231
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------
NET OPERATING IDENTIFIABLE
SALES INCOME ASSETS
<S> <C> <C> <C>
Domestic.............................................. $62,410 $5,952 $24,620
Foreign............................................... 12,122 104 5,828
Elimination between geographic area................... (329) (91) (155)
------- ------ -------
$74,203 $5,965 $30,293
======= ====== =======
</TABLE>
L. CONTINGENCIES
From time to time, the Company is subject to routine litigation incidental
to its business. The Company believes that the results of these pending legal
proceedings will not have a materially adverse effect on the Company's financial
condition.
M. INCENTIVE STOCK PLAN
On February 3, 1993, the Company adopted the "1992 Incentive Plan of Curtis
Industries, Inc." Under the plan, the Company may grant incentive and
nonqualified stock options, stock appreciation rights, restricted stock awards
and stock bonus awards up to a maximum of 46,415 shares of Common Stock.
In February 1993, the Company granted options to acquire 25,106 shares of
Common Stock, all of which were granted at $6.18 per share, the estimated fair
market value at date of grant. These options shall be exercisable for a term of
not more than 10 years from the date of grant.
In 1996 and 1995, the Company made awards of 2,100 shares and 3,900 shares,
respectively, of restricted Common Stock, at $6.18 per share, the estimated fair
market value at the time of the award. The restrictions lapse immediately as to
20% of the shares and an additional 20% annually thereafter.
F-34
<PAGE> 123
CURTIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N. INCOME TAXES
The income tax provision for the years ended December 30, 1995, December
28, 1996 and the eleven-month period ended December 5, 1997 was comprised of the
following:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Current tax expense:
Federal................................................... $ -- $ -- $ --
State..................................................... -- -- --
Foreign................................................... 15 63 50
---- ---- ----
15 63 50
Deferred tax expense........................................ -- -- --
---- ---- ----
$ 15 $ 63 $ 50
==== ==== ====
</TABLE>
A reconciliation of the federal statutory income tax expense (benefit) to
the Company's effective tax expense is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Statutory federal tax expense (benefit).................... $(349) $ 418 $ 806
Benefit of net operating loss carryforwards................ 382 (465) (809)
Nondeductible meals and entertainment expense.............. 107 49
Other, net................................................. (18) 3 4
----- ----- -----
$ 15 $ 63 $ 50
===== ===== =====
</TABLE>
Deferred tax assets and liabilities at December 28, 1996 and December 5,
1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards and tax credits.......... $ 10,227 $ 9,815
Depreciation and amortization............................. 582 447
Inventories............................................... 903 1,203
Postretirement health care benefits....................... 818 534
Reserves for future expenses.............................. 611 916
Deferred compensation..................................... 587 626
Other..................................................... 594 619
-------- --------
Total deferred tax assets................................... 14,322 14,160
Deferred tax liabilities:
Pension asset............................................. 165
Original issue discount................................... 586 476
Excess book basis goodwill................................ 9 694
-------- --------
Total deferred tax liabilities.............................. 595 1,335
-------- --------
Net deferred tax asset...................................... 13,727 12,825
Valuation allowance......................................... (13,727) (12,825)
-------- --------
Net deferred taxes.......................................... $ -- $ --
======== ========
</TABLE>
The Company has tax net operating loss carryforwards of $26 million at
December 5, 1997. Of these net operating losses, approximately $22 million will
be utilized by the Company to offset the gain on the sale to Paragon (see Note
A). For financial reporting purposes, a valuation allowance had been established
equal to the net deferred tax assets because the Company's lack of history of
consistent earnings gave rise to uncertainty as to whether the deferred tax
assets were realizable.
No foreign taxes have been provided on the undistributed earnings of
foreign subsidiaries because the Company intends to permanently reinvest these
earnings.
F-35
<PAGE> 124
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 5
Risk Factors.......................... 15
The Company........................... 20
The Exchange Offer.................... 21
Capitalization........................ 28
Selected Consolidated Financial
Data................................ 29
Unaudited Pro Forma Consolidated
Financial Statements................ 34
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 40
Business.............................. 46
Sole Stockholder...................... 55
Management............................ 55
Related Transactions.................. 58
Description of New Credit Agreement... 60
Description of Senior Notes........... 60
Certain Federal Income Tax
Considerations...................... 86
Plan of Distribution.................. 86
Legal Matters......................... 87
Experts............................... 87
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$115,000,000
PARAGON LOGO
PARAGON CORPORATE
HOLDINGS INC.
OFFER TO EXCHANGE
9 5/8% SENIOR B NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 5/8% SERIES A NOTES DUE 2008
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VII, Section 7 of the Bylaws of the Company provides: "The
corporation shall indemnify its officers, directors, employees and agents to the
extent permitted by the General Corporation Law of Delaware."
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
plea of nolo contendere or its equivalent, shall not, in and of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 145 of the DGCL also provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon adjudication that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of Delaware or such other court shall deem proper.
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue,
or matter therein, such person shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by such person in connection
therewith.
Any such indemnification (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding; or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or (iii) by the stockholders.
Section 145 of the DGCL permits a Delaware business corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify such person against such liability.
II-1
<PAGE> 126
The above discussion of Section 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Certificate of Incorporation of Paragon Corporate Holdings
Inc., as currently in effect.
3.2 By-Laws of Paragon Corporate Holdings Inc., as currently in
effect.
3.3 Certificate of Incorporation of A.B. Dick Company, as
currently in effect.
3.4 By-Laws of A.B. Dick Company, as currently in effect.
3.5 Certificate of Incorporation of Curtis Industries, Inc., as
currently in effect.
3.6 By-Laws of Curtis Industries, Inc., as currently in effect.
3.7 Certificate of Incorporation of Itek Graphix Corp., as
currently in effect.
3.8 By-Laws of Itek Graphix Corp., as currently in effect.
3.9 Certificate of Incorporation of Curtis Sub, Inc., as
currently in effect.
3.10 By-Laws of Curtis Sub, Inc., as currently in effect.
4.1 Indenture, dated as of April 1, 1998, among Paragon
Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc. and
Norwest Bank Minnesota, National Association, as Trustee
(containing, as exhibits, specimens of the Series A Notes
and the Series B Notes).
4.2 Purchase Agreement, dated as of March 27, 1998 among Paragon
Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc., and
Donaldson, Lufkin & Jenrette Securities Corporation and CIBC
Oppenheimer Corp., as Initial Purchasers, relating to the
Series A Notes.
4.3 Registration Rights Agreement, dated as of April 1, 1998,
among Paragon Corporate Holdings Inc., A.B. Dick Company,
Curtis Industries, Inc., Itek Graphix Corp., Curtis Sub,
Inc., and Donaldson, Lufkin & Jenrette Securities
Corporation and CIBC Oppenheimer Corp., as Initial
Purchasers.
4.4 Credit and Security Agreement, dated as of April 1, 1998
between Paragon Corporate Holdings Inc. and Key Corporate
Capital Inc.
5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding
securities being registered.
8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax
matters.
10.1 Agreement and Plan of Merger, dated as of November 6, 1997,
among Paragon Corporate Holdings Inc., Curtis Industries,
Inc. and Curtis Acquisition Corp.
10.2 Stock Purchase Agreement, dated as of December 19, 1996,
between Paragon Corporate Holdings Inc. and GEC
Incorporated.
10.3 Management Agreement, dated as of April 1, 1998, between
Paragon Corporate Holdings Inc. and NESCO, Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1998, among
Paragon Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc. and
NES Group, Inc.
10.5 Agreement dated November 10, 1995 between A.B. Dick Company
and Gerald J. McConnell.
10.6 Severance and Non-Competition Agreement dated February 28,
1996 between Curtis Industries, Inc. and A. Keith Drewett.
10.7 Severance and Non-Competition Agreement dated February 28,
1996 between Curtis Industries, Inc. and Maurice P. Andrien,
Jr., as amended April 22, 1998.
12 Statement regarding computation of ratio of earnings to
fixed charges.
21 List of subsidiaries of the Company.
23.1 Consents of Squire, Sanders & Dempsey L.L.P. (included in
opinions filed as Exhibits 5 and 8).
23.2 Consents of Ernst & Young LLP.
25 Statement of Eligibility and Qualification on Form T-1 of
Trustee.
</TABLE>
II-2
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
27 Financial Data Schedule.
99 Form of Letter of Transmittal and related documents.
</TABLE>
(b) Financial Statement Schedules
No Financial Statement Schedules are required.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4,10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Niles, State of Illinois,
on the day of , 1998.
PARAGON CORPORATE HOLDINGS INC.
By: /s/ GERALD J. MCCONNELL
---------------------------------------
Gerald J. McConnell
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD J. MCCONNELL President and Chief Executive Officer , 1998
- --------------------------------------------- (Principal Executive Officer)
Gerald J. McConnell
/s/ FRANK J. RZICZNEK Chief Financial Officer and Secretary , 1998
- --------------------------------------------- (Principal Financial Officer and
Frank J. Rzicznek Principal Accounting Officer)
/s/ JOHN H. FOUNTAIN Chairman of the Board , 1998
- ---------------------------------------------
John H. Fountain
/s/ DONALD F. HASTINGS Director , 1998
- ---------------------------------------------
Donald F. Hastings
/s/ JOHN J. KAHL, JR. Director , 1998
- ---------------------------------------------
John J. Kahl, Jr.
/s/ ROBERT J. TOMSICH Director , 1998
- ---------------------------------------------
Robert J. Tomsich
/s/ JOHN R. TOMSICH Director , 1998
- ---------------------------------------------
John R. Tomsich
/s/ JAMES W. WERT Director , 1998
- ---------------------------------------------
James W. Wert
</TABLE>
II-4
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Niles, State of Illinois,
on the day of , 1998.
A. B. DICK COMPANY
By: /s/ GERALD J. MCCONNELL
---------------------------------------
Gerald J. McConnell
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD J. MCCONNELL President, Chief Executive Officer and , 1998
- --------------------------------------------- Director (Principal Executive Officer)
Gerald J. McConnell
/s/ JAMES R. BRYAN Vice President and Chief Financial Officer , 1998
- --------------------------------------------- (Principal Financial Officer and
James R. Bryan Principal Accounting Officer)
/s/ JOHN H. FOUNTAIN Director , 1998
- ---------------------------------------------
John H. Fountain
/s/ FRANK J. RZICZNEK Director , 1998
- ---------------------------------------------
Frank J. Rzicznek
</TABLE>
II-5
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mayfield Heights, State
of Ohio, on the day of , 1998.
CURTIS INDUSTRIES, INC.
By: /s/ MAURICE P. ANDRIEN
---------------------------------------
Maurice P. Andrien
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAURICE P. ANDRIEN President and Chief Executive Officer , 1998
- --------------------------------------------- (Principal Executive Officer)
Maurice P. Andrien
/s/ IDELLE K. WOLF Senior Vice President, Chief Financial , 1998
- --------------------------------------------- Officer, Treasurer and Secretary (Principal
Idelle K. Wolf Financial Officer and Principal Accounting
Officer)
/s/ ROBERT J. TOMSICH Director , 1998
- ---------------------------------------------
Robert J. Tomsich
</TABLE>
II-6
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Niles, State of Illinois,
on the day of , 1998.
ITEK GRAPHIX CORP.
By: /s/ GERALD J. MCCONNELL
---------------------------------------
Gerald J. McConnell
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GERALD J. MCCONNELL President and Director (Principal Executive , 1998
- --------------------------------------------- Officer)
Gerald J. McConnell
/s/ JAMES R. BRYAN Secretary (Principal Financial Officer , 1998
- --------------------------------------------- and Principal Accounting Officer)
James R. Bryan
/s/ JOHN H. FOUNTAIN Director , 1998
- ---------------------------------------------
John H. Fountain
</TABLE>
II-7
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mayfield Heights, State
of Ohio, on the day of , 1998.
CURTIS SUB, INC.
By: /s/ MAURICE P. ANDRIEN
---------------------------------------
Maurice P. Andrien
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAURICE P. ANDRIEN President (Principal Executive Officer) , 1998
- ---------------------------------------------
Maurice P. Andrien
/s/ IDELLE K. WOLF Treasurer (Principal Financial Officer , 1998
- --------------------------------------------- and Principal Accounting Officer)
Idelle K. Wolf
/s/ ROBERT J. TOMSICH Director , 1998
- ---------------------------------------------
Robert J. Tomsich
</TABLE>
II-8
<PAGE> 133
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S> <C>
3.1 Certificate of Incorporation of Paragon Corporate Holdings
Inc., as currently in effect.
3.2 By-Laws of Paragon Corporate Holdings Inc., as currently in
effect.
3.3 Certificate of Incorporation of A.B. Dick Company, as
currently in effect.
3.4 By-Laws of A.B. Dick Company, as currently in effect.
3.5 Certificate of Incorporation of Curtis Industries, Inc., as
currently in effect.
3.6 By-Laws of Curtis Industries, Inc., as currently in effect.
3.7 Certificate of Incorporation of Itek Graphix Corp., as
currently in effect.
3.8 By-Laws of Itek Graphix Corp., as currently in effect.
3.9 Certificate of Incorporation of Curtis Sub, Inc., as
currently in effect.
3.10 By-Laws of Curtis Sub, Inc., as currently in effect.
4.1 Indenture, dated as of April 1, 1998, among Paragon
Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc. and
Norwest Bank Minnesota, National Association, as Trustee
(containing, as exhibits, specimens of the Series A Notes
and the Series B Notes).
4.2 Purchase Agreement, dated as of March 27, 1998, among
Paragon Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc., and
Donaldson, Lufkin & Jenrette Securities Corporation and CIBC
Oppenheimer Corp., as Initial Purchasers, relating to the
Series A Notes.
4.3 Registration Rights Agreement, dated as of April 1, 1998,
among Paragon Corporate Holdings Inc., A.B. Dick Company,
Curtis Industries, Inc., Itek Graphix Corp., Curtis Sub,
Inc., and Donaldson, Lufkin & Jenrette Securities
Corporation and CIBC Oppenheimer Corp., as Initial
Purchasers.
4.4 Credit and Security Agreement, dated as of April 1, 1998
between Paragon Corporate Holdings Inc. and Key Corporate
Capital Inc.
5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding
securities being registered.
8 Opinion of Squire, Sanders & Dempsey L.L.P. regarding tax
matters.
10.1 Agreement and Plan of Merger, dated as of November 6, 1997,
among Paragon Corporate Holdings Inc., Curtis Industries,
Inc. and Curtis Acquisition Corp.
10.2 Stock Purchase Agreement, dated as of December 19, 1996,
between Paragon Corporate Holdings Inc. and GEC
Incorporated.
10.3 Management Agreement, dated as of April 1, 1998, between
Paragon Corporate Holdings Inc. and NESCO, Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1998, among
Paragon Corporate Holdings Inc., A.B. Dick Company, Curtis
Industries, Inc., Itek Graphix Corp., Curtis Sub, Inc. and
NES Group, Inc.
10.5 Agreement dated November 10, 1995 between A.B. Dick Company
and Gerald J. McConnell.
10.6 Severance and Non-Competition Agreement dated February 28,
1996 between Curtis Industries, Inc. and A. Keith Drewett.
10.7 Severance and Non-Competition Agreement dated February 28,
1996 between Curtis Industries, Inc. and Maurice P. Andrien,
Jr., as amended April 22, 1998.
12 Statement regarding computation of ratio of earnings to
fixed charges.
21 List of subsidiaries of the Company.
23.1 Consents of Squire, Sanders & Dempsey L.L.P. (included in
opinions filed as Exhibits 5 and 8).
</TABLE>
<PAGE> 134
EXHIBIT INDEX -- CONTINUED
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S> <C>
23.2 Consents of Ernst & Young LLP.
25 Statement of Eligibility and Qualification on Form T-1 of
Trustee.
27 Financial Data Schedule.
99 Form of Letter of Transmittal and related documents.
</TABLE>
(b) Financial Statement Schedules
No Financial Statement Schedules are required.
<PAGE> 1
EXHIBIT 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
Paragon Investors Inc.
* * * * * *
1. The name of the corporation is Paragon Investors Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand Five Hundred (1,500) Common Shares; all of
such shares shall be without par value.
5. The board of directors is authorized to make, alter or repeal the
bylaws of the corporation. Election of directors need not be by written ballot.
6. The name and mailing address of the sole incorporator is:
E.L. Kinsler
Corporation Trust Center
1209 Orange St.
Wilmington, Delaware 19801
7. The corporation shall indemnify its officers, directors, employees
and agents to the extent permitted by the General Corporation Law of Delaware.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 3rd day of September, 1996.
/s/ E.L. Kinsler
---------------------------------
E.L. Kinsler Sole Incorporator
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * *
Paragon Investors Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Paragon
Investors Inc. be amended by changing the First Article thereof so
that, as amended, said Article shall be and read as follows:
PARAGON CORPORATE HOLDINGS INC.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Paragon Investors Inc. has caused this
Certificate to be signed by Ralph L. Nehrig, Vice President/Assistant Secretary
as of this 3rd day of October, 1996.
PARAGON INVESTORS INC.
/s/ Ralph L. Nehrig
-----------------------------------
ATTEST: Ralph L. Nehrig, Vice President,
Assistant Secretary
/s/ John H. Fountain
- ----------------------------------
John H. Fountain, Secretary/Treasurer
<PAGE> 3
PARAGON CORPORATE HOLDINGS, INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
Paragon Corporate Holdings, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware does
hereby certify:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of the corporation
be amended by changing the fourth article thereof so that, as amended, said
article shall be and read as follows:
The total number of shares of stock which the Corporation shall have
authority to issue is Thirty Thousand (30,000) Common Shares; all of such shares
to be without par value.
SECOND: That in lieu of a meeting and vote of shareholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware:
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation Law
of the State of Delaware:
IN WITNESS WHEREOF, said Paragon Corporate Holdings, Inc. has caused
this certificate to be assigned by Robert J. Tomsich, President, as of the 15th
day of January, 1997.
PARAGON CORPORATE HOLDINGS, INC.
/s/ Robert J. Tomsich
--------------------------------
Robert J. Tomsich, President
<PAGE> 4
PARAGON CORPORATE HOLDINGS, INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
Paragon Corporate Holdings, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware does
hereby certify:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of the
corporation be amended by changing the fourth article thereof so that,
as amended, said article shall be and read as follows:
4. The total number of shares of stock which the Corporation
shall have authority to issue is Thirty Thousand (30,000) Common Shares;
all of such shares to be without par value, divided by classes as
follows:
CLASS A - COMMON STOCK - 2,000 shares, no par value
Full voting rights, unrestricted Common Stock. Only the holders
of Class A Stock shall constitute shareholders entitled to vote or act
on behalf of the Corporation.
CLASS B - COMMON STOCK - 28,000 shares, no par value
Non-voting, Common Stock, but unrestricted as to all other
shareholder rights.
TOTAL AUTHORIZED: 30,000 shares
RESOLVED FURTHER, that all issued and outstanding Common Stock
shall be considered and remain Class A Common Stock (full voting rights)
and shall not be required to be reissued, but may be so done at either
the shareholder or the company's election.
SECOND: That in lieu of a meeting and vote of shareholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware:
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation Law
of the State of Delaware:
IN WITNESS WHEREOF, said Paragon Corporate Holdings, Inc. has caused
this certificate to be assigned by Ralph L. Nehrig, Assistant Secretary, as of
the 16th day of January, 1997.
PARAGON CORPORATE HOLDINGS, INC.
/s/ Ralph L. Nehrig
------------------------------------
Ralph L. Nehrig, Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
-----------
Paragon Investors Inc.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
OFFICES
Section l. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section l. All meetings of the stockholders for the election of
directors shall be held in the City of Mayfield Hts., State of Ohio, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held, at such other date and time as shall be designated from
time to time by the board of directors and stated in the notice of the meeting,
at which they shall elect by a majority, a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 1 nor more than 5 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any
<PAGE> 3
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 10 nor more than 60 days before the date of
the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
<PAGE> 4
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action
<PAGE> 5
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section l. The number of directors which shall constitute the whole
board shall be not less than 1 nor more than 5. The first board shall consist of
1 directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in
<PAGE> 6
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a
<PAGE> 7
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on 1 days' notice to each director, either personally or by mail or by
facsimile communication; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors unless the board consists of only one director; in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 8. At all meetings of a majority of the board of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of
<PAGE> 8
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
<PAGE> 9
NOTICES
Section l. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto .
ARTICLE V
OFFICERS
Section l. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
<PAGE> 10
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation,
<PAGE> 11
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly delegated
by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose
<PAGE> 12
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper
<PAGE> 13
vouchers for such disbursements, and shall render to the president and the board
of directors, at its regular meetings, or when the board of directors so
requires, an account of all his transactions as treasurer and of the financial
condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section l. The shares of the corporation shall be represented by a
certificate or shall be uncertificated.
<PAGE> 14
Certificates shall be signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, or the president or a
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall
<PAGE> 15
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
<PAGE> 16
purpose of any other lawful action, the board of directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section l. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital
<PAGE> 17
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
<PAGE> 18
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section l. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE> 1
EXHIBIT 3.3
-----------
RESTATED
CERTIFICATE OF INCORPORATION
OF
A. B. DICK COMPANY
FIRST. The name of the corporation is A. B. Dick Company.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the corporation
shall have authority to issue is 1,000 shares of Common Stock, par value $1.00
per share.
FIFTH. The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Roy B. Larson 299 Park Avenue
New York, New York 10171
SIXTH. The corporation is to have perpetual existence.
<PAGE> 2
SEVENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
To authorize and cause to be executed mortgages and liens upon the real
and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The by-laws may provide that in the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
nay unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution or in the by-laws of the
corporation, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation, and may authorize
the
-2-
<PAGE> 3
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and, unless the resolution or
by-laws expressly so provide, no such committee shall have the power or auth-
ority to declare a dividend or to authorize the issuance of stock.
EIGHTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court
-3-
<PAGE> 4
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
NINTH. Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
TENTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-4-
<PAGE> 5
ELEVENTH. (a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
-5-
<PAGE> 6
(b) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attor-
ney's fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circum-
stances of the case, such person is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise
-6-
<PAGE> 7
in defense of any action, suit or proceeding referred to in paragraphs (a) and
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
-7-
<PAGE> 8
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(g) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article.
(h) For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or
was a director, officer, employee or agent of such a constituent corporation or
is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
-8-
<PAGE> 9
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
-9-
<PAGE> 1
EXHIBIT 3.4
-----------
BY - LAWS
A. B. DICK COMPANY
A DELAWARE CORPORATION
ADOPTED: APRIL 1, 1989 (EFFECTIVE
TIME OF MERGER OF A. B.
DICK COMPANY INTO IGX CORP.)
AMENDED: MAY 1, 1991
APRIL 6, 1993
DECEMBER 4, 1995
<PAGE> 2
ARTICLE I
---------
REGISTERED AND PRINCIPAL OFFICES
The registered office of the Company shall be in the City of
Wilmington, County of New Castle, State of Delaware. The principal office of the
Company shall be at 5700 West Touhy Avenue, Niles, Illinois, or at such other
address in Cook County, Illinois, as may from time to time be fixed by the Board
of Directors by amendment of these By-laws.
2
<PAGE> 3
ARTICLE II
----------
BOARD OF DIRECTORS: COMMITTEE
SECTION 1 - BOARD OF DIRECTORS
The property, business and affairs of the Company shall be managed by a
Board of not less than two nor more than nine directors. The number of directors
shall be determined from time to time by the Board of Directors. The directors
shall be elected at the annual meeting of the stockholders, except in the case
of vacancies and newly created directorships resulting from any increase in the
authorized number of directors which may be filled in the manner provided by the
General Corporation Law of the State of Delaware. Each director elected shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal. Directors need not be stockholders of the Company.
SECTION 2 - COMMITTEES
The Board of Directors may from time to time, by resolution passed by a
majority of the whole Board, designate such committees, delegate to them such
powers, and prescribe for them such procedures, as the Board by determine and as
are permitted under the General Corporation Law of the State of Delaware.
3
<PAGE> 4
ARTICLE III
-----------
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1 - REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held without call
or notice at such times as may be provided by resolution of the Board of
Directors from time to time.
SECTION 2 - SPECIAL MEETINGS
Special meetings of the Board of Directors shall be held at the call of
the Chairman (if one shall have been elected) or the President, or of the
Secretary upon the written request of any two directors.
SECTION 3 - NOTICE
Written notice of each special meeting of the Board of Directors shall
be sent by mail or delivered personally by the Secretary at least two days prior
to the meeting; provided, however, that a meeting may be held at any time
without notice, if all of the directors waive notice thereof. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
SECTION 4 - PLACE
Each meeting of the Board of Directors shall be held at the principal
office of the Company in Cook County, Illinois or at such other place either
within or without the State of
4
<PAGE> 5
Delaware, but outside the United Kingdom, as may be specified in the notice or
waiver of notice of such meeting.
SECTION 5 - QUORUM
Two directors shall constitute a quorum for the transaction of
business.
SECTION 6 - CHAIRMAN
The Board of Directors may elect one of its members as Chairman. The
Chairman (if one shall have been elected) or, in the absence of the Chairman or
if one shall not have been elected, a director to be selected by the directors
present shall preside at all meetings of the Board of Directors.
ACTION BY CONSENT
SECTION 7 - UNANIMOUS CONSENT
Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee may be taken without a meeting, if all
members of the Board of Directors or of any such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or of such committee, as the
case may be.
5
<PAGE> 6
ARTICLE IV
----------
STOCKHOLDERS' MEETINGS
SECTION 1 - ANNUAL MEETING
The annual meeting of the stockholders, for the election of directors
and for the transaction of such other business as may lawfully come before the
meeting, shall be held on the fourth Thursday in April each year or on such
other date and at such time as may be designated from time to time by the Board
of Directors and stated in the notice of such meeting, at the principal office
of the Company in Cook County, Illinois or at such other place either within or
without the State of Delaware, but outside the United Kingdom, as shall be
designated by the Board of Directors and specified in the notice of such
meeting.
SECTION 2 - SPECIAL MEETINGS
Upon due notice, special meetings of the stockholders may be held
whenever called as hereinafter provided. Each special meeting shall be held at
the principal office of the Company in Cook County, Illinois or at such other
place either within or without the State of Delaware, but outside the United
Kingdom, as shall be designated by the Board of Directors and specified in the
notice of such meeting, on any day and at such time as shall be designated by
the Board of Directors and specified in the notice of such meeting. Special
meetings of the stockholders may be called by the Chairman (if one shall have
been elected), the President, by the Board of Directors by resolution duly
adopted, or by the holders of not less than one-fifth of all the outstanding
voting shares of the Company by written request signed by them specifying the
purpose of such special meeting, which request shall be personally delivered or
sent by
6
<PAGE> 7
registered mail to the Company at its principal office in Cook County, Illinois.
Within thirty days after the receipt by the Company of such written request, the
Chairman (if one shall have been elected) or the President shall fix the time
for the holding of a special meeting for the purpose specified in such written
request, and shall cause notice thereof to be given in accordance with Section 3
of this Article IV. If such notice be not given by an officer of the Company
within thirty days after receipt of such written request, the person calling
such meeting may fix the time therefor, and may give notice thereof in the
manner and within the time prescribed in said Section 3 for the given of notice
by an officer of the Company.
SECTION 3 - NOTICE
Written notice of each annual or special meeting of the stockholders
stating the place, day and hour thereof and, in the case of a special meeting,
the purpose or purposes for which it is called, shall be sent not less than ten
nor more than sixty days prior to the date fixed for such meeting, by an officer
of the Company at the direction of the person or persons calling the meeting, by
mail with postage prepaid, to each stockholder of record entitled to vote at
such meeting at this address as it shall then appear on the records of the
Company.
SECTION 4 - QUORUM AND VOTING
Each stockholder shall be entitled to vote, in person or by proxy, at
any meeting of stockholders the shares of stock entitled to be voted at such
meeting owned by him of record on the record date for such meeting. Subject to
the provisions of law and the Certificate of Incorporation of the Company and
any resolution or resolutions of the Board of Directors providing for the issue
of any series of Preference Stock which may be authorized as to the vote
7
<PAGE> 8
required for a specified action, the holders of outstanding shares of the
Company entitled to cast a majority of the votes at the meeting, represented in
person or by proxy, shall constitute a quorum at such meeting of stockholders
and the vote of the holders of shares entitled to cast a majority of the votes
represented at such meeting shall decide any question brought before such
meeting; provided, that if such quorum be not present, the holders of shares
entitled to cast a majority of the votes represented at the meeting may adjourn
the meeting from time to time without further notice unless the adjournment is
for more than thirty days or a new record date is fixed after adjournment for
the adjourned meeting, in either of which cases a notice of adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
Voting by ballot shall not be necessary at any meeting of stockholders except
when demanded by a stockholder entitled to vote at such meeting.
SECTION 5 - THE PRESIDING OFFICER
The Chairman (if one shall have been elected) or, in the absence of the
Chairman or if one shall not have been elected, the President shall preside at
all meetings of the stockholders. In the absence of both the Chairman (if one
shall have been elected) and the President, the stockholders present at the
meeting in person or by proxy may elect one of their number as chairman of the
meeting.
SECTION 6 - PROXIES
A stockholder may vote either in person or by proxy duly executed in
writing by the stockholder or his duly authorized attorney-in-fact.
8
<PAGE> 9
SECTION 7 - RECORD DATE FOR DETERMINATION OF STOCKHOLDERS
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders, or stockholders entitled to receive payment
of any dividend, or in order to make a determination of stockholders for any
other purpose, the Board of Directors may fix in advance, as the record date for
such determination of stockholders, a date not more than sixty days prior to the
date of such meeting or other determination of stockholders, provided that in
the case of a meeting of stockholders the date so fixed shall be not less then
ten days prior to the date of the meeting.
SECTION 8 - VOTING LISTS
The Secretary of the Company shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 9 - ACTION BY STOCKHOLDERS CONSENT
9
<PAGE> 10
Unless otherwise provided in the Certificate of Incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the Company, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous consent shall be given the those stockholders who have not
consented in writing.
10
<PAGE> 11
ARTICLE V
---------
OFFICERS - ELECTION AND TENURE
The Board of Directors shall, at its regular meeting next following
each annual meeting of stockholders, elect a President, one or more Vice
Presidents (the number thereof to be determined by the Board of Directors), a
Secretary and a Controller, each of whom, unless removed, shall hold his office
during the ensuing year and until his successor shall have been elected and
qualified. The Board of Directors may elect a Chairman and may elect or appoint
such additional officers as it may deem advisable. Any officer may be removed at
anytime and a vacancy in any office, for whatever cause, may be filled at any
time by the Board of Directors. Any two offices except those of (1) Chairman and
Secretary; (2) President and Secretary; (3) Chairman and any Vice President and
(4) President and any Vice President, may be held by the same person.
11
<PAGE> 12
ARTICLE VI
----------
OFFICERS - POWERS AND DUTIES
SECTION 1 - THE CHAIRMAN
The Chairman shall have such powers and perform such duties as may be
conferred by these By-laws or as the Board of Directors may from time to time
assign.
SECTION 2 - THE PRESIDENT
The President shall be the Chief Executive Officer of the Company and,
subject to the control of the Board of Directors, shall have general charge,
direction and supervision of the business and affairs of the Company and over
all other officers, employees and agents of the Company. He shall have the power
to execute, acknowledge and deliver all deeds, bonds, contracts and other
instruments in the name and on behalf of the Company. He shall have such
incidental powers as may be reasonably necessary to carry out his duties and
shall have such other powers and duties as the Board of Directors may from time
to time prescribe.
SECTION 3 - THE VICE PRESIDENTS
Each Vice President shall perform such duties and have such powers as
from time to time may be assigned to him by the President or the Board of
Directors.
SECTION 4 - THE SECRETARY
The Secretary shall attend and keep records of all proceedings of the
Board of Directors and of all meetings of the stockholders. He shall affix and
attest the seal of the Company to all
12
<PAGE> 13
deeds, bonds and other instruments requiring the corporate seal, when such
instruments shall have been signed by the President or such other officer who
shall have been authorized to sign any such instruments on behalf of the
Company. He shall give or cause to be given notice of all meetings of the Board
of Directors and of the stockholders, subject to the direction of the person or
persons calling such meetings, and in accordance with these By-laws. He shall
have such other powers and duties as the Board of Directors or the President
shall from time to time prescribe.
SECTION 5 - THE CONTROLLER
The Controller shall have the responsibility for establishing and
maintaining the accounting procedures and records of the Company and shall have
functional supervision over the records of all other departments pertaining to
revenues, expenses, moneys and property, and over the accounting procedures and
records of the subsidiaries. He shall be responsible for the auditing of all
accounts and records of the Company. He shall have such other powers and duties
as are commonly incidental to the office of Controller.
SECTION 6 - ASSISTANT SECRETARIES AND ASSISTANT CONTROLLERS
Assistant Secretaries and Assistant Controllers shall respectively
assist the Secretary and the Controller in the performance of the respective
duties assigned to such principal officers, and, in assisting his principal
officer, each of such assistant officers shall for such purpose have the powers
of his principal officer. In case of the absence, disability, death, resignation
or removal from office of any one or more of such principal officers, his or
their duties shall, except as
13
<PAGE> 14
otherwise ordered by the Board of Directors, temporarily devolve upon such
assistant officer or officers as shall be designated by the President.
SECTION 7 - ADDITIONAL OFFICERS
Any additional officers elected or appointed shall have such powers and
duties as may be prescribed by the Board of Directors or the President.
14
<PAGE> 15
ARTICLE VII
-----------
CERTIFICATES REPRESENTING STOCK
SECTION 1 - TRANSFERS
Transfers of stock of the Company shall be made only upon the books of
the Company by the holder thereof in person or by the attorney of such holder
duly authorized in writing, and upon surrender of certificates for such stock.
In case of loss or destruction of a certificate representing stock
another may be issued in its place upon the stockholder's submitting to a
transfer agent of the Company adequate proof of such loss or destruction and
giving of a bond of indemnity satisfactory to such transfer agent.
SECTION 2 - EXECUTION OF CERTIFICATES
Certificates representing stock shall be signed by the President or any
Vice President who is also a director of the Company and by the Secretary or an
Assistant Secretary, and sealed with the seal of the Company. Such seal may be a
facsimile. On any such certificate which is countersigned by a transfer agent or
by a registrar, other than the Company itself or one of its employees, the
signatures of the President or such Vice President and of the Secretary or
Assistant Secretary may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimiles. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Company
with the same effect as if such officer, transfer agent or registrar were such
officer, transfer agent or registrar at the date of its issue.
15
<PAGE> 16
SECTION 3 - FORM OF CERTIFICATES
Every certificate representing stock shall state upon the face or back
thereof, in full or in the form of a summary, the powers, designations,
preferences and relative participating optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights, or, in lieu thereof, a legend
stating that such statement, in full, will be furnished by the Company or its
transfer agent to any stockholder upon request and without charge.
16
<PAGE> 17
ARTICLE VIII
------------
CORPORATE SEAL
The corporate seal of the Company shall be circular in form, bearing on
its face the inscription: "A. B. DICK COMPANY, CORPORATE SEAL, DELAWARE."
17
<PAGE> 18
ARTICLE IX
----------
FISCAL YEAR
The fiscal year of the Company shall end at the close of business on
December 31 of each year, or on such other date as the Board shall designate by
resolution properly enacted.
(By resolution duly adopted, the Board of Directors has designated
March 31 of each year as the close of the fiscal year.)
18
<PAGE> 19
ARTICLE X
---------
PROXIES FOR STOCK IN OTHER CORPORATIONS OWNED BY COMPANY
The President, or in his absence, any Vice President together with the Secretary
or an Assistant Secretary, shall have the authority to give to any person or
persons (including any one or more of themselves) a written proxy in the name of
the Company and under its corporate seal, to vote any or all shares of stock in
any other corporation, which are owned by the Company, in any election or upon
any question that may be presented at any meeting of the stockholders of such
corporation, with full power to waive any notice of such meeting and consent to
the holder of any such meeting without notice.
19
<PAGE> 20
BY - LAWS
ITEK GRAPHIX CORP.
A DELAWARE CORPORATION
ADOPTED: JANUARY 14, 1989
AMENDED AND
RESTATED: SEPTEMBER 9, 1996
<PAGE> 1
EXHIBIT 3.5
-----------
RESTATED CERTIFICATE OF INCORPORATION
OF
CURTIS INDUSTRIES, INC.
Curtis Industries, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Curtis Industries, Inc. and the name
under which the Corporation was orginally incorporated is BTIC Acquisition
Corp.
The date of filing its original Certificate of Incorporation with the
Secretary of State was July 27, 1990.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of the Corporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth
in full:
FIRST: The name of the Corporation is Curtis Industries, Inc.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted are to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH:
A. GENERAL AUTHORIZATION. The aggregate number of shares of capital
stock which the Corporation is authorized to issue is Seven Hundred Twelve
Thousand One Hundred Sixty Nine (712,169) shares, consisting of:
1. Five Hundred Thousand (500,000) shares of common stock having a par
value of one cent ($.01) per share; and
<PAGE> 2
2. Two Hundred Twelve Thousand Six Hundred Nineteen (212,619)
shares of preferred stock having a par value of one cent ($.01) per
share.
B. COMMON STOCK. A statement of the designations and the powers,
preferences and rights, including voting rights, and the qualifications,
limitations and restrictions in respect of the common stock is as follows:
1. DIVIDENDS. Except as otherwise provided in this Restated
Certificate of Incorporation, the Board of Directors of the Corporation
may cause dividends to be paid to the holders of shares of common stock
out of funds legally available for the payment of dividends by declaring
an amount per share as dividends. When and as dividends are declared
other than dividends declared with respect to the preferred stock,
whether payable in cash, in property or in shares of common stock, the
holders of common stock shall be entitled to share equally, share for
share, in such dividends.
2. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, after payment shall have been made to the holders of
preferred stock of the full amount to which they shall be entitled, the
holders of common stock shall be entitled, to the exclusion of the
holders of preferred stock, to share, ratably according to the number of
shares of common stock held by them, in all remaining assets of the
Corporation available for distribution to its stockholders.
3. VOTING RIGHTS. Except as otherwise provided in this Restated
Certificate of Incorporation or by applicable law, the holders of common
stock shall be entitled to vote on each matter on which the stockholders
of the Corporation shall be entitled to vote, and each holder of common
stock shall be entitled to one vote for each share of such stock held by
such holder.
C. PREFERRED STOCK. A statement of the designations and the powers,
preferences and rights, including voting rights, if any, and the qualifications,
limitations and restrictions in respect of the shares of preferred stock is as
follows:
1. Subject to Article EIGHTH and the express provisions of each
series of preferred stock, the Board of Directors is hereby empowered to
cause the preferred stock to be issued from time to time for such
consideration as it may from time to time fix, and to cause such
preferred stock to be issued in one or more series, with such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional and other special
rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing
for the issues of such stock adopted by the Board of Directors. Each
senes of preferred stock shall be distinctly designated. Except in
respect of the particulars fixed by the Board of Directors for each
series as permitted hereby, all shares of preferred stock shall be of
equal rank and shall be identical. All shares of any one senes
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<PAGE> 3
of preferred stock so designated by the Board of Directors shall be
alike in every particular, except that shares of any one series issued
at different times may differ as to the dates from which dividends
thereon shall be cumulative. The voting rights, if any, of each such
series and the preferences and relative, participating, optional and
other special rights of each such series and the qualifications,
limitations and restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and the Board of
Directors of the Corporation is hereby expressly granted authority to
fix, by resolutions duly adopted prior to the issuance of any shares of
a particular series of preferred stock so designated by the Board of
Directors, the voting powers of stock of such series, if any, and the
designations, preferences and relative, participating, optional and
other special rights and the qualifications, limitations and
restrictions thereof, if any, for such series, including without
limitation the following:
(a) The distinctive designation of and the number of
shares of preferred stock which shall constitute such series
provided that such number may be increased (but not above the
total number of authorized shares of preferred stock) or
decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of
Directors;
(b) The rate and time at which, and the terms and
conditions upon which, dividends, if any, on preferred stock of
such series shall be paid, the extent of the preference or
relation, if any, of such dividends to the dividends payable on
any other series of preferred stock or any other class of stock
of the Corporation and whether such dividends shall be
cumulative or noncumulative;
(c) The right, if any, of the holders of preferred stock
of such series to convert the same into, or exchange the same
for, shares of any other class of stock or any series of any
class of stock of the Corporation and the terms and conditions
of such conversion or exchange;
(d) Whether or not preferred stock of such series shall
be subject to redemption, and the redemption price or prices and
the time or times at which and the terms and conditions upon
which, preferred stock of such series may be redeemed;
(e) The rights, if any, of the holders of preferred
stock of such senes upon the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary;
(f) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the preferred
stock of such series; and
(g) The voting powers, if any, of the holders of such
series of preferred stock which may, without limiting the
generality of the foregoing,
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<PAGE> 4
include the right, voting as a series by itself or together with
any other series of the preferred stock as a class, (i) to vote
more or less than one vote per share on any or all matters voted
by the stockholders and (ii) to elect one or more directors of
the Corporation if there has been a default in the payment of
dividends on any one or more series of the preferred stock or
under such other circumstances and upon such other condition as
the Board of Directors may fix.
2. The Board may, in establishing any series of preferred stock,
provide limitations on the payment of dividends on the common stock
while any dividends on shares of preferred stock are accrued and unpaid.
D. PROVISIONS RELATING TO ALL CLASSES OF STOCK. The Corporation may
issue shares of its preferred stock or common stock from time to time for such
consideration (not less than the par value thereof) as may be fixed from time to
time by the Board. Any and all shares so issued, for which such consideration
has been paid or delivered to the Corporation, shall be deemed fully paid shares
and shall not be liable to any further call or assessments thereon, and the
holders of such shares shall not be liable for any further payments in respect
of such shares.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and
to abolish any such reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the directors of
the Corporation.
When and as authorized by the stockholders in accordance with
statute, to sell lease or exchange all or substantially all of the
property and assets of the Corporation, including its good will and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist, in whole or in part, of money or
property including shares of stock in, and/or other securities of, any
other corporation or corporations, as its Board of Directors shall deem
expedient and for the best interests of the Corporation.
SIXTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the Corporation or its stockholders (2) for
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<PAGE> 5
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law, or (4) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitations on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this Article shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
SEVENTH:
A. Each person who was or is made a party to or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
subsection B of this Article, the Corporation shall indemnify any such person
seeking indemnification in (or part thereof) was authorized by the Board of
Directors of the Corporation. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to connection
with a proceeding (or part thereof) initiated by such person only if such
proceeding be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that if
the Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking, by or
on behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Article or otherwise. The Corporation may, by action
of
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<PAGE> 6
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
B. If a claim under subsection A of this Article is not paid in full by
the Corporation within thirty (30) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
E. As used in this Article, references to "the Corporation" shall
include, in addition to the resulting or surviving corporation, any constituent
corporation absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees and agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
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<PAGE> 7
F. If this Article or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, officer, employee and agent of the
Corporation as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including a grand jury
proceeding and an action by the Corporation, to the fullest extent permitted by
any applicable portion of this Article that shall not have been invalidated or
by any other applicable law.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
NINTH: Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the Corporation. Elections of directors
need not be by written ballot unless the by-laws of the Corporation shall so
provide.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
4. This Restated Certificate of Incorporation was duly adopted by vote
of the stockholders in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
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<PAGE> 8
IN WITNESS WHEREOF, said Curtis Industries, Inc. has caused this
certificate to be signed by Maurice P. Andrien, Jr., its President, and attested
by Scott A. Boyle, its Secretary, this 17th day of August, 1992.
CURTIS INDUSTRIES, INC.
By: /s/ Maurice P. Andrien
----------------------------------
Maurice P. Andrien, Jr., President
ATTEST:
By: /s/ Livio M. Borghese
--------------------------------------
Livio M. Borghese, Assistant Secretary
-8-
<PAGE> 1
EXHIBIT 3.6
-----------
CURTIS INDUSTRIES, INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Mayfield Heights, State of Ohio, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the
<PAGE> 2
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on December 30 if not a legal holiday, and if a legal
holiday, then on the next previous secular day at 10:00 a.m. or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect by written
ballot a board of directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
<PAGE> 3
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than 2 nor more than 10 days before the date of
the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person
<PAGE> 4
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
<PAGE> 5
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
At all elections of directors of the corporation each stockholder having
voting power shall be entitled to exercise the right of cumulative voting as
provided in the certificate of incorporation.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
<PAGE> 6
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be 1. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies
<PAGE> 7
or newly created directorships, or to replace the directors chosen by the
directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
<PAGE> 8
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on 2 days' notice to each director, either personally or by mail or by
facsimile communication; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors unless the board consists of only one director; in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 8. At all meetings of a majority of the board of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
<PAGE> 9
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
<PAGE> 10
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation) adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially
<PAGE> 11
all of the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
Section 12. Each committee shall keep regular minutes or its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing
<PAGE> 12
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing,
<PAGE> 13
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretarIes and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
<PAGE> 14
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents
<PAGE> 15
in the order designated by the directors, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-presidents shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to
<PAGE> 16
affix the seal of the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his
<PAGE> 17
transactions as treasurer and of the financial condition of the corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated.
<PAGE> 18
Certificates shall be signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, or the president or a
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation.
Section 2. Any of or all the signatures on a certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
<PAGE> 19
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to
<PAGE> 20
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting: provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
<PAGE> 21
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
<PAGE> 22
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7.. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by
<PAGE> 23
the board of directors, when such power is conferred upon the board of
directors by the certificate of incorporation at any regular meeting of
the stockholders or of the board of directors or at any special meeting
of the stockholders or of the board of directors if notice of such
alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting. If the power to adopt, amend or
repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of
the stockholders to adopt, amend or repeal by-laws.
<PAGE> 1
EXHIBIT 3.7
-----------
ITEK GRAPHIX CORP.
(a Delaware corporation)
CERTIFICATE OF AMENDMENT & RESTATEMENT
--------------------------------------
OF
--
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
ITEK GRAPHIX CORP.
------------------
ITEK GRAPHIX CORP. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY AS FOLLOWS:
(1): The Certificate of Incorporation of the Corporation was filed in
the Office of the Secretary of State of the State of Delaware on November 18,
1985 and was heretofore previously amended by that certain Certificate of
Amendment (Before Payment of Capital) of Certificate of Incorporation of the
Corporation filed in the Office of the Secretary of State of the State of
Delaware January 7, 1986.
(2): This Certificate of Amendment & Restatement of Certificate of
Incorporation further amends, restates and integrates the Certificate of
Incorporation of the Corporation as heretofore previously amended as follows:
(a) By striking the caption on Page 1 thereof in its entirety and
substituting in lieu thereof a new caption to read as follows:
"AMENDED & RESTATED CERTIFICATE OF INCORPORATION
OF
ITEK GRAPHIX CORP."
; and
(b) By striking the initial paragraph following the
above-referenced caption on Page 1 in its entirety; and
(c) By dividing ARTICLE FIFTH into a revised ARTICLE FIFTH and a
new ARTICLE SIXTH by ending ARTICLE FIFTH after the initial sentence thereof and
creating a new ARTICLE SIXTH by
-1-
<PAGE> 2
commencing a new paragraph and inserting the word "SIXTH:" immediately prior to
the second sentence of former ARTICLE FIFTH and by adding the phrase ";
provided, that a By-Law provision adopted by vote of the stockholders of the
Corporation may be altered, amended or repealed, in whole or in part, only by
vote of the stockholders if such exclusive right has been expressly reserved by
the stockholders in the resolution adopting the same." immediately after the
last word of new ARTICLE SIXTH; and
(d) By adding a new ARTICLE SEVENTH to be inserted immediately
following new ARTICLE SIXTH, which new ARTICLE SEVENTH shall read as follows:
"SEVENTH: The liability, if any, of each director of the
Corporation to the Corporation or its stockholders, or any of them, for
monetary damages or otherwise shall be limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as
amended from time to time. In furtherance and not in limitation of the
generality of the foregoing, no director of the Corporation shall be
liable to the Corporation or its stockholders, or any of them, for
monetary damages for breach of fiduciary duty as a director; provided
that this ARTICLE SEVENTH shall not, unless otherwise permitted under the
General Corporation Law of the State of Delaware, as amended from time to
time, be deemed to eliminate or limit liability: (i) for any breach of
such director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of the State of Delaware, as amended from time to
time, or (iv) for any transaction from which such director derived an
improper personal benefit."
; and
(e) By renumbering existing ARTICLE SIXTH by striking the word
"SIXTH:" from the caption of existing ARTICLE SIXTH in its entirety and
substituting in lieu thereof the word "EIGHTH:", by adding the phrase "defend
and" immediately prior to the word "indemnify" in the third line thereof, and
by striking the word "persons" in the third line thereof in its entirety and
substituting in lieu thereof the phrase "past, present and future directors,
officers, employees and agents of the Corporation or any of its subsidiaries";
and
-2-
<PAGE> 3
(f) By striking existing ARTICLE SEVENTH in its entirety; and
(g) By adding a new ARTICLE NINTH to be inserted immediately
following newly renumbered ARTICLE EIGHTH, which new ARTICLE NINTH shall read as
follows:
"NINTH: Any action which is required or permitted to be taken at a
meeting of stockholders entitled to vote thereon may be taken without the
necessity of a formal meeting and without prior notice if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding shares of capital stock having not less than the minimum
number of votes that would be necessary to take such action at a meeting
at which all shares entitled to vote thereon were present and voted."
; and
(h) By thereafter restating the Certificate of Incorporation of the
Corporation in its entirety as hereinbefore amended.
(3): The text of the Certificate of Incorporation of the Corporation as
heretofore previously amended, is hereby further amended, restated and
integrated in its entirety to read as hereinbelow set forth as follows:
-3-
<PAGE> 4
AMENDED & RESTATED CERTIFICATE OF INCORPORATION
-----------------------------------------------
OF
--
ITEK GRAPHIX CORP.
------------------
FIRST: The name of the corporation (which is hereinafter referred to as
the "Corporation") is
ITEK GRAPHIX CORP.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such registered office is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: (1) The total number of shares of all classes of stock which the
Corporation is authorized to issue is Five Thousand (5,000) shares, all
consisting of shares of Common Stock, par value ten cents ($0.10) per share. The
amount of the authorized stock of the Corporation may be increased or decreased
by the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote.
(2) The holders of the Common Stock shall be entitled to receive, to the
extent permitted by law, such dividends as may be declared from time to time by
the Board of Directors of the Corporation and shall participate in any and all
dividend distributions on an equal per share basis. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation or any
reduction of the capital stock of the Corporation resulting in the distribution
of any of its assets to its stockholders, the holders of the Common Stock shall
be entitled to receive the net assets of the Corporation, after the Corporation
shall have satisfied or made provision for its debts and obligations and for the
payment to the holders of shares of the Preferred Stock any preferential rights
to receive distributions of the net assets of the Corporation, and shall
participate in any and all such distributions on an equal per share basis.
(3) The holders of the Common Stock shall have the exclusive right to
vote for (or to consent with respect to) the election of directors and, except
as otherwise may be required by law, on all other matters requiring action by
the stockholders or submitted to the stockholders for action. Each holder of a
share of the Common Stock shall be entitled to one vote for each share of the
Common Stock standing in his name on the books of the Corporation.
-4-
<PAGE> 5
FIFTH: Election of directors need not be by ballot, unless the By-Laws
of the Corporation shall so provide.
SIXTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered, without the assent or vote of the stockholders, to
make, alter, amend and repeal the By-Laws of the Corporation, in any manner not
inconsistent with the General Corporation Law of the State of Delaware or the
Certificate of Incorporation of the Corporation; provided, that a By-Law
provision adopted by vote of the stockholders of the Corporation may be altered,
amended or repealed, in whole or in part, only by vote of the stockholders if
such exclusive right has been expressly reserved by the stockholders in the
resolution adopting the same.
SEVENTH: The liability, if any, of each director of the Corporation to
the Corporation, its stockholders or any other person, or any of them, for
monetary damages or otherwise shall be limited to the fullest extent permitted
by the General Corporation Law of the State of Delaware, as amended from time to
time. In furtherance and not in limitation of the generality of the foregoing,
no director of the Corporation shall be liable to the Corporation, its
stockholders or any other person, or any of them, for monetary damages for
breach of fiduciary duty as a director; provided that this ARTICLE SEVENTH shall
not, unless otherwise permitted under the General Corporation Law of the State
of Delaware, as amended from time to time, be deemed to eliminate or limit
liability of a director to the Corporation or its stockholders (i) for any
breach of such director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, as amended from time to
time, or (iv) for any transaction from which such director derived an improper
personal benefit.
EIGHTH: The Corporation shall, to the full extent permitted by the
General Corporation Law of the State of Delaware, as amended from time to time,
defend and indemnify all past, present and future directors, officers, employees
and agents of the Corporation or any of its subsidiaries whom it has the power
to indemnify pursuant thereto.
NINTH: Any stockholder action which is required or permitted to be taken
at a meeting of stockholders entitled to vote thereon may be taken without the
necessity of a formal meeting and without prior notice if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares of capital stock having not less than the minimum number of votes that
would be necessary to take such action at a meeting at which all shares entitled
to vote thereon were present and voted.
-5-
<PAGE> 6
(4): The Amended & Restated Certificate of Incorporation provided for
hereinabove was duly and unanimously adopted by the Board of Directors of the
Corporation by vote of directors of the Corporation at a meeting duly called and
held on September 9, 1986 in accordance with the General Corporation Law of the
State of Delaware and the Certificate of Incorporation and By-Laws of the
Corporation.
(5): The Amended & Restated Certificate of Incorporation provided for
hereinabove was duly and unanimously adopted by the sole stockholder of the
Corporation by written consent dated September 9, 1986 of the sole holder of the
outstanding shares of Common Stock of the Corporation in accordance with the
applicable provisions of Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware and the Certificate of Incorporation and By-Laws of
the Corporation.
(6): This Certificate of Amendment & Restatement of Certificate of
Incorporation and the Amended & Restated Certificate of Incorporation provided
for herein shall be and become effective as and when filed in the Office of the
Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, ITEK GRAPHIX CORP. has caused this Certificate of
Amendment & Restatement of Certificate of Incorporation to be duly executed on
its behalf by its President and its Assistant Secretary on and as of this 31st
day of December, 1986.
ITEK GRAPHIX CORP.
(CORPORATE SEAL)
/s/ R. Patrick Forster
---------------------------
R. Patrick Forster
President
ATTEST:
/s/ Robert C. Varga
- ---------------------------
Robert C. Varga
Assistant Secretary
-6-
<PAGE> 1
EXHIBIT 3.8
-----------
BY-LAWS
ITEK GRAPHIX CORP.
A DELAWARE CORPORATION
Adopted: January 14, 1986
Amended and
Restated: September 9, 1986
<PAGE> 2
ITEK GRAPHIX CORP.
(a Delaware corporation)
BY-LAWS
-------
ARTICLE I
Stockholders
------------
Section 1. ANNUAL MEETINGS. The annual meeting of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other business as may be brought before the meeting shall be held on such
day each year, other than a legal holiday, as may be fixed by the Board of
Directors from time to time, but in any event not sooner than thirty days nor
later than one-hundred-twenty days after the close of the Corporation's fiscal
year-end. The meeting may be held at such time and such place within or without
the State of Delaware as shall be fixed by the Board of Directors and stated in
the notice of the meeting.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be called at any time by the Board of Directors, the Chairman of the Board, by
the President, or by any number of stockholders owning an aggregate of not less
than twenty-five percent of the member of outstanding shares of capital stock
entitled to vote. Special meetings shall be held on the date and at the time and
place either within or without the State of Delaware as specified in the notice
thereof.
Section 3. NOTICE OF MEETINGS. Except as otherwise expressly required by
law or the Certificate of Incorporation of the Corporation, written notice
stating the place and time of the meeting and, in the case of a special meeting,
the purpose or purposes of such meeting, shall be given either by delivering a
notice personally or mailing a notice to each stockholder of record entitled to
vote thereat at his address as it appears on the records of the Corporation not
less than ten nor more than sixty days prior to the meeting. No business other
than that stated in the notice shall be transacted at any special meeting.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy; and if any
stockholder shall, in person or by attorney thereunto duly authorized, waive
notice of any meeting, in writing or by telegraph, cable, telex, telecopy or
other standard form of written telecommunication whether before or after such
meeting be held, the notice thereof need not be given to him. The attendance
of any stockholder at a meeting, in person or by proxy, without
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protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him. Notice of any adjourned
meeting of stockholders need not be given except as provided in Section 5 of
this Article I.
Section 4. QUORUM. Subject to the provisions of law in respect of the
vote that shall be required for a specific action, the number of shares the
holders of which shall be present or represented by proxy at any meeting of
stockholders in order to constitute a quorum for the transaction of any business
shall be a majority of all the shares issued and outstanding and entitled to
vote at such meeting.
Section 5. ADJOURNMENT. At any meeting of stockholders, whether or not
there shall be a quorum present, the holders of a majority of shares voting at
the meeting, whether present in person at the meeting or represented by proxy at
the meeting, may adjourn the meeting from time to time. Except as provided by
law, notice of such adjourned meeting need not be given otherwise than by
announcement of the time and place of such adjourned meeting at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the original meeting.
Section 6. ORGANIZATION. Unless the Board of Directors shall designate a
certain director or officer, the Chairman of the Board or, in his absence or
non-election, the President or, in the absence of both of the foregoing
officers, a Vice President, shall call meetings of the stockholders to order and
shall act as Chairman of such meetings. In the absence of the Chairman of the
Board, the President, or a Vice President, the holders of a majority in number
of the shares of the capital stock of the Corporation present in person or
represented by proxy and entitled to vote at such meeting shall elect a
Chairman, who may be the Secretary of the Corporation. Unless the Board of
Directors shall designate a certain director or officer, the Secretary of the
Corporation shall act as secretary of all meetings of the stockholders, but in
the absence of the Secretary, the Chairman may appoint any person to act as
secretary of the meeting.
Section 7. VOTING. Each stockholder shall, except as otherwise provided
by law or by the Certificate of Incorporation, at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock entitled to vote held by such stockholder, but no proxy shall be
voted on after three years from its date, unless said proxy provides for a
longer period. Upon the demand of any stockholder, the vote for directors and
the vote upon any matter before the meeting shall be by ballot. Except as
otherwise provided by law, the Certificate of Incorporation or these By-Laws,
all matters shall be decided by a majority of the votes cast thereon, except
that approval of the
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following matters shall be decided by the vote of the holders of a majority of
issued and outstanding stock of the Corporation entitled to vote in respect
thereof: (i) amendment of the Certificate of Incorporation; (ii) amendment of
the By-Laws; (iii) approval of a merger or consolidation; (iv) approval of a
sale, lease or exchange of all or substantially all of the Corporation's
property and assets; or (v) approval of a dissolution.
Section 8. STOCKHOLDERS LIST. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order,
with the address of each, and the number of shares held by each, shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole thereof
and may be inspected by any stockholder who is present.
Section 9. ADDRESSES OF STOCKHOLDERS. Each stockholder shall designate
to the Secretary of the Corporation an address at which notices of meetings and
all other corporate notices may be served upon or mailed to him, and if any
stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post office address.
Section 10. JUDGES OF VOTING. The Board of Directors may at any time
appoint two or more persons to serve as Judges of Voting at the next-succeeding
annual meeting of stockholders or at any other meeting or meetings and the Board
of Directors may at any time fill any vacancy in the office of Judges of Voting.
If the Board of Directors fails to appoint Judges of Voting, or if any Judge of
Voting appointed be absent or refuse to act, or if his office becomes vacant and
be not filled by the Board of Directors, the Chairman of any meeting of the
stockholders may appoint one or more temporary Judges of Voting for such
meeting. All proxies shall be filed with the Judges of Voting of the meeting
before being voted upon.
Section 11. ACTION BY CONSENT. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any meeting of
stockholders, or any action which may be taken at any meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote if a consent in writing, setting forth the action so taken, shall be signed
by the holders of shares of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the
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corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
------------------
Section 1. GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors.
Section 2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of
directors shall be as set from time to time by the Board of Directors, but not
more than twelve nor less than one. Directors need not be stockholders. Each
director shall hold office for the term for which he is appointed or elected and
until his successor (unless there shall be no successor) shall have been elected
and shall qualify, or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
Section 3. QUORUM AND MANNER OF ACTION. Except as otherwise provided by
statute or these By-Laws, a majority of the members of the Board of Directors
shall be required to constitute a quorum for the transaction of business at any
meeting, and the act of a majority of the directors present and voting at any
meeting at which a quorum is present shall be the act of the Board of Directors.
In the absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum be had. Notice of any adjourned meeting
need not be given. The directors shall act only as a board and individual
directors shall have no power as such.
Section 4. PLACE OF MEETING, ETC. The Board of Directors may hold its
meetings, have one or more offices and keep the books and records of the
Corporation at such place or places within or without the State of Delaware,
as the Board may from time to time determine or as shall be specified or fixed
in the respective notices or waivers of notice thereof.
Section 5. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held for the election of officers and the transaction of other business
as soon as practicable after each annual meeting of stockholders, and other
regular meetings of said Board shall be held at such times and places as said
Board shall direct. No notice shall be required for any regular meeting of the
Board of Directors but a copy of every resolution fixing or changing the time or
place of regular meetings shall be mailed to every director at least five days
before the first meeting held in pursuance thereof, and, unless it shall be a
meeting after the annual meeting of stockholders at which he was elected, a copy
of
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<PAGE> 6
the resolution fixing the time or place of regular meetings shall be mailed to
any newly elected director at least five days before the first regular meeting
that he is entitled to attend.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by a majority of the Board of Directors, by a sole remaining
director or by the holders of a majority of the issued and outstanding common
stock of the Corporation at the next annual meeting or any special meeting
called for the purpose. Notice of such special meeting, designating its time and
place, and signed by the majority of the Board of Directors who are calling it,
shall be mailed to every other director at least five days before such meeting
unless receipt of such notice shall have been waived by all directors entitled
to receive it. In case all the directors shall die or resign or be removed or be
disqualified, any stockholder having voting powers may call a special meeting of
the stockholders, upon notice given as herein provided for meetings of the
stockholders, at which directors may be elected.
Section 7. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
Section 8. ORGANIZATION. Unless a majority of the Board of Directors
shall designate a certain director or officer, at each meeting of the Board of
Directors, the Chairman of the Board or, in his absence or non-election, the
President or, in the absence of both of the foregoing officers, a director
chosen by a majority of the directors shall act as Chairman. Unless a majority
of the Board of Directors shall designate a certain director or officer, the
Secretary or, in his absence, as Assistant Secretary or, in the absence of both
the Secretary and Assistant Secretary, any person appointed by the Chairman
shall act as secretary of the meeting.
Section 9. RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board of Directors, the President or
the Secretary of the Corporation. The resignation of any director shall take
effect at the time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 10. REMOVAL OF DIRECTORS. Except as otherwise provided by law or
the Certificate of Incorporation, any director may be removed, either with or
without cause, at any time by the affirmative vote of the holders of a majority
of the issued and outstanding shares of common stock of the Corporation at a
special meeting of the stockholders called for the purpose or by a consent of
stockholders as provided for in Section 11 of Article I hereof; and the vacancy
in the Board caused by any such removal may be
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filled by the stockholders at such meeting or by such consent or by the Board of
Directors in the manner provided in Section 11 of this Article II.
Section 11. VACANCIES. Any vacancy in the Board of Directors caused by
death, resignation, removal (whether or not for cause), disqualification, an
increase in the number of directors or any other cause may be filled by the
majority vote of the remaining directors at any meeting, by a sole remaining
director or by the stockholders of the Corporation at the next annual meeting or
any special meeting called for the purpose or by a consent of stockholders as
provided for in Section 2 of Article I hereof. Each director so elected shall
hold office for the unexpired term or for such lesser term as may be designated
and until his successor (unless there shall be no successor) shall be duly
elected and qualified, or until his death or until he shall resign or shall have
been removed in the manner herein provided. In case all the directors shall die
or resign or be removed or disqualified, any stockholder having voting powers
may call a special meeting of the stockholders, upon notice given as herein
provided for meetings of stockholders, at which directors may be elected for the
unexpired term.
Section 12. COMPENSATION OF DIRECTORS. Directors shall receive such sums
for their services and expenses as may be directed by resolution of the Board;
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 13. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors designate one or more committees,
including without limitation an executive committee, each such committee to
consist of one or more directors of the Corporation and to have such power and
authority as is designated in the resolution establishing such committee and is
consistent with law.
Section 14. PARTICIPATION IN MEETINGS. Members of the Board of Directors
may participate in any meeting of the Board by means of conference, telephone or
similar communication equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at such meeting.
Section 15. LIMITATION OF DIRECTOR'S LIABILITY. The liability, if any,
of each director of the Corporation to the Corporation, its stockholders or any
other person, or any of them, for monetary damages or otherwise shall be limited
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time. In furtherance and not in limitation of
the generality of the foregoing, no director of the
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Corporation shall be liable to the Corporation, its stockholders or any other
person, or any of them, for monetary damages for breach of fiduciary duty as a
director; provided that this Section 15 shall not, unless otherwise permitted
under the General Corporation Law of the State of Delaware, as amended from time
to time, be deemed to eliminate or limit liability of a director to the
Corporation or its stockholders (i) for any breach of such director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, as amended from time to time, or (iv) for any transaction from which
such director derived an improper personal benefit.
ARTICLE III
Officers
--------
Section 1. EXECUTIVE OFFICERS. The executive officers of the Corporation
shall be a President, a Treasurer and a Secretary or such other officers as the
Board of Directors may designate. In addition, the Board may elect a Chairman of
the Board and appoint such other officers, including one or more Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries, and such agents and employees of the Corporation as may be deemed
necessary or desirable and any of whom may be designated an executive officer.
All officers, agents and employees shall hold office for such period and upon
such terms and conditions, have such authority and perform such duties as the
Board of Directors may from time to time prescribe. The Board of Directors may
from time to time authorize any officer to appoint and remove subordinate
officers, agents and employees and to prescribe the powers and duties thereof.
Any number of offices may be held by the same person.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
shall be elected annually by the Board of Directors at their first meeting after
each annual meeting of the stockholders of the Corporation. Each officer, shall
hold office until his death or until he shall have resigned or shall have become
disqualified or shall have been removed in the manner provided in these By-Laws.
The Chairman of the Board of Directors shall be chosen from among the directors.
Section 3. REMOVAL. Any officer may be removed, either with or without
cause, by the vote of a majority of the whole Board of Directors or, except in
case of any officer elected or appointed by the Board of Directors, by any
committee or superior officer upon whom the power of removal may be conferred by
the Board of Directors.
Section 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors, the president
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or the Secretary. Any such resignation shall take effect at the date of receipt
of such notice or at any later time specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may be filled for the
unexpired portion of the term in the manner prescribed in these By-Laws for
regular election or appointment to such office.
Section 6. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE IV
Contracts, Checks, Drafts, Bank Accounts, Etc.
----------------------------------------------
Section 1. CONTRACTS, ETC.; HOW EXECUTED. Except as otherwise provided
in these By-Laws, the Board of Directors may authorize any officer, employee or
agent of the Corporation to enter into any contract or execute and deliver any
instrument, in the name and on behalf of the Corporation, and such authority may
be general or confined to specific instances; and, unless so authorized by the
Board of Directors or by these By-Laws, no officer, employee or agent shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or render it liable for any purpose or amount.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money and all notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers, or
employee or employees of the Corporation as shall from time to time be
determined by resolution of the Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such banks, trust
companies or other depositaries as the Board of Directors may designate from
time to time or as may be designated from time to time by any officer or
officers of the Corporation to whom such power may be delegated by the Board of
Directors; and, for the purpose of such deposit, any officer as the Board of
Directors may designate may endorse, assign and deliver checks, drafts and other
orders for the payment of money which are payable to the order of the
Corporation.
Section 4. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of Directors may
authorize from time to time the opening and keeping, with such banks, trust
companies or other depositaries as it may
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designate, of general and special bank accounts and may make such special rules
and regulations with respect thereto, not inconsistent with the provisions of
these By-Laws, as it may deem expedient.
Section 5. PROXIES. Except as otherwise provided in these By-Laws or in
the Certificate of Incorporation of the Corporation, and unless otherwise
provided by resolution of the Board of Directors, the officers designated by the
Board of Directors may from time to time appoint an attorney or attorneys, or
agent or agents, of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
a stockholder or otherwise in any other corporation any of whose stock or other
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing to
any action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, all such written proxies or other
instruments as he may deem necessary or proper in the premises.
ARTICLE V
Shares and Their Transfer
-------------------------
Section 1. CERTIFICATES OF STOCK. Certificates for shares of the capital
stock of the Corporation shall be in such form, not inconsistent with law, as
shall be approved by the Board of Directors. They shall be numbered in order of
their issue and shall be signed by any two officers, one of whom shall be an
executive officer, and the seal of the Corporation shall be affixed thereto. The
signatures of any such officers and the seal of the Corporation upon such
certificate may be facsimiles. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar.
Section 2. TRANSFER OF STOCK. Transfer of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the holder
thereof, or by his attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary of the Corporation or with a transfer
agent of the Corporation, if any, and on surrender of the certificate or
certificates for such shares properly endorsed. A person in whose name shares of
stock stand on the books of the Corporation shall be deemed the owner thereof as
regards the Corporation, and the Corporation shall not be bound to recognize any
equitable or other
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claim to, or interest in, such shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware.
Section 3. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder of any
stock issued by the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor or the failure to
receive a certificate of stock issued by the Corporation, and the Board of
Directors or the Secretary of the Corporation or any other officer of the
Corporation designated by the Board of Directors for such purpose, may, in its
or his discretion, cause to be issued to such holder a new certificate or
certificates of stock, upon compliance with such rules, regulations and/or
procedures as may have been prescribed by the Board of Directors with respect to
the issuance of new certificates in lieu of such other certificate or
certificates of stock.
Section 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or to receive
payment of any dividend or other distribution or allotment of any rights, or to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date which in the case of a meeting, but not a consent action,
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action, and only such
stockholders as shall be stockholders of record of the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and (except as provided
in Section 4 of Article I hereof) any adjournment thereof, or to express consent
to any such corporate action, to receive payment of such dividend or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
ARTICLE VI
Seal
----
The Board of Directors shall provide a suitable seal containing the name
of the Corporation and its state of incorporation, which seal shall be in the
charge of the Secretary and which may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced. If and
when so directed by the Board of Directors, duplicates of the seal may be kept
and be used by officers of the Corporation designated by the Board.
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ARTICLE VII
Miscellaneous Provisions
------------------------
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall end on
such date in each year as shall be fixed by the Board of Directors of the
Corporation from time to time.
Section 2. WAIVERS OF NOTICE. Whenever any notice of any nature is
required by law, the provisions of the Certificate of Incorporation or of these
By-Laws, to be given, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 3. QUALIFYING IN FOREIGN JURISDICTIONS. The Board of Directors
shall have the power at any time and from time to time to take or cause to be
taken any and all measures which they may deem necessary for qualification to do
business as a foreign corporation in any one or more foreign jurisdictions and
for withdrawal therefrom.
Section 4. INDEMNIFICATION. The Corporation shall, to the full extent
permitted by the laws of the State of Delaware and the Certificate of
Incorporation, in each case as amended from time to time, defend and indemnify
all past, present and future directors, officers, employees and agents of the
Corporation or any of its subsidiaries whom it has the power to indemnify
pursuant thereto.
Section 5. AMENDMENTS. In furtherance and not in limitation of the
powers conferred by the General Corporation Law of the State of Delaware, the
Board of Directors is expressly authorized and empowered, without the assent or
vote of the stockholders, to make, alter, amend and repeal the By-Laws of the
Corporation, in any manner not inconsistent with the General Corporation Law of
the State of Delaware or the Certificate of Incorporation of the Corporation;
provided, that a By-Law provision adopted by vote of the stockholders of the
Corporation may be altered, amended or repealed, in whole or in part, only by
vote of the stockholders if such exclusive right has been expressly reserved by
the stockholders in the resolution adopting the same.
* * *
11
<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
CURTIS SUB, INC.
----------------
FIRST: The name of the Corporation is Curtis Sub, Inc.
SECOND: The address of its registered office in the State of Delaware
is No. 1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is 3,000 shares of common stock with a par value
of $.01 per share.
FIFTH: The name and mailing address of the Incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
ACFB Incorporated 1100 Citizens Building
850 Euclid Avenue
Cleveland, Ohio 44114
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon
the real property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the directors
of the Corporation. The board may designate one or more directors as
alternate members of any committee, who may replace
<PAGE> 2
any absent or disqualified member at any meeting of the committee. The
by-laws may provide that in the absence or disqualification of a
member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, or in the
by-laws of the Corporation, shall have and may exercise all of the
powers and authority of the board of directors in the management of
the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require
it; but no such committee shall have the power or authority in
reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders
the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or
amending the by-laws of the Corporation; and unless the resolution or
by-laws expressly so provide, no such committee shall have the power
or authority to declare a dividend or to authorize the issuance of
stock.
When and as authorized by the stockholders s in accordance
with statute, to sell, lease or exchange all or substantially all of
the property and assets of the Corporation, including its good will and
its corporate franchises, upon such terms and conditions and for such
consideration, which may consist, in whole or in part, of money or
property, including shares of stock in, and/or other securities of, any
other corporation or corporations, as its board of directors shall deem
expedient and for the best interests of the Corporation.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
NINTH: Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the Corporation may be
kept (subject to
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<PAGE> 3
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation. Elections of directors need not
be by written ballot unless the by-laws of the Corporation shall so provide.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH: No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the Delaware General Corporation Law, or (4) for
any transaction from which the director derived an improper personal benefit. If
the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitations on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware General Corporation Law. Any repeal or
modification of this Article shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the Corporation
existing at the time of such repeal or modification.
TWELFTH: A. Each person who was or is made a party to or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent, authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA, excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
subsection B of this Article, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any
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<PAGE> 4
such proceeding in advance of its final disposition; provided, however, that if
the Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Article or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification
to employees and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers.
B. If a claim under subsection A of this Article is not paid in full by
the Corporation within thirty (30) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
E. As used in this Article, references to "the Corporation" shall
include, in addition to the resulting or surviving corporation, any constituent
corporation absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to
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<PAGE> 5
indemnify its directors, officers, employees and agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
F. If this Article or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, officer, employee and agent of the
Corporation as to expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including a grand jury
proceeding and an action by the Corporation, to the fullest extent permitted by
any applicable portion of this Article that shall not have been invalidated or
by any other applicable law.
THE UNDERSIGNED, being the Incorporator hereinabove named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is its act and deed and the facts herein stated are true, and
accordingly have hereunto set its hand this 28th day of April, 1992.
ACFB INCORPORATED
ATTEST: Incorporator
By: /s/ Mary P. Heinrichs By: /s/ Patricia M. Holland
--------------------- -----------------------
Mary P. Heinrichs Patricia M. Holland
Assistant Secretary Vice President
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<PAGE> 1
EXHIBIT 3.10
------------
BY-LAWS
OF
CURTIS SUB, INC.
ARTICLE I
STOCKHOLDERS
Section 1. PLACE OF STOCKHOLDERS' MEETINGS. All meetings of the
stockholders of the Corporation shall be held at such place or places, within or
outside the State of Delaware, as may be fixed by the Board of Directors from
time to time or as shall be specified in the respective notices thereof.
Section 2. DATE, HOUR AND PURPOSE OF ANNUAL MEETINGS OF STOCKHOLDERS.
Annual Meetings of Stockholders, commencing with the year 1994, shall be held on
such day and at such time as the Directors may determine from time to time by
resolution, at which meeting the stockholders shall elect, by a plurality of the
votes cast at such election, a Board of Directors, and transact such other
business as may properly be brought before the meeting. If for any reason a
Board of Directors shall not be elected at the Annual Meeting of Stockholders,
or if it appears that such Annual Meeting is not held on such date as may be
fixed by the Directors in accordance with the provisions of the By-laws, then in
either such event the Directors shall cause the election to be held as soon
thereafter as convenient.
Section 3. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the
stockholders entitled to vote may be called by the Chairman of the Board, the
Vice Chairman of the Board, the President or any Vice President, the Secretary
or by the Board of Directors, and shall be called by any of the foregoing at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the meeting.
Section 4. NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise
expressly required or permitted by the laws of Delaware, not less than ten days
nor more than sixty days before the date of every stockholders' meeting the
Secretary shall give to each stockholder of record entitled to vote at such
meeting written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Such notice, if mailed, shall be deemed to be given when deposited in
the United States mail, with postage thereon prepaid, addressed to the
stockholder at the post office address for notices to such stockholder as it
appears on the records of the Corporation.
An Affidavit of the Secretary or an Assistant Secretary or of a transfer
agent of the Corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
<PAGE> 2
Section 5. QUORUM OF STOCKHOLDERS.
(a) Unless otherwise provided by the laws of Delaware, at any
meeting of the stockholders the presence in person or by proxy of stockholders
entitled to cast a majority of the votes thereat shall constitute a quorum.
(b) At any meeting of the stockholders at which a quorum shall
be present, a majority of those present in person or by proxy may adjourn the
meeting from time to time without notice other than announcement at the meeting.
In the absence of a quorum, the officer presiding thereat shall have power to
adjourn the meeting from time to time until a quorum shall be present. Notice of
any adjourned meeting other than announcement at the meeting shall not be
required to be given, except as provided in paragraph (d) below and except where
expressly required by law.
(c) At any adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the meeting
as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof, unless a new record date is fixed by the Board of
Directors.
(d) if an adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
Section 6. CHAIRMAN AND SECRETARY OF MEETING. The Chairman, or in his
absence, the Vice Chairman, or in his absence, the President, or in his absence,
any Vice President, shall preside at meetings of the stockholders. The
Secretary shall act as secretary of the meeting, or in his absence an Assistant
Secretary shall act, or if neither is present, then the presiding officer shall
appoint a person to act as secretary of the meeting.
Section 7. VOTING BY STOCKHOLDERS. Except as may be otherwise provided
by the Certificate of Incorporation or by these By-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation on the record date
for the meeting. All elections and questions shall be decided by the vote of a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the laws of Delaware, the Certificate of Incorporation or these
By-laws.
Section 8. PROXIES. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by his attorney-in-fact. Every proxy
shall be in writing, subscribed by the stockholder or his duly authorized
attorney-in-fact, but need not be dated, sealed, witnessed or acknowledged.
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<PAGE> 3
Section 9. LIST OF STOCKHOLDERS.
(a) At least ten days before every meeting of stockholders, the
Secretary shall prepare or cause to be prepared a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder.
(b) During ordinary business hours, for a period of at least ten
days prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held.
(c) The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and it may be
inspected by any stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
ARTICLE II
----------
DIRECTORS
---------
Section 1. POWERS OF DIRECTORS. The property, business and affairs of
the Corporation shall be managed by its Board of Directors, which may exercise
all the powers of the Corporation except such as are by the laws of Delaware or
the Certificate of Incorporation or these By-laws required to be exercised or
done by the stockholders.
Section 2. NUMBER, METHOD OF ELECTION, TERMS OF OFFICE OF DIRECTORS. The
number of Directors which shall constitute the whole Board of Directors shall be
such as from time to time shall be determined by resolution of the Board of
Directors, but the number shall not be less than one provided that the tenure of
a Director shall not be affected by any decrease in the number of Directors so
made by the Board. Each Director shall hold office until his successor is
elected and qualified, provided however that a Director may resign at any time.
Section 3. VACANCIES ON BOARD OF DIRECTORS.
(a) Any Director may resign his office at any time by delivering
his resignation in writing to the Chairman or the President or the Secretary. It
will take effect at the time specified therein, or if no time is specified, it
will be effective at
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<PAGE> 4
the time of its receipt by the Corporation. The acceptance of a resignation
shall not be necessary to make it effective, unless expressly so provided in the
resignation.
(b) Any vacancy or newly created Directorship resulting from any
increase in the authorized number of Directors may be filled by vote of a
majority of the Directors then in office, though less than a quorum, and any
Director so chosen shall hold office until the next annual election of Directors
by the stockholders and until his successor is duly elected and qualified, or
until his earlier resignation or removal.
Section 4. MEETINGS OF THE BOARD OF DIRECTORS.
(a) The Board of Directors may hold their meetings, both regular
and special, either within or outside the State of Delaware.
(b) Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by resolution of the Board of Directors.
(c) The first meeting of each newly elected Board of Directors
except the initial Board of Directors shall be held as soon as practicable after
the Annual Meeting of the stockholders for the election of officers and the
transaction of such other business as may come before it.
(d) Special meetings of the Board of Directors shall be held
whenever called by direction of the Chairman or the President or at the request
of Directors constituting one-third of the number of Directors then in office,
but not less than two Directors.
(e) The Secretary shall give notice to each Director of any
meeting of the Board of Directors by mailing the same at least two days before
the meeting or by telegraphing or delivering the same not later than the day
before the meeting. Such notice need not include a statement of the business to
be transacted at, or the purpose of, any such meeting. Any and all business may
be transacted at any meeting of the Board of Directors. No notice of any
adjourned meeting need be given. No notice to or waiver by any Director shall be
required with respect to any meeting at which the Director is present.
Section 5. QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business; but if
there shall be less than a quorum at any meeting of the Board, a majority of
those present may adjourn the meeting from time to time. Unless otherwise
provided by the laws of Delaware, the Certificate of Incorporation or these
By-laws, the act of a majority of the Directors present at any meeting at which
a quorum is present shall be the act of the Board of Directors.
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<PAGE> 5
Section 6. PRESIDING OFFICER AND SECRETARY OF MEETING. The Chairman or,
in his absence, a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officers shall
appoint a secretary of the meeting.
Section 7. ACTION BY CONSENT WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the records of the Board or committee.
Section 8. EXECUTIVE COMMITTEE. The Board of Directors may appoint from
among its members and from time to time may fill vacancies in an Executive
Committee to serve during the pleasure of the Board. The Executive Committee
shall consist of three members, or such greater number of members as the Board
of Directors may by resolution from time to time fix. One of such members shall
be the Chairman of the Board and another shall be the Vice Chairman of the
Board, who shall be the presiding officer of the Committee. During the intervals
between the meetings of the Board, the Executive Committee shall possess and may
exercise all of the powers of the Board in the management of the business and
affairs of the Corporation conferred by these By-laws or otherwise. The
Committee shall keep a record of all its proceedings and report the same to the
Board. A majority of the members of the Committee shall constitute a quorum. The
act of a majority of the members of the Committee present at any meeting at
which a quorum is present shall be the act of the Committee.
Section 9. OTHER COMMITTEES. The Board of Directors may also appoint
from among its members such other committees of two or more Directors as it may
from time to time deem desirable, and may delegate to such committees such
powers of the Board as it may consider appropriate.
Section 10. COMPENSATION OF DIRECTORS. Directors shall receive such
reasonable compensation for their service on the Board of Directors or any
committees thereof, whether in the form of salary or a fixed fee for attendance
at meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
ARTICLE III
-----------
OFFICERS
--------
Section 1. EXECUTIVE OFFICERS OF THE CORPORATION. The executive officers of
the Corporation shall be chosen by the Board of Directors and shall be a
President, a Secretary and a Treasurer. The Board of Directors also may appoint
a Chairman of the Board, a Vice
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<PAGE> 6
Chairman of the Board, and one or more Vice Presidents, Assistant Secretaries
and Assistant Treasurers. Any two offices except those of Chairman of the Board
and Vice Chairman of the Board, President and Vice President, or President and
Secretary may be filled by the same person. None of the officers need be a
member of the Board except the Chairman of the Board and the Vice Chairman of
the Board.
Section 2. CHOOSING OF EXECUTIVE OFFICERS. The Board of Directors at its
first meeting after each Annual Meeting of Stockholders shall choose a
President, a Secretary and a Treasurer.
Section 3. ADDITIONAL OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. SALARIES. The salaries of all officers and agents of the
Corporation specially appointed by the Board shall be fixed by the Board of
Directors.
Section 5. TERM, REMOVAL AND VACANCIES. The officers of the Corporation
shall hold office until their respective successors are chosen and qualify. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the stockholders. He
shall be the Chief Executive Officer of the Company, unless the Board has
designated the President as the Chief Executive Officer. In the absence or
disability of the Chairman of the Board: (a) the Vice Chairman of the Board
shall preside at all meetings of the Board of Directors and of the stockholders,
and (b) the powers and duties of the Chairman of the Board shall be exercised
jointly by the Vice Chairman of the Board and the President until such authority
is altered by action of the Board of Directors. The Chairman of the Board shall
present to the Annual Meeting of Stockholders a report of the business of the
preceding fiscal year.
Section 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
shall have such powers and perform such duties as are provided in these By-laws
or as may be delegated to him by the Chairman of the Board, and shall perform
such other duties as may from time to time be assigned to him by the Board of
Directors.
Section 8. PRESIDENT. The President shall have such powers and perform
such duties as are provided in these By-laws or as may be delegated to him by
the Board of Directors or the Chairman of the Board. If there is no Chairman of
the Board, the President shall be the Chief Executive Officer of the Corporation
and shall have all the duties and responsibilities previously enumerated for the
Chairman of the Board. In the
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absence of the Chairman of the Board and the Vice Chairman of the Board, the
President shall preside at all meetings of the stockholders.
Section 9. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The Chief
Executive Officer shall have general charge and supervision of the business of
the Company and shall exercise and perform all the duties incident to the office
of the Chief Executive Officer. He shall have direct supervision of the other
officers and shall also exercise and perform such powers and duties as may be
assigned to him by the Board of Directors.
Section 10. POWERS AND DUTIES OF VICE PRESIDENTS. Any Vice President
designated by the Board of Directors shall, in the absence, disability, or
inability to act of the President, perform all duties and exercise all the
powers of the President and shall perform such other duties as the Board may
from time to time prescribe. Each Vice President shall have such other powers
and shall perform such other duties as may be assigned to him by the Board.
Section 11. POWERS AND DUTIES OF TREASURER AND ASSISTANT TREASURERS.
(a) The Treasurer shall have the care and custody of all the
funds and securities of the Corporation except as may be otherwise ordered by
the Board of Directors, and shall cause such funds to be deposited to the credit
of the Corporation in such banks or depositories as may be designated by the
Board of Directors, the Chairman, the President or the Treasurer, and shall
cause such securities to be placed in safekeeping in such manner as may be
designated by the Board of Directors, the Chairman, the President or the
Treasurer.
(b) The Treasurer, or an Assistant Treasurer, or such other
person or persons as may be designated for such purpose by the Board of
Directors, the Chairman, the President or the Treasurer, may endorse in the name
and on behalf of the Corporation all instruments for the payment of money, bills
of lading, warehouse receipts, insurance policies and other commercial documents
requiring such endorsement.
(c) The Treasurer, or an Assistant Treasurer, or such other
person or persons as may be designated for such purpose by the Board of
Directors, the Chairman, the President or the Treasurer, may sign all receipts
and vouchers for payments made to the Corporation; he shall render a statement
of the cash account of the Corporation to the Board of Directors as often as it
shall require the same; he shall enter regularly in books to be kept by him for
that purpose full and accurate accounts of all moneys received and paid by him
on account of the Corporation and of all securities received and delivered by
the Corporation.
(d) Each Assistant Treasurer shall perform such duties as may
from time to time be assigned to him by the Treasurer or by the Board of
Directors. In the event of the absence of the Treasurer or his incapacity or
inability to act, then any
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<PAGE> 8
Assistant Treasurer may perform any of the duties and may exercise any of the
powers of the Treasurer.
Section 12. POWERS AND DUTIES OF SECRETARY AND ASSISTANT SECRETARIES.
(a) The Secretary shall attend all meetings of the Board, all meetings
of the stockholders, and shall keep the minutes of all proceedings of the
stockholders and the Board of Directors in proper books provided for that
purpose. The Secretary shall attend to the giving and serving of all notices of
the Corporation in accordance with the provisions of the By-laws and as required
by the laws of Delaware. The Secretary may, with the President, a Vice President
or other authorized officer, sign all contracts and other documents in the name
of the Corporation. He shall perform such other duties as may be prescribed in
these Bylaws or assigned to him and all other acts incident to the position of
Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time
to time be assigned to him by the Secretary or by the Board of Directors. In the
event of the absence of the Secretary or his incapacity or inability to act,
then any Assistant Secretary may perform any of the duties and may exercise any
of the powers of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary, without
the express authorization and direction of the Board of Directors, have any
responsibility for, or any duty or authority with respect to, the withholding or
payment of any federal, state or local taxes of the Corporation, or the
preparation or filing of any tax return.
ARTICLE IV
----------
CAPITAL STOCK
-------------
Section 1. STOCK CERTIFICATES.
(a) Every holder of stock in the Corporation shall be entitled to have a
certificate signed in the name of the Corporation by the Chairman or the
President or the Vice Chairman or a Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the
number of shares owned by him.
(b) If such a certificate is countersigned by a transfer agent other
than the Corporation or its employee, or by a registrar other than the
Corporation or its employee, the signatures of the officers of the Corporation
may be facsimiles and, if permitted by Delaware law, any other signature on the
certificate may be a facsimile.
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<PAGE> 9
(c) In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not
inconsistent with the Certificate of Incorporation as shall be approved by the
Board of Directors. They shall be numbered and registered in the order in which
they are issued. No certificate shall be issued until fully paid.
Section 2. RECORD OWNERSHIP. A record of the name and address of the
holder of each certificate, the number of shares represented thereby, and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
required by the laws of Delaware.
Section 3. TRANSFER OF RECORD OWNERSHIP. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or his attorney, lawfully constituted in writing, and only upon
the surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions as the Board of Directors from time to time may
authorize.
Section 5. TRANSFER AGENT, REGISTRAR, RULES RESPECTING CERTIFICATES. The
Corporation shall maintain one or more transfer offices or agencies where stock
of the Corporation shall be transferable. The Corporation shall also maintain
one or more registry offices where such stock shall be registered. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
Section 6. FIXING RECORD DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. The Board of Directors may fix in advance a date as the record date for
the purpose of determining the stockholders entitled to notice of, or to vote
at, any meeting of the stockholders or any adjournment thereof, or the
stockholders entitled to receive payment of any dividend or other distribution
or the allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
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<PAGE> 10
stockholders for the purpose of any other lawful action. Such record date in any
case shall not be more than sixty days nor less than ten days before the date of
a meeting of the stockholders, nor more than sixty days prior to any other
action requiring such determination of the stockholders. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE V
---------
SECURITIES HELD BY THE CORPORATION
----------------------------------
Section 1. VOTING. Unless the Board of Directors shall otherwise order,
the Chairman, the Vice Chairman, the President, any Vice President or the
Treasurer shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock and at such meeting to exercise any or all
rights and powers incident to the ownership of such stock, and to execute on
behalf of the Corporation a proxy or proxies empowering another or others to act
as aforesaid. The Board of Directors from time to time may confer like powers
upon any other person or persons.
Section 2. GENERAL AUTHORIZATION TO TRANSFER SECURITIES HELD BY THE
CORPORATION.
(a) Any of the following officers, to-wit: the Chairman, the
President, any Vice President, the Treasurer or the Secretary of the Corporation
shall be and are hereby authorized and empowered to transfer, convert, endorse,
sell, assign, set over and deliver any and all shares of stock, bonds,
debentures, notes, subscription warrants, stock purchase warrants, evidences of
indebtedness, or other securities now or hereafter standing in the name of or
owned by the Corporation, and to make, execute and deliver under the seal of the
Corporation any and all written instruments of assignment and transfer
necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of
assignment and transfer executed, pursuant to and in accordance with the
foregoing paragraph (a), a certificate of the Secretary or an Assistant
Secretary of the Corporation in office at the date of such certificate setting
forth the provisions hereof and stating that they are in full force and effect
and setting forth the names of persons who are then officers of the Corporation,
then all persons to whom such instrument and annexed certificate shall
thereafter come shall be entitled, without further inquiry or investigation and
regardless of the date of such certificate, to assume and to act in reliance
upon the assumption that the shares of stock or other securities named in such
instrument were theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the Corporation, and that with respect to
such
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<PAGE> 11
securities the authority of these provisions of the By-laws and of such officers
is still in full force and effect.
ARTICLE VI
-----------
DIVIDENDS
----------
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. PAYMENT AND RESERVES. Before payment of any dividend, there
may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Directors shall think conducive to
the interest of the Corporation, and the directors may modity or abolish any
such reserves in the manner in which they were created.
Section 3. RECORD DATE. The Board of Directors may, to the extent
provided by law, prescribe a period, in no event in excess of sixty (60) days,
prior to the date for payment of any dividend, as a record date for the
determination of stockholders entitled to receive payment of any such dividend,
and in such case such stockholders and only such stockholders as shall be
stockholders of record on said date so fixed shall be entitled to receive
payment of such dividend, notwithstanding any transfer of any stock on the books
of the Corporation after any such record date fixed as aforesaid.
ARTICLE VII
------------
GENERAL PROVISIONS
------------------
Section 1. SIGNATURES OF OFFICERS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate. The signature of any officer upon any of the foregoing instruments
may be a facsimile whenever authorized by the Board.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31 unless otherwise fixed by resolution of the Board of Directors.
Section 3. SEAL. Upon resolution of the Board of Directors, the
Corporation may elect to have a corporate seal. In such even, the corporate seal
shall have inscribed thereon
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<PAGE> 12
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal, Delaware". Said seal may be used for causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
------------
WAIVER OF OR DISPENSING WITH NOTICE
-----------------------------------
Whenever any notice of the time, place or purpose of any meeting of the
stockholders, Directors or a committee is required to be given under the laws of
Delaware, the Certificate of Incorporation or these By-laws, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the holding thereof, or actual attendance at the meeting in person, or
in the case of the stockholders, by his attorney-in-fact, shall be deemed
equivalent to the giving of such notice to such persons. No notice need be given
to any person with whom communication is made unlawful by any law of the United
States or any rule, regulation, proclamation or executive order issued under any
such law.
ARTICLE IX
-----------
AMENDMENT OF BY-LAWS
--------------------
These By-laws, or any of them, may from time to time be supplemented,
amended or repealed by the Board of Directors, or by the vote of a majority in
interest of the stockholders represented and entitled to vote at any meeting at
which a quorum is present.
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<PAGE> 1
Exhibit 4.1
===============================================================================
-----------------------------------------
PARAGON CORPORATE HOLDINGS INC.
SERIES A AND SERIES B
9 5/8% SENIOR NOTES DUE 2008
INDENTURE
-----------------------------------------
Dated as of April 1, 1998
NORWEST BANK MINNESOTA, National Association
Trustee
===============================================================================
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
<S> <C> <C>
310 (a)(1)................................................................................................7.10
(a)(2) ...................................................................................................7.10
(a)(3)....................................................................................................N.A.
(a)(4)....................................................................................................N.A.
(a)(5)....................................................................................................7.10
(i)(b)....................................................................................................7.10
(ii)(c)...................................................................................................N.A.
311(a)....................................................................................................7.11
(b)..................................................................................................... 7.11
(iii(c)...................................................................................................N.A.
312 (a)...................................................................................................2.05
(b).......................................................................................................11.03
(iv)(c)...................................................................................................11.03
313(a)....................................................................................................7.06
(b)(1)....................................................................................................10.03
(b)(2)....................................................................................................7.07
(v)(c)....................................................................................................7.06;
11.02
(vi)(d)...................................................................................................7.06
314(a)....................................................................................................4.03;
11.02
(A)(b)....................................................................................................10.02
(c)(1)....................................................................................................11.04
(c)(2)....................................................................................................11.04
(c)(3)....................................................................................................N.A.
(d).......................................................................................................N.A.
(vii)(e)..................................................................................................11.05
(f)........................................................................................................NA
315 (a)...................................................................................................7.01
(b).......................................................................................................7.05,
11.02
(B)(c)....................................................................................................7.01
(d).......................................................................................................7.01
(e).......................................................................................................6.11
316 (a)(last sentence)....................................................................................2.09
(a)(1)(A).................................................................................................6.05
(a)(1)(B).................................................................................................6.04
(a)(2)....................................................................................................N.A.
(b).......................................................................................................6.07
(C)(c)....................................................................................................2.12
317(a)(1).................................................................................................6.08
(a)(2)....................................................................................................6.09
(b).......................................................................................................2.04
318 (a)...................................................................................................11.01
(b).......................................................................................................N.A.
(c) ......................................................................................................11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
PAGE
<CAPTION>
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
SECTION 1.01. DEFINITIONS................................................................................1
SECTION 1.02. OTHER DEFINITIONS.........................................................................13
SECTION 1.03. RULES OF CONSTRUCTION.....................................................................13
ARTICLE 2. THE NOTES.............................................................................................14
SECTION 2.01. FORM AND DATING...........................................................................14
SECTION 2.02. EXECUTION AND AUTHENTICATION..............................................................15
SECTION 2.03. REGISTRAR AND PAYING AGENT................................................................16
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.......................................................16
SECTION 2.05. HOLDER LISTS..............................................................................16
SECTION 2.06. TRANSFER AND EXCHANGE.....................................................................16
SECTION 2.07. REPLACEMENT SENIOR NOTES..................................................................26
SECTION 2.08. OUTSTANDING SENIOR NOTES..................................................................27
SECTION 2.09. TREASURY SENIOR NOTES.....................................................................27
SECTION 2.10. TEMPORARY SENIOR NOTES....................................................................27
SECTION 2.11. CANCELLATION..............................................................................27
SECTION 2.12. DEFAULTED INTEREST........................................................................28
ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................28
SECTION 3.01. NOTICES TO TRUSTEE........................................................................28
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED OR PURCHASED.....................................28
SECTION 3.03. NOTICE OF REDEMPTION......................................................................28
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION............................................................29
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE...................................................29
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.............................................................30
SECTION 3.07. OPTIONAL REDEMPTION.......................................................................30
SECTION 3.08. MANDATORY REDEMPTION......................................................................30
SECTION 3.09. REPURCHASE OFFERS.........................................................................31
ARTICLE 4. COVENANTS.............................................................................................32
SECTION 4.01. PAYMENT OF SENIOR NOTES...................................................................32
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY...........................................................32
SECTION 4.03. REPORTS...................................................................................33
SECTION 4.04. COMPLIANCE CERTIFICATE....................................................................34
SECTION 4.05. TAXES.....................................................................................34
SECTION 4.06. STAY, EXTENSION AND USURY LAWS............................................................34
SECTION 4.07. RESTRICTED PAYMENTS.......................................................................34
SECTION 4.08. DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...........................36
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK................................36
SECTION 4.10. ASSET SALES...............................................................................38
SECTION 4.11. TRANSACTIONS WITH AFFILIATES..............................................................39
SECTION 4.12. LIENS.....................................................................................39
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS...........................................................39
SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.................................................40
SECTION 4.15. CORPORATE EXISTENCE.......................................................................40
SECTION 4.16. LINE OF BUSINESS..........................................................................41
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES..........................................................42
SECTION 4.18. PAYMENT FOR CONSENTS......................................................................42
SECTION 4.19. SATISFACTION OF GEC NOTE..................................................................43
ARTICLE 5. SUCCESSORS............................................................................................43
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS..................................................43
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.........................................................43
ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................44
SECTION 6.01. EVENTS OF DEFAULT.........................................................................44
SECTION 6.02. ACCELERATION..............................................................................45
SECTION 6.03. OTHER REMEDIES............................................................................46
SECTION 6.04. WAIVER OF PAST DEFAULTS...................................................................46
SECTION 6.05. CONTROL BY MAJORITY.......................................................................46
SECTION 6.06. LIMITATION ON SUITS.......................................................................46
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT......................................47
SECTION 6.08. COLLECTION SUIT BY TRUSTEE................................................................47
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM..........................................................47
SECTION 6.10. PRIORITIES................................................................................48
SECTION 6.11. UNDERTAKING FOR COSTS.....................................................................48
ARTICLE 7. TRUSTEE...............................................................................................48
SECTION 7.01. DUTIES OF TRUSTEE.........................................................................48
SECTION 7.02. RIGHTS OF TRUSTEE.........................................................................49
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE..............................................................50
SECTION 7.04. TRUSTEE'S DISCLAIMER......................................................................50
SECTION 7.05. NOTICE OF DEFAULTS........................................................................50
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.........................................50
SECTION 7.07. COMPENSATION AND INDEMNITY................................................................50
SECTION 7.08. REPLACEMENT OF TRUSTEE....................................................................51
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC..........................................................52
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.............................................................52
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.....................................52
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................53
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE..................................53
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE............................................................53
SECTION 8.03. COVENANT DEFEASANCE.......................................................................53
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE................................................54
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS.......................................................................55
SECTION 8.06. REPAYMENT TO THE COMPANY..................................................................55
SECTION 8.07. REINSTATEMENT.............................................................................55
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................56
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE SENIOR NOTES............................................56
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES...................................................56
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.......................................................57
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.........................................................58
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES...................................................58
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC...........................................................58
ARTICLE 10. GUARANTEE OF SENIOR NOTES............................................................................58
SECTION 10.01. SUBSIDIARY GUARANTEE....................................................................58
SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE..........................................59
SECTION 10.03. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS...........................59
SECTION 10.04. RELEASES FOLLOWING SALE OF ASSETS.......................................................60
SECTION 10.05. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY............................................60
SECTION 10.06. "TRUSTEE" TO INCLUDE PAYING AGENT.......................................................61
ARTICLE 11. MISCELLANEOUS........................................................................................61
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.............................................................61
SECTION 11.02. NOTICES..................................................................................61
</TABLE>
iv
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<TABLE>
<S> <C>
SECTION 11.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF SENIOR
NOTES..........................................................................................62
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.......................................62
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION............................................62
SECTION 11.06. RULES BY TRUSTEE AND AGENTS..............................................................63
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS...................................................................................63
SECTION 11.08. GOVERNING LAW............................................................................63
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS............................................63
SECTION 11.10. SUCCESSORS..............................................................................63
SECTION 11.11. SEVERABILITY............................................................................63
SECTION 11.12. COUNTERPART ORIGINALS....................................................................63
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.........................................................64
EXHIBITS
Exhibit A.........FORM OF NOTE
Exhibit B.........FORM OF CERTIFICATE OF TRANSFER
Exhibit C.........FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E.........FORM OF SUBSIDIARY GUARANTEE
Exhibit F.........FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
v
<PAGE> 8
INDENTURE dated as of April 1, 1998 among Paragon Corporate
Holdings Inc., a Delaware corporation (the "Company"), the Subsidiary Guarantors
listed on the signature pages hereto (the "Subsidiary Guarantors") and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee").
The Company, the Subsidiary Guarantors and the Trustee agree
as follows for the benefit of each other and for the equal and ratable benefit
of the Holders of the 9 5/8% Series A Senior Notes due 2008 (the "Series A
Senior Notes") and the 9 5/8% Series B Senior Notes due 2008 (the "Series B
Senior Notes" and, together with the Series A Senior Notes, the "Senior Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Senior Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Senior Notes" means up to $35.0 million in
aggregate principal amount of Senior Notes (other than the Initial Senior Notes)
issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control; provided, further, that in the case of a
joint venture, partnership, association or other business arrangement with any
Person entered into in the ordinary course of business, neither such Person nor
the joint venture, partnership, association or business arrangement shall be
deemed to be an Affiliate by reason of the preceding proviso.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of Section 4.14 hereof, and/or the provisions of Section 5.01 hereof and not by
the provisions of Section 4.10 hereof and (ii) the issue or sale by the Company
or any of its Subsidiaries of Equity Interests of any of the
<PAGE> 9
Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a
Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary,
(iii) a Restricted Payment that is permitted by Section 4.07 hereof and (iv)
dispositions of obsolete equipment, in each case, will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the board of directors of the
Company, or any authorized committee of such board of directors.
"Borrowing Base" means, as of any date, an amount equal to
the sum of (a) 85% of the face amount of all accounts receivable owned by the
Company and its Subsidiaries (other than Foreign Subsidiaries) as of such date
that are not more than 60 days past due, and (b) 65% of the book value of all
inventory owned by the Company and its Subsidiaries (other than Foreign
Subsidiaries) as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to the
amount of accounts receivable or inventory as of a specific date, the Company
shall utilize the most recent available information for purposes of calculating
the Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case,
with any lender party to the New Credit Agreement or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds at least
95% of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i) through (v) above. Notwithstanding the foregoing, up to 40% of the
Cash Equivalents of the kinds
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<PAGE> 10
described in clauses (ii), (iii) and (v) above at any one time held by the
Company or any Restricted Subsidiary of the Company may be invested in
securities, certificates of deposit, eurodollar time deposits, bankers'
acceptances and commercial paper having maturities of not more than one year
after the date of acquisition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principal or his Related Parties
(as defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of the first transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above) becomes the "beneficial owner" (as
defined above), directly or indirectly, of more of the Voting Stock of the
Company (measured by voting power rather than number of shares) than is at the
time "beneficially owned" (as defined above) by the Principal and his Related
Parties in the aggregate or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Company" means Paragon Corporate Holdings Inc., a Delaware
corporation, and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, less (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to such Person or a Wholly Owned Subsidiary thereof that is a
Subsidiary Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
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<PAGE> 11
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date hereof in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of the Principal or a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company or any
of its Subsidiaries (other than Foreign Subsidiaries), one or more debt
facilities (including, without limitation, the New Credit Agreement) or other
debt securities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities outstanding on the date on which Senior Notes are first issued
and authenticated under this Indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (i) of the second
paragraph of Section 4.09.
"Custodian" means the Trustee, as custodian with respect to
the Senior Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Senior Note registered
in the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Senior Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Senior Notes issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Senior Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Senior Notes mature; provided, however, that any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof have
the right to require the Company to repurchase such Capital Stock
4
<PAGE> 12
upon the occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Senior Notes" means the Senior Notes issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $1.2 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Agreement) in existence on the date hereof,
such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations) and (ii) the consolidated interest expense of
such Person and its Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be
5
<PAGE> 13
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.
"Foreign Borrowing Base" means, as of any date, an amount
equal to the sum of (a) 85% of the face amount of all accounts receivable owned
by Foreign Subsidiaries of the Company as of such date that are not more than 60
days past due, and (b) 65% of the book value of all inventory owned by Foreign
Subsidiaries of the Company as of such date, all calculated on a consolidated
basis and in accordance with GAAP. To the extent that information is not
available as to the amount of accounts receivable or inventory as of a specific
date, the Company shall utilize the most recent available information for
purposes of calculating the Foreign Borrowing Base.
"Foreign Credit Facilities" means, with respect to any Foreign
Subsidiary of the Company, one or more debt facilities or other debt securities
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Foreign Credit Facilities outstanding on the date on which Senior Notes are
first issued and authenticated under this Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
second paragraph of Section 4.09.
"Foreign Subsidiary" means any Subsidiary of the Company, more
than 80% of the sales, earnings or assets (determined on a consolidated basis)
of which are located or derived from operations outside the United States.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date hereof.
"GEC Note" means that certain promissory note, dated January
17, 1997, in the principal amount of $6.0 million and issued by the Company to
GEC Incorporated in connection with the acquisition of by the Company of A.B.
Dick.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
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<PAGE> 14
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) other agreements
or arrangements designed to protect such Person against fluctuations in interest
rates and (iii) agreements entered into for the purpose of fixing or hedging the
risks associated with fluctuations in foreign currency exchange rates.
"Holder" means a Person in whose name a Senior Note is
registered.
"IAI Global Note" means the global Senior Note in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Senior Notes sold to Institutional
Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing Indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Senior Notes" means $115.0 million in aggregate
principal amount of Senior Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding SEC, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of
Section 4.07.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment shall be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
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<PAGE> 15
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Senior Notes for use by
such Holders in connection with the Exchange Offer.
"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).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Management Agreement" means that certain Management Agreement
between NESCO, Inc. and the Company dated as of April 1, 1998.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Credit Agreement" means that certain Credit and Security
Agreement, dated as of April 1, 1998, by and among the Company, A.B. Dick,
Curtis and the lenders party thereto, providing for up to $32.0 million of
revolving credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offer and sale of the Senior Notes as
contemplated by the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum, dated
March 27, 1998, relating to the Company's offering and placement of the Senior
Notes.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
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<PAGE> 16
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Businesses" means the manufacture, sale or
distribution of equipment, parts, supplies or other goods or the provision of
services relating to industrial, automotive, graphic arts, printing and
reasonably related businesses.
"Permitted Investments" means (a) any Investment in the
Company or in a Wholly Owned Subsidiary of the Company that is a Subsidiary
Guarantor that is engaged in a Permitted Business; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Subsidiary of the Company
in a Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Subsidiary of the Company that is a Subsidiary Guarantor that is engaged
in a Permitted Business or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company that is a Subsidiary Guarantor; (d) any Restricted Investment made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition
of assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) any Investment by a Foreign Subsidiary
of the Company in any other Foreign Subsidiary of the Company; and (g) any
Investment in any Person principally engaged in a Permitted Business having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (g) that are at the time
outstanding, not to exceed $20.0 million.
"Permitted Liens" means (i) Liens on assets securing
Indebtedness under Credit Facilities and Foreign Credit Facilities that was
permitted by the terms of this Indenture to be incurred; (ii) Liens securing
Indebtedness incurred pursuant to (A) the Fixed Charge Coverage Ratio test set
forth under the first paragraph of Section 4.09 hereof or (B) clause (ix) of the
second paragraph of Section 4.09 hereof, provided that, in either case, such
Indebtedness ranks, by its terms, pari passu with the Senior Notes; (iii) Liens
in favor of the Company; (iv) Liens on property of a Person existing at the time
such Person is merged into or consolidated with the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company; (v)
Liens on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company, provided that such Liens were in existence prior
to the contemplation of such acquisition; (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 to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of Section 4.09 hereof covering only the
assets acquired with such Indebtedness; (viii) Liens existing on the date
hereof; (ix) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (x) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
9
<PAGE> 17
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Subsidiary; and (xi) Liens arising by reason of (1) any
attachment, judgment, decree or order of any court, so long as such Lien is
being contested in good faith and is either adequately bonded or execution
thereon has been stayed pending appeal or review, and any appropriate legal
proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been fully terminated or
the period within which such proceedings may be initiated shall not have
expired; (2) security for payment of workers' compensation or other insurance;
(3) security for the performance of tenders, bids, leases and contracts (other
than contracts for the payment of money); (4) operation of law in favor of
carriers, warehousemen, landlords, mechanics, materialmen, laborers, employees
or suppliers, incurred in the ordinary course of business for sums which are not
yet delinquent or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof; (5) any interest
or title of a lessor under any lease; and (6) easements, rights-of-way, zoning
and similar covenants and restrictions and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount and which do not
in any case materially interfere with the ordinary course of business of the
Company or any of its Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the Holders of Senior Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Principal" means Robert J. Tomsich.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Senior Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 1, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time, and, with respect to any Additional
Senior Notes, one or more registration rights agreements between the Company and
the other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Senior Notes to register such Additional Senior Notes
under the Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
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<PAGE> 18
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Senior Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and
the Private Placement Legend and deposited with or on behalf of and registered
in the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Senior Note in the form of Exhibit A-2 hereto bearing the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee, issued in a denomination equal to the outstanding
principal amount of the Senior Notes initially sold in reliance on Rule 903 of
Regulation S.
"Related Party" with respect to the Principal means (A) any
80% (or more) owned Subsidiary, or spouse or immediate family member (in the
case of an individual) of the Principal; or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling interest of which
consist of the Principal and/or such other Persons referred to in the
immediately preceding clause (A); or (C) the estate of the Principal until such
estate is distributed pursuant to his will or applicable state law.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Notes" has the meaning assigned to it in the preamble
to this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
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<PAGE> 19
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Subsidiary
Guarantor of the Company's payment obligations under this Indenture and the
Notes, executed pursuant to the provisions of this Indenture.
"Subsidiary Guarantor" means each of (i) A.B. Dick Company and
Curtis Industries, Inc. and (ii) any other Subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of Section 4.17 hereof, and their
respective successors and assigns.
"Tax Payment Agreement" means that certain Tax Payment
Agreement among NES Group, Inc., the Company and the Subsidiary Guarantors,
dated as of April 1, 1998, as in effect on the date hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Senior
Note in the form of Exhibit A-1 attached hereto that bears the Global Note
Legend and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Senior Notes that do not
bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
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<PAGE> 20
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Acceleration Notice"........................................................6.02
"Affiliate Transaction"......................................................4.11
"Asset Sale".................................................................4.10
"Asset Sale Offer"...........................................................4.10
"Authentication Order".......................................................2.02
"Change of Control Offer"....................................................4.14
"Change of Control Payment"..................................................4.14
"Change of Control Payment Date" ............................................4.14
"Covenant Defeasance"........................................................8.03
"Event of Default"...........................................................6.01
"Excess Proceeds"............................................................4.10
"incur"......................................................................4.09
"Legal Defeasance" ..........................................................8.02
"Offer Amount"...............................................................3.09
"Offer Period"...............................................................3.09
"Paying Agent"...............................................................2.03
"Permitted Debt".............................................................4.09
"Purchase Date"..............................................................3.09
"Registrar"..................................................................2.03
"Repurchase Offer"...........................................................3.09
"Restricted Payments"........................................................4.07
"Senior Note Custodian"......................................................2.01
</TABLE>
SECTION 1.03. RULES OF CONSTRUCTION.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Senior Notes;
"indenture security holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Senior Notes and the Subsidiary Guarantees
means the Company and the Subsidiary Guarantors, respectively, and any successor
obligor upon the Senior Notes and the Subsidiary Guarantees, respectively.
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<PAGE> 21
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Senior Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 or A-2 hereto.
The Senior Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage. Each Senior Note shall be dated the date of its
authentication. The Senior Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Subsidiary Guarantors and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby. However, to the extent any provision of any Senior Note
conflicts with the express provisions of this Indenture, the provisions of this
Indenture shall govern and be controlling.
(b) Global Notes. Senior Notes issued in global form shall be
substantially in the form of Exhibit A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Senior Notes issued in definitive form shall be
substantially in the form of Exhibit A-1 attached hereto (but without the Global
Note Legend thereon and without the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Each Global Note shall represent such of the
outstanding Senior Notes as shall be specified therein and each shall provide
that it shall represent the aggregate principal amount of outstanding Senior
Notes from time to time endorsed thereon and that the aggregate principal amount
of outstanding Senior Notes represented thereby may from time to time be reduced
or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount of outstanding Senior Notes represented
thereby shall be made by the Trustee or the Senior Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Senior Notes offered and sold in reliance
on Regulation S shall be issued initially in the form of the Regulation S
Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Senior Notes represented thereby with the Trustee, as custodian for the
Depositary (the "Senior Note Custodian"), and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated
agents holding on behalf of Euroclear or Cedel Bank, duly executed by the
Company and authenticated
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<PAGE> 22
by the Trustee as hereinafter provided. The Restricted Period shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein during the Restricted Period pursuant to another
exemption from registration under the Securities Act and who will take delivery
of a beneficial ownership interest in a 144A Global Note or an IAI Global Note
bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee, as the case may
be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Senior Notes for the Company by
manual or facsimile signature.
If the Officer whose signature is on a Senior Note no longer
holds that office at the time a Senior Note is authenticated, the Senior Note
shall nevertheless be valid.
A Senior Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by one Officer (an "Authentication Order"), authenticate Senior Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Senior Notes. The aggregate principal amount of Senior Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Senior Notes. An authenticating agent may
authenticate Senior Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
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<PAGE> 23
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Senior
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Senior Notes may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Senior
Notes and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrars and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such.
The Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Senior Note Custodian with respect to
the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Senior Notes, and shall notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Senior Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Senior Notes and the Company shall otherwise comply with TIA Section
312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
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<PAGE> 24
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Senior Note authenticated and delivered in exchange for, or
in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06
or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Senior Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Temporary Regulation S
Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Registrar containing information regarding the Person in whose
name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Senior Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
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<PAGE> 25
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and
Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Senior Notes
or (3) a Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in
a Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes
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in an aggregate principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest in
a Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a
Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such
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Definitive Notes to the Persons in whose names such Senior Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject
to all restrictions on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in
the case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Senior Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in
a Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced
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accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Senior Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Senior Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery thereof in the form of a beneficial
interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Senior Note for a beneficial
interest in a Restricted Global Note, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
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<PAGE> 29
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Senior Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Senior Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Senior Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c) thereof;
or
(2) if the Holder of such Definitive Notes
proposes to transfer such Senior Notes to a Person who shall take
delivery thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Senior Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Senior Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Senior Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Senior Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in
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<PAGE> 31
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Senior Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Senior Notes and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Senior Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Senior
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT WILL NOT,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
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<PAGE> 32
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.06 (and all Senior Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Senior Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
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(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14
and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Senior Note selected for redemption in
whole or in part, except the unredeemed portion of any Senior Note
being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such registration
of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange any Senior Notes during a
period beginning at the opening of business 15 days before the day of
any selection of Senior Notes for redemption under Section 3.02 hereof
and ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Senior Note so selected for
redemption in whole or in part, except the unredeemed portion of any
Senior Note being redeemed in part or (c) to register the transfer of
or to exchange a Senior Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Senior Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Senior Note is registered
as the absolute owner of such Senior Note for the purpose of receiving
payment of principal of and interest on such Senior Notes and for all
other purposes, and none of the Trustee, any Agent or the Company shall
be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07. REPLACEMENT SENIOR NOTES
If any mutilated Senior Note is surrendered to the Trustee
or the Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Senior Note if the Trustee's requirements are met. If required by
the Trustee or the Company, an indemnity bond must be supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Senior Note is replaced. The Company may charge for
its expenses in replacing a Senior Note.
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Every replacement Senior Note is an additional obligation of
the Company and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Senior Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior
Notes authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Senior Note does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Senior Note; however, Senior Notes held
by the Company or a Subsidiary of the Company shall not be deemed to be
outstanding for purposes of Section 3.07(b) hereof.
If a Senior Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Senior Notes payable on that date, then on and after that date
such Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal
amount of Senior Notes have concurred in any direction, waiver or consent,
Senior Notes owned by the Company, or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Senior Notes that the Trustee knows are
so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SENIOR NOTES
Until certificates representing Senior Notes are ready for
delivery, the Company may prepare and the Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form of certificated Senior Notes but
may have variations that the Company considers appropriate for temporary Senior
Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Senior Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of
the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Senior Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Senior Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Senior Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy cancelled Senior Notes (subject to the record
retention requirement of the Exchange Act). Certification of the destruction of
all cancelled Senior Notes shall be delivered to the Company. The Company may
not issue new Senior Notes to replace Senior Notes that it has paid or that have
been delivered to the Trustee for cancellation.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Senior Notes, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Senior Notes and in Section 4.01 hereof. The Company shall
notify the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Senior Note and the date of the proposed payment. The Company shall
fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Trustee in the name and at the expense of the Company) shall mail
or cause to be mailed to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 45 days but not more than 60 days before a redemption date
(unless a shorter period is acceptable to the Trustee) an Officers' Certificate
setting forth (i) the Section of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Senior
Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Senior
Notes pursuant to Section 4.10 or 4.14 hereof, it shall furnish to the Trustee,
at least 45 days before the scheduled purchase date, an Officers' Certificate
setting forth (i) the section of this Indenture pursuant to which the offer to
purchase shall occur, (ii) the terms of the offer, (iii) the principal amount of
Senior Notes to be purchased, (iv) the purchase price, (v) the purchase date and
(vi) and further setting forth a statement to the effect that (a) the Company or
one its Subsidiaries has affected an Asset Sale and there are Excess Proceeds
aggregating more than $10.0 million or (b) a Change of Control has occurred, as
applicable.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED OR PURCHASED.
If less than all of the Senior Notes are to be redeemed at
any time, selection of the Senior Notes for redemption shall be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed, or, if the Senior Notes
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee deems fair and appropriate; provided that no Senior Notes with a
principal amount of 1,000 or less shall be redeemed in part.
The Trustee shall promptly notify the Company in writing of
the Senior Notes selected for redemption and, in the case of any Senior Note
selected for partial purchase or redemption, the principal amount thereof to be
redeemed. Senior Notes and portions of Senior Notes selected shall be in amounts
of $1,000 or whole multiples of $1,000; except that if all of the Senior Notes
of a Holder are to be purchased or redeemed, the entire outstanding amount of
Senior Notes held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Senior Notes called for redemption also apply to
portions of Senior Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail or cause to be mailed by first class mail, a notice
of redemption to each Holder whose Senior Notes are to be redeemed.
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The notice shall identify the Senior Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price for the Senior Notes and
accrued interest, and Liquidated Damages, if any;
(3) if any Senior Note is being redeemed in part,
the portion of the principal amount of such Senior Notes to be redeemed
and that, after the redemption date, upon surrender of such Senior
Note, a new Senior Note or Senior Notes in principal amount equal to
the unredeemed portion shall be issued upon surrender of the original
Senior Note;
(4) the name and address of the Paying Agent;
(5) that Senior Notes called for redemption must
be surrendered to the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making
such redemption payment, interest and Liquidated Damages, if any, on
Senior Notes called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Senior Notes and/or
Section of this Indenture pursuant to which the Senior Notes called for
redemption are being redeemed; and
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Senior Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date (or such shorter period as shall be acceptable to
the Trustee), an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in the notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Senior Note shall not affect the
validity of the proceeding for the redemption of any other Senior Note.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Senior Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price plus accrued and unpaid
interest and Liquidated Damages, if any, to such date. A notice of redemption
may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or before 10:00 a.m. (New York City time) on each
redemption date or the date on which Senior Notes must be accepted for purchase
pursuant to Section 4.10 or 4.14, the Company shall deposit with the Trustee or
with the Paying Agent money sufficient to pay the redemption price of and
accrued and unpaid interest and Liquidated Damages, if any, on all Senior Notes
to be redeemed or purchased on that date. The Trustee or the Paying Agent shall
promptly return to the Company upon its written request any money deposited with
the Trustee or the Paying Agent by the Company in excess of the amounts
necessary to pay the redemption price of (including any applicable premium),
accrued interest and Liquidated Damages, if any, on all Senior Notes to be
redeemed or purchased.
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If Senior Notes called for redemption or tendered in an Asset
Sale Offer or Change of Control Offer are paid or if the Company has deposited
with the Trustee or Paying Agent money sufficient to pay the redemption or
purchase price of, unpaid and accrued interest and Liquidated Damages, if any,
on all Senior Notes to be redeemed or purchased, on and after the redemption or
purchase date interest and Liquidated Damages, if any, shall cease to accrue on
the Senior Notes or the portions of Senior Notes called for redemption or
tendered and not withdrawn in an Asset Sale Offer or Change of Control Offer
(regardless of whether certificates for such securities are actually
surrendered). If a Senior Note is redeemed or purchased on or after an interest
record date but on or prior to the related interest payment date, then any
accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the
Person in whose name such Senior Note was registered at the close of business on
such record date. If any Senior Note called for redemption shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall be paid on the unpaid principal and
Liquidated Damages, if any, from the redemption or purchase date until such
principal and Liquidated Dames, if any, is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case, at the rate provided
in the Senior Notes and in Section 4.01 hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Senior Notes pursuant to this Section
3.07 prior to April 1, 2003. Thereafter, the Company shall have the option to
redeem the Senior Notes, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below plus any accrued
and unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on April 1
of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2003................................................................104.8125%
2004................................................................103.2083%
2005................................................................101.6042%
2006 and thereafter.................................................100.0000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
prior to April 1, 2001, the Company may on any one or more occasions redeem up
to an aggregate of 33 1/3% of the original aggregate principal amount of Senior
Notes at a redemption price of 109.625% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of an offering of common stock of
the Company; provided that at least 66 2/3% of the aggregate principal amount of
Senior Notes originally issued remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption shall
occur within 60 days of the date of the closing of such offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 3.09, 4.10 and 4.14 hereof,
the Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
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SECTION 3.09. REPURCHASE OFFERS.
In the event that the Company shall be required to commence an
offer to all Holders to repurchase Senior Notes (a "Repurchase Offer") pursuant
to Section 4.10 hereof, an "Excess Proceeds Offer," or pursuant to Section 4.14
hereof, a "Change of Control Offer," the Company shall follow the procedures
specified below.
A Repurchase Offer shall commence no later than ten (10)
Business Days after a Change of Control (unless the Company is not required to
make such offer pursuant to Section 4.14(c) hereof) or an Excess Proceeds Offer
Triggering Event (as defined below), as the case may be, and remain open for a
period of twenty (20) Business Days following its commencement and no longer,
except to the extent that a longer period is required by applicable law (the
"Offer Period"). No later than five (5) Business Days after the termination of
the Offer Period (the "Purchase Date"), the Company shall purchase the principal
amount of Senior Notes required to be purchased pursuant to Section 4.10 hereof,
in the case of an Excess Proceeds Offer, or 4.14 hereof, in the case of a Change
of Control Offer (the "Offer Amount") or, if less than the Offer Amount has been
tendered, all Senior Notes tendered in response to the Repurchase Offer. Payment
for any Senior Notes so purchased shall be made in the same manner as interest
payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest and Liquidated Damages, if any, shall be paid to the Person in whose
name a Senior Note is registered at the close of business on such record date,
and no additional interest or Liquidated Damages, if any, shall be payable to
Holders who tender Senior Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to such
Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice,
which shall govern the terms of the Repurchase Offer, shall describe the
transaction or transactions that constitute the Change of Control or Excess
Proceeds Offer Triggering Event, as the case may be and shall state:
(a) that the Repurchase Offer is being made pursuant to this Section
3.09 and Section 4.10 or 4.14 hereof, as the case may be, and the length of time
the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Repurchase Offer shall cease to
accrue interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant to a
Repurchase Offer shall be required to surrender the Senior Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Note,
duly completed, or transfer by book-entry transfer, to the Company, the
Depository, or the Paying Agent at the address specified in the notice not later
than the close of business on the last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depository or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Senior Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Senior Note purchased;
(g) that, if the aggregate principal amount of Senior Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Senior Notes
to be purchased on a pro rata basis (with such adjustments as
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may be deemed appropriate by the Company so that only Senior Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased); and
(h) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased portion
of the Senior Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. (New York City time) on each Purchase
Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Senior Notes equal to the Offer Amount, together with
accrued and unpaid interest and Liquidated Damages, if any, thereon, to be held
for payment in accordance with the terms of this Section 3.09. On the Purchase
Date, the Company shall, to the extent lawful, (i) accept for payment, on a pro
rata basis to the extent necessary, the Offer Amount of Senior Notes or portions
thereof tendered pursuant to the Repurchase Offer, or if less than the Offer
Amount has been tendered, all Senior Notes tendered, (ii) deliver or cause the
Paying Agent or depository, as the case may be, to deliver to the Trustee Senior
Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate
stating that such Senior Notes or portions thereof were accepted for payment by
the Company in accordance with the terms of this Section 3.09. The Company, the
Depository or the Paying Agent, as the case may be, shall promptly (but in any
case not later than three (3) Business Days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Senior Notes tendered by such Holder and accepted by the Company for purchase,
plus any accrued and unpaid interest and Liquidated Damages, if any, thereon,
and the Company shall promptly issue a new Senior Note, and the Trustee, shall
authenticate and mail or deliver such new Senior Note, to such Holder, equal in
principal amount to any unpurchased portion of such Holder's Senior Notes
surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce in a newspaper of general circulation or in a press release provided to
a nationally recognized financial wire service the results of the Repurchase
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01, 3.02, 3.05 and 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Senior Notes on the dates and in the manner
provided in the Senior Notes. The Company shall pay all Liquidated Damages, if
any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement. Principal, premium, if any, interest, and
Liquidated Damages, if any, shall be considered paid for all purposes hereunder
on the date the Paying Agent if other than the Company or a Subsidiary thereof
holds, as of 10:00 a.m. (New York City time) money deposited by the Company in
immediately available funds and designated for and sufficient to pay all such
principal, premium, if any, interest and Liquidated Damages, if any, then due.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Senior Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee or Registrar) where Senior Notes may
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be surrendered for registration of transfer or for exchange and where notices
and demands to or upon the Company in respect of the Senior Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Senior Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
SECTION 4.03 REPORTS.
(a) From and after the earlier of the effective date of the
Exchange Offer Registration Statement or the effective date of the Shelf
Registration Date, whether or not required by the rules and regulations of the
SEC, so long as any Senior Notes are outstanding, the Company shall furnish to
the Holders of Senior Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports, in each case within the time periods specified in
the SEC's rules and regulations. In addition, following consummation of the
Exchange Offer, whether or not required by the rules and regulations of the SEC,
the Company shall file a copy of all such information and reports with the SEC
for public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Senior Notes remain outstanding, the
Company shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act. The financial information to be
distributed to Holders of Senior Notes shall be filed with the Trustee and
mailed to the Holders at their addresses appearing in the register of Senior
Notes maintained by the Registrar, within 90 days after the end of the Company's
fiscal years and within 45 days after the end of each of the first three
quarters of each such fiscal year. The Company shall provide the Trustee with a
sufficient number of copies of all reports and other documents and information
and, if requested by the Company, the Trustee will deliver such reports to the
Holders under this Section 4.03.
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SECTION 4.04 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled its
obligations under this Indenture (including, with respect to any Restricted
Payments made during such year, the basis upon which the calculations required
by Section 4.07 hereof were computed, which calculations may be based on the
Company's latest available financial statements), and further stating, as to
each such Officer signing such certificate, that, to the best of his or her
knowledge, each entity has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that, to the best of his or her knowledge, no event has occurred and remains in
existence by reason of which payments on account of the principal of, interest
or Liquidated Damages, if any, on the Senior Notes is prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, in connection with the
year-end financial statements delivered pursuant to Section 4.03 hereof, the
Company shall use its best efforts to deliver a written statement of the
Company's independent public accountants (who shall be a firm of established
national reputation reasonably satisfactory to the Trustee) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company has
violated any provisions of Article Four or Section 5.01 hereof or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation. In the event that such written statement of the Company's independent
public accountants cannot be obtained, the Company shall deliver an Officers'
Certificate certifying that it has used its best efforts to obtain such
statements and was unable to do so.
The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency all material taxes, assessments and
governmental levies, except such as are contested in good faith and by
appropriate proceedings and with respect to which appropriate reserves have been
taken in accordance with GAAP.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Company and each Subsidiary Guarantor covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each Subsidiary Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07 RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
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Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Senior Notes or the Subsidiary Guarantees, except a payment
of interest or principal at Stated Maturity; (iv) pay fees pursuant to, or make
any other distribution in respect of, the Management Agreement; or (v) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (v) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries on or after
the date hereof (excluding Restricted Payments permitted by clause (ii), (iii),
(v) or (vi) of the next succeeding paragraph and excluding any Restricted
Payment made on the date hereof directly by the Company with the proceeds of the
Offering in amounts not to exceed the amounts set forth in this Offering
Memorandum under the caption "Use of Proceeds"), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date hereof to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company since the date hereof
as a capital contribution to its common equity capital or from the issue or sale
of Equity Interests of the Company (other than Disqualified Stock) or from the
issuance or sale of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date hereof is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment.
(d) The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions hereof; (ii)
the redemption, repurchase, retirement, defeasance or other acquisition of any
subordinated Indebtedness or Equity Interests of the Company in exchange for, or
out of the net cash proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iii) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) payments by the Company or any Subsidiary of
the Company, directly or indirectly, to NES Group, Inc. to satisfy tax
obligations, in accordance with the Tax Payment Agreement as in effect on the
date hereof; provided that such amounts do not exceed the amounts that, without
recognizing any tax loss carryforwards or carrybacks or other tax
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attributes, such as alternative minimum tax carryforwards, would otherwise be
due and owing if the Company and its Subsidiaries were an independent,
individual taxpayer; and (vi) so long as no Default or Event of Default has
occurred and is continuing or would occur as a result thereof, the payment of
fees pursuant to the Management Agreement, as in effect on the date hereof;
provided that the amount of fees paid pursuant to the Management Agreement in
any calendar year shall not exceed an amount equal to five percent of the
Company's earnings before interest, taxes, depreciation, amortization and
miscellaneous expenses (income).
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
SECTION 4.08 DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i) (a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect
to any other interest or participation in, or measured by, its profits, or (b)
pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make
loans or advances to the Company or any of its Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date hereof, (b) this Indenture, the
Senior Notes and the Subsidiary Guarantees, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired; provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of
this Indenture to be incurred, (e) by reason of customary non-assignment
provisions in leases or contracts entered into in the ordinary course of
business and consistent with past practices, (f) mortgages or other purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (g) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (h) any agreement
for the sale of a Subsidiary that restricts distributions by that Subsidiary
pending its sale, (i) secured Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 4.12 hereof that limits the right of the
debtor to dispose of the assets securing such Indebtedness, (j) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (k) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock
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if the Fixed Charge Coverage Ratio for the Company'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
or such Disqualified Stock is issued would have been at least 2 to 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 , or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period. The Company shall not incur any Indebtedness (other than
Existing Indebtedness) that is contractually subordinated in right of payment to
any other Indebtedness of the Company or such Subsidiary Guarantor,
respectively, unless such Indebtedness is also contractually subordinated in
right of payment to the Senior Notes or the Subsidiary Guarantee of such
Subsidiary Guarantor, respectively, on substantially identical terms; provided,
however, that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company or
such Subsidiary Guarantor, respectively, solely by virtue of being unsecured.
The provisions of the first paragraph of this Section 4.09
shall not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company or any Subsidiary Guarantor
of Indebtedness under Credit Facilities; provided that the aggregate
principal amount of all Indebtedness (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder) outstanding
under all Credit Facilities after giving effect to such incurrence,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (i), does not exceed an amount equal to the greater of (x) $32.0
million and (y) the Borrowing Base;
(ii) the incurrence by any Foreign Subsidiary of Indebtedness
under Foreign Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to have
a principal amount equal to the maximum potential liability of Foreign
Subsidiaries thereunder) outstanding under all Foreign Credit
Facilities after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (ii),
does not exceed an amount equal to the greater of (x) $8.0 million and
(y) the Foreign Borrowing Base;
(iii) the incurrence by the Company and its Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company and the Subsidiary
Guarantors of Indebtedness represented by the Senior Notes and the
Subsidiary Guarantees, respectively;
(v) the incurrence by the Company or any of its Subsidiaries
of Indebtedness represented by Capital Lease Obligations, sale and
leaseback transactions, mortgage financings, purchase money
obligations, capital expenditures or similar financing transactions, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property,
plant or equipment used in the business of the Company or such
Subsidiary, in each case with respect to the respective properties,
assets and rights of the Company or such Subsidiary as of the date
hereof, in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (v), not to exceed
$10.0 million;
(vi) the incurrence by the Company or any of its Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace any
Indebtedness (other than intercompany Indebtedness and Indebtedness
incurred under Credit Facilities) that was permitted by this Indenture
to be incurred;
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(vii) the incurrence by the Company or any of the Subsidiary
Guarantors of intercompany Indebtedness between or among the Company
and any Subsidiaries that are Subsidiary Guarantors; provided, however,
that (i) if the Company or a Subsidiary Guarantor is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
Senior Notes and the Subsidiary Guarantees, respectively, and (ii) (A)
any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or
a Subsidiary Guarantor and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Subsidiary
Guarantor shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case may
be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of its
Subsidiaries of Hedging Obligations;
(ix) the guarantee by the Company or any of the Subsidiary
Guarantors of Indebtedness of the Company or a Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant; and
(x) the incurrence by the Company or any of its Subsidiaries
of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any other Indebtedness incurred pursuant to this clause (x),
not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (ix) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph of this Section 4.09. Accrual of interest,
accretion or amortization of original issue discount, the payment of interest on
any Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on Disqualified Stock in the form of additional shares
of the same class of Disqualified Stock shall not be deemed to be an incurrence
of Indebtedness for purposes of this Section 4.09; provided, in each case, that
the amount thereof shall be included in Fixed Charges of the Company as accrued.
SECTION 4.10 ASSET SALES
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (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 (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 75% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet), of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or such
Subsidiary's Subsidiary Guarantee thereof) that are assumed by the transferee of
any such assets pursuant (except with respect to assumptions of trade payables)
to a customary novation agreement that releases the Company or such Subsidiary
from further liability and (y) any securities, notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this clause (ii).
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under the New Credit Agreement or (b) to an investment in a
Permitted Business through the making of a capital expenditure or the
acquisition of other assets that are used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the
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Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall commence an Asset Sale Offer to purchase the maximum principal
amount of Senior Notes that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in Section 3.09
hereof. The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Senior Notes in any Asset Sale Offer. To the extent that the
aggregate amount of Senior Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use any remaining Excess Proceeds
for general corporate purposes. If the aggregate principal amount of Senior
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (A) any employment
agreement entered into by the Company or any of its Subsidiaries in the ordinary
course of business and consistent with the past practice of the Company or such
Subsidiary, (B) transactions between or among the Company and/or its
Subsidiaries, (C) Restricted Payments that are permitted by the provisions of
Section 4.07 hereof and (D) the payment by the Company or its Subsidiaries of
reasonable and customary fees to members of their respective Boards of
Directors, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except for Permitted Liens, unless the Senior Notes and the Subsidiary
Guarantees are secured on an equal and ratable basis (or senior basis where such
Liens secure subordinated debt) with the obligations so secured until such time
as such obligations are no longer secured by a Lien.
SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company and any Subsidiary Guarantor may enter into a sale and leaseback
transaction if: (i) the Company or such Subsidiary Guarantor could have (a) (1)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09 hereof or (2) incurred
Indebtedness pursuant to clause (v) of
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the second paragraph of Section 4.09 hereof and (b) incurred a Lien to secure
such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds
of such sale and leaseback transaction are at least equal to the fair market
value (as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction, and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company or the
applicable Subsidiary Guarantor applies the proceeds of such transaction in
compliance with Section 4.10 hereof.
SECTION 4.14 OFFER TO PURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of
Senior Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase (the "Change of Control Payment"). Within ten days following
any Change of Control, the Company shall mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Senior Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by Section 3.09 hereof and described in such notice. The
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Senior
Notes as a result of a Change of Control.
The Change of Control Offer shall remain open from the time of
mailing until the Business Day preceding the Change of Control Payment Date.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Senior Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth herein applicable to a Change of Control Offer made by
the Company and purchases all Senior Notes validly tendered and not withdrawn
under such Change of Control Offer.
SECTION 4.15 CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, as the case may
be, the Company and each Subsidiary Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each of its
Subsidiaries in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
the rights (charter and statutory), licenses and franchises of the Company and
its Subsidiaries; provided that the Company shall not be required to preserve
any such right, license or franchise, or the corporate, partnership or other
existence of any of its Subsidiaries, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its
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Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Senior Notes.
SECTION 4.16 LINE OF BUSINESS.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
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SECTION 4.17 ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall after the date
hereof, (i) transfer or cause to be transferred in one or a series of
transactions (whether or not related), any assets, businesses, divisions, real
property or equipment having an aggregate fair market value (as determined in
good faith by the Board of Directors) in excess of $1.0 million to any
Subsidiary (other than a Foreign Subsidiary) that is not a Subsidiary Guarantor;
(ii) acquire or create another Subsidiary (other than a Foreign Subsidiary); or
(iii) any Subsidiary of the Company, that is not a Subsidiary Guarantor,
guarantees any Indebtedness of the Company other than the Senior Notes, or
pledges any of its assets to secure any Indebtedness of the Company other than
the Senior Notes, then the Company shall cause such Subsidiary to (A) execute
and deliver to the Trustee a Supplemental Indenture in form attached hereto as
Exhibit F pursuant to which such Subsidiary shall unconditionally Guarantee all
of the Company's obligations under the Senior Notes on the terms set forth in
such supplemental indenture and (B) deliver to the Trustee an Opinion of Counsel
that such supplemental indenture has been duly executed and delivered by such
Subsidiary.
SECTION 4.18 PAYMENT FOR CONSENTS.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Senior Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
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SECTION 4.19 SATISFACTION OF GEC NOTE.
The Company shall cause all Obligations with respect to the
GEC Note to be fully satisfied on for before May 15, 1998.
ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company 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
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have 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 Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Senior Notes and this
Indenture pursuant to a Supplemental Indenture in the form of Exhibit F hereto;
(iii) immediately after such transaction no Default or Event of Default exists;
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) 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 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 the first paragraph of Section 4.09 hereof; and
(v) each Subsidiary Guarantor, unless it is the other party to the transactions
described above, shall have by Supplemental Indenture in form attached hereto as
Exhibit F confirmed that its Subsidiary Guarantee shall apply to the Company's
or the surviving Person's obligations under this Indenture and the Senior Notes.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and shall
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, that, (i) solely for the purposes of computing Consolidated Net Income
for purposes of clause (b) of the first paragraph of Section 4.07 hereof, the
Consolidated Net Income of any person other than the Company and its
Subsidiaries shall be included only for periods subsequent to the effective time
of such merger, consolidation, combination or transfer of assets; and (ii) in
the case of any sale, assignment, transfer, lease, conveyance, or other
disposition of less than all of the assets of the predecessor Company, the
predecessor Company shall not be released or discharged from the obligation to
pay the principal of or interest and Liquidated Damages, if any, on the Senior
Notes.
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ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
Each of the following constitutes an "Event of Default:"
(i) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to the Senior Notes;
(ii) default in payment when due of principal of or premium,
if any, on the Senior Notes;
(iii) failure by the Company or any Subsidiary to comply with
the provisions described under Sections 3.09, 4.07, 4.09, 4.10, 4.14 or
4.19 or Article 5 hereof;
(iv) failure by the Company or any Subsidiary for 60 days
after notice to comply with its other agreements in this Indenture or
the Senior Notes;
(v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (A) (i) is
caused by a failure to pay when due at final stated maturity (giving
effect to any grace period related thereto) any principal of or
premium, if any, or interest on such Indebtedness (a "Payment Default")
or (ii) results in the acceleration of such Indebtedness prior to its
express maturity and (B) in each case, the principal amount of any such
Indebtedness as to which a Payment Default shall have occurred,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has
been so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $5.0 million, which judgments
are not paid, discharged or stayed within 60 days after their entry;
(vii) the Company, any of its Significant Subsidiaries or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, pursuant to or within the meaning of any
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case in which
it is the debtor,
(iii) consents to the appointment of a Custodian
of it or for all or substantially all of its
property,
(iv) makes a general assignment for the benefit
of its creditors, or
(v) admits in writing its inability generally
to pay its debts as the same become due;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(i) is for relief against the Company, any of
its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would
constitute a Significant Subsidiary, in an
involuntary case in which it is the debtor,
(ii) appoints a Custodian of the Company, any of
its Significant Subsidiaries or any group of
Subsidiaries that, taken together, would
constitute a Significant Subsidiary, or for
all or substantially all of the property of
the Company, any of its Significant
Subsidiaries or any group of Subsidiaries
that taken, taken together, would constitute
a Significant Subsidiary, or
(iii) orders the liquidation of the Company or any
of its Subsidiaries,
and the order or decree contemplated in clauses (i) (ii) or (iii),
remains unstayed and in effect for 60 consecutive days; or
(ix) the termination of the Subsidiary Guarantee of any
Subsidiary Guarantor for any reason not permitted by this Indenture, or
the denial of any Person acting on behalf of any such Subsidiary
Guarantor of its Obligations under any such Subsidiary Guarantee.
To the extent that the last day of the period referred to in
clauses (i), (iii), (iv) or (vi) of the immediately preceding paragraph is not a
Business Day, then the first Business Day following such day shall be deemed to
be the last day of the period referred to in such clauses. Any "day" will be
deemed to end as of 11:59 p.m., New York City time.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default with
respect to the Company specified in clauses (vii) and (viii) of Section 6.01
hereof) occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Senior Notes may declare the unpaid
principal of, premium, if any, interest and Liquidated Damages, if any, on all
the Senior Notes to be due and payable by notice in writing to the Company (and
the Trustee, if given by the Holders) specifying the respective Event of Default
and that it is a "notice of acceleration" (the "Acceleration Notice"), and the
same shall become immediately due and payable. If an Event of Default with
respect to the Company, any Significant Subsidiary or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary specified in
clauses (vii) or (viii) of Section 6.01 hereof occurs, all outstanding Senior
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then outstanding Senior Notes by
written notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal or interest that has
become due solely because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after April 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Senior Notes pursuant to the optional redemption provisions of 3.07(a) hereof,
then, upon acceleration of the Senior Notes, an equivalent premium shall also
become and be immediately due and payable, to the extent permitted by law,
anything in this Indenture or in the Senior Notes to the contrary
notwithstanding. If an Event of Default occurs prior to April 1, 2003 by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Senior Notes prior to such date, then, upon acceleration of the Senior Notes, an
additional premium shall also become and be immediately due and payable in an
amount, for each of the years beginning on April 1 of the years set forth below,
as set forth below (expressed as a percentage of the
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aggregate principal amount that would otherwise be due but for the provisions of
this sentence, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of payment):
YEAR PERCENTAGE
- ---- ----------
1998..............................................................112.8335%
1999..............................................................111.2293%
2000..............................................................109.6251%
2001..............................................................108.0209%
2002..............................................................106.4167%
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, interest and Liquidated Damages, if any, on the Senior Notes or to enforce
the performance of any provision of the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Senior Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Senior Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of at least a majority in principal amount of the
Senior Notes then outstanding (including consents obtained in connection with a
tender offer or exchange for Senior Notes) by notice to the Trustee may on
behalf of the Holders of all of the Senior Notes waive an existing Default or
Event of Default and its consequences hereunder, except a continuing Default or
Event of Default in the payment of principal of or premium, if any, or interest
or Liquidated Damages, if any, on the Senior Notes. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Senior Notes or that
may involve the Trustee in personal liability. The Trustee may take any other
action which it deems proper which is not inconsistent with any such direction.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Senior Note may pursue a remedy with respect to
this Indenture, the Subsidiary Guarantees or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee
written notice of a continuing Event of Default or
the Trustee receives such notice from the Company;
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(b) the Holders of at least 25% in principal amount of
the then outstanding Senior Notes make a written
request to the Trustee to pursue the remedy;
(c) such Holder of a Senior Note or Holders of Senior
Notes offer and, if requested, provide to the Trustee
indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer
and, if requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Senior
Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to
prejudice the rights of another Holder of a Senior Note or to obtain a
preference or priority over another Holder of a Senior Note.
SECTION 6.07 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Senior Note to receive payment of principal, premium,
if any, interest, and Liquidated Damages, if any, on the Senior Note, on or
after the respective due dates expressed in the Senior Note (including in
connection with an offer to purchase), or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Senior Notes and interest on overdue principal
and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Senior Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other securities or property payable or deliverable upon the
conversion or exchange of the Senior Notes or on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the
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Senior Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid
on the Senior Notes for principal, premium, if any, interest, and Liquidated
Damages, if any, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Senior Notes for principal, premium, if
any, interest, and Liquidated Damages, if any, respectively;
Third: without duplication, to the Holders for any other
Obligations owing to the Holders under this Indenture and the Senior Notes; and
Fourth: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder of a Senior Note pursuant to Section 6.07 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Senior Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of which
it has knowledge, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture or the TIA and the Trustee
need perform only those duties that are specifically set forth in this
Indenture or the TIA and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished
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to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) he Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely on the truth of the
statements and correctness of the opinions contained in, and shall be protected
from acting or refraining from acting upon, any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. Prior to taking,
suffering or admitting any action, the Trustee may consult with counsel of the
Trustee's own choosing and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Subsidiary
Guarantor shall be sufficient if signed by an Officer of the Company or
Subsidiary Guarantor, as applicable.
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(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become
the owner of Senior Notes and may otherwise deal with the Company, the
Subsidiary Guarantors or any Affiliate of the Company or any Subsidiary
Guarantor with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
Trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the Subsidiary
Guarantees or the Senior Notes, it shall not be accountable for the Company's
use of the proceeds from the Senior Notes or any money paid to the Company or
upon the Company's direction under any provision of this Indenture, it shall not
be responsible for the use or application of any money received by any Paying
Agent other than the Trustee, and it shall not be responsible for any statement
or recital herein or any statement in the Senior Notes or any other document in
connection with the sale of the Senior Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and
if it is known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Senior Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Senior Note pursuant to Section 6.01(i) or (ii) hereof, the
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Senior Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.
Within 60 days after each March 15 beginning with the March 15
following the date of this Indenture, and for so long as Senior Notes remain
outstanding, the Trustee shall mail to the Holders of the Senior Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Senior Notes shall be mailed to the Company and filed with the SEC
and each stock exchange on which the Company has informed the Trustee in writing
the Senior Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee when the Senior Notes are listed on any stock
exchange and of any delisting thereof.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company and the Subsidiary Guarantors shall pay to the
Trustee from time to time reasonable compensation for its acceptance of this
Indenture and services hereunder. To the extent permitted by law, the Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and
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expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company and the Subsidiary Guarantors shall indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company and the Subsidiary Guarantors (including this
Section 7.07) and defending itself against any claim (whether asserted by the
Company, the Subsidiary Guarantors or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company and the Subsidiary Guarantors promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify the Company and the
Subsidiary Guarantors shall not relieve the Company and the Subsidiary
Guarantors of its obligations hereunder. The Company and the Subsidiary
Guarantors shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company and the
Subsidiary Guarantors shall pay the reasonable fees and expenses of such
counsel. The Company and the Subsidiary Guarantors need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company and the Subsidiary Guarantors
under this Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
To secure the Company's and the Subsidiary Guarantors' payment
obligations in this Section 7.07, the Trustee shall have a Lien prior to the
Senior Notes on all money or property held or collected by the Trustee, except
that held in trust to pay principal, interest and Liquidated Damages, if any, on
particular Senior Notes. Such Lien shall survive the satisfaction and discharge
of this Indenture and the resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(vii) or (viii) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of a majority in principal amount of the then outstanding Senior Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Senior Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of at least 10% in principal amount of the then
outstanding Senior Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a
Senior Note who has been a Holder of a Senior Note for at least six months,
fails to comply with Section 7.10 hereof, such Holder of a Senior Note may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and the duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders of the Senior Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided that all sums owing to the Trustee hereunder have been paid and subject
to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of
the Trustee pursuant to this Section 7.08, the Company's obligations under
Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee or any Agent, as applicable.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities. The Trustee and its direct parent shall at all
times have a combined capital surplus of at least $50.0 million as set forth in
its most recent annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company and the Subsidiary Guarantors may, at the option
of their respective Boards of Directors evidenced by a resolution set forth in
an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03
hereof be applied to all outstanding Senior Notes and Subsidiary Guarantees upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company and each Subsidiary
Guarantor shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be deemed to have been discharged from their respective
obligations with respect to all outstanding Senior Notes and Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Company and each Subsidiary Guarantor shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Senior Notes
and Subsidiary Guarantees, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all their
respective other obligations under such Senior Notes and Subsidiary Guarantees
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Senior Notes when such payments are due
from the trust referred to in Section 8.04(a); (b) the Company's obligations
with respect to such Senior Notes under Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.10 and 4.02 hereof; (c) the rights, powers, trusts, duties and
immunities of the Trustee including without limitation thereunder Section 7.07,
8.05 and 8.07 hereof and the Company's obligations in connection therewith and
(d) the provisions of this Article 8. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and each Subsidiary
Guarantor shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be released from its obligations under the covenants
contained in Sections 3.09, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 5.01 and 11.01 hereof with respect to the
outstanding Senior Notes and Subsidiary Guarantees on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Senior Notes and Subsidiary Guarantees shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Senior Notes and Subsidiary Guarantees
shall not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Senior Notes and
Subsidiary Guarantees, the Company or any of its Subsidiaries may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Senior Notes and Subsidiary Guarantees shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(i) through 6.01(vi)
and Section 6.01(ix) hereof shall not constitute Events of Default.
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SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Senior Notes and
Subsidiary Guarantees:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Senior Notes, (i) cash in United
States dollars, (ii) non-callable Government Securities which through the
scheduled payment of principal, premium, if any, interest and Liquidated
Damages, if any, in respect thereof in accordance with their terms will provide,
not later than one day before the due date of payment, cash in United States
dollars in an amount, or (iii) a combination thereof, in such amounts as shall
be sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge the principal of, premium, if any, interest and
Liquidated Damages, if any, on the outstanding Senior Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Senior Notes are being defeased to maturity or
to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding
Senior Notes shall not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and shall be subject to federal
income tax on the same amounts, in the same manner and at the same time as would
have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes shall not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and shall be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default of Event or Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Sections 6.01(vii) and (viii) hereof are concerned, at any time in the period
ending on the 91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds shall not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
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(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(i) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably required.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Senior Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Senior Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Senior Notes of all sums due and to become due thereon in respect of principal,
premium, if any, interest and Liquidated Damages, if any, but such money need
not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
written request of the Company and be relieved of all liability with respect to
any money or non-callable Government Securities held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, interest or Liquidated Damages, if any, on any Senior Note and remaining
unclaimed for one year after such principal, and premium, if any, or interest or
Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Senior Note shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application,
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then the obligations of the Company and the Subsidiary Guarantors under this
Indenture, the Senior Notes and the Subsidiary Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, interest or Liquidated Damages, if any, on any Senior Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Senior Notes to receive such payment from
the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, without the
consent of any Holder of Senior Notes the Company and the Trustee may amend or
supplement this Indenture, the Senior Notes or the Subsidiary Guarantees:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to
or in place of certificated Senior Notes;
(c) to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to the Holders of the Senior Notes in the case of a
merger, or consolidation pursuant to Article 5 or Article 10 hereof, as
applicable;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Senior Notes;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) to allow any Subsidiary Guarantor to guarantee the Senior
Notes.
Upon the written request of the Company accompanied by a
resolution of its Board of Directors of the Company authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 9.06 hereof, the Trustee shall join with the
Company and the Subsidiary Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, this Indenture,
the Senior Notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer,
for Senior Notes), and, subject to any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of, or
premium, if any, or interest or Liquidated Damages, if any, on the Senior Notes
(except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Senior Notes
or the Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with or a tender offer or exchange offer for the
Senior Notes).
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Upon the request of the Company accompanied by a resolution of
its Board of Directors of the Company authorizing the execution of any such
amended or supplemental indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of Senior
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 9.06 hereof, the Trustee shall join with the Company and the
Subsidiary Guarantors in the execution of such amended or supplemental Indenture
unless such amended or supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders of
Senior Notes under this Section 9.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof. After an amendment, supplement or waiver under
this Section 9.02 becomes effective, the Company shall mail to the Holders of
each Senior Note affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such amended or supplemental Indenture or waiver.
Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of
a majority in aggregate principal amount of the Senior Notes then outstanding
may waive compliance in a particular instance by the Company or the Subsidiary
Guarantors with any provision of this Indenture, the Senior Notes or the
Subsidiary Guarantees. However, without the consent of each Holder affected, an
amendment, or waiver may not (with respect to any Senior Note or Subsidiary
Guarantee held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Note or alter the provisions with respect to the redemption of the Senior
Notes (other than provisions relating to Sections 3.09, 4.10 and 4.14 hereof);
(c) reduce the rate of or change the time for payment of interest
or Liquidated Damages, if any, on any Senior Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Senior Notes (except a rescission of acceleration of the Senior Notes by the
Holders of at least a majority in aggregate principal amount of the Senior Notes
and a waiver of the payment default that resulted from such acceleration);
(e) make any Senior Note payable in money other than that stated
in the Senior Notes;
(f) make any change in Section 6.04 or 6.07 hereof;
(g) waive a redemption or repurchase payment with respect to
any Senior Note (other than a payment required by Section 4.10 or 4.14 hereof);
(h) make any change in the amendment and waiver provisions of this
Article 9; or
(i) except as provided in Sections 8.02, 8.03 and 10.04 hereof,
release any of the Subsidiary Guarantors from their obligations under the
Subsidiary Guarantees or make any change in the Subsidiary Guarantees that would
adversely affect the Holders.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the
Subsidiary Guarantees or the Senior Notes shall be set forth in an amended or
supplemental Indenture that complies with the TIA as then in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Senior Note is a continuing consent by the Holder
and every subsequent Holder of a Senior Note or portion of a Senior Note that
evidences the same debt as the consenting Holder's Senior Note, even if notation
of the consent is not made on any Senior Note. However, any such Holder or
subsequent Holder of a Senior Note may revoke the consent as to its Senior Note
if the Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
The Company may, but shall not be obligated to, fix a record
date for determining which Holders of the Senior Notes must consent to such
amendment, supplement or waiver. If the Company fixes a record date, the record
date shall be fixed at (i) the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders of Senior Notes
furnished for the Trustee prior to such solicitation pursuant to Section 2.05
hereof or (ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Senior Note thereafter authenticated. The
Company in exchange for all Senior Notes may issue and the Trustee shall
authenticate new Senior Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior
Note shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company and the Subsidiary Guarantors may not sign an amendment or
supplemental Indenture until their respective Boards of Directors approve it. In
signing or refusing to sign any amended or supplemental indenture the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture, that it is not inconsistent herewith, and that it
will be valid and binding upon the Company and the Subsidiary Guarantors in
accordance with its terms.
ARTICLE 10.
GUARANTEE OF SENIOR NOTES
SECTION 10.01. SUBSIDIARY GUARANTEE.
Subject to Section 10.06 hereof, each of the Subsidiary
Guarantors hereby, jointly and severally, unconditionally guarantees to each
Holder of a Senior Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Senior Notes and the Obligations of the
Company hereunder and thereunder, that: (a) the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Senior Notes will be promptly
paid in full when due, subject to any applicable grace period, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal, premium, if any, (to the extent permitted by law) interest on any
interest, if any, and Liquidated Damages, if any, on the Senior Notes, and all
other payment Obligations of the Company to the Holders or the Trustee hereunder
or thereunder will be promptly paid in full and performed, all in accordance
with the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Senior Notes or any of such other Obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the
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extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration, redemption or otherwise. Failing payment when so due
of any amount so guaranteed or any performance so guaranteed for whatever reason
the Subsidiary Guarantors will be jointly and severally obligated to pay the
same immediately. An Event of Default under this Indenture or the Senior Notes
shall constitute an event of default under the Subsidiary Guarantees, and shall
entitle the Holders to accelerate the Obligations of the Subsidiary Guarantors
hereunder in the same manner and to the same extent as the Obligations of the
Company. The Subsidiary Guarantors hereby agree that their Obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Senior Notes or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Subsidiary Guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
Obligations contained in the Senior Notes and this Indenture. If any Holder or
the Trustee is required by any court or otherwise to return to the Company, the
Subsidiary Guarantors, or any Senior Note Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or the
Subsidiary Guarantors, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it shall not be entitled to, and hereby
waives, any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as
between the Subsidiary Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Obligations guaranteed
hereby may be accelerated as provided in Article 6 hereof for the purposes of
its Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed thereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Subsidiary
Guarantor for the purpose of its Subsidiary Guarantee. The Subsidiary Guarantors
shall have the right to seek contribution from any non-paying Subsidiary
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantees.
SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section
10.01 hereof, each Subsidiary Guarantor hereby agrees that a notation of such
Subsidiary Guarantee substantially in the form of Exhibit E hereto shall be
endorsed by manual or facsimile signature by an Officer of such Subsidiary
Guarantor on each Senior Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Subsidiary Guarantor, by
manual or facsimile signature, by an Officer of such Subsidiary Guarantor.
Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee set forth in Section 10.01 hereof shall remain in full force and
effect notwithstanding any failure to endorse on each Senior Note a notation of
such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Senior Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary
Guarantors.
SECTION 10.03. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
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(a) Except as set forth in Articles 4 and 5 hereof, nothing contained
in this Indenture shall prohibit a merger between a Subsidiary Guarantor and
another Subsidiary Guarantor or a merger between a Subsidiary Guarantor and the
Company.
(b) No Subsidiary Guarantor shall consolidate with or merge with or
into (whether or not such Subsidiary Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Subsidiary
Guarantor unless, other than with respect to a merger between a Subsidiary
Guarantor and another Subsidiary Guarantor or a merger between a Subsidiary
Guarantor and the Company, (i) subject to the provisions of Section 10.04
hereof, the Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture substantially in the
form of Exhibit F hereto, under the Senior Notes and this Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; (iii) such Subsidiary Guarantor, or any Person formed by or
surviving any such consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or greater than
the Consolidated Net Worth of such Subsidiary Guarantor immediately preceding
the transaction; and (iv) the Company would be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
(c) In the case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and substantially in the form of Exhibit F
hereto, of the Subsidiary Guarantee endorsed upon the Senior Notes and the due
and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Subsidiary Guarantor, such successor Person
shall succeed to and be substituted for the Subsidiary Guarantor with the same
effect as if it had been named herein as a Subsidiary Guarantor; provided that,
solely for purposes of computing Consolidated Net Income for purposes of clause
(b) of the first paragraph of Section 4.07 hereof, the Consolidated Net Income
of any Person other than the Company and its Subsidiaries shall only be included
for periods subsequent to the effective time of such merger, consolidation,
combination or transfer of assets. Such successor Person thereupon may cause to
be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Senior Notes issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee. All of the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
SECTION 10.04. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the
assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) shall be released and relieved of any obligations
under its Subsidiary Guarantee; provided that (i) in the event of an Asset Sale,
the Net Proceeds from such sale or other dispositions are treated in accordance
with the provisions of Section 4.10 hereof and (ii) the Company is in compliance
with all other provisions of this Indenture applicable to such disposition. Upon
delivery by the Company to the Trustee of an Officers' Certificate to the effect
of the foregoing, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Subsidiary Guarantor from its Obligation
under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its
Obligations under its Subsidiary Guarantee shall remain liable for the full
amount of principal of, premium, if any, interest and Liquidated Damages, if
any, on the Senior Notes and for the other Obligations of such Subsidiary
Guarantor under this Indenture as provided in this Article 10.
SECTION 10.05. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY.
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For purposes hereof, each Subsidiary Guarantor's liability
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Senior Notes and this Indenture and (ii) the amount, if
any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as
such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of
the State of New York) or (B) left such Subsidiary Guarantor with unreasonably
small capital at the time its Subsidiary Guarantee of the Senior Notes was
entered into; provided that, it will be a presumption in any lawsuit or other
proceeding in which a Subsidiary Guarantor is a party that the amount guaranteed
pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above
unless any creditor, or representative of creditors of such Subsidiary
Guarantor, or debtor in possession or trustee in bankruptcy of the Subsidiary
Guarantor, otherwise proves in such a lawsuit that the aggregate liability of
the Subsidiary Guarantor is the amount set forth in clause (ii) above. In making
any determination as to solvency or sufficiency of capital of a Subsidiary
Guarantor in accordance with the previous sentence, the right of such Subsidiary
Guarantor to contribution from other Subsidiary Guarantors, and any other rights
such Subsidiary Guarantor may have, contractual or otherwise, shall be taken
into account.
SECTION 10.06. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 10 shall in each case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 10 in place of the Trustee
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company, any Subsidiary
Guarantor or the Trustee to the others is duly given if in writing and delivered
in Person or mailed by first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the others' address:
If to the Company and/or any Subsidiary Guarantor:
Paragon Corporate Holdings Inc.
5700 West Touhy Avenue
Niles, Illinois 60714
Telecopier No.: (847) 779-1900
Attention: Gerald McConnell
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Telecopier No.: (216) 479-8780
Attention: David Zagore, Esq.
If to the Trustee:
61
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Norwest Bank Minnesota, National Association
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Telecopier No.: (612) 667-9825
Attention: Corporate Trust Services
The Company, any Subsidiary Guarantor or the Trustee, by
notice to the others may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail to its address shown on the register kept by the Registrar. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF
SENIOR NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Senior
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any
Subsidiary Guarantor to the Trustee to take any action under this Indenture, the
Company or such Subsidiary Guarantor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
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(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Subsidiary Guarantor, as such,
shall have any liability for any obligations of the Company or such Subsidiary
Guarantor under the Senior Notes, the Subsidiary Guarantees, or this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Senior Notes and the Subsidiary Guarantees.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company and the Subsidiaries Guarantors
in this Indenture, the Senior Notes and the Subsidiary Guarantees shall bind
their respective successors and assigns. All agreements of the Trustee in this
Indenture shall bind its successors and assigns.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture, the Senior Notes or
in the Subsidiary Guarantees shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
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The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[signature page follows]
64
<PAGE> 72
SIGNATURES
Dated as of April 1, 1998
PARAGON CORPORATE HOLDINGS INC.
BY: /s/ Gerald J. McConnell
-----------------------------
Name: Gerald J. McConnell
Title: President & CEO
A.B. DICK COMPANY
BY: /s/ Gerald J. McConnell
-----------------------------
Name: Gerald J. McConnell
Title: President & CEO
CURTIS INDUSTRIES, INC.
BY: /s/ A. Keith Drewett
-----------------------------
Name: A. Keith Drewett
Title: Senior Vice President
CURTIS SUB, INC.
BY: /s/ A. Keith Drewett
-----------------------------
Name: A. Keith Drewett
Title: Senior Vice President
ITEK GRAPHIX, INC.
BY: /s/ Gerald J. McConnell
-----------------------------
Name: Gerald J. McConnell
Title: President
65
<PAGE> 73
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
BY: /s/ Curtis D. Schwegman
--------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
66
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EXHIBIT A-1
(Face of Senior Note)
==============================================================================
CUSIP/CINS _______
9 5/8% [Series A] [Series B] Senior Notes due 2008
No. 1 $_______________
PARAGON CORPORATE HOLDINGS INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
___________ Dollars on April 1, 2008.
Interest Payment Dates: April 1, and October 1
Record Dates: March 15, and September 15
DATED: APRIL 1, 1998
PARAGON CORPORATE HOLDINGS INC.
BY:
________________________________
Name:
Title:
This is one of the [Global]
Senior Notes referred to in the
within-mentioned
Indenture:
Norwest Bank Minnesota, National Association,
as Trustee
By:_________________________
Name:
Title:
===============================================================================
A-1
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(Back of Senior Note)
9 5/8% [Series A] [Series B] Senior Notes due 2008
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD
SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1 INTEREST. Paragon Corporate Holdings Inc., a Delaware
corporation, or its successor (the "Company"), promises to pay interest on the
principal amount of this Senior Note at 9 5/8% per annum from April
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1, 1998 until maturity and shall pay the Liquidated Damages, if any, payable
pursuant to Section 5 of the Registration Rights Agreement referred to below.
The Company will pay interest and Liquidated Damages semi-annually on April 1
and October 1 of each year, or if any such day is not a Business Day, on the
next succeeding Business Day (each an "Interest Payment Date"). Interest on the
Senior Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of issuance; provided that
if there is no existing Default in the payment of interest, and if this Senior
Note is authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date is October 1, 1998. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Senior Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Senior Notes (except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Senior Notes at the close of business on
the March 15 or September 15 next preceding the Interest Payment Date, even if
such Senior Notes are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.13 of the Indenture with
respect to defaulted interest. The Senior Notes shall be payable as to
principal, premium, if any, interest and Liquidated Damages, if any, at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds shall be required with
respect to principal of, and interest, premium and Liquidated Damages, if any,
on, all Global Notes and all other Senior Notes the Holders of which shall have
provided written wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank
Minnesota, National Association, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Senior Notes under an
Indenture dated as of April 1, 1998 ("Indenture") among the Company, the
Subsidiary Guarantors and the Trustee. The terms of the Senior Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"). The Senior Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Senior Notes are general unsecured Obligations of the Company limited
to $115,000,000 in aggregate principal amount, plus amounts, if any, sufficient
to pay premium, if any, interest or Liquidated Damages, if any, on outstanding
Senior Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Senior Notes
shall not be redeemable at the Company's option prior to April 1, 2003.
Thereafter, the Senior Notes shall be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below together with accrued and unpaid interest and any Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on April 1 of the years indicated below:
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Year Percentage
2003...............................................................104.8125%
2004...............................................................103.2083%
2005...............................................................101.6042%
2006 and thereafter................................................100.0000%
Notwithstanding the foregoing, at any time prior to April 1,
2001, the Company may on any one or more occasions redeem up to 331/3% of the
original aggregate principal amount of Senior Notes at a redemption price of
109.625% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date with the net proceeds of an
offering of common stock of the Company; provided that at least 662/3% of the
original aggregate principal amount of the Senior Notes originally issued remain
outstanding immediately after the occurrence of any such redemption; and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of any such.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
date of purchase. Within 10 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control setting forth the procedures governing the
Change of Control Offer required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds at an offer price in cash equal to 100% of
principal amount thereof, plus accrued and unpaid interest, and Liquidated
Damages thereon, if any, to the date of purchase in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for any general
corporate purposes. If the aggregate principal amount of Senior Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior Notes to be purchased on a pro rata basis.
(c) Holders of the Senior Notes that are the subject of an
offer to purchase will receive a Change of Control Offer or Asset Sale Offer
from the Company prior to any related purchase date and may elect to have such
Senior Notes purchased by completing the form titled "Option of Holder to Elect
Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Senior Notes are to be redeemed at its registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder are
to be redeemed. On and after the redemption date, interest and Liquidated
Damages, if any, ceases to accrue on the Senior Notes or portions thereof called
for redemption.
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9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in initial denominations of $1,000 and integral
multiples of $1,000. The transfer of the Senior Notes may be registered and the
Senior Notes may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Senior Note or portion of a
Senior Note selected for redemption, except for the unredeemed portion of any
Senior Note being redeemed in part. Also, it need not exchange or register the
transfer of any Senior Notes for a period of 15 days before a selection of
Senior Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior
Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture, the Senior Notes and the Subsidiary Guarantees may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Senior Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of or, tender offer
or exchange offer for Senior Notes) and any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, interest or Liquidated Damages, if any, on the Senior Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of the Indenture, the Senior Notes or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with a tender offer or exchange offer for Senior
Notes).
Without the consent of any Holder of Senior Notes, the Company
and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees
or the Senior Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Senior Notes in addition to or in place of certificated
Senior Notes, to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to Holders of Senior Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Senior Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act or to allow any Subsidiary Guarantor to
guarantee the Senior Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on or Liquidated
Damages, if any, with respect to the Senior Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Senior Notes; (iii) failure
by the Company or any Subsidiary to comply with the provisions described in
Sections 3.09, 4.07, 4.09, 4.10, 4.13, 4.14, 4.19 or 5.01 of the Indenture; (iv)
failure by the Company or any Subsidiary for 60 days after notice from the
Trustee or the Holders of at least 25% in principal amount of the Senior Notes
then outstanding to comply with its other agreements in the Indenture or the
Senior Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of their its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (A) (i) is caused by a failure to
pay when due at final stated maturity (giving effect to any grace period related
thereto) any principal of or premium, if any, or interest on such Indebtedness
(a "Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and (B) in each case, the principal amount of any
such Indebtedness as to which a Payment Default shall have occurred, together
with the principal amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more; (vi) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which
judgments are not paid discharged or stayed within 60 days after their entry;
(vii) certain events of bankruptcy or insolvency with respect to the Company,
any of its Significant Subsidiaries or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary; and (viii) the termination
of the Subsidiary Guarantee of any Subsidiary Guarantor for any reason not
permitted by the
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Indenture, or the denial of any Person acting on behalf of any Subsidiary
Guarantor of its Obligations under any such Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" and the same shall become
immediately due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, any Significant Subsidiary or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary, all outstanding
Senior Notes will become due and payable without further action or notice.
Holders of the Senior Notes may not enforce the Indenture or the Senior Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding, by notice to
the Trustee, may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture,
except a continuing Default or Event of Default in the payment of interest or
Liquidated Damages, if any, on, or principal of, the Senior Notes. The Trustee
may withhold from Holders of the Senior Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal, interest or Liquidated Damages, if any) if it determines
that withholding notice is in such Holders' interest. The Company is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, the Subsidiary Guarantors or their respective
Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors
or their respective Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, incorporator or stockholder, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Senior Notes, the Indenture or the
Subsidiary Guarantees or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Senior Notes by accepting a
Senior Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Senior Notes and any
Subsidiary Guarantee.
16. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Senior Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the A/B
Exchange Registration Rights Agreement dated as of April 1, 1998, among the
Company, the Subsidiary Guarantors and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A-6
<PAGE> 80
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Paragon Corporate Holdings Inc.
5700 West Touhy Avenue
Niles, Illinois 60714
Telecopy: (847) 647-0634
Attention: President
A-7
<PAGE> 81
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date:
Your Signature:
------------------------------
(Sign exactly as your name appears on the
face of this Senior Note)
SIGNATURE GUARANTEE:
A-8
<PAGE> 82
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by
the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Senior Note
purchased by the Company pursuant to Section 4.10 or Section 4.14 of the
Indenture, state the amount you elect to have purchased: $________
Date: Your Signature:
------------------------------------
(Sign exactly as your name appears on
the Senior Note)
Tax Identification No:
------------------------
SIGNATURE GUARANTEE:
A-9
<PAGE> 83
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE1/
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease in Amount of increase in following such authorized officer
Principal Amount of Principal Amount of decrease of Trustee or Senior
Date of Exchange this Global Note this Global Note (or increase) Note Custodian
---------------- ---------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------
1 This should be included only if the Senior Note is issued in global form.
A-10
<PAGE> 84
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP/CINS______________
9 5/8% [Series A] [Series B] Senior Notes due 2008
No.___________ $_____________
PARAGON CORPORATE HOLDINGS INC.
promises to pay to Cede & Co., or registered assigns, the principal sum of
_____________ Dollars on April 1, 2008.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
DATED: APRIL 1, 1998
PARAGON CORPORATE HOLDINGS INC.
BY:
-----------------------------
Name:
Title:
This is one of the [Global] Senior Notes referred to in the within-mentioned
Indenture:
Norwest Bank Minnesota, National Association,
as Trustee
By:
-----------------------------------------
Name:
Title:
===============================================================================
A2-1
<PAGE> 85
(Back of Regulation S Temporary Global Note)
9 5/8% [Series A] [Series B] Senior Notes due 2008
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD
SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A) (1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN
"IAI"), (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN
AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY
A2-2
<PAGE> 86
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Paragon Corporate Holdings Inc., a Delaware
corporation, or its successor (the "Company"), promises to pay interest on the
principal amount of this Senior Note at 9 5/8% per annum from April 1, 1998
until maturity and shall pay the Liquidated Damages, if any, payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages semi-annually on April 1 and October 1
of each year, or if any such day is not a Business Day, on the next succeeding
Business Day (each an "Interest Payment Date"). Interest on the Senior Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that if there is no
existing Default in the payment of interest, and if this Senior Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date is October 15, 1998. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to 1% per annum in excess of the then applicable
interest rate on the Senior Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Senior Notes under the
Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on the
Senior Notes (except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Senior Notes at the close of business on
the March 15 or September 15 next preceding the Interest Payment Date, even if
such Senior Notes are canceled after such record date and on or before such
Interest Payment Date, except as provided in Section 2.13 of the Indenture with
respect to defaulted interest. The Senior Notes shall be payable as to
principal, premium, if any, interest and Liquidated Damages, if any, at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds shall be required with
respect to principal of, and interest, premium and Liquidated Damages, if any,
on, all Global Notes and all other Senior Notes the Holders of which shall have
provided written wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, Norwest Bank
Minnesota, National Association, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Senior Notes under an
Indenture dated as of April 1, 1998 ("Indenture") among the Company, the
Subsidiary Guarantors and the Trustee. The terms of the Senior Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA"). The Senior Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Senior Notes are general unsecured Obligations of the Company limited
to $115,000,000 in aggregate principal amount,
A2-3
<PAGE> 87
plus amounts, if any, sufficient to pay premium, if any, interest or Liquidated
Damages, if any, on outstanding Senior Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Senior Notes
shall not be redeemable at the Company's option prior to April 1, 2003.
Thereafter, the Senior Notes shall be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below together with accrued and unpaid interest and any Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on April 1 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2003..................................................................104.8125%
2004..................................................................103.2083%
2005..................................................................101.6042%
2006 and thereafter...................................................100.0000%
Notwithstanding the foregoing, at any time prior to April 1,
2001, the Company may on any one or more occasions redeem up to 331/3% of the
original aggregate principal amount of Senior Notes at a redemption price of
109.625% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date with the net proceeds of an
offering of common stock of the Company; provided that at least 662/3% of the
original aggregate principal amount of the Senior Notes originally issued remain
outstanding immediately after the occurrence of any such redemption; and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of any such.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
date of purchase. Within 10 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control setting forth the procedures governing the
Change of Control Offer required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds at an offer price in cash equal to 100% of
principal amount thereof, plus accrued and unpaid interest, and Liquidated
Damages thereon, if any, to the date of purchase in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Senior Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for any general
corporate purposes. If the aggregate principal amount of Senior Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior Notes to be purchased on a pro rata basis.
(c) Holders of the Senior Notes that are the subject of an
offer to purchase will receive a Change of Control Offer or Asset Sale Offer
from the Company prior to any related purchase date and may elect to
A2-4
<PAGE> 88
have such Senior Notes purchased by completing the form titled "Option of Holder
to Elect Purchase" appearing below.
8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Senior Notes are to be redeemed at its registered address. Senior
Notes in denominations larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000, unless all of the Senior Notes held by a Holder are
to be redeemed. On and after the redemption date, interest and Liquidated
Damages, if any, ceases to accrue on the Senior Notes or portions thereof called
for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in initial denominations of $1,000 and integral
multiples of $1,000. The transfer of the Senior Notes may be registered and the
Senior Notes may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Senior Note or portion of a
Senior Note selected for redemption, except for the unredeemed portion of any
Senior Note being redeemed in part. Also, it need not exchange or register the
transfer of any Senior Notes for a period of 15 days before a selection of
Senior Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Global Notes only (i) on or after the
termination of the 40-day restricted period (as defined in Regulation S) and
(ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior
Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture, the Senior Notes and the Subsidiary Guarantees may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Senior Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of or, tender offer
or exchange offer for Senior Notes) and any existing Default or Event of Default
(other than a Default or Event of Default in the payment of the principal of,
premium, if any, interest or Liquidated Damages, if any, on the Senior Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of the Indenture, the Senior Notes or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with a tender offer or exchange offer for Senior
Notes).
Without the consent of any Holder of Senior Notes, the Company
and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees
or the Senior Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Senior Notes in addition to or in place of certificated
Senior Notes, to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to Holders of Senior Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Senior Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act or to allow any Subsidiary Guarantor to
guarantee the Senior Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on or Liquidated
Damages, if any, with respect to the Senior Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Senior Notes; (iii) failure
by the Company or any Subsidiary to comply with the provisions described in
Sections 3.09, 4.07, 4.09, 4.10, 4.13, 4.14, 4.19 or 5.01 of the Indenture; (iv)
failure by the Company or any Subsidiary for 60 days after notice from the
Trustee or the Holders of
A2-5
<PAGE> 89
at least 25% in principal amount of the Senior Notes then outstanding to comply
with its other agreements in the Indenture or the Senior Notes; (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of their its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (A) (i) is caused by a failure to pay when due at final stated maturity
(giving effect to any grace period related thereto) any principal of or premium,
if any, or interest on such Indebtedness (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and (B)
in each case, the principal amount of any such Indebtedness as to which a
Payment Default shall have occurred, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $5.0 million or more; (vi)
failure by the Company or any of its Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid discharged
or stayed within 60 days after their entry; (vii) certain events of bankruptcy
or insolvency with respect to the Company, any of its Significant Subsidiaries
or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary; and (viii) the termination of the Subsidiary Guarantee
of any Subsidiary Guarantor for any reason not permitted by the Indenture, or
the denial of any Person acting on behalf of any Subsidiary Guarantor of its
Obligations under any such Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Senior Notes may declare all the Senior Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" and the same shall become
immediately due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, any Significant Subsidiary or any group of Subsidiaries
that, taken together, would constitute a Significant Subsidiary, all outstanding
Senior Notes will become due and payable without further action or notice.
Holders of the Senior Notes may not enforce the Indenture or the Senior Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Holders of a majority in
aggregate principal amount of the Senior Notes then outstanding, by notice to
the Trustee, may on behalf of the Holders of all of the Senior Notes waive any
existing Default or Event of Default and its consequences under the Indenture,
except a continuing Default or Event of Default in the payment of interest or
Liquidated Damages, if any, on, or principal of, the Senior Notes. The Trustee
may withhold from Holders of the Senior Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal, interest or Liquidated Damages, if any) if it determines
that withholding notice is in such Holders' interest. The Company is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, the Subsidiary Guarantors or their respective
Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors
or their respective Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, incorporator or stockholder, of the Company or any Subsidiary
Guarantor, as such, shall have any liability for any obligations of the Company
or any Subsidiary Guarantor under the Senior Notes, the Indenture or the
Subsidiary Guarantees or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Senior Notes by accepting a
Senior Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Senior Notes and any
Subsidiary Guarantee.
16. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint
A2-6
<PAGE> 90
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Senior Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the A/B
Exchange Registration Rights Agreement dated as of April 1, 1998, among the
Company, the Subsidiary Guarantors and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Senior Notes and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Paragon Corporate Holdings Inc.
5700 West Touhy Avenue
Niles, Illinois 60714
Telecopy: (847) 647-0634
Attention: President
A2-7
<PAGE> 91
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date:
----------------------
Your Signature:
--------------------------
(Sign exactly as your name appears
on the face of this Senior Note)
SIGNATURE GUARANTEE:
A2-8
<PAGE> 92
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by
the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the
appropriate box below:
|_| Section 4.10 |_| Section 4.14
If you want to elect to have only part of the Senior Note
purchased by the Company pursuant to Section 4.10 or Section 4.14 of the
Indenture, state the amount you elect to have purchased: $___________
- -------------------------------------------------------------------------------
Date: Your Signature:
------------------ ------------------------------
(Sign exactly as your name appears
on the Senior Note)
Tax Identification No.:
----------------------
SIGNATURE GUARANTEE:
A2-9
<PAGE> 93
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of of this Global Note Signature of
decrease in Amount of increase in following such authorized officer
Principal Amount Principal Amount decrease of Trustee or Senior
Date of Exchange of this Global Note of this Global Note (or increase) Note Custodian
---------------- ------------------- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 94
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
PARAGON CORPORATE HOLDINGS INC.
5700 West Touhy Avenue
Niles, Illinois 60714
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Administration
Re: 9 5/8% Senior Notes due 2008
Reference is hereby made to the Indenture, dated as of April
1, 1998 (the "INDENTURE"), among Paragon Corporate Holdings Inc., as issuer (the
"COMPANY"), the Subsidiary Guarantors listed on the signature pages thereto and
Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
______________, (the "TRANSFEROR") owns and proposes to
transfer the Senior Note[s] or interest in such Senior Note[s] specified in
Annex A hereto, in the principal amount of $___________ in such Senior Note[s]
or interests (the "TRANSFER"), to __________ (the "TRANSFEREE"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or
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<PAGE> 95
Rule 904(b) of Regulation S under the Securities Act (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser)]. Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. |_| CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and
in accordance with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company
or a subsidiary thereof;
or
(c) |_| such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Senior
Notes at the time of transfer of less than $250,000, an Opinion of Counsel
provided by the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the IAI Global Note and/or
the Definitive Notes and in the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
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<PAGE> 96
(a) |_| CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) |_| CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) |_| CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
---------------------------------
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated: ,
--------------- ------
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<TABLE>
<CAPTION>
ANNEX A TO CERTIFICATE OF TRANSFER
<S> <C>
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _________), or
(ii) |_| Regulation S Global Note (CUSIP _________), or
(iii) |_| IAI Global Note (CUSIP ________); or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _______ ), or
(ii) |_| Regulation S Global Note (CUSIP ________), or
(iii) |_| IAI Global Note (CUSIP ________); or
(iv) |_| Unrestricted Global Note (CUSIP ________); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
</TABLE>
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<PAGE> 98
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
PARAGON CORPORATE HOLDINGS INC.
5700 West Touhy Avenue
Niles, Illinois 60714
Norwest Bank Minnesota, National Association
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Administration
Re: 9 5/8% Senior Notes due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of April
1, 1998 (the "INDENTURE"), among Paragon Corporate Holdings Inc., as issuer (the
"COMPANY"), the Subsidiary Guarantors listed on the signature pages thereto and
Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
____________, (the "OWNER") owns and proposes to exchange the
Senior Note[s] or interest in such Senior Note[s] specified herein, in the
principal amount of $____________ in such Senior Note[s] or interests (the
"EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being
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<PAGE> 99
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note, |_| IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
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<PAGE> 100
This certificate and the statements
contained herein are made for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By: _______________________________
Name:
Title:
Dated: ________________, ____
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<PAGE> 101
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
PARAGON CORPORATE HOLDINGS INC.
5700 West Touhy Avenue
Niles, Illinois 60714
Norwest Bank Minnesota
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Administration
Re: 9 5/8% Senior Notes due 2008
Reference is hereby made to the Indenture, dated as of April
1, 1998 (the "INDENTURE"), among Paragon Corporate Holdings Inc., as issuer (the
"COMPANY"), the Subsidiary Guarantors listed on the signature pages thereto and
Norwest Bank Minnesota, National Association, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer
of the Senior Notes or any interest therein is subject to certain restrictions
and conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Senior Notes or any
interest therein except in compliance with, such restrictions and conditions and
the United States Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale
of the Senior Notes have not been registered under the Securities Act, and that
the Senior Notes and any interest therein may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell the Senior Notes or any interest therein, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (c) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of a principal amount of Senior Notes, at
the time of transfer of less than $250,000, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
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<PAGE> 102
3. We understand that, on any proposed
resale of the Senior Notes or beneficial interest therein, we will be required
to furnish to you and the Company such certifications, legal opinions and other
information as you and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further understand
that the Senior Notes purchased by us will bear a legend to the foregoing
effect. We further understand that any subsequent transfer by us of the Senior
Notes or beneficial interest therein acquired by us must be effected through one
of the Placement Agents.
4. We are an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Senior Notes, and we and any accounts for which we are acting
are each able to bear the economic risk of our or its investment.
5. We are acquiring the Senior Notes or
beneficial interest therein purchased by us for our own account or for one or
more accounts (each of which is an institutional "accredited investor") as to
each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE> 103
EXHIBIT E
FORM OF SUBSIDIARY GUARANTEE
Subject to Section 10.06 of the Indenture, each
Subsidiary Guarantor hereby, jointly and severally, unconditionally guarantees
to each Holder of a Senior Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Senior Notes and the Obligations of the
Company under the Senior Notes or under the Indenture, that: (a) the principal
of, premium, if any, interest and Liquidated Damages, if any, on the Senior
Notes will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration, redemption or otherwise, and
interest on overdue principal, premium, if any, (to the extent permitted by law)
interest on any interest, if any, and Liquidated Damages, if any, on the Senior
Notes and all other payment Obligations of the Company to the Holders or the
Trustee under the Indenture or under the Senior Notes will be promptly paid in
full and performed, all in accordance with the terms thereof; and (b) in case of
any extension of time of payment or renewal of any Senior Notes or any of such
other payment Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration,
redemption or otherwise. Failing payment when so due of any amount so guaranteed
or any performance so guaranteed for whatever reason, the Subsidiary Guarantors
will be jointly and severally obligated to pay the same immediately.
The obligations of the Subsidiary Guarantor to the
Holders and to the Trustee pursuant to this Subsidiary Guarantee and the
Indenture are expressly set forth in Article 10 of the Indenture, and reference
is hereby made to such Indenture for the precise terms of this Subsidiary
Guarantee. The terms of Articles 10 of the Indenture are incorporated herein by
reference. This Subsidiary Guarantee is subject to release as and to the extent
provided in Section 10.04 of the Indenture.
This is a continuing Guarantee and shall remain in
full force and effect and shall be binding upon each Subsidiary Guarantor and
its respective successors and assigns to the extent set forth in the Indenture
until full and final payment of all of the Company's Obligations under the
Senior Notes and the Indenture and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a Subsidiary Guarantee of payment and not a guarantee of collection.
This Subsidiary Guarantee shall not be valid or
obligatory for any purpose until the certificate of authentication on the Senior
Note upon which this Subsidiary Guarantee is noted shall have been executed by
the Trustee under the Indenture by the manual signature of one of its authorized
officers.
For purposes hereof, each Subsidiary Guarantor's
liability shall be limited to the lesser of (i) the aggregate amount of the
Obligations of the Company under the Senior Notes and the Indenture and (ii) the
amount, if any, which would not have (A) rendered such Subsidiary Guarantor
"insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and
Creditor Law of the State of New York) or (B) left such Subsidiary Guarantor
with unreasonably small capital at the time its Subsidiary Guarantee of the
Senior Notes was entered into; provided that, it will be a presumption in any
lawsuit or other proceeding in which a Subsidiary Guarantor is a party that the
amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth
in clause (i) above unless any creditor, or representative of creditors of such
Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of such
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of the Subsidiary Guarantor is limited to the amount set forth in
clause (ii) above. The Indenture provides that, in making any determination as
to the solvency or sufficiency of capital of a Subsidiary Guarantor in
accordance with the previous sentence, the right of such Subsidiary Guarantors
to contribution from other Subsidiary Guarantors and any other rights such
Subsidiary Guarantors may have, contractual or otherwise, shall be taken into
account.
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<PAGE> 104
Capitalized terms used herein have the same meanings
given in the Indenture unless otherwise indicated.
A.B. DICK COMPANY
By: _______________________________
Name:
Title:
CURTIS INDUSTRIES, INC.
By: _______________________________
Name:
Title:
CURTIS SUB, INC.
By: _______________________________
Name:
Title:
ITEK GRAPHIX CORP.
By: _______________________________
Name:
Title:
E-2
<PAGE> 105
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of ___________, between [Subsidiary Guarantor] (the "New Subsidiary
Guarantor"), a subsidiary of Paragon Corporate Holdings, a Delaware corporation
(the "Company"), and Norwest Bank Minnesota, National Association, as trustee
under the indenture referred to below (the "Trustee"). Capitalized terms used
herein and not defined herein shall have the meaning ascribed to them in the
Indenture (as defined below).
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and
delivered to the Trustee an indenture (the "Indenture"), dated as of April 1 ,
1998 providing for the issuance of an aggregate principal amount of up to
$150,000,000 of 9 5/8% Senior Notes due 2008 (the "Senior Notes");
WHEREAS, Section 10.05 of the Indenture provides
that under certain circumstances the Company may cause, and Section 10.03 of the
Indenture provides that under certain circumstances the Company must cause,
certain of its subsidiaries to execute and deliver to the Trustee a supplemental
indenture pursuant to which such subsidiaries shall unconditionally guarantee
all of the Company's Obligations under the Senior Notes pursuant to a Subsidiary
Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the New Subsidiary Guarantor and the Trustee mutually covenant and
agree for the equal and ratable benefit of the Holders of the Senior Notes as
follows:
1. CAPITALIZED TERMS. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New
Subsidiary Guarantor hereby agrees, jointly and severally with all other
Subsidiary Guarantors, to guarantee the Company's Obligations under the Senior
Notes and the Indenture on the terms and subject to the conditions set forth in
Article 10 of the Indenture and to be bound by all other applicable provisions
of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or
future director, officer, employee, incorporator, shareholder or agent of any
Subsidiary Guarantor, as such, shall have any liability for any obligations of
the Company or any Subsidiary Guarantor under the Senior Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Senior Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior
Notes.
4. NEW YORK LAW TO GOVERN. The internal law of the
State of New York shall govern and be used to construe this Supplemental
Indenture.
5. COUNTERPARTS The parties may sign any number
of copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
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<PAGE> 106
6. EFFECT OF HEADINGS. The Section headings herein
are for convenience only and shall not affect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible
in any manner whatsoever for or in respect of the validity or sufficiency of
this Supplemental Indenture or for or in respect of the correctness of the
recitals of fact contained herein, all of which recitals are made solely by the
New Subsidiary Guarantor.
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<PAGE> 107
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: ________________ [NAME OF NEW SUBSIDIARY GUARANTOR]
By: ____________________________
Name:
Title:
Dated: ________________ NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By: ____________________________
Name:
Title:
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<PAGE> 108
SCHEDULE I
SCHEDULE OF SUBSIDIARY GUARANTORS
The following schedule lists each Subsidiary Guarantor under
the Indenture as of the Issue Date:
A.B. Dick Company
Curtis Industries, Inc.
Curtis Sub, Inc.
Itek Graphix, Inc.
<PAGE> 1
Exhibit 4.2
===============================================================================
PARAGON CORPORATE HOLDINGS INC.
----------------------------------------
$115,000,000
9 5/8% SERIES A SENIOR NOTES DUE 2008
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PURCHASE AGREEMENT
DATED AS OF MARCH 27, 1998
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DONALDSON, LUFKIN & JENRETTE CIBC OPPENHEIMER CORP.
SECURITIES CORPORATION
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March 27, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC OPPENHEIMER CORP.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Paragon Corporate Holdings Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell an aggregate of $115,000,000 in principal
amount of its 9 5/8% Series A Senior Notes due 2008 (the "SERIES A SENIOR
NOTES") to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and CIBC
Oppenheimer Corp. (each, an "INITIAL PURCHASERS" and, collectively, the "INITIAL
PURCHASERS"), subject to the terms and conditions set forth herein. The Series A
Senior Notes will be issued pursuant to the provisions of an indenture (the
"INDENTURE") to be dated as of April 1, 1998 among the Company, the Subsidiary
Guarantors (as defined below) and Norwest Bank Minnesota, N.A., as trustee (the
"TRUSTEE"). The Series A Senior Notes and the Series B Senior Notes (as defined
below) issuable in exchange therefor are collectively referred to herein as the
"SENIOR NOTES." The Senior Notes will be, jointly and severally, guaranteed on a
senior unsecured basis by each of the entities listed on Schedule I hereto (each
a "SUBSIDIARY GUARANTOR" and together, the "SUBSIDIARY GUARANTORS"), being the
Company's only domestic subsidiaries as of the Closing Date (as defined below).
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
The proceeds to the Company from the sale to the Initial Purchasers of
the Senior Notes (the "PROCEEDS") will be used (i) to refinance substantially
all indebtedness of the Company, including indebtedness incurred in connection
with the acquisitions of A.B. Dick Company ("A.B. DICK") and Curtis Industries,
Inc. ("CURTIS"); (ii) for general corporate purposes, including to fund future
acquisitions to the extent permitted by the Indenture; (iii) to pay fees and
expenses incurred in connection with the offering of the Series A Senior Notes;
and (iv) to fund a dividend to the sole stockholder of the Company.
On or prior to the Closing Date, the Company will enter into a
revolving credit facility (the "NEW CREDIT AGREEMENT") with Key Corporate
Capital Inc. and the other lenders thereunder. The New Credit Agreement will be
guaranteed by A.B. Dick and Curtis
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pursuant to separate subsidiary guaranty agreements (each, a "SUBSIDIARY CREDIT
GUARANTY AGREEMENT") to be executed by each of them and will be secured by a
first priority lien on the accounts receivable and inventory of each of A.B.
Dick and Curtis pursuant to separate security agreements (each, a "SUBSIDIARY
SECURITY AGREEMENT") to be executed by each of them.
1. OFFERING MEMORANDUM. The Series A Senior Notes will be offered and sold to
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "ACT"). The
Company and the Subsidiary Guarantors have prepared a preliminary offering
memorandum, dated March 13, 1998 (the "PRELIMINARY OFFERING MEMORANDUM") and a
final offering memorandum, dated March 27, 1998 (the "OFFERING MEMORANDUM"),
relating to the Series A Senior Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Senior Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7)
OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"), (2) AGREES THAT IT
WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
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MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO
AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Senior Notes set forth opposite the name of such Initial Purchaser
on Schedule II hereto at a purchase price equal to 97% of the principal amount
thereof (the "PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchasers have advised the Company
that the Initial Purchasers will make offers (the "EXEMPT RESALES") of the
Series A Senior Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBS"), and (ii) to persons permitted to purchase
the Series A Senior Notes in offshore transactions in reliance
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upon Regulation S under the Act (each, a "REGULATION S PURCHASER") (such persons
specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE
PURCHASERS"). The Initial Purchasers will offer the Series A Senior Notes to
Eligible Purchasers initially at a price equal to 100% of the principal amount
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Senior Notes
will have the registration rights set forth in the registration rights agreement
(the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Senior
Notes constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the Subsidiary Guarantors will agree to file with the Securities
and Exchange Commission (the "COMMISSION") under the circumstances set forth
therein, (i) a registration statement under the Act (the "EXCHANGE OFFER
REGISTRATION STATEMENT") relating to the Company's ___% Series B Senior Notes
due 2008 (the "SERIES B SENIOR NOTES"), to be offered in exchange for the Series
A Senior Notes (such offer to exchange being referred to as the "EXCHANGE
OFFER") and the Subsidiary Guarantees thereof and/or (ii) a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT"
and, together with the Exchange Offer Registration Statement, the "REGISTRATION
STATEMENTS") relating to the resale by certain holders of the Series A Senior
Notes and to use their reasonable best efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer. This Agreement, the Indenture, the Notes, the Subsidiary Guarantees and
the Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Senior Notes shall be made at the offices of Latham & Watkins
or such other location as may be mutually acceptable. Such delivery and
payment shall be made at 9:00 a.m. New York City time, on April 1, 1998
or at such other time on the same date or such other date as shall be
agreed upon by the Initial Purchasers and the Company in writing. The
time and date of such delivery and the payment for the Series A Senior
Notes are herein called the "CLOSING DATE."
(b) One or more of the Series A Senior Notes in definitive
global form, registered in the name of Cede & Co., as nominee of the
Depository Trust Company ("DTC"), having an aggregate principal amount
corresponding to the aggregate principal amount of the Series A Senior
Notes (collectively, the "GLOBAL NOTE"), shall be delivered by
the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by
the Company against
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payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in immediately available federal funds to the order of the
Company or as the Company may direct. The Global Note shall be made
available to the Initial Purchasers for inspection not later than 9:30
a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE SUBSIDIARY GUARANTORS. Each of the
Company and the Subsidiary Guarantors hereby agrees with the Initial Purchasers
as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, to confirm such advice in writing,
(i) of receipt of any notification with respect to the issuance by any
state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Series A
Senior Notes or the Subsidiary Guarantees for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section
5(f) hereof, or the initiation of any proceeding for such purpose by
any state securities commission or other regulatory authority and (ii)
of the happening of any event that makes any statement of a material
fact made in the Preliminary Offering Memorandum or the Offering
Memorandum (or any amendment or supplement thereto) untrue or that
requires the making of any additions to or changes in the Preliminary
Offering Memorandum or the Offering Memorandum (or any amendment or
supplement thereto) in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
The Company shall use its reasonable best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption from qualification of any Series A Senior Notes under any
state securities or Blue Sky laws, and, if at any time any state
securities commission or other regulatory authority shall issue any
stop order or order suspending the qualification or exemption from
qualification of any Series A Senior Notes under any state securities
or Blue Sky laws, the Company shall use its reasonable best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time.
(b) Subject to paragraph (e) below, to furnish to the Initial
Purchasers and those persons identified by the Initial Purchasers to
the Company, without charge, as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request.
The Company consents to the lawful use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) Not to amend or supplement the Offering Memorandum,
whether before or after the Closing Date, unless (i) the Initial
Purchasers have been previously advised thereof and (ii) the Initial
Purchasers have not reasonably objected thereto
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(unless in the reasonable judgment of counsel to the Company such
amendment or supplement is necessary to make the statements made in the
Offering Memorandum not misleading); and to prepare, promptly upon the
Initial Purchasers' request, any amendment or supplement to the
Offering Memorandum that may be reasonably deemed to be necessary or
advisable in connection with Exempt Resales (except to the extent any
such amendment or supplement requested would, in the judgment of
counsel to the Company, render the statements made in the Offering
Memorandum, as proposed to be amended or supplemented, misleading).
(d) Subject to paragraph (e) below, if, after the date hereof
and prior to the completion of Exempt Resales of the Series A Senior
Notes by the Initial Purchasers, any event shall occur as a result of
which, in the reasonable judgment of the Company or the Initial
Purchasers, it becomes necessary to amend or supplement the Offering
Memorandum to comply with any law, statute, rule or regulation or to
make the statements therein, in the light of the circumstances at the
time that the Offering Memorandum is delivered to an Eligible Purchaser
which is a prospective purchaser of the Series A Senior Notes, not
misleading, to promptly prepare an appropriate amendment or supplement
to the Offering Memorandum so that the statements in the Offering
Memorandum, as so amended or supplemented, will comply with all
applicable laws, statutes, rules and regulations and will not, in the
light of the circumstances at the time it is so delivered, be
misleading.
(e) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable Shelf Registration Statement if, in the
reasonable judgment of the Initial Purchasers, the Initial Purchasers
or any of their respective affiliates (as such term is defined in the
rules and regulations under the Act) are required to deliver a
prospectus or an offering memorandum in connection with sales of, or
market-making activities with respect to, the Senior Notes, (A) to
periodically amend or supplement the Offering Memorandum so that the
information contained in the Offering Memorandum complies with the
requirements of Rule 144A of the Act, (B) to amend or supplement the
Offering Memorandum when necessary to reflect any material changes in
the information provided therein so that the Offering Memorandum will
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
light of the circumstances existing as of the date the Offering
Memorandum is so delivered, not misleading and (C) to provide each
Initial Purchaser with copies of each such amended or supplemented
Offering Memorandum as each Initial Purchaser may reasonably request.
Subject to the terms of the Registration Rights Agreement,
following the consummation of the Exchange Offer or the effectiveness
of an applicable Shelf Registration Statement and for so long as the
Senior Notes are outstanding, if, in the reasonable judgment of the
Initial Purchasers, the Initial Purchasers or any of their
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respective affiliates (as such term is defined in the rules and
regulations under the Act) are required to deliver a prospectus in
connection with sales of, or market-making activities with respect to,
such securities, (A) to periodically amend the applicable Registration
Statement so that the information contained therein complies with the
requirements of Section 10(a) of the Act, (B) to amend the applicable
Registration Statement or supplement the related prospectus or the
documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the Registration
Statement and the prospectus will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances existing as
of the date the prospectus is so delivered, not misleading and (C) to
provide each Initial Purchaser with copies of each amendment or
supplement filed and such other documents as each Initial Purchaser may
reasonably request.
The Company hereby expressly acknowledges that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each Offering Memorandum,
Registration Statement, prospectus, amendment or supplement referred to
in this Section 5(e).
(f) To (i) cooperate with the Initial Purchasers and counsel
for the Initial Purchasers in connection with the registration or
qualification of the Series A Senior Notes and the Subsidiary
Guarantees for offer and sale by the Initial Purchasers under the state
securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably request, (ii) continue such qualification in
effect so long as required for Exempt Resales of the Series A Senior
Notes and the Subsidiary Guarantees and (iii) file such consents to
service of process or other documents as may be necessary in order to
effect such qualification; provided that in no event shall the Company
or any Subsidiary Guarantor be obligated to qualify to do business in
any jurisdiction where it is not now so qualified, or take any action
which would subject it to general consent to service of process or
taxation, other than as to matters and transactions relating to the
Preliminary Offering Memorandum and the Offering Memorandum or Exempt
Resales, in any jurisdiction where it is not now so subject.
(g) From and after the effective date of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement
and as long as any of the Senior Notes are outstanding, to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and, during the period of three years
following the date of this Agreement, to deliver without charge to the
Initial Purchasers, promptly upon their becoming available, (i) all
reports or other publicly available information that the Company shall
mail or otherwise make available to its stockholders and (ii) all
reports, financial statements and proxy or
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information statements filed by the Company or the Subsidiary
Guarantors with the Commission or any national securities exchange.
(h) To use the Proceeds from the sale of the Series A Senior
Notes in the manner specified in the Offering Memorandum (and any
amendments or supplements thereto) under the caption "Use of Proceeds."
(i) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Senior Notes.
(j) To pay and be responsible for all costs, expenses, fees
and taxes in connection with, incident to or in respect of:
(1) the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial
statements and exhibits) and all amendments and supplements to
any of them;
(2) the preparation, printing and delivery of the
Operative Documents, all preliminary and final Blue Sky
memoranda and all other agreements, memoranda, correspondence
and other documents printed and delivered in connection
herewith and with the Exempt Resales (including in each case
any disbursements of counsel to the Initial Purchasers
relating to such printing and delivery; provided that such
fees and disbursements, together with any disbursements of
counsel to the Initial Purchasers reimbursed pursuant to
clause (4) below, shall not exceed $20,000);
(3) the issuance, transfer and delivery by the
Company and the Subsidiary Guarantors of the Senior Notes and
the Subsidiary Guarantees to the Initial Purchasers;
(4) the registration or qualification of the Senior
Notes and Subsidiary Guarantees for offer and sale under the
securities or Blue Sky laws of the jurisdictions referred to
in Section 5(f) hereof (including in each case, the reasonable
fees and disbursements of counsel to the Initial Purchasers
relating to such registration or qualification and memoranda
relating thereto; provided that such fees and disbursements,
together with any disbursements of counsel to the Initial
Purchasers reimbursed pursuant to clause (2) above, shall not
exceed $20,000);
(5) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum and all
amendments and
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supplements thereto as may be reasonably requested for use in
connection with the Exempt Resales;
(6) the preparation of certificates for the Senior
Notes (including, without limitation, printing and engraving
thereof);
(7) the fees, disbursements and expenses of the
Company's counsel and accountants;
(8) the rating of the Senior Notes by investment
rating agencies, if any;
(9) all expenses and listing fees in connection with
the application for quotation of the Series A Senior Notes in
the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System - PORTAL ("PORTAL");
(10) all fees and expenses of the Company in
connection with approval of the Senior Notes by DTC for
"book-entry" transfer;
(11) the fees and expenses of the Trustee and the
Trustee's counsel in connection with the Indenture and the
Senior Notes;
(12) the performance by the Company of its other
obligations under this Agreement and the other Operative
Documents; and
(13) all costs and expenses of the Exchange Offer and
any Registration Statement, as set forth in the Registration
Rights Agreement.
(k) If this Agreement shall be terminated pursuant to any of
the provisions hereof (other than a default by the Initial Purchasers)
or if for any reason the Company and the Subsidiary Guarantors shall be
unable or unwilling to perform their obligations hereunder, the Company
and the Subsidiary Guarantors shall, except as otherwise agreed by the
parties hereto, reimburse the Initial Purchasers for the fees and
expenses to be paid or reimbursed pursuant to Section 5(j) above, and
reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and expenses of counsel to the Initial
Purchasers) reasonably incurred by the Initial Purchasers in connection
with the transactions contemplated by this Agreement.
(l) During the period set forth in 5(o) hereof, to furnish to
the Initial Purchasers, as soon as they have been prepared by the
Company, a copy of any
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consolidated financial statements of the Company for any period
subsequent to the period covered by the financial statements appearing
in the Offering Memorandum.
(m) Not to distribute prior to the Closing Date any offering
material in connection with the offering and sale of the Series A
Senior Notes other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(n) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Senior Notes in
a manner that would require the registration under the Act of the sale
to the Initial Purchasers or the Eligible Purchasers of Series A Senior
Notes.
(o) For so long as any of the Senior Notes remain outstanding
and during any period in which the Company is not subject to Section 13
or 15(d) of the Exchange Act, to make available to any holder of Series
A Senior Notes in connection with any sale thereof and any prospective
purchaser of such Series A Senior Notes from such holder, the
information (the "RULE 144A INFORMATION") required by Rule 144A(d)(4)
under the Act.
(p) To cause the Exchange Offer to be made on the appropriate
form to permit registered Series B Senior Notes to be offered in
exchange for the Series A Senior Notes and to comply in all material
respects with all applicable federal and state securities laws in
connection with the Exchange Offer.
(q) To comply with its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the
representation letters of the Company to DTC relating to the approval
of the Senior Notes by DTC for "book-entry" transfer.
(r) To use its reasonable best efforts to effect the inclusion
of the Series A Senior Notes in PORTAL and to obtain approval of the
Senior Notes by DTC for "book-entry" transfer.
(s) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer
or dispose of any Senior Notes or any other debt security issued by the
Company or any of its subsidiaries (other than a private loan, credit
or financing agreement with a bank or similar financing institution) or
any security convertible into or exchangeable or exercisable for any
such debt security, for a period of 180 days after the Closing Date,
without each Initial Purchaser's prior written consent, except for (i)
sales or transfers between affiliates of
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the Company and the Company or any of its subsidiaries and (ii) the
issue and exchange of Series B Senior Notes for Series A Senior Notes
in the Exchange Offer.
(t) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(u) To do and perform all things required or necessary to be
done and performed under this Agreement by the Company that are within
its control prior to the Closing Date and to satisfy all conditions on
its part precedent to the delivery of the Series A Senior Notes that
are within its control.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SUBSIDIARY
GUARANTORS. As of the date hereof, each of the Company, and as regards itself
only, each of the Subsidiary Guarantors, represents and warrants to, and agrees
with, the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales.
The Preliminary Offering Memorandum as of its date did not, and the
Offering Memorandum as of its date does not and as of the Closing Date
will not, and any amendment or supplement thereto will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph (a)
shall not apply to statements or omissions in the Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto) made in reliance upon or in conformity with information
relating to each Initial Purchaser furnished to the Company in writing
by such Initial Purchaser expressly for use therein. The Company has no
knowledge of, and has not received any notifications with respect, to
the issuance of any stop order preventing the use of any of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act.
(b) The Company and each of its direct and indirect
subsidiaries (1) is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of
incorporation, (2) has requisite corporate power and authority to carry
on its respective business as it is currently being conducted and to
own, lease and operate its respective properties, and (3) is duly
qualified and in good standing as a foreign corporation registered to
do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not, singly or in the
aggregate, have a
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Material Adverse Effect. As used herein, "MATERIAL ADVERSE EFFECT"
shall mean any effect or group of related or unrelated effects that (i)
would be reasonably expected, individually or in the aggregate, to
result in a material adverse effect on the assets, properties,
business, results of operations, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole, or
(ii) would interfere with, adversely affect or question the validity of
(A) the execution, delivery and performance of any of the Operative
Documents, the issuance of the Senior Notes and the Subsidiary
Guarantees or the consummation of this Agreement and the transactions
contemplated hereby or (B) the performance by the Company and each of
its subsidiaries of its respective agreements and obligations under
this Agreement or the consummation of the transactions contemplated
thereby.
(c) All of the outstanding shares of capital stock of or other
ownership interests in the Company and each of its subsidiaries has
been duly authorized and validly issued, is fully paid and
nonassessable; the outstanding shares of capital stock of or other
ownership interests in each of the Company's subsidiaries have not been
issued in violation of any preemptive or similar rights and are owned
free and clear of any security interest, mortgage, pledge, claim, lien,
limitation on voting rights or encumbrance (each, a "LIEN"). There are
no outstanding subscriptions, rights, warrants or options to ----
acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any
of its subsidiaries.
(d) The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under each of
the Operative Documents and the New Credit Agreement and to consummate
the transactions contemplated by the Operative Documents and the New
Credit Agreement and to issue, sell and deliver the Series A Senior
Notes pursuant to this Agreement. To the extent a party thereto, each
of the Subsidiary Guarantors has all necessary corporate power and
authority to execute, deliver and perform its obligations under the
Operative Documents, the Subsidiary Credit Guaranty Agreements and the
Subsidiary Security Agreements and to consummate the transactions
contemplated by the Operative Documents, the Subsidiary Credit Guaranty
Agreements and the Subsidiary Security Agreements and to issue and
deliver the Subsidiary Guarantees pursuant to this Agreement. On
December 31, 1997, as adjusted to reflect the Offering and the
application of the net proceeds therefrom, the Company would have had
an authorized and outstanding consolidated cash and capitalization as
set forth in the Offering Memorandum under the caption
"Capitalization."
(e) The Company has no direct or indirect subsidiaries other
than those listed on Schedule III hereto.
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<PAGE> 14
(f) None of the Company or any of its subsidiaries is (1) in
violation of its respective charter or bylaws or (2) in default in the
performance of any term, provision, obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other
contract, lease or other instrument to which the Company or any of its
subsidiaries is a party or to which any of them or their respective
properties may be subject or bound, except, in the cause of clause (2)
above, for such defaults as would not, singly or in the aggregate, have
a Material Adverse Effect.
(g) None of (A) the execution, delivery or performance by the
Company and the Subsidiary Guarantors of this Agreement, the New Credit
Agreement, the Subsidiary Credit Guaranty Agreements, the Subsidiary
Security Agreements and the other Operative Documents, (B) the issuance
and sale of the Series A Senior Notes by the Company, (C) the issuance
of the Subsidiary Guarantees by the Subsidiary Guarantors and (D) the
consummation by the Company and the Subsidiary Guarantors of the
transactions described in the Offering Memorandum under the caption
"Use of Proceeds," will conflict with or constitute a breach of any of
the terms or provisions of, or a default under, or result in the
imposition of a Lien on any properties of the Company or any of its
subsidiaries, or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of the Company or any of its subsidiaries, (2) any
bond, debenture, note, or any other evidence of indebtedness, or any
indenture, mortgage, deed of trust or other contract, lease or other
instrument to which the Company or any of its subsidiaries is a party
or by which any of them or their property is bound, or (3) any law or
administrative regulation applicable to the Company, any of its
subsidiaries or any of their assets or properties, or any judgment,
order or decree of any court or governmental agency or authority
entered in any proceeding to which the Company or any of its
subsidiaries was or is now a party or to which any of them or their
respective properties may be subject or bound. No consent, approval,
authorization or order of, or filing or registration with, any
regulatory body, administrative agency, or other governmental agency
(except as securities or Blue Sky laws of the various states may
require) that has not been made or obtained is required for the
execution, delivery and performance of the Operative Documents, the New
Credit Agreement, the Subsidiary Credit Guaranty Agreements and the
Subsidiary Security Agreements and the valid issuance and sale of the
Series A Senior Notes and the Subsidiary Guarantees and the
transactions contemplated hereby and thereby, except where the failure
to obtain such consents, approvals, authorizations or orders would not
have a Material Adverse Effect. No consents or waivers from any person
are required to consummate the transactions contemplated by the
Operative Documents or the Offering Memorandum, other than such
consents and waivers as have been or will be obtained prior to the
Closing Date or, in the case of the Registration Rights Agreement and
the transactions contemplated thereby, will be
13
<PAGE> 15
obtained and made under the Act, the Trust Indenture Act of 1939, as
amended (the "TIA"), and state securities or Blue Sky laws and
regulations.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
(i) The Indenture has been duly authorized by the Company and
the Subsidiary Guarantors and when executed and delivered by the
Company (assuming the due execution and delivery thereof by the
Trustee) will be a legally valid and binding obligation of the Company
and the Subsidiary Guarantors, enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the terms of the Indenture.
(j) The Series A Senior Notes have been duly authorized by the
Company and, when issued, executed and authenticated in accordance with
the terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be the
legally valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the terms of the Series A Senior
Notes.
(k) The Series B Senior Notes have been duly authorized by the
Company and, when issued, executed and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, will be the legally
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Offering Memorandum contains an accurate summary, in all
material respects, of the terms of the Series B Senior Notes.
(l) The Subsidiary Guarantee to be endorsed on the Series A
Senior Notes by each Subsidiary Guarantor has been duly authorized by
such Subsidiary Guarantor. When the Series A Senior Notes have been
issued, executed and authenticated in
14
<PAGE> 16
accordance with the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement and
when each Subsidiary Guarantee to be endorsed on the Series A Senior
Notes has been duly executed and delivered in accordance with the
Indenture, the Subsidiary Guarantee of each Subsidiary Guarantor
endorsed thereon will be entitled to the benefits of the Indenture and
will be the legally valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except
as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally and
(ii) limited by general principles of equity (whether considered in a
proceeding at law or in equity). The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of the
Subsidiary Guarantees to be endorsed on the Series A Senior Notes.
(m) The Subsidiary Guarantee to be endorsed on the Series B
Senior Notes by each Subsidiary Guarantor has been duly authorized by
such Subsidiary Guarantor. When the Series B Senior Notes have been
issued, executed and authenticated in accordance with the Exchange
Offer and the Indenture and delivered in exchange for the Series A
Senior Notes in accordance with the terms of this Agreement and the
Registration Rights Agreement and when each Subsidiary Guarantee to be
endorsed on the Series B Senior Notes has been duly executed and
delivered in accordance with the Indenture, the Subsidiary Guarantee of
each Subsidiary Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the legally valid and binding
obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity). The
Offering Memorandum contains an accurate summary, in all material
respects, of the terms of the Subsidiary Guarantees to be endorsed on
the Series B Senior Notes.
(n) The Registration Rights Agreement has been duly authorized
by the Company and the Subsidiary Guarantors and when executed and
delivered by the Company and the Subsidiary Guarantors (assuming the
due execution and delivery thereof by the Initial Purchasers), will be
a legally valid and binding obligation of the Company and the
Subsidiary Guarantors, enforceable against the Company and the
Subsidiary Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally, (ii) limited by
general principles of equity (whether considered in a proceeding at law
or in equity) and (iii) limited by securities laws prohibiting or
limiting the availability of,
15
<PAGE> 17
and public policy against, indemnification or contribution. The
Offering Memorandum contains an accurate summary, in all material
respects, of the principal terms of Registration Rights Agreement.
(o) The New Credit Agreement has been duly authorized and when
executed and delivered by the Company (assuming the due execution and
delivery thereof by the other parties thereto), will be a legally valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as the enforceability thereof may
be (i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity). The
Offering Memorandum contains an accurate summary, in all material
respects, of the principal terms of the New Credit Agreement.
(p) The Subsidiary Credit Guaranty Agreement of A.B. Dick has
been duly authorized and when executed and delivered by A.B. Dick
(assuming the due execution and delivery thereof by the other parties
thereto), will be a legally valid and binding obligation of A.B. Dick,
enforceable against A.B. Dick in accordance with its terms, except as
the enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the principal terms of the
Subsidiary Credit Guaranty Agreement of A.B. Dick.
(q) The Subsidiary Credit Guaranty Agreement of Curtis has
been duly authorized and when executed and delivered by Curtis
(assuming the due execution and delivery thereof by the other parties
thereto), will be a legally valid and binding obligation of Curtis,
enforceable against Curtis in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the principal terms of the
Subsidiary Credit Guaranty Agreement of Curtis.
(r) The Subsidiary Security Agreement of A.B. Dick has been
duly authorized and when executed and delivered by A.B. Dick (assuming
the due execution and delivery thereof by the other parties thereto),
will be a legally valid and binding obligation of A.B. Dick,
enforceable against A.B. Dick in accordance with its terms, except as
the enforceability thereof may be (i) subject to applicable bankruptcy,
16
<PAGE> 18
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors rights generally and (ii) limited
by general principles of equity (whether considered in a proceeding at
law or in equity). The Offering Memorandum contains an accurate
summary, in all material respects, of the principal terms of the
Subsidiary Security Agreement of A.B. Dick.
(s) The Subsidiary Security Agreement of Curtis has been duly
authorized and when executed and delivered by Curtis (assuming the due
execution and delivery thereof by the other parties thereto), will be a
legally valid and binding obligation of Curtis, enforceable against
Curtis in accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at law or in
equity). The Offering Memorandum contains an accurate summary, in all
material respects, of the principal terms of the Subsidiary Security
Agreement of Curtis.
(t) The Tax Payment Agreement has been duly authorized and
when executed and delivered by the Company and its subsidiaries and
will be a legally valid and binding obligation of the Company and its
subsidiaries, enforceable against the Company and its subsidiaries in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity). The
Offering Memorandum contains an accurate summary, in all material
respects, of the principal terms of the Tax Payment Agreement.
(u) The Management Agreement has been duly authorized and when
executed and delivered by the Company will be a legally valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally, (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity) and
(iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution. The Offering Memorandum contains an accurate summary, in
all material respects, of the principal terms of the Management
Agreement.
(v) The Pledge Agreement is effective to create in favor of
the Trustee, for the benefit of the Holders, a legal, valid and
enforceable security interest in the Collateral described therein. When
stock certificates representing such Collateral are
17
<PAGE> 19
delivered to the Collateral Agent, the Pledge Agreement shall
constitute a fully perfected Lien on, and security interest in, all
right, title and interest of the Holders in such Collateral, as
security for the Obligations (as defined in the Indenture), in each
case prior and superior in right to any other Person, subject to the
Liens created under the New Credit Agreement.
(w) Except to the extent described in the Offering Memorandum
there is (i) no action, suit, proceeding or investigation before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the knowledge of the Company or
any Subsidiary Guarantor, threatened or contemplated to which the
Company or any of its subsidiaries is or may be a party or to which the
business or property of the Company or any of its subsidiaries is
subject, (ii) no law, statute, rule, regulation or order has been
enacted, adopted or issued by any governmental agency or, to the best
knowledge of the Company or any Subsidiary Guarantor, proposed by any
governmental body or (iii) no injunction, restraining order or order of
any nature by a federal or state court or other tribunal of competent
jurisdiction applicable to the Company or any of its subsidiaries has
been issued that, in the case of clauses (i), (ii) and (iii) above, (1)
is required to be disclosed in the Offering Memorandum and that is not
so disclosed, (2) might have a Material Adverse Effect, (3) would
interfere with or adversely affect the issuance of the Series A Senior
Notes and the Subsidiary Guarantees or (4) in any manner draw into
question the validity of the Operative Documents, the Series A Senior
Notes or the Subsidiary Guarantees.
(x) No holder of any security of the Company or any of its
subsidiaries has any right or, by reason of the execution by the
Company and the Subsidiary Guarantors of this Agreement, the New Credit
Agreement, or any other Operative Document, the issuance and sale of
the Series A Senior Notes and the Subsidiary Guarantees by the Company
and the Subsidiary Guarantors, respectively, or the consummation of the
transactions contemplated hereby and thereby, have the right to request
or demand that the Company or any of its subsidiaries register under
the Act or analogous foreign laws and regulations securities held by
them.
(y) Neither the Company nor any of its subsidiaries is
involved in any material labor dispute nor, to the knowledge of the
Company or any Subsidiary Guarantor, is any material dispute threatened
which, if such dispute were to occur, would have a Material Adverse
Effect.
(z) The Company and its subsidiaries have not violated any
applicable existing federal, state, local or foreign laws or
regulations ("LAWS") including, but not limited to (i) safety or
similar Laws applicable to its business, (ii) Laws relating to
discrimination in the hiring, promotion or pay of employees, (iii)
wages and hour
18
<PAGE> 20
Laws and (iv) provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the rules and regulations promulgated
thereunder, except for such instances of noncompliance that, in each
case, either singly or in the aggregate, would not have a Material
Adverse Effect.
(aa) Except as set forth in the Offering Memorandum, the
Company and its subsidiaries are in compliance with all applicable
existing federal, state, local and foreign laws and regulations
(collectively, "ENVIRONMENTAL LAWS") relating to protection of human
health or the environment or imposing liability or standards of conduct
concerning any Hazardous Material (as defined below), except for such
instances of noncompliance that, either singly or in the aggregate,
would not have a Material Adverse Effect. The term "HAZARDOUS MATERIAL"
means (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or
petroleum product, (iv) any polychlorinated biphenyl and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of
any other Environmental Law. Except as set forth in the Offering
Memorandum, there is no alleged liability, or, to the best knowledge
and information of the Company or any Subsidiary Guarantor, potential
liability (including, without limitation, alleged or potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal injuries,
or penalties) of the Company or any of its subsidiaries arising out of,
based on, or resulting from (1) the presence or release into the
environment of any Hazardous Material at any location currently or
previously owned by the Company or any of its subsidiaries or at any
location currently or previously used or leased by the Company or any
of its subsidiaries, or (2) any violation or alleged violation of any
Environmental Law, except in each case with respect to clause (1) and
(2), alleged or potential liabilities that, singly or in the aggregate,
would not have a Material Adverse Effect.
(bb) The Company and each of its subsidiaries owns free and
clear of all Liens or possesses or has the right to use free and clear
of any rights of third parties that adversely affects such use by the
Company and its subsidiaries, the patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
(collectively, "INTELLECTUAL PROPERTY") employed by it, except where
the failure to own, possess or use such Intellectual Property would
not, either singly or in the aggregate, have a Material Adverse Effect,
and none of the Company or any of its subsidiaries has received any
notice that its use of any Intellectual Property allegedly infringes
upon, or conflicts
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<PAGE> 21
with, rights asserted by others, or any notice of an action or
proceedings seeking to limit, cancel or question the validity of any
Intellectual Property except for such instances that, singly or in the
aggregate, would not have a Material Adverse Effect if an unfavorable
decision, judgment, ruling or finding is rendered against the Company
or any of its subsidiaries. No other person is to the Company's or any
Subsidiary Guarantor's knowledge, infringing upon any of the
Intellectual Property or has notified the Company or any of its
subsidiaries that it is claiming ownership of, or the right to use any
Intellectual Property owned by the Company or its subsidiaries. The
Company and its subsidiaries have taken all reasonable steps to protect
the Intellectual Property from infringement by any other person, except
where the failure to take such steps would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or its
subsidiaries.
(cc) Except as set forth in the Offering Memorandum, all tax
returns required to be filed by the Company and each of its
subsidiaries in any jurisdiction have been filed, and all material
taxes (including, but not limited to, withholding taxes, penalties and
interest, assessments, fees and other charges due or claimed to be due
from any taxing authority) have been paid other than those (i) being
contested in good faith and for which adequate reserves have been
provided or (ii) currently payable without penalty or interest.
(dd) Except as set forth in the Offering Memorandum or that,
singly or in the aggregate, would not have a Material Adverse Effect,
(i) the Company and each of its subsidiaries has (1) such permits,
licenses, franchises, authorizations or approvals of governmental or
regulatory authorities ("PERMITS") and has made all declarations and
filings with and notices to, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all
courts and other tribunals as are necessary to own, lease, operate and
use its respective properties and assets and to conduct their business
as presently conducted and (2) fulfilled and performed all of their
material obligations with respect to the Permits, and (ii) no event has
occurred that could allow, or after notice or lapse of time could
allow, revocation or termination of any Permit or that could result in
any other material impairment of the rights granted to the Company or
any of its subsidiaries under any Permit, and the Company has no reason
to believe that any governmental body or agency is considering
limiting, suspending or revoking any Permit.
(ee) Except as set forth in the Offering Memorandum or that,
singly or in the aggregate, would not have a Material Adverse Effect,
(i) the Company and each of its subsidiaries will have good and
marketable title, free and clear of all Liens except Liens for taxes
not yet due and payable and Liens granted pursuant to the New Credit
Agreement to all property and assets described in the Offering
Memorandum as being owned by it, (ii) each lease to which the Company
and each of its subsidiaries will be a
20
<PAGE> 22
party will be valid and binding and no default will have occurred or
will be continuing thereunder and (iii) the Company and its
subsidiaries will enjoy peaceful and undisturbed possession under all
such leases to which it will be a party as lessee.
(ff) The Company and each of its subsidiaries maintains
insurance for their respective businesses and the value of their
respective properties (including, without limitation, public liability
insurance, third party property damage insurance and replacement value
insurance) which the Company and its subsidiaries believe is adequate
in accordance with customary industry practice to protect the Company
and its subsidiaries and their businesses, and all such insurance is
outstanding and in force as of the date hereof.
(gg) The financial statements, together with related notes
forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of
the Company and its subsidiaries on the basis stated in the Offering
Memorandum at the respective dates or for the respective periods to
which they apply, and such financial statements and related schedules
and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein and comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(hh) The unaudited pro forma financial statements included in
the Preliminary Offering Memorandum and the Offering Memorandum have
been based upon the historical consolidated financial statements of the
Company, A.B. Dick and Curtis included in the Preliminary Offering
Memorandum and the Offering Memorandum and give effect to assumptions
used in the preparation thereof on a reasonable basis and in good
faith. The unaudited pro forma consolidated balance sheet at December
31, 1997 included in the Preliminary Offering Memorandum and the
Offering Memorandum is adjusted to give effect to the Offering and the
application of the net proceeds therefrom as if such transactions had
occured on December 31, 1997, as contemplated by the Preliminary
Offering Memorandum and the Offering Memorandum. The unaudited pro
forma consolidated statement of income for the year ended December 31,
1997 included in the Preliminary Offering Memorandum and the Offering
Memorandum is adjusted to give effect to the Offering, the application
of the net proceeds therefrom and the acquisition of Curtis as if such
transactions had occured on January 1, 1997, as contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum. Such pro
forma financial statements comply as to form in all material respects
with the requirements applicable to pro forma financial statements
included in registration statements on Form S-1 under the Act. The
other pro forma financial and statistical information and data included
in the
21
<PAGE> 23
Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the unaudited pro forma
consolidated financial statements. The unaudited pro forma adjustments
are based on available information and certain assumptions that the
Company believes are factually supportable.
(ii) The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; and (3) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect thereto.
(jj) Subsequent to the respective dates as of which
information is given in the Preliminary Offering Memorandum and up to
the Closing Date, except as set forth in the Offering Memorandum: (1)
neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to the Company and its subsidiaries,
taken as a whole, nor entered into any material transactions not in the
ordinary course of business; (2) there has not been any decrease in the
Company's capital stock or the capital stock of the Company's
subsidiaries or any increase in long-term indebtedness to meet working
capital requirements or any material increase in short-term
indebtedness of the Company or any of its subsidiaries, considered in
the aggregate, or any payment of or declaration to pay any dividends or
any other distribution with respect to the Company's or any of its
subsidiaries' capital stock, as the case may be; and (3) there has not
been any event or series of events that would have a Material Adverse
Effect.
(kk) Immediately prior to and upon the issuance of the Series
A Senior Notes, (i) the present fair saleable value of the assets of
the Company and its subsidiaries exceeded and will exceed the amount
that will be required to be paid on, or in respect of, the debts and
other liabilities (including contingent liabilities) of the Company and
its subsidiaries as they become absolute and matured, (ii) the assets
of the Company and its subsidiaries do not constitute and will not
constitute unreasonably small capital to carry out their businesses as
conducted or as proposed to be conducted and (iii) the Company and its
subsidiaries do not intend to, or believe that they will, incur debts
or other liabilities beyond their ability to pay such debts and
liabilities as they mature. The Company does not intend to permit any
of its subsidiaries to incur debts or other liabilities beyond their
respective ability to pay such debts and liabilities as they mature.
22
<PAGE> 24
(ll) There are no contracts, agreements or understandings
between the Company or any Subsidiary Guarantor and any person granting
such person the right to require the Company or such Subsidiary
Guarantor to file a registration statement under the Act with respect
to any securities of the Company or such Subsidiary Guarantor or to
require the Company or such Subsidiary Guarantor to include such
securities with the Senior Notes and Subsidiary Guarantees registered
pursuant to any Registration Statement.
(mm) Neither the Company nor any of its subsidiaries has
violated any provisions of the Foreign Corrupt Practices Act or the
rules and regulations thereunder, except for such violations that,
singly or in the aggregate, would not have a Material Adverse Effect.
(nn) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on their behalf, has taken and none of them will
take, any action that might cause this Agreement or the issuance or
sale of the Series A Senior Notes to violate Regulation G (12 C.F.R.
Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System, in each case as in effect now
or as the same may hereafter be in effect on the Closing Date.
(oo) None of the Company or its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (b) a
"holding company" or a "subsidiary company" of a holding company or an
"affiliate" thereof within the meaning of the Public Utility Holding
Company Act of 1935, as amended or (c) subject to regulation under the
Federal Power Act, the Interstate Commerce Act or any federal or state
statute or regulation limiting its respective ability to incur
indebtedness for borrowed money.
(pp) The Company and its subsidiaries have complied with all
of the provisions of Florida H.B. 1771, codified as Section 517.075 of
the Florida Statutes, and all regulations promulgated thereunder
relating to issuers doing business with the Government of Cuba or with
any person or any affiliate located in Cuba.
(qq) The accountants, Ernst & Young LLP, that have certified
certain financial statements and supporting schedules included in the
Offering Memorandum are independent public accountants with respect to
the Company as required by the Act and the Exchange Act. The historical
financial statements of the Company, together with related schedules
and notes, set forth in the Offering Memorandum
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<PAGE> 25
comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Act.
(rr) When the Series A Senior Notes and the Subsidiary
Guarantees are issued and delivered pursuant to this Agreement, such
Series A Senior Notes and Subsidiary Guarantees will not be of the same
class (within the meaning of Rule 144A under the Act) as securities of
the Company or the Subsidiary Guarantors that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation
system.
(ss) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act (i) has imposed (or has informed the Company or any
Subsidiary Guarantor that it is considering imposing) any condition
(financial or otherwise) on the Company's or any Subsidiary Guarantor's
retaining any rating assigned to the Company or any Subsidiary
Guarantor, any securities of the Company or any Subsidiary Guarantor or
(ii) has indicated to the Company or any Subsidiary Guarantor that it
is considering (a) the downgrading, suspension, or withdrawal of, or
any review for a possible change that does not indicate the direction
of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company, any Subsidiary Guarantor or
any securities of the Company or any Subsidiary Guarantor.
(tt) Assuming (i) that the representations and warranties of
the Initial Purchasers in Section 7 hereof are true, (ii) compliance by
the Initial Purchasers with its covenants set forth in Section 7
hereof, (iii) that none of the Eligible Purchasers is an affiliate of
the Company and (iv) that each of the Eligible Purchasers is a QIB or a
Regulation S Purchaser, the purchase and Exempt Resales of the Series A
Senior Notes pursuant hereto are exempt from the registration
requirements of the Act. No form of general solicitation or general
advertising was used by the Company or any of its representatives in
connection with the offer and sale of the Series A Senior Notes or in
connection with the Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Series A Senior Notes have been issued and sold by the Company
within the six-month period immediately prior to the date hereof.
(uu) Set forth on Schedule IV hereto is a list of each
employee pension or benefit plan with respect to which the Company or
any of its subsidiaries is a party in interest or disqualified person.
The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Series A Senior Notes to be purchased by
the Eligible Purchasers will not involve any prohibited transaction
within the
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<PAGE> 26
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986, as amended. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy
of, and compliance with, the representations and covenants made or
deemed made by the Eligible Purchasers as set forth in the Offering
Memorandum under the Section entitled "Notice to Investors."
(vv) The Company and the Subsidiary Guarantors have not (i)
taken, directly or indirectly, any action designed to cause or to
result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Series A Senior Notes or (ii) since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased, or paid anyone other
than the Initial Purchasers any compensation for soliciting purchases
of, the Series A Senior Notes or (B) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company.
(ww) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Act.
(xx) The Indenture conforms as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. The Indenture is not required to be qualified
under the Trust Indenture Act prior to the first to occur of (i) the
Exchange Offer and (ii) the effectiveness of the Shelf Registration
Statement.
(yy) Each certificate signed by any officer of the Company or
a Subsidiary Guarantor and delivered to the Initial Purchasers or
counsel for the Initial Purchasers shall be deemed to be a
representation and warranty by the Company or such Subsidiary Guarantor
to the Initial Purchasers as to the matters covered thereby.
(zz) None of the Company, its subsidiaries or any of its or
their affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company and the Subsidiary
Guarantors make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with
respect to the Series A Senior Notes, and the Company, its subsidiaries
and its or their affiliates and all persons acting on its or their
behalf (other than the Initial Purchasers, as to whom the Company and
the Subsidiary Guarantors make no representation) have complied with
and will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Series A Senior
Notes outside the United States.
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<PAGE> 27
(aaa) None of the Company, its subsidiaries or any of its or
their affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company and the Subsidiary
Guarantors make no representation) has offered or sold, or will offer
or sell, the Series A Senior Notes in reliance on Regulation S in any
transaction other than offshore transactions.
(bbb) There is no "substantial U.S. market interest" as
defined in Rule 902(n) of Regulation S for the Series A Senior Notes.
(ccc) The sale of the Series A Senior Notes pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
The Company and the Subsidiary Guarantors acknowledge that the
Initial Purchasers and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Subsidiary Guarantors and counsel to the Initial Purchasers will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each Initial
Purchaser, severally and not jointly, represents and warrants to, and agrees
with, the Company and the Subsidiary Guarantors:
(a) Such Initial Purchaser is either a QIB or an Institutional
"Accredited Investor" (as defined in Rule 501(A) (1), (2), (3) or (7)
of Regulation D under the Act) (an "ACCREDITED INSTITUTION"), in either
case, with such knowledge and experience in financial and business
matters as is necessary in order to evaluate the merits and risks of an
investment in the Series A Senior Notes.
(b) Such Initial Purchaser (i) is not acquiring the Series A
Senior Notes with a view to any distribution thereof or with any
present intention of offering or selling any of the Series A Senior
Notes in a transaction that would violate the Act or the securities
laws of any state of the United States or any other applicable
jurisdiction and (ii) will be reoffering and reselling the Series A
Senior Notes only to (A) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A, and (B) in
offshore transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D
under the Act) has been or will be used by such Initial Purchaser or
any of its representatives in connection with the offer and sale of the
Series A Senior Notes pursuant hereto, including, but not limited to,
articles, notices or other communications published in any newspaper,
26
<PAGE> 28
magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the
Series A Senior Notes only from, and will offer to sell the Series A
Senior Notes only to, Eligible Purchasers. Each Initial Purchaser
further agrees that it will offer to sell the Series A Senior Notes
only to, and will solicit offers to buy the Series A Senior Notes only
from (A) Eligible Purchasers that the Initial Purchasers reasonably
believe are QIBs and (B) Regulation S Purchasers, in each case, that
agree that (x) the Series A Senior Notes purchased by them may be
resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of
Rule 144(d) under the Act, if applicable) under the Act, as in effect
on the date of the transfer of such Series A Senior Notes, only (I) to
the Company or any of its subsidiaries, (II) to a person whom the
seller reasonably believes is a QIB purchasing for its own account or
for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Act, (III) in an offshore transaction (as defined
in Rule 902 under the Act) meeting the requirements of Rule 904 of the
Act, (IV) in a transaction meeting the requirements of Rule 144 under
the Act, (V) to an Accredited Institution that, prior to such transfer,
furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer
of such Series A Senior Note and, if such transfer is in respect of an
aggregate principal amount of Series A Senior Notes less than $250,000,
an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Act, (VI) in accordance with another exemption
from the registration requirements of the Act (and based upon an
opinion of counsel acceptable to the Company) or (VII) pursuant to an
effective registration statement and, in each case, in accordance with
the applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person
to whom such Series A Senior Notes or an interest therein is
transferred a notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in
any directed selling efforts within the meaning of Regulation S with
respect to the Series A Senior Notes or the Subsidiary Guarantees.
(f) The Series A Senior Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and
will be offered and sold only in offshore transactions.
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<PAGE> 29
(g) The sale of the Series A Senior Notes offered and sold by
such Initial Purchaser pursuant hereto in reliance on Regulation S is
not part of a plan or scheme to evade the registration provisions of
the Act.
(h) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Series A Notes in the United States
or to, or for the benefit or account of, a U.S. Person (other than a
distributor), in each case, as defined in Rule 902 under the Act (i) as
part of its distribution at any time and (ii) otherwise until 40 days
after the later of the commencement of the offering of the Series A
Notes pursuant hereto and the Closing Date, other than in accordance
with Regulation S of the Act or another exemption from the registration
requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day restricted period, it will not cause any advertisement with
respect to the Series A Notes (including any "tombstone" advertisement)
to be published in any newspaper or periodical or posted in any public
place and will not issue any circular relating to the Series A Notes,
except such advertisements as permitted by and include the statements
required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration during the 40-day restricted period referred to in Rule
903(c)(3) under the Act, it will send to such distributor, dealer or
person receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:
"The Series A Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the "ACT"),
and may not be offered and sold within the United States or
to, or for the account or benefit of, U.S. persons (i) as part
of your distribution at any time or (ii) otherwise until 40
days after the later of the commencement of the Offering and
the Closing Date, except in either case in accordance with
Regulation S under the Act (or Rule 144A or to Accredited
Institutions in transactions that are exempt from the
registration requirements of the Act), and in connection with
any subsequent sale by you of the Series A Notes covered
hereby in reliance on Regulation S during the period referred
to above to any distributor, dealer or person receiving a
selling concession, fee or other remuneration, you must
deliver a notice to substantially the foregoing effect. Terms
used above have the meanings assigned to them in Regulation
S."
(j) Such Initial Purchaser agrees that the Series A Notes
offered and sold in reliance on Regulation S will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the 40-day restricted period
referred to in Rule 903(c)(3) of the Act and only upon certification of
beneficial
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<PAGE> 30
ownership of such Series A Notes by non-U.S. persons or U.S. persons
who purchased such Series A Notes in transactions that were exempt from
the registration requirements of the Act.
Each Initial Purchaser acknowledges that the Company and the
Subsidiary Guarantors and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Subsidiary Guarantors and counsel to the Initial Purchasers will rely upon the
accuracy and truth of the foregoing representations and such Initial Purchaser
hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company and each Subsidiary Guarantor agree, jointly
and severally, to indemnify and hold harmless each Initial Purchaser,
its directors, its officers and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments (including, without
limitation, any reasonable legal or other expenses incurred in
connection with investigating or defending any matter raised by a third
party, including any action, that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in
the Offering Memorandum (or any amendment or supplement thereto), the
Preliminary Offering Memorandum or any Rule 144A Information provided
by the Company or any Subsidiary Guarantor to any holder or prospective
purchasers of Series A Senior Notes pursuant to Section 5(o) or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to either Initial Purchaser furnished in writing to the
Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who
failed to deliver an Offering Memorandum (as then amended or
supplemented, provided by the Company to the several Initial Purchasers
in the requisite quantity and on a timely basis to permit proper
delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages and liabilities and judgments caused by any
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum, or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged
material misstatement or omission was cured in the Offering Memorandum.
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<PAGE> 31
(b) Each Initial Purchaser agrees, severally and not jointly,
to indemnify and hold harmless the Company and the Subsidiary
Guarantors, and their respective directors and officers and each
person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) the Company or the Subsidiary
Guarantors, to the same extent as the foregoing indemnity from the
Company and the Subsidiary Guarantors to the Initial Purchasers but
only with reference to information relating to either Initial Purchaser
furnished in writing to the Company by such Initial Purchaser expressly
for use in the Preliminary Offering Memorandum or the Offering
Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly
notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party shall
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case
of any action in respect of which indemnity may be sought pursuant to
both Sections 8(a) and 8(b), neither Initial Purchaser shall be
required to assume the defense of such action pursuant to this Section
8(c), but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided
below, shall be at the expense of such Initial Purchaser). Any
indemnified party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the indemnified
party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party shall have been advised
by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by DLJ, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and
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<PAGE> 32
hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii)
effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have
received a request from the indemnified party for reimbursement for the
fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of
such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of
such action and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or limited in respect
of any losses, claims, damages, liabilities or judgments referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Subsidiary Guarantors, on the one hand, and each Initial Purchaser on
the other hand from the offering of the Series A Senior Notes or (ii)
if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also
the relative fault of the Company and the Subsidiary Guarantors, on the
one hand, and each Initial Purchaser, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Subsidiary Guarantors, on the one hand and each Initial
Purchaser, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Series A
Senior Notes (after underwriting discounts and commissions, but before
deducting expenses) received by the Company, and the total discounts
and commissions received by the Initial Purchasers bear to the total
price to investors of the Series A Senior Notes, in each case as set
forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Subsidiary Guarantors, on the one
hand, and each Initial Purchaser, on the other hand, shall be
determined by reference to, among
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<PAGE> 33
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Subsidiary
Guarantors, on the one hand, or each Initial Purchaser, on the other
hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Subsidiary Guarantors, and each Initial
Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter raised by a third
party, including any action, that could have given rise to such losses,
claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchasers shall not be
required to contribute any amount in excess of the amount by which the
total discounts and commissions received by such Initial Purchaser
exceeds the amount of any damages which the Initial Purchasers have
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Series A Senior Notes
purchased by each of the Initial Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
9. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATION. The obligation of
each Initial Purchaser to purchase the Series A Senior Notes under this
Agreement is subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
the Subsidiary Guarantors contained in this Agreement shall be true and
correct on the date hereof and on the Closing Date with the same force
and effect as if made on and as of the date hereof and the Closing
Date, respectively. The Company and the Subsidiary Guarantors shall
have performed or complied with all of the agreements
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<PAGE> 34
and satisfied all conditions to be performed, complied with or
satisfied by it on or prior to the Closing Date.
(b) (1) The Offering Memorandum shall have been printed and
copies distributed to the Initial Purchasers not later than 9:00 a.m.,
New York City time, on April 1, 1998, or at such later date and time as
the Initial Purchasers may approve in writing;
(2) no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the
Series A Senior Notes; and
(3) at the Closing Date, no stop order preventing the use of
the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or suspending the qualification or
exemption from qualification of the Series A Senior Notes for sale in
any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(f) hereof shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or, to the
knowledge of the Company or any Subsidiary Guarantor, be contemplated.
(c) (1) Since the date of the latest balance sheet included in
the Offering Memorandum, except as may be set forth or contemplated in
the Offering Memorandum, there shall not have been any event that had a
Material Adverse Effect, or any development involving a prospective
change that would have a Material Adverse Effect, whether or not
arising in the ordinary course of business;
(2) since the date of the latest balance sheet included in the
Offering Memorandum, there has not been any material change, or any
development involving a prospective change, in the capital stock or in
the long-term debt or material increase in short term debt of the
Company and its subsidiaries, considered in the aggregate, from that
set forth in the Offering Memorandum; and
(3) on the Closing Date, the Initial Purchasers shall have
received certificates dated the Closing Date, signed on behalf of the
Company and the Subsidiary Guarantors by the principal executive
officer and the principal financial or accounting officer of the
Company and each Subsidiary Guarantor, confirming as of the Closing
Date, all matters set forth in Sections 9(a), (b) and (c) hereof with
respect to the Company and the Subsidiary Guarantors, as applicable.
(d) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel to
the Initial Purchasers)
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<PAGE> 35
dated the Closing Date, of Squire, Sanders & Dempsey L.L.P., counsel
for the Company and the Subsidiary Guarantors, to the effect that:
(1) The Company and each of the Subsidiary Guarantors
(A) is a corporation validly existing and in good standing
under the laws of its respective jurisdiction of incorporation
and (B) has requisite corporate power and authority to carry
on its respective business as it is currently being conducted
and to own, lease and operate its respective properties.
(2) The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations
under each of the Operative Documents, and the New Credit
Agreement and to consummate the transactions contemplated by
the Operative Documents, and the New Credit Agreement, and to
issue, sell and deliver the Series A Senior Notes pursuant to
this Agreement.
(3) To the extent a party thereto, each of the
Subsidiary Guarantors has all necessary corporate power and
authority to execute, deliver and perform its obligations
under the Operative Documents, the Subsidiary Credit Guaranty
Agreements and the Subsidiary Security Agreements and to
consummate the transactions contemplated by the Operative
Documents, the Subsidiary Credit Guaranty Agreements and the
Subsidiary Security Agreements and to issue and deliver the
Subsidiary Guarantees pursuant to this Agreement.
(4) None of (A) the execution, delivery or
performance by the Company and the Subsidiary Guarantors of
this Agreement, the New Credit Agreement, the Subsidiary
Credit Guaranty Agreements, the Subsidiary Security Agreements
and the other Operative Documents, (B) the issuance and sale
of the Senior Notes by the Company, (C) the issuance of the
Subsidiary Guarantees by the Subsidiary Guarantors and (D) the
consummation by the Company and the Subsidiary Guarantors of
the transactions described in the Offering Memorandum under
the caption "Use of Proceeds," will conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, or result in the imposition of a Lien on any
properties of the Company or any of the Subsidiary Guarantors,
or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of any of the Company or any of the
Subsidiary Guarantors, (2) any bond, debenture, note, or other
evidence of indebtedness or any indenture, mortgage, deed of
trust or other contract, lease or other instrument set forth
on Schedule V hereto or (3) any law or administrative
regulation applicable to the Company, any of the Subsidiary
Guarantors, or any of their assets or properties, or any
judgment, order or decree of any court or governmental agency
or authority entered in any proceeding to which the
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<PAGE> 36
Company or any of the Subsidiary Guarantors was or is now a
party or to which any of them or their respective properties
may be subject or bound and which is known to such counsel.
(5) No consent, approval, authorization or order of,
or filing or registration with, any regulatory body,
administrative agency, or other governmental agency (except as
securities or Blue Sky laws of the various states may require)
or pursuant to the terms of any agreement or other instrument
set forth on Schedule V hereto, that have not been made or
obtained prior to the Closing Date or, in the case of the
Registration Rights Agreement and the transactions
contemplated thereby, will be obtained or made, is required
for the execution, delivery and performance of the Operative
Documents, the New Credit Agreement, the Subsidiary Credit
Guaranty Agreements, the Subsidiary Security Agreements and
the valid issuance and sale of the Series A Senior Notes and
the Subsidiary Guarantees except where the failure to obtain
such consents, approvals, authorizations or orders would not
have a Material Adverse Effect.
(6) This Agreement has been duly authorized, executed
and delivered by the Company and the Subsidiary Guarantors.
(7) The Indenture has been duly authorized, executed
and delivered by the Company and the Subsidiary Guarantors and
(assuming the due execution and delivery thereof by the
Trustee) is a legally valid and binding obligation of the
Company and the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its
terms, except as the enforceability thereof may be (i) subject
to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(8) The Series A Senior Notes have been duly
authorized, issued and authenticated in accordance with the
terms of the Indenture and are the legally valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(9) The Series B Senior Notes have been duly
authorized by the Company and, when issued and authenticated
in accordance with the terms of
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<PAGE> 37
the Exchange Offer and the Indenture, will be the legally
valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as
the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in
equity).
(10) The Subsidiary Guarantees endorsed on the Series
A Senior Notes by the Subsidiary Guarantors have been duly
authorized and, when the Series A Senior Notes are executed
and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the
Subsidiary Guarantees endorsed thereon will be entitled to the
benefits of the Indenture and will be legally valid and
binding obligations of the Subsidiary Guarantors, enforceable
in accordance with their terms except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(11) When the Series B Senior Notes are executed and
authenticated in accordance with the provisions of the
Indenture and delivered in exchange for Series A Senior Notes
in accordance with the Indenture and the Exchange Offer, the
Subsidiary Guarantees endorsed thereon will be entitled to the
benefits of the Indenture and will be legally valid and
binding obligations of the Subsidiary Guarantors, enforceable
in accordance with their terms except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(12) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the
Subsidiary Guarantors and (assuming the due execution and
delivery thereof by the Initial Purchasers) is a legally valid
and binding obligation of the Company and the Subsidiary
Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally, (ii) limited by general principles of equity
(whether considered in a proceeding at
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<PAGE> 38
law or in equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy
against, indemnification or contribution.
(13) The New Credit Agreement has been duly
authorized, executed and delivered by the Company and
(assuming the due execution and delivery thereof by the other
parties thereto) is a legally valid and binding obligation of
the Company, enforceable against the Company in accordance
with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(14) The Subsidiary Credit Guaranty Agreement of A.B.
Dick has been duly authorized, executed and delivered by A.B.
Dick and (assuming the due execution and delivery thereof by
the other parties thereto) is a legally valid and binding
obligation of A.B. Dick, enforceable against A.B. Dick in
accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(15) The Subsidiary Credit Guaranty Agreement of
Curtis has been duly authorized, executed and delivered by
Curtis and (assuming the due execution and delivery thereof by
the other parties thereto) is a legally valid and binding
obligation of Curtis, enforceable against Curtis in accordance
with its terms, except as the enforceability thereof may be
(i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(16) The Subsidiary Security Agreement of A.B. Dick
has been duly authorized, executed and delivered by A.B. Dick
and (assuming the due execution and delivery thereof by the
other parties thereto) is a legally valid and binding
obligation of A.B. Dick, enforceable against A.B. Dick in
accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
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<PAGE> 39
(17) The Subsidiary Security Agreement of Curtis has
been duly authorized, executed and delivered by Curtis and
(assuming the due execution and delivery thereof by the other
parties thereto) is a legally valid and binding obligation of
Curtis, enforceable against Curtis in accordance with its
terms, except as the enforceability thereof may be (i) subject
to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the
enforcement of creditors rights generally and (ii) limited by
general principles of equity (whether considered in a
proceeding at law or in equity).
(18) The Tax Payment Agreement has been duly
authorized, executed and delivered by the Company and its
subsidiaries and is a legally valid and binding obligation of
the Company and its subsidiaries, enforceable against the
Company and its subsidiaries in accordance with its terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at
law or in equity).
(19) The Management Agreement has been duly
authorized, executed and delivered by the Company and is a
legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally, (ii) limited by general principles
of equity (whether considered in a proceeding at law or in
equity) and (iii) limited by securities laws prohibiting or
limiting the availability of, and public policy against,
indemnification or contribution.
(20) The Series A Senior Notes, the Series B Senior
Notes, the Subsidiary Guarantees to be endorsed on the Series
A Senior Notes, the Subsidiary Guarantees to be endorsed on
the Series B Senior Notes, the Indenture, the Registration
Rights Agreement, the New Credit Agreement, the Subsidiary
Credit Guaranty Agreements, the Subsidiary Security
Agreements, the Tax Payment Agreement and the Management
Agreement conform in all material respects to the descriptions
thereof contained in the Offering Memorandum.
(21) The statements in the Offering Memorandum under
the caption "Certain United States Federal Income Tax
Considerations for Non-United States Holders," insofar as such
statements constitute a summary of legal
38
<PAGE> 40
matters, documents or proceedings referred to therein, fairly
present in all material respects such legal matters, documents
and proceedings.
(22) None of the Company or the Subsidiary Guarantors
is (a) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended or (b) a "holding company" or
a "subsidiary company" of a holding company or an "affiliate"
thereof within the meaning of the Public Utility Holding
Company Act of 1935, as amended or (c) subject to regulation
under the Federal Power Act, the Interstate Commerce Act or
any federal or state statute or regulation limiting its
respective ability to incur indebtedness for borrowed money.
(23) When the Series A Senior Notes are issued and
delivered pursuant to this Agreement, such Series A Senior
Notes will not be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are
listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(24) The Indenture conforms as to form in all
material respects with the requirements of the TIA, and the
rules and regulations of the Commission applicable to an
indenture which is qualified thereunder. The Indenture is not
required to be qualified under the Trust Indenture Act prior
to the first to occur of (i) the Exchange Offer and (ii) the
effectiveness of the Shelf Registration Statement.
(25) No registration under the Act of the Series A
Senior Notes is required for the sale of the Series A Senior
Notes to the Initial Purchasers as contemplated hereby or for
the Exempt Resales as described in the Offering Memorandum
(assuming (i) that the Eligible Purchasers who buy the Series
A Senior Notes in the Exempt Resales are QIBs or Regulation S
Purchasers and (ii) the accuracy of, and compliance with, the
representations of the Initial Purchasers and those of the
Company contained in Sections 6 and 7 hereof.
(26) To the best knowledge of such counsel, no
injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the
issuance of the Series A Senior Notes and no stop order
preventing the use of the Preliminary Offering Memorandum or
the Offering Memorandum, or any amendment or supplement
thereto, or suspending the qualification or exemption from
qualification of the Series A Senior Notes for sale in any
39
<PAGE> 41
jurisdiction designated by the Initial Purchasers pursuant to
Section 5(f) hereof shall have been issued and no proceedings
for that purpose shall have been commenced or shall be pending
before or, to the best knowledge of such counsel, be
contemplated.
In addition, such counsel shall state that it has participated
in conferences with representatives of the Company, representatives of
the Subsidiary Guarantors, representatives of the Company's and the
Subsidiary Guarantors' accountants, each Initial Purchaser's
representatives and counsel for the Initial Purchasers, at which
conferences the contents of the Offering Memorandum and related matters
were discussed, and, although such counsel has not independently
verified and is not passing upon and assumes no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, lawyers of such counsel responsible for this
matter who actively participated in the preparation of the Offering
Memorandum are not presently aware of any information that came to
their attention in the course of the performance of the services
referred to herein that leads such counsel to believe that the Offering
Memorandum, on the date thereof or on the date of such opinion,
contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need
express no view with respect to the financial statements, financial
information and related notes included in the Offering Memorandum).
Such counsel may set forth such assumptions, qualifications
and definitions as are customary in opinions of this nature and may
rely upon certificates as to factual matters and from public officials.
Such opinion may be limited to federal, Delaware, New York and Ohio
law.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel to
the Initial Purchasers), dated the Closing Date, of Larry J. Carlini,
as counsel for the Company and the Subsidiary Guarantors, to the effect
that:
(1) To the best of such counsel's knowledge, the
Company and each of the Subsidiary Guarantors is duly
qualified and in good standing as a foreign corporation
registered to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so
qualified would not, singly or in the aggregate, have a
Material Adverse Effect.
40
<PAGE> 42
(2) All of the outstanding shares of capital stock of
or other ownership interests in the Company and each of the
Subsidiary Guarantors has been duly authorized and validly
issued, is fully paid and nonassessable; the outstanding
shares of capital stock of or other ownership interests in
each of the Company's subsidiaries have not been issued in
violation of any preemptive or similar rights and to the best
of such counsel's knowledge are owned free and clear of any
Lien.
(3) To the best of such counsel's knowledge, except
as disclosed in the Offering Memorandum, there are not any
outstanding, subscriptions, rights, warrants or options to
acquire, or instruments convertible into or exchangeable for,
any shares of capital stock or other equity interests in the
Company or any of its subsidiaries.
(4) None of the Company or any of the Subsidiary
Guarantors (i) is in violation of its respective charter or
bylaws, or (ii) to the best knowledge of such counsel after
due inquiry is in default in the performance of any term,
provision, obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or
any indenture, mortgage, deed of trust or other contract,
lease or other instrument, to which the Company or any of the
Subsidiary Guarantors is a party or to which any of them or
their respective properties may be subject or bound, except in
the case of clause (ii) for such defaults that, singly or in
the aggregate, would not have a Material Adverse Effect.
(5) To the best knowledge of such counsel after due
inquiry, there is (i) no action, suit, proceeding or
investigation before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign,
now pending, threatened or contemplated to which the Company
or any of its subsidiaries is or may be a party or to which
the business or property of the Company or any of its
subsidiaries is subject or (ii) no injunction, restraining
order or order of any nature by a federal or state court or
other tribunal of competent jurisdiction applicable to the
Company or any of its subsidiaries has been issued that, in
the case of clauses (i) and (ii) above in the reasonable
judgment of such counsel, (A) is required to be disclosed in
the Offering Memorandum and that is not so disclosed, (B)
might have a Material Adverse Effect, (C) would interfere with
or adversely affect the issuance of the Series A Senior Notes
and the Subsidiary Guarantees, or (D) in any manner draw into
question the validity of the Operative Documents the Series A
Senior Notes or Subsidiary Guarantees.
41
<PAGE> 43
(6) To the best knowledge of such counsel, there is
no law, statute, rule, regulation or order that has been
enacted, adopted or issued by any governmental agency or
proposed by any governmental body that in the reasonable
judgment of such counsel, (A) is required to be disclosed in
the Offering Memorandum and that is not so disclosed, (B)
might have a Material Adverse Effect, (C) would interfere with
or adversely affect the issuance of the Series A Senior Notes
and the Subsidiary Guarantees, or (D) in any manner draw into
question the validity of the Operative Documents the Series A
Senior Notes or Subsidiary Guarantees.
(7) Such counsel is not aware of any violation by the
Company or any of its subsidiaries of any Environmental Law or
any provisions of ERISA, any provisions of the Foreign Corrupt
Practices Act or the rules and regulations promulgated
thereunder, except for such violations that, singly or in the
aggregate, would not have a Material Adverse Effect.
(8) To the best of such counsel's knowledge after due
inquiry, there are no contracts, agreements or understandings
between the Company or any Subsidiary Guarantor and any person
granting such person the right to require the Company or such
Subsidiary Guarantor to file a registration statement under
the Act with respect to any securities of the Company or such
Subsidiary Guarantor or to require the Company or such
Subsidiary Guarantor to include such securities with the
Senior Notes and the Subsidiary Guarantees pursuant to any
Registration Statement.
In addition, such counsel shall state that he has participated
in conferences with representatives of the Company, representatives of
the Subsidiary Guarantors, outside counsel for the Company and the
Subsidiary Guarantors, representatives of the Company's and the
Subsidiary Guarantors' accountants, each Initial Purchaser's
representatives and counsel for the Initial Purchasers, at which
conferences the contents of the Offering Memorandum and related matters
were discussed, and, although such counsel has not independently
verified and is not passing upon and assumes no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, he is not presently aware of any information that
came to his attention in the course of the performance of the services
referred to herein that leads such counsel to believe that the Offering
Memorandum, on the date thereof or on the date of such opinion,
contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need
express no view with
42
<PAGE> 44
respect to the financial statements, financial information and related
notes included in the Offering Memorandum).
Such counsel may set forth such assumptions, qualifications
and definitions as are customary in opinions of this nature and may
rely upon certificates as to factual matters and from public officials.
Such opinion may be limited to federal, Delaware and Ohio law.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, in form
and substance satisfactory to the Initial Purchasers, and the Company
and the Subsidiary Guarantors shall have provided Latham & Watkins such
papers and information as it requests to enable it to pass upon the
matters contained in such opinion.
(g) The Initial Purchasers shall have received letters from
Ernst & Young LLP, independent public accountants with respect to the
Company, on the date hereof and on the Closing Date, in form and
substance satisfactory to the Initial Purchasers, with respect to the
financial statements and certain financial information contained in the
Offering Memorandum.
(h) The Company, the Subsidiary Guarantors and the Trustee
shall have entered into the Indenture and the Initial Purchasers shall
have received counterparts, conformed as executed, thereof.
(i) The Company, the Subsidiary Guarantors and the Initial
Purchasers shall have entered into the Registration Rights Agreement
and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(j) The Company shall have entered into the New Credit
Agreement (the form and substance of which shall be reasonably
acceptable to the Initial Purchasers) and the Initial Purchasers shall
have received counterparts, conformed as executed, thereof and of all
other documents and agreements entered into in connection therewith.
(k) Each of A.B. Dick and Curtis shall have entered into its
Subsidiary Credit Guaranty Agreement (the form and substance of which
shall be reasonably acceptable to the Initial Purchasers) and the
Initial Purchasers shall have received counterparts, conformed as
executed, thereof and of all other documents and agreements entered
into in connection therewith.
(l) Each of A.B. Dick and Curtis shall have entered into its
Security Agreement (the form and substance of which shall be reasonably
acceptable to the
43
<PAGE> 45
Initial Purchasers) and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof and of all other documents
and agreements entered into in connection therewith.
(m) There shall exist at and as of the Closing Date (after
giving effect to the transactions contemplated by this Agreement) no
conditions that would constitute a default (or an event that with
notice or the lapse of time, or both, would constitute a default) under
the New Credit Agreement.
(n) On the Closing Date, the Company and its subsidiaries
shall have entered into the Tax Payment Agreement (the form and
substance of which shall be reasonably acceptable to the Initial
Purchasers), and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(o) On the Closing Date, the Company shall have entered into
the Management Agreement (the form and substance of which shall be
reasonably acceptable to the Initial Purchasers), and the Initial
Purchasers shall have received counterparts, conformed as executed,
thereof.
(p) The Company shall have given to the trustee under the
indenture governing the 13 1/8% Senior Subordinated Debentures due 2003
(the "DEBENTURES") of Curtis irrevocable instructions to redeem all of
Curtis' outstanding Debentures and shall have delivered irrevocable
notice of prepayment to the holders all outstanding notes issued in
connection with the acquisition of Curtis (the "CURTIS ACQUISITION
NOTES") by the Company.
(q) The lenders of the Indebtedness to be refinanced by the
Company as set forth in the Offering Memorandum under the caption "Use
of Proceeds" other than the Curtis Acquisition Notes and the Debentures
shall have delivered evidence satisfactory to the Initial Purchasers in
connection with the Company's repayment and termination of such
Indebtedness, and the Company shall have delivered such letters or such
other evidence to the Initial Purchasers.
(r) The Series A Senior Notes shall have been approved for
listing by the NASD for trading and duly listed in PORTAL.
(s) The Company and the Subsidiary Guarantors shall have fully
performed or complied with any of the agreements herein contained and
required to be performed or complied with by the Company and the
Subsidiary Guarantors on or prior to the Closing Date.
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<PAGE> 46
(t) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 9 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any
of the representations, warranties or conditions herein contained.
(u) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by the Initial Purchasers by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Series A Senior Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading generally in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Subsidiary
Guarantor on any exchange or in the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
the opinion of the Initial Purchasers materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole, (v)
the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
opinion of the Initial Purchasers has a material adverse effect on the financial
markets in the United States and would in the Initial Purchasers' judgment make
it impracticable or inadvisable to market the Series A Senior Notes or to
enforce contracts for the sales of the Series A Senior Notes.
If on the Closing Date either Initial Purchaser shall fail or refuse to
purchase the Series A Notes that it or they have agreed to purchase hereunder on
such date and the aggregate principal amount of the Series A Notes that such
defaulting Initial Purchaser agreed but failed or refused to purchase is not
more than one-tenth of the aggregate principal amount of the Series A Notes to
be purchased on such date by both Initial Purchasers, the non-defaulting Initial
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<PAGE> 47
Purchaser shall be obligated to purchase the Series A Note that such defaulting
Initial Purchaser agreed but failed or refused to purchase on such date;
provided that in no event shall the aggregate principal amount of the Series A
Notes that either Initial Purchaser has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 10 by an amount in excess of
one-ninth of such principal amount of the Series A Notes without the written
consent of such Initial Purchaser. If on the Closing Date either Initial
Purchaser shall fail or refuse to purchase the Series A Notes and the aggregate
principal amount of the Series A Notes with respect to which such default occurs
is more than one-tenth of the aggregate principal amount of the Series A Notes
to be purchased by both Initial Purchasers and arrangements satisfactory to the
Initial Purchasers and the Company for purchase of such Series A Notes are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of the non-defaulting Initial Purchaser and the Company.
In any such case that does not result in a termination of this Agreement, either
the non-defaulting Initial Purchaser or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Offering Memorandum or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Initial Purchaser from liability in respect of
any default of such Initial Purchaser under this Agreement.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or any Subsidiary
Guarantor, to Paragon Corporate Holding Inc., 5700 West Touhy Avenue, Niles,
Illinois 60714, Attention John Fountain, with a copy to Squire, Sanders &
Dempsey L.L.P., 4900 Key Tower, 127 Public Square, Cleveland, Ohio 44114,
Attention: Jeffrey Margulies, Esq. and (ii) if to the Initial Purchasers,
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York,
New York 10172, Attention: Syndicate Department with a copy to Latham & Watkins,
885 Third Avenue, New York, New York 10022, Attention: Kirk Davenport, Esq. or
in any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Subsidiary Guarantors and
each Initial Purchaser set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Senior Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of each Initial
Purchaser, the officers or directors of such Initial Purchaser, any person
controlling such Initial Purchaser, the Company, any Subsidiary Guarantor, the
officers or directors of the Company or any Subsidiary Guarantor, or any person
controlling the Company or any Subsidiary Guarantor, (ii) acceptance of the
Series A Senior Notes and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Series A Senior Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and each
Subsidiary Guarantor, jointly and severally,
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<PAGE> 48
agree to reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and disbursements of counsel) reasonably incurred
by them in connection with the transactions contemplated by this Agreement.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(j) hereof. The
Company and each Subsidiary Guarantor also agree, jointly and severally, to
reimburse each Initial Purchaser and its officers, directors and each person, if
any, who controls such Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act for any and all fees and expenses
(including without limitation the fees and expenses of counsel) incurred by them
in connection with enforcing their rights under this Agreement (including
without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Subsidiary
Guarantors, each Initial Purchaser, such Initial Purchaser's directors and
officers, any controlling persons referred to herein, the directors of the
Company and the Subsidiary Guarantors and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Series
A Senior Notes from the Initial Purchasers merely because of such purchase.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
[signature pages follow]
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<PAGE> 49
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Subsidiary Guarantors and the Initial Purchasers.
Very truly yours,
PARAGON CORPORATE HOLDINGS INC.
By: /s/ John H. Fountain
----------------------------
Name: John H. Fountain
Title: Authorized Officer
A.B. DICK COMPANY
By: /s/ John H. Fountain
----------------------------
Name: John H. Fountain
Title: Authorized Officer
ITEK GRAPHIX CORP.
By: /s/ John H. Fountain
----------------------------
Name: John H. Fountain
Title: Authorized Officer
CURTIS INDUSTRIES, INC.
By: /s/ John H. Fountain
----------------------------
Name: John H. Fountain
Title: Authorized Officer
CURTIS SUB, INC.
By: /s/ John H. Fountain
----------------------------
Name: John H. Fountain
Title: Authorized Officer
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<PAGE> 50
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William J. R. Wilson
---------------------------
Name: William J. R. Wilson
Title: Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Brian J. Gerson
---------------------------
Name: Brian J. Gerson
Title: Managing Director
49
<PAGE> 1
===============================================================================
PARAGON CORPORATE HOLDINGS INC.
----------------------------------------
$115,000,000
95/8% SERIES A SENIOR NOTES DUE 2008
----------------------------------------
-------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 1, 1998
-------------------
DONALDSON, LUFKIN & JENRETTE CIBC OPPENHEIMER CORP.
SECURITIES CORPORATION
===============================================================================
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of April 1, 1998, by and among Paragon Corporate Holdings Inc.,
a Delaware corporation (the "COMPANY"), the entities listed on Schedule I hereto
(each, a "SUBSIDIARY GUARANTOR" and together, the "SUBSIDIARY GUARANTORS") and
Donaldson, Lufkin & Jenrette Securities Corporation and CIBC Oppenheimer Corp.
(each, an "INITIAL PURCHASER" and together, the "INITIAL PURCHASERS"), who has
agreed to purchase the Company's 95/8% Series A Senior Notes due 2008 (the
"SERIES A SENIOR NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March
27, 1998 (the "PURCHASE AGREEMENT"), by and among the Company, the Subsidiary
Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Series A Senior Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BROKER-DEALER TRANSFER RESTRICTED SECURITIES: Series B Senior Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Senior Notes that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Series A Senior Notes acquired directly from the Company or any of its
affiliates).
CERTIFICATED SECURITIES: As defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Senior Notes to be issued in the Exchange Offer, (b)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Senior Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Senior Notes
tendered by Holders thereof pursuant to the Exchange Offer.
<PAGE> 3
DAMAGES PAYMENT DATE: With respect to the Transfer Restricted
Securities, each Interest Payment Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Act of the
Series B Senior Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Series B Senior Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Series A Senior Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and in offshore
transactions in reliance upon Regulation S under the Act.
GLOBAL NOTE HOLDER: As defined in the Indenture.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated the Closing Date, among the Company,
the Subsidiary Guarantors and Norwest Bank Minnesota, National Association, as
trustee (the "TRUSTEE"), pursuant to which the Senior Notes are to be issued, as
such Indenture is amended or supplemented from time to time in accordance with
the terms thereof.
INTEREST PAYMENT DATE: As defined in the Indenture and the Senior
Notes.
NASD: National Association of Securities Dealers, Inc.
OFFERING MEMORANDUM: As defined in the Purchase Agreement.
PERSON: Any individual, corporation, partnership, joint venture,
association, jointstock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
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<PAGE> 4
RECORD HOLDER: With respect to any Damages Payment Date, each Person
who is a Holder of Senior Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Subsidiary Guarantors relating to (a) an offering of Series B Senior Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) which is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
SENIOR NOTES: The Series A Senior Notes and the Series B Senior Notes.
SERIES B SENIOR NOTES: The Company's 95/8% Series B Senior Notes due
2008 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii)
upon the request of any Holder of Series A Senior Notes covered by a Shelf
Registration Statement, in exchange for such Series A Senior Notes.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Note, until the earliest to
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Senior Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Senior Note is distributed to
the public pursuant to Rule 144 under the Act.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Subsidiary
3
<PAGE> 5
Guarantors shall (i) cause to be filed with the Commission, on or prior to 60
days after the Closing Date, the Exchange Offer Registration Statement, (ii) use
their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Senior Notes
to be made under the Blue Sky laws of such jurisdictions as are necessary to
permit Consummation of the Exchange Offer and (iv) upon the effectiveness of
such Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Senior Notes to be offered in exchange for the
Series A Senior Notes that are Transfer Restricted Securities and to permit
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Subsidiary Guarantors shall use their
reasonable best efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open, for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Subsidiary Guarantors shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Senior Notes shall be included in the Exchange Offer Registration Statement. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Senior Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Senior Notes (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with its
initial sale of each Series B Senior Note received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied by the
delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their reasonable
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms with the requirements of
this Agreement, the Act and the policies, rules
4
<PAGE> 6
and regulations of the Commission as announced from time to time, for a period
of 120 days from the date on which the Exchange Offer is Consummated.
The Company and the Subsidiary Guarantors shall provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than two days after
such request, at any time during such 120-day period in order to facilitate such
sales.
4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Senior Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Senior Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Senior Notes acquired directly
from the Company or one of its affiliates, then the Company and the Subsidiary
Guarantors shall (x) cause to be filed on or prior to the earliest of (1) 30
days after the date on which the Company is notified by the Commission or
otherwise determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above and (2) 30 days after the
date on which the Company receives the notice specified in clause (ii) above, a
shelf registration statement pursuant to Rule 415 under the Act, (which may be
an amendment to the Exchange Offer Registration Statement (in either event, the
"SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use their reasonable best efforts to cause such
Shelf Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the date on which the Company becomes
obligated to file such Shelf Registration Statement. If, after the Company has
filed an Exchange Offer Registration Statement which satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above. Such an event shall have no effect on the requirements of clause (y)
above, or on the Effectiveness Target Date as defined in Section 5 below. The
Company and the Subsidiary Guarantors shall use their reasonable best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the date on which such Shelf Registration Statement first becomes effective
under the Act or such shorter period ending when all of the Transfer Restricted
Securities available for sale thereunder have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder
5
<PAGE> 7
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such information. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within three Business
Days by a post-effective amendment to such Registration Statement that cures
such failure and that is itself declared effective within three Business Days of
filing (each such event referred to in clauses (i) through (iv), a "REGISTRATION
DEFAULT"), the Company hereby agrees to pay to each Holder of Transfer
Restricted Securities, for the first 90-day period immediately following the
occurrence of such Registration Default, liquidated damages in an amount equal
to $.05 per week per $1,000 principal amount of Senior Notes constituting
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages payable to each Holder shall increase by an additional $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the liquidated damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global Note Holder
by wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified on each Damages Payment Date. All obligations of the Company and
the Subsidiary Guarantors set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
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<PAGE> 8
6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their reasonable best
efforts to effect such exchange and to permit the sale of Broker- Dealer
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof (which shall be in a manner consistent with
the terms of this Agreement), and shall comply with all of the following
provisions:
(i) If, following the date hereof and prior to Consummation of
the Exchange Offer, there has been published a change in Commission
policy with respect to exchange offers such as the Exchange Offer, such
that in the reasonable judgment of counsel to the Company there is a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Company and the
Subsidiary Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the
Subsidiary Guarantors to Consummate an Exchange Offer for such Series A
Senior Notes. The Company and the Subsidiary Guarantors hereby agree to
pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to
effect a change of Commission policy. In connection with the foregoing,
the Company and the Subsidiary Guarantors hereby agree, however, but
subject to the proviso set forth above, to take all such other actions
as are reasonably requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Subsidiary Guarantors (which may
be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Series B Senior Notes to be
issued in the Exchange Offer and (C) it is acquiring the Series B
Senior Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker- Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in MORGAN STANLEY AND CO.,
INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507
or 508, as applicable, of Regulation S-K if the resales are of Series B
Senior Notes obtained by such Holder in exchange for Series A Senior
Notes acquired by such Holder directly from the Company or an affiliate
thereof.
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<PAGE> 9
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Company
and the Subsidiary Guarantors shall provide a supplemental letter to
the Commission (A) stating that the Company and the Subsidiary
Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor any Subsidiary Guarantor has entered into
any arrangement or understanding with any Person to distribute the
Series B Senior Notes to be received in the Exchange Offer and that, to
the best of the Company's and the Subsidiary Guarantors' information
and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Senior Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate
in the distribution of the Series B Senior Notes received in the
Exchange Offer and (C) any other undertaking or representation required
by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement the Company and the Subsidiary Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their reasonable
best efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Subsidiary Guarantors will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities Notes (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company and the Subsidiary Guarantors shall:
(i) use their reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of either clause (A) or (B), use their
reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will
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<PAGE> 10
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462 as applicable, under the Act
in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the selling Holders
thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Subsidiary Guarantors shall use their reasonable
best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to the Initial Purchasers, each selling Holder
under any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders and underwriter(s) in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) if the selling
Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such
sale shall provide notice to the Company within five Business Days
after the receipt thereof to the effect that (A) such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act or (B) that
any of the information furnished to the Company by such selling Holder
or underwriter, if any, and included in such Registration
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<PAGE> 11
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed is incorrect in any respect;
(v) at reasonable times requested by the selling Holders
and/or the underwriters upon reasonable notice, prior to the filing of
any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document
to the selling Holders and to the underwriter(s) in connection with
such sale, if any, make the Company's and the Subsidiary Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Subsidiary Guarantors
and cause the Company's and the Subsidiary Guarantors' officers,
directors and employees to supply all information reasonably requested
by any such Holder, underwriter, attorney or accountant in connection
with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Subsidiary Guarantors hereby consent to the use (in accordance
with law) of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any
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<PAGE> 12
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities or
underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company and the Subsidiary Guarantors shall:
(A) furnish to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker-Dealer
upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed on behalf of each of the
Company and the Subsidiary Guarantors by (x) the
President or any Vice President and (y) a principal
financial or accounting officer of each of the
Company and the Subsidiary Guarantors confirming, as
of the date thereof, the matters set forth in
paragraphs (a) through (c) of Section 9 of the
Purchase Agreement and such other similar matters as
the Holders, underwriter(s) and/or Restricted Broker
Dealers may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and the
Subsidiary Guarantors, covering matters customarily
covered in opinions requested in Underwritten
Offerings and dated the date of effectiveness of the
Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may
be; and
(3) customary comfort letters, dated as of
the date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
Underwritten Offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to
Section 9(f) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporated by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by the selling Holders, the
underwriter(s), if any, and Restricted Broker Dealers, if any,
to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company and the
Subsidiary Guarantors pursuant to this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
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<PAGE> 13
the Company and the Subsidiary Guarantors contemplated in (A)(1) above
cease to be true and correct, the Company and the Subsidiary Guarantors
shall so advise the underwriter(s), if any, selling Holders and each
Restricted Broker Dealer promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s), if any, may reasonably request and do any
and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Subsidiary Guarantor shall be
required to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Senior
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Senior Notes, having an aggregate principal amount
equal to the aggregate principal amount of Series A Senior Notes
surrendered to the Company by such Holder in exchange therefor or being
sold by such Holder; such Series B Senior Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Senior
Notes, as the case may be; in return, the Series A Senior Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as
the Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use their reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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<PAGE> 14
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use their reasonable best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) otherwise use their reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders of Senior Notes to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its
reasonable best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will immediately
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the "Advice"). If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such
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<PAGE> 15
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Senior Notes to be issued in the Exchange Offer
and printing of Prospectuses); (iv) all fees and disbursements of counsel for
the Company, the Subsidiary Guarantors and, in accordance with Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all messenger and
delivery services and telephone expenses of the Company and the Subsidiary
Guarantors; (vi) all application and filing fees in connection with listing the
Senior Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof and (vii) all fees and disbursements of
independent certified public accountants of the Company and the Subsidiary
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its and the Subsidiary Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Subsidiary Guarantors.
(b) In connection with any Registration Statement required by this
Agreement, as applicable, (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the Company and
the Subsidiary Guarantors will reimburse the Initial Purchasers and the Holders
of Transfer Restricted Securities being tendered in the Exchange Offer and/or
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared; provided however, that such fees and disbursements
shall in no event exceed $10,000.
8. INDEMNIFICATION
(a) The Company and the Subsidiary Guarantors agree, jointly
and severally, to indemnify and hold harmless (i) each Holder and (ii) each
person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) any Holder (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "controlling person") and
(iii) the respective officers, directors, partners, employees, representatives
and agents of any Holder or any controlling person (any person referred to in
clause (i), (ii) or (iii) may hereinafter be referred to as an "INDEMNIFIED
HOLDER"), from and against any and all losses, claims, damages, liabilities,
judgments (including without limitation, any reasonable legal or other expenses
incurred in connection with investigating or defending any matter raised by a
third party, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged
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<PAGE> 16
untrue statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Series B
Notes that becomes a Holder, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is based upon information relating
to any of the Holders furnished in writing to the Company by any of the Holders,
provided however, that the indemnification contained in this paragraph (a) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Holder on account of any such losses, claims, damages, liabilities
or judgments arising from the sale of Series A Senior Notes by such Indemnified
Holder to any person if a copy of the Prospectus, as it may be amended or
supplemented, shall not have been delivered or sent to such person, at or prior
to the written confirmation of such sale, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
any preliminary prospectus was corrected in the Prospectus, as it may have been
amended or supplemented; provided that the Company has delivered the Prospectus,
as it may be amended or supplemented, to such Holder in requisite quantity on a
timely basis to permit such delivery or sending.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and the
Subsidiary Guarantors, and their respective directors, officers, partners,
employees, representatives and agents and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Subsidiary Guarantors to the same extent as the foregoing
indemnity from the Company and the Guarantors to each of the Indemnified
Holders, but only with reference to information relating to such Indemnified
Holder furnished in writing to the Company by such Indemnified Holder expressly
for use in any Registration Statement. In no event shall any Indemnified Holder
be liable or responsible for any amount in excess of the amount by which the
total amount received by such Indemnified Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Indemnified Holder for such Transfer Restricted
Securities and (ii) the amount of any damages that such Indemnified Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying person") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Indemnified Holder). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or
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<PAGE> 17
additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Indemnified Holders, in the case of the parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall indemnify and hold harmless the indemnified
party from and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in
this Section 8 is unavailable to an indemnified party or limited in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Subsidiary Guarantors, on the one hand, and the Indemnified Holder, on the
other hand, from their sale of Transfer Restricted Securities or (ii) if the
allocation provided by clause 8(d)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Subsidiary Guarantors, on the one hand, and of the Indemnified Holder,
on the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Subsidiary Guarantors, on the one hand, and of the Indemnified Holder, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Subsidiary Guarantor, on the one hand, or by the Indemnified Holder, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Subsidiary Guarantors and each Holder agree
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation (even if the Holders were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities
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<PAGE> 18
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any matter raised by a third party, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
9. RULE 144A
The Company and the Subsidiary Guarantors hereby agree with each
Holder, for so long as any Transfer Restricted Securities remain outstanding and
during any period in which the Company and the Subsidiary Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Senior Notes, the investment banker or
investment bankers and manager or managers for any Underwritten Offering of
Senior Notes, that will administer such offering will be selected by the Holders
of a majority in aggregate principal amount of the Transfer Restricted
Securities included in such offering. Such investment bankers and managers are
referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the Purchase Agreement or granted
by law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any
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<PAGE> 19
loss incurred by reason of a breach by them of the provisions of this Agreement
and hereby agree to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Subsidiary
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Subsidiary Guarantor has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantors' securities under any agreement in effect on the
date hereof.
(c) ADJUSTMENTS AFFECTING THE SENIOR NOTES. Neither the Company nor any
Subsidiary Guarantor will take any action, or voluntarily permit any change to
occur, with respect to the Senior Notes that would materially and adversely
affect the ability of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture;
With a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Kirk A. Davenport
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<PAGE> 20
(ii) if to the Company or any Subsidiary Guarantor:
Paragon Corporate Holdings Inc.
5700 West Touhy Avenue
Niles, Illinois 60714
Telecopier No.: (847) 647-0634
Attention: John H. Fountain
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Telecopier No.: (216) 479-8793
Attention: Jeffrey J. Margulies
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder at a time when such
Holder could not transfer such Transfer Restricted Securities pursuant to a
Shelf Registration Statement. Each Holder of Transfer Restricted Securities
agrees to be bound by and comply with the terms and provisions of this
Agreement.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
19
<PAGE> 21
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
[signature page follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PARAGON CORPORATE HOLDINGS INC.
By: /s/ Gerald J. McConnell
-----------------------------------
Name: Gerald J. McConnell
Title: President and CEO
CURTIS INDUSTRIES, INC.
By: /s/ A. Keith Drewett
-----------------------------------
Name: A. Keith Drewett
Title: Senior Vice President
A.B. DICK COMPANY
By: /s/ Gerald J. McConnell
-----------------------------------
Name: Gerald J. McConnell
Title: President and CEO
ITEX GRAPHIX CORP.
By: /s/ Gerald J. McConnell
-----------------------------------
Name: Gerald J. McConnell
Title: President
CURTIS SUB, INC.
By: /s/ A. Keith Drewett
-----------------------------------
Name: A. Keith Drewett
Title: Senior Vice President
<PAGE> 23
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ________________________________
Name:
Title:
CIBC OPPENHEIMER CORP.
By: ________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 4.4
-----------
================================================================================
CREDIT AND SECURITY AGREEMENT
(U.S. $32,000,000)
Dated as of April 1, 1998
among
PARAGON CORPORATE HOLDINGS INC.
as Borrower
and
THE BANKS WHICH ARE SIGNATORIES HERETO
and
KEY CORPORATE CAPITAL INC.
as Agent
and
KEY CORPORATE CAPITAL INC.
as Letter of Credit Bank
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
Section 1 DEFINITIONS AND ACCOUNTING TERMS
1.1 Certain Defined Terms........................................................ 1
1.2 Computation of Time Periods.................................................. 1
1.3 Accounting Terms............................................................. 1
Section 2 STATEMENT OF TERMS.
2.1 Revolving Credit Facility.................................................... 1
(a) Revolving Credit Advances........................................... 1
(b) Revolving Credit Borrowings......................................... 2
(c) Revolving Credit Notes.............................................. 2
(d) Control Account Maintained by Agent................................. 2
2.2 Permitted Discretion......................................................... 3
2.3 Requests for Revolving Credit Advances....................................... 3
(a) Credit Requests Executed by the Borrower............................ 3
(b) Requests for Borrowing Deemed Given................................. 4
2.4 Funding of Revolving Credit Advances......................................... 4
(a) Agent Election as to Funding........................................ 4
(b) Same Day Funding by Banks........................................... 4
(c) Periodic Funding by Banks; KCCI Settlement Advances................. 5
(d) Periodic Funding by Banks; Agent Special Advances................... 6
(e) Settlement of Settlement Advances and Agent Special Advances........ 7
2.5 Failure of Bank to Fund...................................................... 9
(a) Payment Constituting Ratable Portion................................ 9
(b) Treatment of Defaulting Bank........................................ 10
(c) Continuing Obligation of Banks to Fund.............................. 10
2.6 Repayments and Prepayments................................................... 10
(a) Repayment........................................................... 10
(b) Mandatory Prepayment of Revolving Credit Advances and Agent
Special Advances.................................................... 10
(c) Reduction of Revolving Credit Commitment............................ 11
(d) Permitted Prepayments............................................... 11
(e) Mandatory Application of Net Proceeds............................... 12
(f) Prepayment Premium.................................................. 12
2.7 Rate Conversion and Rate Continuation........................................ 12
2.8 Letters of Credit............................................................ 14
(a) Term; Form and Conditions of Letters of Credit...................... 14
(b) Requests for Letters of Credit...................................... 14
(c) Participation by Banks.............................................. 15
(d) Reimbursement....................................................... 15
(e) Failure to Reimburse................................................ 15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
(f) Obligations Absolute................................................ 16
(g) Liability of Letter of Credit Bank.................................. 16
(h) Letter of Credit Bank Indemnity..................................... 17
(i) Effect of Applicable Law or Custom.................................. 17
(j) Termination of Letter of Credit Commitment.......................... 17
2.9 Fees......................................................................... 18
(a) Agent's Fee......................................................... 18
(b) Unused Line Fee..................................................... 18
(c) Letter of Credit Fees............................................... 18
(d) Collateral Management Fee........................................... 18
(e) Per Diem Audit Fees................................................. 18
(f) Late Charges........................................................ 19
(g) Payment of Fees; NonRefundable...................................... 19
2.10 Interest on Advances......................................................... 19
(a) Interest Rate-Revolving Credit Advances............................. 19
(b) Applicable Margin; Terms of Adjustment.............................. 20
2.11 Default Interest............................................................. 21
2.12 Interest Rate Determination.................................................. 21
2.13 Payments and Computations.................................................... 21
(a) Payments............................................................ 21
(b) Payment Procedures.................................................. 22
(c) Application of Payments............................................. 22
(d) Authorization to Charge Account..................................... 22
(e) Computations of Interest and Fees................................... 22
(f) Payment not on Business Day......................................... 23
(g) Presumption of Payment in Full by the Borrower...................... 23
2.14 Change in Law; LIBOR Rate Advances Unlawful.................................. 23
2.15 Unavailability............................................................... 24
(a) Inadequate Rate..................................................... 24
(b) Unavailable Quotations.............................................. 24
(c) Unavailable Deposits................................................ 24
2.16 Pro Rata Treatment........................................................... 24
Section 3 CONDITIONS OF LENDING.
3.1 Conditions Precedent to Initial Advances..................................... 24
3.2 Conditions Precedent to all Advances......................................... 24
(a) Representation Bringdown............................................ 25
(b) No Default; Compliance with Terms................................... 25
(c) No Material Adverse Change.......................................... 25
(d) Confirmation of Borrowing Base...................................... 25
(e) Other Deliveries.................................................... 25
Section 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL
REQUIREMENTS
4.1 Grant of Security Interest................................................... 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
4.2 Perfection................................................................... 26
4.3 General Representations as to Collateral..................................... 26
4.4 Title to Collateral; Liens; Transfers........................................ 26
4.5 Changes Affecting Perfection................................................. 26
4.6 Power of Attorney for Insurance.............................................. 27
4.7 Protection of Collateral; Reimbursement...................................... 27
4.8 Inspection; Verification..................................................... 28
4.9 Assignments, Records and Schedules of Accounts............................... 28
4.10 Reporting Regarding Inventory................................................ 29
4.11 Other Collateral Reports..................................................... 29
4.12 Status of Collateral......................................................... 30
4.13 Reinstatement................................................................ 30
4.14 Termination of Security Interest; Release of Collateral...................... 30
Section 5 PROCEEDS OF ACCOUNTS AND INVENTORY
5.1 Receipt in Trust............................................................. 30
5.2 Cash Collateral Accounts..................................................... 30
5.3 Application of Deposits to Loan Account...................................... 31
5.4 Crediting of Collections and Remittances..................................... 32
5.5 Cost of Collection........................................................... 32
5.6 Return of Funds.............................................................. 32
5.7 Notice to Account Debtors.................................................... 33
5.8 Appointment of Attorney-in-Fact.............................................. 33
Section 6 SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Representations and Warranties Regarding Accounts............................ 34
6.2 Disputes and Claims Regarding Accounts....................................... 34
6.3 Accounts..................................................................... 34
6.4 Compliance with Terms of Accounts............................................ 34
6.5 No Waivers, Extensions, Amendments........................................... 35
6.6 Lien Priority................................................................ 35
6.7 Location of Collateral....................................................... 35
6.8 Lien Waivers, Landlord Waivers, Warehouse Receipts........................... 35
6.9 Maintenance of Insurance..................................................... 36
6.10 Limitations on Dispositions of Inventory..................................... 36
Section 7 GENERAL REPRESENTATIONS AND WARRANTIES.
7.1 Existence.................................................................... 36
7.2 Authorization................................................................ 37
7.3 Enforceability............................................................... 37
7.4 Litigation; Proceedings...................................................... 37
7.5 Taxes........................................................................ 37
7.6 Title........................................................................ 38
7.7 Consents; Approvals.......................................................... 38
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.8 Lawful Operations............................................................ 38
7.9 Environmental Compliance..................................................... 38
7.10 Environmental Laws and Permits............................................... 40
7.11 ERISA........................................................................ 40
7.12 Agreements; Adverse Obligations; Labor Disputes.............................. 40
7.13 Financial Statements......................................................... 40
7.14 Intellectual Property........................................................ 41
7.15 Insurance.................................................................... 41
7.16 Value; Solvency.............................................................. 41
7.17 Investment Company Act Status................................................ 41
7.18 Regulation U/Regulation X Compliance......................................... 41
7.19 Full Disclosure.............................................................. 42
Section 8 COVENANTS OF THE BORROWER.
8.1 Reporting and Notice Covenants............................................... 42
(a) Monthly Financial Statements........................................ 42
(b) Quarterly Financial Statements...................................... 42
(c) Annual Financial Statements......................................... 43
(d) Officer's Certificate............................................... 43
(e) Annual Business Plan................................................ 43
(f) Intercompany Loans.................................................. 44
(g) Other Information................................................... 44
(h) Notices............................................................. 44
(i) Notice of Default under ERISA....................................... 44
(j) Environmental Reporting............................................. 45
(k) Multiemployer Plan Withdrawal Liability............................. 45
8.2 Affirmative Covenants........................................................ 45
(a) Corporate Existence................................................. 45
(b) Financial Records................................................... 45
(c) Visitation.......................................................... 45
(d) Compliance with Law................................................. 46
(e) Compliance with Environmental Laws.................................. 46
(f) Properties.......................................................... 47
(g) Use of Proceeds; Intercompany Loans................................. 47
(h) Compliance with Terms of All Material Contracts..................... 47
(i) Taxes............................................................... 47
(j) Insurance........................................................... 47
(k) License to Third Parties and Subsidiaries........................... 48
(l) Year 2000 Compliance................................................ 48
(m) Refinancing......................................................... 48
8.3 Negative Covenants........................................................... 48
(a) Equity Transactions; Permitted Acquisitions......................... 48
(b) Credit Extensions................................................... 49
(c) Indebtedness........................................................ 49
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
(d) Liens; Leases....................................................... 50
(e) Investments......................................................... 50
(f) Dividends; Management Fee........................................... 51
(g) Change in Nature of Business........................................ 51
(h) Charter Amendments.................................................. 51
(i) Accounting Changes.................................................. 51
(j) Compliance with ERISA............................................... 52
(k) Additional Bank Accounts; Excess Cash............................... 53
(l) Regulation U Compliance............................................. 53
(m) Arm's-Length Transactions........................................... 53
8.4 Financial Covenants.......................................................... 53
(a) Minimum Consolidated EBITDA......................................... 54
(b) Consolidated Fixed Charge Coverage Ratio............................ 54
Section 9 EVENTS OF DEFAULT
9.1 Payment...................................................................... 54
9.2 Representations and Warranties............................................... 54
9.3 Reporting and Notice Provisions; Violation of Certain Affirmative
Covenants.................................................................... 54
9.4 Violation of Negative Covenants and Financial Covenants...................... 55
9.5 Other Loan Documents......................................................... 55
9.6 Cross-Default................................................................ 55
9.7 False or Misleading Reports.................................................. 55
9.8 Destruction of Collateral.................................................... 55
9.9 Material Adverse Effect...................................................... 55
9.10 Termination of Existence..................................................... 55
9.11 Control...................................................................... 55
9.12 Failure of Enforceability of this Agreement, Credit Document; Security....... 55
9.13 ERISA........................................................................ 56
9.14 Judgments.................................................................... 56
9.15 Forfeiture Proceedings....................................................... 56
9.16 Financial Impairment......................................................... 56
Section 10 REMEDIES
10.1 Optional Defaults............................................................ 57
10.2 Automatic Defaults........................................................... 57
10.3 General Rights and Remedies of Agent and the Banks........................... 57
10.4 Additional Remedies.......................................................... 57
(a) Possession of Collateral............................................ 57
(b) Foreclosure of Liens................................................ 58
(c) Disposition of Collateral........................................... 58
(d) Application of Collateral........................................... 58
10.5 Termination; Effect on Borrower Obligations.................................. 58
10.6 Set-off...................................................................... 58
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
10.7 Authority to Execute Transfers............................................... 58
10.8 Limited License to Liquidate................................................. 59
10.9 Actions in Respect of the Letters of Credit Upon Default..................... 59
10.10 Letter of Credit Collateral Account.......................................... 59
(a) Application......................................................... 59
(b) No Borrower or Third Party Claims................................... 60
(c) No Liens or Transfers of Account.................................... 60
(d) Reasonable Care..................................................... 60
10.11 Equalization................................................................. 60
10.12 Remedies Cumulative.......................................................... 60
Section 11 THE AGENT
11.1 The Agent.................................................................... 60
11.2 Nature of Appointment........................................................ 61
11.3 Agent as a Bank; Other Transactions.......................................... 61
11.4 Instructions from Banks...................................................... 61
11.5 Bank's Diligence............................................................. 61
11.6 No Implied Representations................................................... 61
11.7 Sub-Agents................................................................... 62
11.8 Agent's Diligence............................................................ 62
11.9 Notice of Default............................................................ 62
11.10 Agent's Liability............................................................ 62
11.11 Agent's Indemnity............................................................ 63
11.12 Resignation or Removal of Agent.............................................. 63
Section 12 TRANSFERS AND ASSIGNMENTS.
12.1 Transfer of Commitments...................................................... 63
(a) Prior Consent....................................................... 64
(b) Agreement; Transfer Fee............................................. 64
(c) Notes............................................................... 64
(d) Parties............................................................. 64
12.2 Sale of Participations....................................................... 65
(a) Benefits of Participant............................................. 65
(b) Rights Reserved..................................................... 65
(c) No Delegation....................................................... 65
12.3 Confidentiality.............................................................. 65
Section 13 INDEMNITIES.
13.1 Increased Costs.............................................................. 66
13.2 Risk-Based Capital........................................................... 67
13.3 Taxes........................................................................ 67
(a) Taxes; Withholding.................................................. 67
(b) Stamp Taxes......................................................... 67
(c) Other Taxes......................................................... 68
</TABLE>
vi
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<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
(d) Request for Refund.................................................. 68
(e) Exemption Certificate............................................... 68
(f) Furnishing of Certificate........................................... 69
(g) Survival of Provision............................................... 69
13.4 Losses....................................................................... 69
13.5 Indemnification for Requests................................................. 69
13.6 General Indemnity............................................................ 70
13.7 Certificate for Indemnification.............................................. 70
13.8 Duty To Mitigate; Standard Treatment......................................... 70
Section 14 GENERAL
14.1 Amendments and Waivers....................................................... 70
14.2 General Appointment as Attorney-in-Fact...................................... 71
(a) Agent Not Liable.................................................... 72
(b) Performance by Agent of the Borrower's Obligations.................. 72
14.3 Cumulative Provisions........................................................ 72
14.4 Binding Effect............................................................... 72
14.5 Costs and Expenses........................................................... 72
14.6 Survival of Provisions....................................................... 73
14.7 Immediate U.S. Funds......................................................... 73
14.8 Captions..................................................................... 73
14.9 Sharing of Information....................................................... 73
14.10 Interest Rate Limitation..................................................... 73
14.11 Limitation of Liability...................................................... 74
14.12 Illegality................................................................... 74
14.13 Notices...................................................................... 74
14.14 Governing Law................................................................ 74
14.15 Entire Agreement............................................................. 75
14.16 JURY TRIAL WAIVER............................................................ 75
14.17 Jurisdiction; Venue; Inconvenient Forum...................................... 75
(a) Jurisdiction........................................................ 75
(b) Venue; Inconvenient Forum........................................... 75
14.18 Execution in Counterparts.................................................... 76
</TABLE>
vii
<PAGE> 9
EXHIBITS AND SCHEDULES
Exhibit A (Form of Revolving Credit Note)
Exhibit B (Form of Credit Request)
Exhibit C (Form of Rate Conversion/Continuation Request)
Exhibit D [ Intentionally Omitted ]
Exhibit E (Form of Subsidiary Guaranty)
Exhibit F-1 (Form of Curtis Security Agreement)
Exhibit F-2 (Form of A.B. Dick Security Agreement)
Exhibit G (Form of Borrowing Base Certificate)
Exhibit H (Form of Restricted Account Agreement)
Exhibit I (Form of Assignment Agreement)
Exhibit J-1 (Form of Landlord Waiver)
Exhibit J-2 (Form of Mortgagee Waiver)
Exhibit J-3 (Form of Warehouseman's Waiver)
Exhibit K-1 (Form of Limited License--Borrower)
Exhibit K-2 (Form of Limited License--Subsidiary Guarantor)
Exhibit K-3 (Form of Limited License--Third Party Licensor)
Annex I Commitments
Annex II Definitions
Annex III Conditions Precedent to Initial Advances
Annex IV Supplemental Schedule
viii
<PAGE> 10
CREDIT AND SECURITY AGREEMENT
U.S. $32,000,000
Dated as of April 1, 1998
PARAGON CORPORATE HOLDINGS INC., a Delaware corporation, the
BANKS listed on the signature pages of this Agreement, KEY CORPORATE CAPITAL
INC., a Michigan corporation, as Agent for the Banks under this Agreement, and
KEY CORPORATE CAPITAL INC., a Michigan corporation, as Letter of Credit Bank
under this Agreement, hereby agree as follows:
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.
1.1 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement are defined on ANNEX II attached hereto and incorporated herein by
reference.
1.2 COMPUTATION OF TIME PERIODS. In this Agreement, for the purpose of
computing periods of time from a specified date to a later specified date, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding".
1.3 ACCOUNTING TERMS. All accounting and financial terms not
specifically defined herein shall be construed in accordance with GAAP as in
effect from time to time and shall be applied on a basis consistent with those
applied in the preparation of the Borrower's audited financial statements for
the Fiscal Year ending December 31, 1997; PROVIDED, HOWEVER, that (a) all
financial statements shall reflect the Borrower's adoption of FAS 106 and (b) if
any change in GAAP itself affects the calculation of any financial covenant in
Section 8.4 of this Agreement, the Borrower may by written notice to the Agent,
or the Agent (upon request by the Required Banks), may by written notice to the
Borrower, require that such covenant thereafter be calculated in accordance with
GAAP as in effect, and applied by the Borrower, immediately before such change
in GAAP occurs. If any such notice is given, the compliance certificates
delivered pursuant to Section 8.1(d) of this Agreement after such change occurs
shall be accompanied by reconciliations of the difference between the
calculation set forth therein and a calculation made in accordance with GAAP as
in effect from time to time after such change occurs.
SECTION 2 STATEMENT OF TERMS.
2.1 REVOLVING CREDIT FACILITY.
(a) REVOLVING CREDIT ADVANCES. Subject to the terms and
conditions set forth in this Agreement, each Bank, severally agrees to
make, from time to time from and after the Closing Date until the
Business Day immediately preceding the Revolving Credit Termination
Date, advances to or for the account of the Borrower on a revolving
credit basis (each a "Revolving Credit Advance"); PROVIDED, HOWEVER,
that the outstanding principal amount of Revolving Credit Advances by
or on behalf of such
<PAGE> 11
Bank shall not at any time exceed the lesser of: (x) an amount equal to
such Bank's Ratable Portion of the Borrowing Base at such time minus
the LC Exposure of such Bank at such time or (y) such Bank's Ratable
Portion of the Revolving Credit Commitment in effect at such time minus
the LC Exposure of such Bank at such time. Within the limits set forth
in this Agreement, the Borrower may borrow, prepay and reborrow
Revolving Credit Advances.
(b) REVOLVING CREDIT BORROWINGS. Each Revolving Credit
Borrowing shall be: (i) if comprised of Alternate Base Rate Advances,
in an amount at the option of the Borrower, and (ii) if comprised of
LIBOR Rate Advances, in an aggregate amount of not less than Five
Hundred Thousand Dollars ($500,000) or an integral multiple of One
Hundred Thousand Dollars ($100,000) in excess thereof. The Borrower
shall be entitled to have more than one Revolving Credit Borrowing
outstanding at one time; provided, however, that the Borrower shall not
be entitled to request any Revolving Credit Borrowing which, together
with all other outstanding Revolving Credit Borrowings, would result in
any Bank's having an aggregate of more than ten (10) LIBOR Rate
Advances outstanding at any one time.
(c) REVOLVING CREDIT NOTES; LOAN ACCOUNT. Each Bank's
Revolving Credit Advances shall be evidenced at all times by a
Revolving Credit Note executed and delivered by the Borrower, payable
to the order of such Bank and in a principal amount equal to such
Bank's Revolving Credit Commitment in effect at the execution and
delivery of the Revolving Credit Note. Whenever the Borrower obtains a
Revolving Credit Borrowing, each Bank shall endorse an appropriate
entry in respect of the Revolving Credit Advance of such Bank
comprising such Revolving Credit Borrowing on such Bank's Revolving
Credit Note or make an appropriate entry in a loan account (the "Loan
Account") maintained in such Bank's books and records, or both, to
evidence such Bank's Revolving Credit Advances. The Loan Account shall
also evidence: (i) accrued interest on the Revolving Credit Advances of
such Bank, (ii) all other amounts due to the Bank in respect of such
Revolving Credit Advances and (iii) all payments by the Borrower in
respect of such Revolving Credit Advances and the Ratable Portion of
Collections and Remittances received by such Bank from the Agent for
application to such Revolving Credit Advances. Each entry on a Bank's
Revolving Credit Note, books and records or Loan Account shall be prima
facie evidence of the data entered. Such entries by a Bank shall not be
a condition to the Borrower's obligation to pay.
(d) CONTROL ACCOUNT MAINTAINED BY AGENT. The Agent shall
maintain on its books and records a control account (the "Control
Account") in respect of the Borrower and the Revolving Credit
Borrowings hereunder. The Agent shall record in the Control Account:
(i) advances of Revolving Credit Borrowings to the Borrower, (ii) the
Ratable Portion of each Bank in the outstanding Revolving Credit
Borrowings, (iii) the amounts of any Collections and Remittances
received and credited to reduce the Revolving Credit Advances and (iv)
the Ratable Portion of each Bank in such credited Collections and
Remittances. Each entry by the Agent in the Control Account shall be
prima facie evidence of the data entered.
2
<PAGE> 12
2.2 PERMITTED DISCRETION. The Agent may, but shall not be obligated to,
rely on each Borrowing Base Certificate and any other schedules or reports in
evaluating Accounts and Inventory for purposes of calculating the Borrowing
Base. The Borrower and the Banks agree that the Agent, in the good faith
exercise of its Permitted Discretion, may from time to time: (a) establish
reserves against, and increase or decrease the amount of reserves against,
Eligible Accounts and Eligible Inventory, (b) reduce the advance rates provided
for in the definition of Borrowing Base or restore such reduced rates of advance
to any level up to the rates of advance stated in the definition of Borrowing
Base, (c) impose additional restrictions to the standards of eligibility set
forth in the definition of Eligible Accounts and Eligible Inventory, and (d)
determine whether Accounts and Inventory constitute Eligible Accounts or
Eligible Inventory, as the case may be. The Agent shall use reasonable efforts
to notify the Borrower prior to any actions taken under clauses (a)-(d) of this
Section 2.2, but shall not be liable for any damages arising out of any failure
to so notify the Borrower.
2.3 REQUESTS FOR REVOLVING CREDIT ADVANCES. Revolving Credit Advances
comprising a Revolving Credit Borrowing shall be made upon request of the
Borrower in accordance with clause (a) below or upon a request deemed to be made
by the Borrower pursuant to clause (b) below or in conjunction with Section
2.8(e) of this Agreement.
(a) CREDIT REQUESTS EXECUTED BY THE BORROWER. Requests
from the Borrower for Revolving Credit Advances comprising a Revolving
Credit Borrowing shall be given by the Borrower to the Agent not later
than 12:00 noon (Cleveland, Ohio time): (i) on the Business Day which
is the requested date of a proposed Revolving Credit Borrowing
comprised of Alternate Base Rate Advances (Revolving Credit Advances
made on the Closing Date must consist entirely of Alternate Base Rate
Advances) and (ii) on the Business Day which is three (3) Business Days
before the requested date of a proposed Revolving Credit Borrowing
comprised of LIBOR Rate Advances. Except as herein after permitted,
each such request (a "Credit Request") for a Revolving Credit Borrowing
shall be in writing signed by the Borrower and transmitted by the
Borrower to the Agent by telecopier, telex or cable (in the case of
telex or cable, confirmed in writing prior to the date of the requested
Revolving Credit Borrowing), in substantially the form of Exhibit B
hereto. Each Credit Request shall specify: (A) the requested date of
the Revolving Credit Advances comprising such Revolving Credit
Borrowing, (B) the aggregate amount of such Revolving Credit Advances,
(C) whether such Revolving Credit Borrowing is to be comprised of
Alternate Base Rate Advances or LIBOR Rate Advances, and (D) in the
case of a proposed Revolving Credit Borrowing comprised of LIBOR Rate
Advances, the initial Interest Period for such LIBOR Rate Advances.
Each Credit Request shall be irrevocable and binding on the Borrower
and be subject to the indemnification provisions of Section 13 of this
Agreement. The Borrower may give a Credit Request telephonically so
long as: (I) a written Credit Request confirmation is received by the
Agent by 12:30 p.m. (Cleveland, Ohio time) on the same day such
telephonic Credit Request was given and (II) that the other
requirements of this Section 2.3(a) are complied with. The Agent may
rely on such telephonic Credit Request to the same extent that the
Agent may rely on a written Credit Request. The Borrower shall bear all
3
<PAGE> 13
risks related to the giving of a Credit Request by the Borrower whether
given telephonically or by such other method of transmission as the
Borrower shall elect.
(b) REQUESTS FOR BORROWING DEEMED GIVEN. The Borrower
shall be deemed to have made a request for a Revolving Credit Borrowing
comprised of Alternate Base Rate Advances (a "Deemed Credit Request"),
which Deemed Credit Request shall be deemed to be irrevocable, upon the
occurrence of any of the following:
(i) LETTER OF CREDIT DRAWING. As specified in Section
2.8(e) of this Agreement, upon a drawing under a Letter of
Credit, the Borrower shall be deemed to have made a request
for a Revolving Credit Borrowing comprised of Alternate Base
Rate Advances in an amount equal to the amount necessary to
reimburse the Letter of Credit Bank for any drawing upon the
Letter of Credit.
(ii) PAYMENT OF INTEREST AND OBLIGATIONS. Unless
payment is otherwise made by the Borrower, upon any interest,
fee or other payment Obligation hereunder becoming due without
payment by or on behalf of the Borrower, the Borrower shall be
deemed to have made a request for a Revolving Credit Borrowing
comprised of Alternate Base Rate Advances in an amount equal
to the amount necessary to pay such interest or fee.
Each Bank acknowledges and agrees that its obligation to participate in
and make Advances comprising a Borrowing pursuant to a Deemed Credit
Request is absolute and unconditional and shall not be affected by any
event or circumstance whatsoever, including the occurrence of any
Potential Default or Event of Default hereunder or the failure of any
condition precedent set forth in Section 3 of this Agreement to be
satisfied at the time of the making of such Deemed Credit Request, and
each Advance made by a Bank in satisfaction of its obligation shall be
made without any offset, abatement, withholding or reduction
whatsoever.
2.4 FUNDING OF REVOLVING CREDIT ADVANCES.
(a) AGENT ELECTION AS TO FUNDING. Promptly after receipt
of a Credit Request for a Revolving Credit Borrowing or a Deemed Credit
Request, the Agent shall elect, in its sole discretion, either: (i) to
require same day funding pursuant to Section 2.4(b) for Revolving
Credit Advances in connection with such requested Revolving Credit
Borrowing or (ii) to request KCCI to make a Settlement Advance pursuant
to Section 2.4(c) in the amount of the requested Revolving Credit
Borrowing; provided, however, that, if KCCI declines, in its sole
discretion, to make such a Settlement Advance, the Agent shall elect to
have the terms of Section 2.4(b) apply to such requested Borrowing.
(b) SAME DAY FUNDING BY BANKS. In the event the Agent has
elected to have same day funding of Revolving Credit Advances pursuant
to this Section 2.4(b), the Agent shall notify each Bank of each Credit
Request or Deemed Credit Request no later than 12:30 p.m. (Cleveland,
Ohio time) on the date received by telecopy, telephone
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or similar form of transmission. Unless the Agent elects to have
periodic funding of Advances by the Banks in accordance with Section
2.4(c) below, each Bank shall, before 3:00 p.m. (Cleveland, Ohio time)
on the date of each Revolving Credit Borrowing requested, make
available to the Agent, in immediately available funds at the account
of the Agent maintained at the Payment Office as shall have been
notified by the Agent to the Banks prior to such date, such Bank's
Ratable Portion of such Revolving Credit Borrowing.
(i) DISBURSEMENT OF FUNDS RECEIVED. On the date
requested by the Borrower for a Revolving Credit Borrowing,
after the Agent's receipt of the funds representing a Bank's
Ratable Portion of such Revolving Credit Borrowing and subject
to the terms and conditions set forth in this Agreement, the
Agent shall make such Revolving Credit Advance of such Bank
available to the Borrower, in immediately available funds, by
wire transfer or intrabank transfer to the Operating Account.
(ii) AVAILABILITY OF REVOLVING CREDIT ADVANCE FUNDS.
Unless the Agent shall have received notice from a Bank prior
to the time of any Revolving Credit Borrowing that such Bank
will not make available to the Agent such Bank's Ratable
Portion of such Borrowing, the Agent may assume that such Bank
has made its Ratable Portion of such Borrowing available to
the Agent on the date of such Borrowing in accordance with
Section 2.4(b) of this Agreement. In reliance upon such
assumption, the Agent may, but shall not be obligated to, make
available to the Borrower on such date, a corresponding
portion of such Borrowing. Any disbursement by the Agent in
reliance on such assumption shall be deemed to be a Revolving
Credit Advance by such Bank.
(c) PERIODIC FUNDING BY BANKS; KCCI SETTLEMENT ADVANCES.
In the event the Agent elects, in its sole discretion, with the consent
of KCCI, to have periodic funding of Revolving Credit Borrowings
pursuant to Section 2.4(e) below, KCCI shall, upon the request of the
Agent, on the date requested by the Borrower for a Revolving Credit
Borrowing, make a Revolving Credit Advance to the Borrower from its own
funds and on a nonratable basis pending settlement pursuant to Section
2.4(e) below in the amount of such requested Revolving Credit Borrowing
(any such Revolving Credit Advance made solely by KCCI pursuant to this
Section 2.4(c) being hereinafter referred to as a "Settlement Advance"
and, collectively with all such Advances, as "Settlement Advances");
PROVIDED, HOWEVER, that the outstanding principal amount of Settlement
Advances advanced by KCCI shall not at any time exceed the lesser of:
(x) an amount equal to the Borrowing Base of the Borrower at such time
MINUS the aggregate outstanding principal of Revolving Credit Advances
(excluding Settlement Advances but including Agent Special Advances) at
such time AND MINUS the aggregate LC Exposure of the Banks at such time
or (y) an amount equal to the aggregate Revolving Credit Commitments of
the Banks in effect at such time MINUS the aggregate outstanding
Revolving Credit Advances (excluding Settlement Advances but including
Agent Special Advances) at such time AND MINUS the aggregate LC
Exposure of the Banks at such time.
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(i) DISBURSEMENT OF KCCI FUNDS. If KCCI has agreed to
make a requested Settlement Advance, KCCI shall, before 2:00
p.m. (Cleveland, Ohio time) on the date requested by the
Borrower for such Revolving Credit Borrowing, make such
Settlement Advance available to the Borrower, in immediately
available funds, by wire transfer or intrabank transfer to the
Operating Account.
(ii) SETTLEMENT ADVANCES AS REVOLVING CREDIT
ADVANCES. Each Settlement Advance shall be deemed for all
purposes hereof to be a Revolving Credit Advance hereunder and
shall be subject to all the terms and conditions applicable to
other Revolving Credit Advances except that all payments
thereon shall be payable to KCCI solely for its own account
(and for the account of the holder of any participation
interest with respect to such Revolving Credit Advance
purchased pursuant to Section 2.4(e)(iii) of this Agreement).
(iii) DISBURSEMENT OF KCCI FUNDS. The Agent shall not
request KCCI to make any Settlement Advance if the Agent has
received written notice from any Bank that one or more of the
conditions set forth in Section 3 will not be satisfied on the
date requested by the Borrower for such Borrowing. Prior to
making, in its sole discretion, any Settlement Advance, KCCI
shall not otherwise be required to determine whether the
conditions precedent set forth in Section 3 of this Agreement
have been satisfied or whether the requested Borrowing would
exceed the Borrowing Base and Revolving Credit Commitments of
the Banks then in effect.
(d) PERIODIC FUNDING BY BANKS; AGENT SPECIAL ADVANCES. The
Agent is hereby authorized by the Borrower and the Banks, to make from
time to time, in the Agent's sole discretion, (i) after the occurrence
of a Potential Default or the occurrence of an Event of Default that
has not been waived by the Required Banks or (ii) at any time that any
of the other applicable conditions precedent set forth in Section 3 of
this Agreement have not been satisfied, to make Revolving Credit
Advances to the Borrower, from its own funds, on a nonratable basis, in
the amount of any requested Revolving Credit Borrowing (any such
Advance being hereinafter referred to as an "Agent Special Advance,"
and, collectively with all such advances, as "Agent Special Advances")
on behalf of the Banks, which the Agent, in its sole discretion, deems
necessary or desirable; provided; however, that: (A) the aggregate
amount of such Agent Special Advances shall not at any time exceed an
amount equal to (x) Five Hundred Thousand Dollars ($500,000) minus (y)
the amount by which Revolving Credit Advances (including Settlement
Advances but excluding Agent Special Advances) outstanding at such
time, together with the aggregate LC Exposure of all Banks at such
time, exceeds the Borrowing Base at such time, and (B) the Agent
Special Advances shall be subject to the periodic settlement with the
Banks pursuant to Section 2.4(e) of this Agreement.
(i) REVOCATION OF AUTHORITY. The Required Banks may
at any time revoke or limit the amount of the Agent's
authorization contained in this Section
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2.4(d) to make Agent Special Advances, any such revocation to
be in writing and to become effective prospectively upon the
Agent's receipt thereof.
(ii) TREATMENT OF AGENT SPECIAL ADVANCES. The Agent
Special Advances shall be repayable on demand, be secured by
the Collateral, constitute in all respects Revolving Credit
Advances and Obligations hereunder, and bear interest at the
rate applicable from time to time to the Revolving Credit
Advances.
(e) SETTLEMENT OF SETTLEMENT ADVANCES AND AGENT SPECIAL
ADVANCES. The Agent and the Banks hereby agree that, except in the case
of Revolving Credit Advances consisting of Settlement Advances or Agent
Special Advances pending settlement as provided in this Section 2.4(e),
each Bank's funded portion of such Revolving Credit Advances is
intended to be equal at all times to such Bank's Ratable Portion of the
outstanding Revolving Credit Advances. The Agent and the Banks agree
(which agreement shall not be for the benefit of or enforceable by the
Borrower) that, in order to facilitate the administration of this
Agreement and other Loan Documents, the Agent may elect, with the
consent of KCCI, to settle accounts (each such settlement of accounts
hereunder, a "Settlement") as to the Settlement Advances and Agent
Special Advances among the Banks on a periodic basis in accordance with
the following provisions:
(i) SETTLEMENT DATE. The Agent shall request
such Settlement of accounts of the Banks as to Settlement
Advances and Agent Special Advances on a basis not less
frequently than once during each five (5) Business Day period,
or on a more frequent basis if so determined by the Agent: (A)
on behalf of KCCI, with respect to each outstanding Settlement
Advance, and (B) for itself, with respect to each Agent
Special Advance, by notifying the other Banks by telecopy,
telephone or other similar form of transmission, of such
requested Settlement, no later than 12:30 p.m. (Cleveland,
Ohio time) on the date of such requested Settlement (the
"Settlement Date"). The Settlement Date for outstanding
Settlement Advances and Agent Special Advances shall be such
day of each calendar week as the Agent shall notify the Banks
of from time to time.
(ii) SETTLEMENT. Each Bank (other than KCCI,
in the case of Settlement Advances) shall make the amount of
such Bank's Ratable Portion of the outstanding principal
amount of the Settlement Advances and Agent Special Advances
with respect to which Settlement is requested available to the
Agent, for itself or for the account of KCCI, in immediately
available funds at the account of the Agent maintained at the
Payment Office not later than 2:00 p.m. (Cleveland, Ohio
time), on the Settlement Date applicable thereto. Such
Settlement shall occur regardless of whether the applicable
conditions precedent set forth in Section 3 have then been
satisfied. Such amounts made available to the Agent shall be
applied against the amounts of the applicable Settlement
Advance or Agent Special Advance and, together with the
portion of such
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Settlement Advance or Agent Special Advance representing
KCCI's Ratable Portion thereof, shall constitute Revolving
Credit Advances of such Banks.
(iii) PARTICIPATION IN SETTLEMENT ADVANCES
AND AGENT SPECIAL ADVANCES. Notwithstanding the occurrence of
a Potential Default or an Event of Default and regardless of
whether the Agent has requested a Settlement with respect to a
Settlement Advance or Agent Special Advance, in the event that
any Revolving Credit Advance pursuant to Subsection (i) above
cannot be made by the Banks because one or more of the Banks
shall determine that such Banks are legally prohibited from
making such a Revolving Credit Advance, each such Bank shall
irrevocably and unconditionally purchase and receive from KCCI
or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such Settlement
Advance or Agent Special Advance to the extent of such Bank's
Ratable Portion thereof by paying to the Agent, in immediately
available funds, an amount equal to such Bank's Ratable
Portion of such Settlement Advance or Agent Special Advance on
the date the Revolving Credit Advance would have been made
pursuant to Subsection (i) above. If such amount is not in
fact made available to the Agent by any Bank, the Agent shall
be entitled to recover such amount on demand from such Bank
together with interest thereon at the Federal Funds Rate for
the first three (3) days from and after such demand and
thereafter at the Interest Rate then applicable to the
Revolving Credit Advances. From and after the date, if any, on
which a Bank purchases an undivided interest and participation
in any Settlement Advance or Agent Special Advance pursuant to
this Section 2.4(e)(iii), and subject to Section 2.13(c) and
Sections 5.3 and 5.4 of this Agreement, such Bank shall be
entitled to its Ratable Portion of all payments made by or on
behalf of the Borrower in respect of, and all Collections and
Remittances received by the Agent and credited to, such
Settlement Advance or Agent Special Advance.
(iv) DISTRIBUTIONS OF PAYMENTS PRIOR TO
SETTLEMENT DATE. If, prior to any Settlement Date, any
payments made by or on behalf of the Borrower or any
Collections and Remittances are received by the Agent which,
in accordance with the terms of this Agreement, are to be
applied to the reduction of the Revolving Credit Advances, and
no Revolving Credit Advances comprised of Settlement Advances
or Agent Special Advances are then outstanding as to which
such Collections and Remittances can be applied pursuant to
Section 5.3, the Agent may pay over such amounts to KCCI for
application to KCCI's Ratable Portion of such Revolving Credit
Advances, unless application would result in an early
prepayment of a LIBOR Borrowing, in which case the Agent shall
immediately settle with the Banks. As of any Settlement Date,
if payments, Collections or Remittances received since the
then immediately preceding Settlement Date have been applied
to KCCI's Ratable Portion of the Revolving Credit Advances
other than Settlement Advances and Agent Special Advances, as
provided for in the immediately preceding sentence, then KCCI
shall pay to the Agent, for the accounts of the Banks, to be
applied to the outstanding Revolving Credit Advances of such
Banks, an amount such
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that each Bank shall have outstanding after giving effect to
such payments by KCCI, its Ratable Portion of such Revolving
Credit Advances; PROVIDED, HOWEVER, that the Agent may net
payments due from KCCI pursuant to this sentence against
payments due to KCCI pursuant to Section 2.4(e)(i) on the
applicable Settlement Date, and require either KCCI or the
other Banks, as applicable, to make only the amount of the
payment due after such netting.
(v) ALLOCATION AND ACCRUAL OF INTEREST.
Pursuant to the Agent's election for periodic funding, the
Agent or KCCI may be advancing and may be receiving repayments
in respect of Revolving Credit Advances prior to the time the
Banks actually advance or are actually repaid Revolving Credit
Advances. Each of: (A) KCCI with respect to Settlement
Advances, (B) the Agent with respect to Agent Special
Advances, and (C) each Bank with respect to the Revolving
Credit Advances other than Settlement Advances and Agent
Special Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement accruing
on the amount of funds employed by reason of actual Advances
by KCCI, the Agent or such Bank. Funds shall be deemed
employed by KCCI, the Agent or the Banks, as the case may be,
until such time as: (I) in the case of the Agent or KCCI,
payments are credited to the Borrower pursuant to Section 2.13
or Collections or Remittances are received by the Agent by
reason of deposit to the Borrower Cash Collateral Account and
credited to the Borrower pursuant to Sections 5.3 and 5.4 or
(II) in the case of a Bank, funds representing such Bank's
Ratable Portion of such payment or Collections and Remittances
are received by such Bank from the Agent pursuant to Section
2.13(a) of this Agreement.
2.5 FAILURE OF BANK TO FUND. If and to the extent that any Bank shall
not have made available to the Agent such Bank's Ratable Portion of any
Revolving Credit Borrowing advanced by the Agent on behalf of the Banks on the
Closing Date or thereafter (whether advanced by KCCI on behalf of the Banks
pursuant to Section 2.4(c), the Agent on behalf of the Banks pursuant to Section
2.4(d), or the Banks otherwise pursuant to this Agreement), such Bank agrees to
pay, and the Borrower agrees to repay to the Agent, severally and not jointly
and severally, immediately upon demand by the Agent, an amount equal to such
Bank's Ratable Portion of such Revolving Credit Borrowing, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at: (A) in the case
of the Bank, Federal Funds Rate for the first three (3) days from and after the
date of the Revolving Credit Borrowing and thereafter at the Interest Rate then
applicable to Alternate Base Rate Advances of such Borrowings and (B) in the
case of the Borrower, the interest rate applicable at the time to such
Borrowings.
(a) PAYMENT CONSTITUTING RATABLE PORTION. If such Bank
pays to the Agent the Bank's Ratable Portion of such Revolving Credit
Borrowing prior to repayment of such amount by the Borrower, the amount
so repaid shall constitute such Bank's Ratable Portion of such
Revolving Credit Borrowing, and the Borrower shall have no further
obligation to make the payment required by this Section.
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(b) TREATMENT OF DEFAULTING BANK. The Agent shall not be
obligated to transfer to a defaulting Bank any payments made by the
Borrower to the Agent for the benefit of such defaulting Bank if such
Bank has not made available to the Agent such Bank's Ratable Portion of
any Borrowing advanced pursuant to this Agreement. Until the earlier of
such defaulting Bank's cure of such failure or the termination of the
Commitments, all amounts repaid to the Agent by the Borrower which
would otherwise be required to be applied to such Bank's Ratable
Portion of the Obligations shall be advanced to the Borrower by the
Agent on behalf such defaulting Bank to cure, in full or in part, the
failure by such Bank, but shall nevertheless be deemed to have been
paid to such defaulting Bank in satisfaction of the Obligations to
which such payment would otherwise have been applied. Notwithstanding
anything contained herein to the contrary, no such defaulting Bank
shall have any voting or consent rights under or with respect to the
Loan Documents or constitute a "Bank" (or be included in the
calculation of "Required Banks" hereunder) for any voting or consent
rights under or with respect to any Loan Document. The terms of this
Section 2.5(b) shall: (i) remain effective with respect to such
defaulting Bank until such time as the defaulting Bank shall no longer
be in default of any of its obligations under this Agreement and (ii)
shall not relieve or excuse the performance by the Borrower of any of
its duties or obligations hereunder.
(c) CONTINUING OBLIGATION OF BANKS TO FUND. It is
understood that: (i) a Bank shall not be responsible for any failure by
any other Bank to perform its obligation to make any Advances
hereunder, (ii) any one or more of the Commitments of a Bank shall not
be increased or decreased as a result of any failure by any other Bank
to perform its obligation to make any Advances hereunder, (iii) failure
by any Bank to perform its obligation to make any Advances hereunder
shall not excuse any other Bank from its obligation to make any
Advances hereunder, and (iv) the obligations of each Bank hereunder
shall be several, not joint and several.
2.6 REPAYMENTS AND PREPAYMENTS.
(a) REPAYMENT. The Borrower shall repay to the Agent for
the account of the Banks the outstanding principal amount of the
aggregate Revolving Credit Advances on the Revolving Credit Termination
Date; PROVIDED, HOWEVER, that Collections and Remittances deposited
into the Borrower Cash Collateral Account will be applied to the
Revolving Credit Advances on an ongoing basis in accordance with
Section 5.4.
(b) MANDATORY PREPAYMENT OF REVOLVING CREDIT ADVANCES AND
AGENT SPECIAL ADVANCES.
(i) PREPAYMENT OF REVOLVING CREDIT ADVANCES. If, on
any Business Day, the aggregate Revolving Credit Advances
(including Settlement Advances but excluding Agent Special
Advances) then outstanding exceeds the lesser of (x) the
Borrowing Base minus the aggregate LC Exposure then existing
or (y) the aggregate Revolving Credit Commitments of all of
the Banks then applicable minus the aggregate LC Exposure then
existing, then the Borrower
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shall on such day prepay to the Agent for the account of the
Banks an amount at least equal to such excess.
(ii) PREPAYMENT OF AGENT SPECIAL ADVANCE. The
aggregate outstanding amount of each Agent Special Advance
shall be prepaid by the Borrower to the Agent for the benefit
of the Banks on or before the fifth (5th) Business Day after
the Agent shall have made such Agent Special Advance.
(c) REDUCTION OF REVOLVING CREDIT COMMITMENT. Upon five
(5) Business Days prior written notice to the Agent, the Borrower may
request that the Banks permanently reduce, in whole or in part, the
aggregate Revolving Credit Commitments, whereupon the aggregate
Revolving Credit Commitments shall be so reduced. Each reduction shall
be subject to the following: (i) each such reduction shall be in an
aggregate principal amount of not less than Five Hundred Thousand
Dollars ($500,000) or a multiple of One Hundred Thousand Dollars
($100,000) in excess thereof, and (ii) the Borrower shall not be
permitted to reduce the aggregate Revolving Credit Commitments unless,
concurrently with any reduction, the Borrower shall make a principal
payment on each Bank's then outstanding Revolving Credit Advances in an
amount equal to the excess, if any, of such Revolving Credit Advances
over the Revolving Credit Commitment of such Bank as so reduced. Each
reduction in the aggregate Revolving Credit Commitments hereunder shall
be made among the Banks ratably in accordance with their Revolving
Credit Commitments. On the date of each reduction, the Borrower shall
pay to the Agent for the account of the Banks (x) the commitment fees
and interest accrued through the date of such reduction in respect of
the aggregate Revolving Credit Commitments, and (y) any amounts
required pursuant to the provisions of Section 13.4 of this Agreement.
Each reduction in the Revolving Credit Commitments hereunder, if any,
shall be a permanent reduction and no amount in excess of such reduced
commitment may be borrowed or reborrowed.
(D) PERMITTED PREPAYMENTS. The Borrower may prepay all or
any part of Revolving Credit Advances by giving notice to the Agent for
the account of the Banks stating the proposed date of prepayment, the
Type of Borrowing being prepaid and the aggregate principal amount of
the prepayment: (i) not later than 11:00 A.M. (Cleveland, Ohio time) on
any Business Day, with respect to Alternate Base Rate Advances and (ii)
not later than 11:00 A.M. (Cleveland, Ohio time) on the second Business
Day prior to such prepayment, with respect to LIBOR Rate Advances. Upon
such notice the Borrower shall: (A) prepay the outstanding aggregate
principal amount of the Alternate Base Rate Advances comprising part of
the same Revolving Credit Borrowing, in whole or ratably in part and
(B) in respect of LIBOR Rate Advances comprising part of the same
Revolving Credit Borrowing, pay the accrued interest to the date of
such prepayment on the principal amount of such Borrowing so prepaid;
PROVIDED, HOWEVER, that: (I) each partial prepayment of LIBOR Rate
Advances shall be in an aggregate principal amount not less than Five
Hundred Thousand Dollars ($500,000), or an integral multiple of One
Hundred Thousand Dollars ($100,000) in excess thereof, and (II) any
prepayment of any LIBOR Rate Advances made on other than the last day
of
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an Interest Period shall obligate the Borrower to reimburse the Bank in
respect thereof pursuant to Section 13.4 of this Agreement.
(e) MANDATORY APPLICATION OF NET PROCEEDS. The Borrower
shall apply all Net Proceeds promptly upon receipt thereof to prepay
the Advances outstanding at the time of such receipt. Net Proceeds
shall be applied to the Advances in the following order: (i) first, to
any Related Expenses or past due amounts owing to the Agent or the
Banks, (ii) second, to the outstanding Revolving Credit Advances
constituting Alternate Base Rate Borrowings and (iii) third, to the
outstanding Revolving Credit Advances constituting LIBOR Rate
Borrowings.
(f) PREPAYMENT PREMIUM. As consideration for the
Borrower's ability to prepay the Obligations as set forth in Section
2.6(d) above, the Borrower shall, in the event the Borrower prepays the
Obligations in full, or refinances all or any part, of the Obligations
from other than internally generated funds (including Collections and
Remittances) and other than as required by Section 2.6(e),
contemporaneously pay to the Agent, for the benefit of the Banks, as
compensation for the costs of being prepared to hold funds available to
the Borrower under this Agreement, an amount equal to the following:
(i) if the date of such prepayment occurs on or prior to April 1, 1999,
an amount equal to two percent (2%) of the Average Commitments
applicable to such date and (ii) if the date of such prepayment occurs
after April 1, 1999, one percent (1%) of the Average Commitments
applicable to such date. Notwithstanding the foregoing provisions of
this Section 2.6(f), in the event that Borrower prepays the Obligations
in full with the proceeds of (i) a public offering of debt or equity or
(ii) a private placement of debt or equity, no prepayment premium shall
be due and owing by Borrower.
2.7 RATE CONVERSION AND RATE CONTINUATION. The Borrower shall have the
right to convert all or any portion of any Borrowing into, or continue all or
any portion of any Borrowing as, a Borrowing comprised of LIBOR Rate Advances or
Alternate Base Rate Advances, as the case may be, upon request delivered by the
Borrower to the Agent not later than 11:00 A.M. (Cleveland time) as follows: (a)
on the Business Day that the Borrower desires to convert all or a portion of a
Revolving Credit Borrowing comprised of LIBOR Rate Advances into a Revolving
Credit Borrowing comprised of Alternate Base Rate Advances, (b) three Business
Days prior to the Business Day on which the Borrower desires to convert any
Alternate Base Rate Advances comprising a Revolving Credit Borrowing into LIBOR
Rate Advances for a given permissible Interest Period comprising a Revolving
Credit Borrowing, (c) three Business Days prior to the Business Day on which
Borrower desires to continue any LIBOR Rate Advances comprising a Revolving
Credit Borrowing as LIBOR Rate Advances for an additional Interest Period of the
same duration comprising a Revolving Credit Borrowing, and (d) three Business
Days prior to the Business Day on which Borrower desires to convert any LIBOR
Rate Advances having a particular Interest Period comprising a Revolving Credit
Borrowing into LIBOR Rate Advances having a different permissible Interest
Period comprising a Revolving Credit Borrowing; PROVIDED, HOWEVER, that each
such Rate Conversion or Rate Continuation shall be subject to the following:
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(i) each Rate Conversion or Rate Continuation shall be
made among the Banks based upon such Bank's Ratable Portion of such
converted or continued Advance comprising a Revolving Credit Borrowing;
(ii) if less than all of the outstanding principal amount
of an Advance comprising a Revolving Credit Borrowing is converted or
continued, the aggregate principal amount of such Advances converted or
continued shall be: (A) in the case of LIBOR Rate Advances, not less
than Five Hundred Thousand Dollars ($500,000), or an integral multiple
of One Hundred Thousand Dollars ($100,000) in excess thereof and (B) in
the case of Alternate Base Rate Advances, One Hundred Thousand Dollars
($100,000);
(iii) each Rate Conversion or Rate Continuation shall be
effected as if each Bank were applying the proceeds of the Advances
resulting from such Rate Conversion or Rate Continuation to the
Advances being converted or continued, as the case may be, and the
accrued interest on any such Advances (or portion thereof) being
converted or continued shall be paid to the Agent on behalf of each
Bank by the Borrower at the time of such Rate Conversion or Rate
Continuation;
(iv) LIBOR Rate Advances shall not be converted or
continued at a time other than the end of an Interest Period applicable
thereto unless the Borrower shall pay, upon demand, any amounts due to
the Agent for the benefit of the Banks pursuant to Section 13 of this
Agreement;
(v) Revolving Credit Advances may not be converted into or
continued as LIBOR Rate Advances comprising a Revolving Credit
Borrowing if the Interest Period applicable thereto will expire less
than one month prior to the Revolving Credit Termination Date;
(vi) after and during the continuance of a Potential
Default, and after the occurrence of an Event of Default that has not
been waived by the Required Banks, Advances may not be converted or
continued as LIBOR Rate Advances;
(vii) Advances that cannot be converted into or continued as
LIBOR Rate Advances by reason of clause (iv), (v), (vi) or (vii) of
this definition shall be automatically converted at the end of the
Interest Period in effect for such LIBOR Rate Advances into Alternate
Base Rate Advances.
Each such request for a conversion or continuation (a "Rate
Conversion/Continuation Request") in respect of Advances comprising a Revolving
Credit Borrowing shall be transmitted by the Borrower to the Agent by
telecopier, telex or cable (in the case of telex or cable, confirmed in writing
prior to the effective date of the Rate Conversion or Rate Continuation
requested), in substantially the form of EXHIBIT C hereto. The Rate
Conversion/Continuation Request shall specify: (A) the identity and amount of
the Advances comprising a Revolving Credit Borrowing that the Borrower requests
be converted or continued, (B) the Type of Advances into which such Advances are
to be converted or continued, (C) if such notice requests a Rate Conversion,
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<PAGE> 23
the date of the Rate Conversion (which shall be a Business Day) and (D) in the
case of Advances comprising a Revolving Credit Borrowing being converted into or
continued as LIBOR Rate Advances, the Interest Period for such LIBOR Rate
Advances. The Borrower may make Rate Conversion/Continuation Requests
telephonically so long as written confirmation of such Revolving Credit
Borrowing is received by the Agent by 12:30 p.m. (Cleveland, Ohio time) on the
same day of such telephonic Rate Conversion/Continuation Request. The Agent may
rely on such telephonic Rate Conversion/Continuation Request to the same extent
that the Agent may rely on a written Rate Conversion/Continuation Request. Each
Rate Conversion/Continuation Request, whether telephonic or written, shall be
irrevocable and binding on the Borrower and subject the Borrower to the
indemnification provisions of Section 13 of this Agreement. The Borrower shall
bear all risks related to giving any Rate Conversion/Continuation Request
telephonically or by such other method of transmission as Borrower shall elect.
2.8 LETTERS OF CREDIT. Subject to the terms and conditions set forth in
this Agreement, the Letter of Credit Bank agrees, at any time and from time to
time, from and including the Closing Date but in no event after the thirtieth
calendar day immediately preceding the Revolving Credit Termination Date, to
issue and deliver, or to extend the expiration of, Letters of Credit for the
account of the Borrower; PROVIDED, HOWEVER, that, the aggregate LC Exposure of
the Banks shall not at any time exceed the lesser of: (x) Three Million Dollars
($3,000,000) outstanding at any time and (y) the Borrowing Base MINUS the sum of
the aggregate outstanding Revolving Credit Advances of the Banks and (z) the
aggregate Revolving Credit Commitments of the Banks MINUS the sum of the
aggregate outstanding Revolving Credit Advances of the Banks.
(a) TERM; FORM AND CONDITIONS OF LETTERS OF CREDIT. Each Letter of
Credit shall be issued in such form as the Letter of Credit Bank may reasonably
require subject to the Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, and any
subsequent revisions thereof. Each Letter of Credit shall: (A) permit drawings
upon presentation of one or more sight drafts and such other documents as
specified by the Borrower in the Credit Request delivered pursuant to Section
2.3(a) of this Agreement and agreed to by the Letter of Credit Bank, which
drawings shall occur on or prior to the applicable expiration date of such
Letter of Credit, (B) by its terms expire not later than the earlier of one (1)
year after the date of the Letter of Credit or the third (3rd) Business Day
prior to the Revolving Credit Termination Date and (C) by its terms provided for
payment of drawings in Dollars.
(b) REQUESTS FOR LETTERS OF CREDIT. Letters of Credit shall be issued
upon request given by the Borrower to the Agent not later than 12:00 noon
(Cleveland, Ohio time) three (3) Business Days prior to the specified date for
the issuance of the requested Letter of Credit. Each such request for a Letter
of Credit shall be made in the form of a Credit Request transmitted by the
Borrower to the Agent by telecopier, telex or cable (in the case of telex or
cable, confirmed in writing prior to the date of the requested issuance of the
Letter of Credit), specifying with respect to each Letter of Credit requested:
(i) the face amount thereof, (ii) the beneficiary, (iii) the intended date of
issuance, (iv) the terms of the Letter of Credit, and shall be promptly
forwarded by the Agent to the Letter of Credit Bank. Concurrently with each
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Credit Request requesting a Letter of Credit, the Borrower shall execute and
deliver to the Letter of Credit Bank a Reimbursement Agreement, in the Letter of
Credit Bank's then standard form of application for and reimbursement agreement
with respect to letters of credit (such documents being hereinafter collectively
referred to as a "Reimbursement Agreement"); PROVIDED, HOWEVER, that in the
event of any conflict between the provisions of any such Reimbursement Agreement
and this Agreement, the provisions of this Agreement shall govern.
(c) PARTICIPATION BY BANKS. By the issuance of a Letter of Credit by
the Letter of Credit Bank and without further action on the part of the Letter
of Credit Bank or any Bank, the Letter of Credit Bank hereby grants to each
Bank, and each Bank hereby acquires from the Letter of Credit Bank, a
participation in such Letter of Credit equal to such Bank's Ratable Portion,
effective on the date of the issuance of such Letter of Credit. In
consideration, each Bank hereby absolutely and unconditionally agrees to pay to
the Agent for the account of the Letter of Credit Bank such Bank's Ratable
Portion of each disbursement made by the Letter of Credit Bank in respect of
such Letter of Credit and not reimbursed by the Borrower forthwith on the date
due as provided in clause (d) below. Each Bank acknowledges and agrees that its
obligation to acquire risk participations pursuant to this Section 2.8(c) is
absolute and unconditional and shall not be affected by any event or
circumstance whatsoever, including the occurrence of any Potential Default or
Event of Default hereunder or the failure of any condition precedent set forth
in Section 3 of this Agreement to be satisfied and each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.
(d) REIMBURSEMENT; INTEREST. The Borrower agrees that whenever there is
a drawing on a Letter of Credit issued by the Letter of Credit Bank, the
Borrower shall pay to the Agent on the date of such drawing, an amount equal to
such drawing. The Agent shall promptly remit any such payment to the Letter of
Credit Bank. If there is a drawing on a Letter of Credit, then, unless the
Borrower shall reimburse such amount in full on such date, the unpaid amount
thereof shall bear interest for the account of the Letter of Credit Bank for
each day from and including the date of such drawing, to but excluding the
earlier of the date of reimbursement or the date on which such drawing is
reimbursed by a Revolving Credit Borrowing, at the rate per annum that would
apply to such amount if such amount were an Alternate Base Rate Advance by a
Bank.
(e) FAILURE TO REIMBURSE. In the event that the Borrower fails to make
a timely reimbursement, together with any interest thereon, to the Agent on the
date of any drawing on a Letter of Credit pursuant to this Section, such failure
shall constitute a Deemed Credit Request requesting an Alternate Base Rate
Advance in an aggregate amount equal to the amount reimbursable to the Letter of
Credit Bank plus any interest thereon. The Agent shall disburse all such loan
proceeds directly to the Letter of Credit Bank to satisfy the Borrower's
aforesaid reimbursement liability. The obligations of the Banks to the Agent
under this Section are in addition to and not in limitation of the obligations
of the Banks under Section 11 of this Agreement. In the event that an Advance
cannot be legally made pursuant to this Section 2.8(e) for any reason, each of
the Banks shall reimburse the Letter of Credit Bank in an amount equal to such
Bank's Ratable Portion of the drawing on the Letter of Credit.
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(f) OBLIGATIONS ABSOLUTE. The obligation of the Banks to make, and of
the Borrower to pay any Revolving Credit Advances required by Section 2.8(e) of
this Agreement shall be absolute and unconditional and shall be performed under
all circumstances including, without limitation: (i) any lack of validity or
enforceability of any Letter of Credit, (ii) the existence of any claim, offset,
defense or other right that the Borrower may have against the beneficiary of any
Letter of Credit or any successor in interest thereto, (iii) the existence of
any claim, offset, defense or other right that any Bank or the Agent may have
against the Borrower or against the beneficiary of any Letter of Credit or
against any successor in interest thereto, (iv) the existence of any fraud or
misrepresentation in the presentment of any draft or other item drawn and paid
under any Letter of Credit by any person other than the Letter of Credit Bank or
(v) any payment of any draft or other item by the Letter of Credit Bank which
does not strictly comply with the terms of any Letter of Credit PROVIDED the
payment shall not have constituted gross negligence or willful misconduct on the
part of the Letter of Credit Bank.
(g) LIABILITY OF LETTER OF CREDIT BANK. Without limiting the generality
of Section 2.8(f) of this Agreement, it is expressly understood and agreed that
the absolute and unconditional obligation of the Borrower hereunder to reimburse
disbursements in respect of Letters of Credit issued by the Letter of Credit
Bank will not be excused by the gross negligence or willful misconduct of the
Letter of Credit Bank. However, the foregoing shall not be construed to excuse
the Letter of Credit Bank from liability to the Borrower to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Borrower to the extent permitted by applicable Law)
suffered by the Borrower or any Subsidiary of the foregoing that are caused by
the gross negligence or willful misconduct of the Letter of Credit Bank in
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties agree that the Letter of
Credit Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary, and may make payment upon presentation of documents
that appear on their face to be in substantial compliance with the terms of such
Letter of Credit; PROVIDED that the Letter of Credit Bank shall have the right
in its sole discretion to decline to accept such documents and to make such
payment if such documents are not in strict compliance with the terms of such
Letter of Credit. In making any payment under any Letter of Credit, the Letter
of Credit Bank's (i) exclusive reliance on the documents, signatures and
endorsements, presented to it under such Letter of Credit and which appear to be
in order on the face of such documents, as to any and all matters set forth
therein, including reliance on the amount of any draft presented under such
Letter of Credit, whether or not the amount due to the beneficiary thereunder
equals the amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be in order, and whether or not any
other statement or any other document or any signature or endorsement with
respect thereto presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) making payment upon presentation of documents not
complying in any immaterial respect with the terms of the Letter of Credit
shall, in each case, not be deemed to constitute willful misconduct or gross
negligence of the Letter of Credit Bank. Any action, inaction or omission on the
part of the Letter of Credit Bank or any of its correspondents, under or in
connection with any Letter of Credit or any renewal or extension thereof or the
related instruments or documents, if in good faith and in conformity with such
Laws,
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regulations or customs as are applicable to the Letter of Credit Bank and the
terms of this Section 2.8(g), shall be binding upon the Borrower and shall not
place the Letter of Credit Bank or any of its correspondents under any liability
to the Borrower. The Letter of Credit Banks' rights, powers, privileges and
immunities specified in or arising under this Agreement are in addition to any
heretofore or at any time hereafter otherwise created or arising rights, powers,
privileges and immunities, whether by statute or rule of Law or contract.
(h) LETTER OF CREDIT BANK INDEMNITY. The Borrower shall indemnify the
Letter of Credit Bank from and against: (i) any loss or liability (other than
any caused by such Letter of Credit Bank's negligence or willful misconduct as
determined by the final judgment of a court of competent jurisdiction) incurred
by the Letter of Credit Bank in respect of this Agreement and the Letters of
Credit and (ii) any reasonable out-of-pocket expenses incurred by the Letter of
Credit Bank in defending itself or otherwise related to this Agreement or any
Letter of Credit (other than any caused by the Letter of Credit Bank's
negligence or willful misconduct as determined by the final judgment of a court
of competent jurisdiction) including, without limitation, reasonable fees and
expenses of legal counsel incurred by such Letter of Credit Bank (including,
without limitation, the reasonable interdepartmental charges of its salaried
attorneys) in the defense of any claim against it or in the prosecution of its
rights and remedies.
(i) EFFECT OF APPLICABLE LAW OR CUSTOM. All Letters of Credit issued
hereunder, all reimbursement obligations hereunder and all reimbursement
obligations under any Reimbursement Agreement will, except to the extent
otherwise expressly provided in this Agreement, the Reimbursement Agreements or
the Letters of Credit, be governed by the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any subsequent revisions thereof. In the event that the
revisions to Article 5 of the UCC become effective in the State of Ohio during
the term of this Agreement, the Borrower, the Agent, the Letter of Credit Bank
and the Banks agree to amend this Agreement to make such changes as are
necessary and appropriate and as mutually agreed by the parties hereto to
reflect such revisions and the effects thereof.
(j) TERMINATION OF LETTER OF CREDIT COMMITMENT. In the event that: (i)
any restriction is imposed on the Letter of Credit Bank (including, without
limitation, any legal lending or acceptance limits imposed by the United States
of America or any political subdivision thereof or of any foreign government or
central bank) which in the judgment of the Letter of Credit Bank would prevent
the Letter of Credit Bank from issuing Letters of Credit or maintaining its
commitment to issue Letters of Credit or (ii) there shall have occurred, at any
time during the term of this Agreement: (A) any outbreak of hostilities or other
national or international crisis or change in economic conditions if the effect
of such outbreak, crisis or change would make the creation of Letters of Credit
impracticable, (B) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which would materially and adversely affect the ability of the
Borrower to perform its obligations under this Agreement, or (C) the taking of
any action by any government or agency in respect of its monetary or fiscal
affairs which would have a material adverse effect on the issuance of Letters of
Credit, THEN the Letter of Credit Bank, in the case of the occurrence of any
event described hereinabove, shall give written notice of the occurrence of such
event to the Borrower and the Agent whereupon the commitment of the
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Letter of Credit Bank to issue Letters of Credit shall be suspended on the
effective date of such notice and shall continue suspended until the effect of
such event shall cease to exist.
2.9 FEES.
(a) AGENT'S FEE. The Borrower agrees to pay to the Agent
for the sole account of the Agent a closing fee in the amount provided
for in that certain fee letter from Agent, addressed to Borrower and
dated April 1, 1998, due and payable on the Closing Date.
(b) UNUSED LINE FEE. The Borrower agrees to pay to the
Agent for the ratable benefit of the Banks, allocable to the Banks in
accordance with each Bank's Ratable Portion thereof, an unused line fee
on the average daily unused portion of the total of the Revolving
Credit Commitments from the Closing Date until the Revolving Credit
Termination Date at the rate of three hundred seventy-five
one-thousandths of one percent (0.375%) per annum, payable monthly in
arrears on the first day of each calendar month commencing May 1, 1998,
and on the Revolving Credit Termination Date.
(c) LETTER OF CREDIT FEES. The Borrower shall pay the
following fees with respect to each Letter of Credit:
(i) LETTER OF CREDIT RISK PARTICIPATION FEE. The
Borrower agrees to pay to the Agent for the ratable benefit of
the Banks, annually in advance on the Closing Date and on the
first Business Day of each calendar year thereafter, a risk
participation fee equal to (A) with respect to Standby Letters
of Credit, an amount equal to the Applicable Revolving Credit
Margin with respect to LIBOR Rate Advances then in effect
MULTIPLIED BY the face amount of each Standby Letter of Credit
then outstanding and (B) with respect to Trade Letters of
Credit, an amount equal to one and one-half percent (1-1/2%)
per annum MULTIPLIED BY the face amount of each Trade Letter
of Credit then outstanding.
(ii) OTHER FEES RELATING TO LETTERS OF CREDIT. The
Borrower agrees to pay to the Agent for the sole account of
the Letter of Credit Bank, for its sole account, upon issuance
of any Letters of Credit any standard amendment and
modification fees, issuance fees, draw fees and any other
standard fees and charges charged by the Letter of Credit Bank
in connection with Standby Letters of Credit and Trade Letters
of Credit.
(d) COLLATERAL MANAGEMENT FEE. The Borrower agrees to pay
to the Agent, for its sole account, a collateral management fee, One
Thousand Dollars ($1,000) per calendar month, payable on the Closing
Date and on the first day of each calendar month thereafter.
(e) PER DIEM AUDIT FEES. The Borrower agrees to pay for
the services associated with any inspection, audit or verification by
the Agent of the Borrower's
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financial or other records, the Collateral or the premises upon which
the Collateral is located or any other security for the Obligations, as
the fees for such services may be increased from time to time. The
Borrower acknowledges that the fees for such inspection, audit and
verification are currently charged at $600 per day (plus out-of-pocket
expenses) per auditor or field examiner.
(f) LATE CHARGES. If the Borrower fails to pay any amount
due under this Agreement, or any fee in connection herewith, in full
within ten (10) days after its due date, the Agent shall be entitled
to, in addition to its remedies under Section 10 hereof, and the
Borrower will incur and shall pay to the Agent for the ratable benefit
of the Banks (in accordance with each Bank's Ratable Portion), in each
such case, a late charge equal to one percent (1%) of the amount failed
to be paid. The payment of a late charge will not cure or constitute a
waiver of any Potential Default or Event of Default under this
Agreement.
(g) PAYMENT OF FEES; NONREFUNDABLE. All fees set forth in
this Section 2.9 shall be paid on the date due, in immediately
available funds, to the Agent for distribution, if and as appropriate,
to the Banks or the Letter of Credit Bank. Once paid, to the extent
permitted by applicable Law, none of such fees shall be refundable
under any circumstances.
2.10 INTEREST ON ADVANCES.
(a) INTEREST RATE-REVOLVING CREDIT ADVANCES. The Borrower shall pay
interest on the unpaid principal amount of each Revolving Credit Advance made by
each Bank from the date of such Revolving Credit Advance until such principal
amount shall be paid in full as follows:
(i) ALTERNATE BASE RATE ADVANCES - REVOLVING CREDIT.
During such periods as any Alternate Base Rate Advance
comprising a Revolving Credit Borrowing is outstanding, the
Borrower shall pay interest on such Alternate Base Rate
Advance at a rate per annum equal to the sum of the Alternate
Base Rate PLUS the Applicable Revolving Credit Margin for
Alternate Base Rate Advances in effect as of the most recently
preceding Margin Adjustment Date occurring prior to the date
of the making, conversion or continuation of such Alternate
Base Rate Advance in accordance with Section 2.7, payable
monthly, in arrears, on the first day of each calendar month
and on the date such Alternate Base Rate Advance comprising a
Revolving Credit Borrowing shall be converted or paid in full
(whether at maturity, by reason of acceleration or otherwise)
and, after maturity, on demand.
(ii) LIBOR RATE ADVANCES. During such periods as any LIBOR
Rate Advance comprising a Revolving Credit Borrowing is
outstanding, the Borrower shall pay interest on such LIBOR
Rate Advance at a rate per annum equal to the sum of the
London Interbank Offered Rate PLUS the Applicable Revolving
Credit Margin for LIBOR Rate Advances in effect as of the most
recently preceding
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Margin Adjustment Date occurring prior to the date of the
making of such LIBOR Rate Advance, or the conversion or
continuation of such LIBOR Rate Advance in accordance with
Section 2.7, payable: (A) on the last day of each Interest
Period and (B) if such Interest Period has a duration of more
than three months, three months after the first day of such
Interest Period and (C) on the date such LIBOR Rate Advance
comprising a Revolving Credit Borrowing shall be converted to
an Alternate Base Rate Advance or paid in full (whether at
maturity, by reason of acceleration or otherwise) and (D)
after maturity, on demand.
(B) APPLICABLE MARGIN; TERMS OF ADJUSTMENT.
(i) COMMENCEMENT; CONDITIONS. So long as no Event of
Default shall have occurred which has not been waived in
writing by all of the Banks, the Applicable Margin shall be
calculated as herein specified as of the Closing Date and as
of the first day of each July and January occurring during any
Fiscal Year commencing January 1, 1999 (each a "Margin
Adjustment Date"), commencing after the date the Agent shall
have received: (A) in respect of any Margin Adjustment Date
made as of any first day of January, financial statements
required by Sections 8.1(a) and 8.1(b) for the Fiscal Month
ending on June 30 of immediately preceding Fiscal Year during
which such Margin Adjustment Date is occurring (each a
"January Determination Date") or (B) in respect of any Margin
Adjustment Date made as of any first day of July, financial
statements required by Sections 8.1(a) and 8.1(c) for the
Fiscal Year immediately preceding the Fiscal Year during which
such Margin Adjustment Date is occurring (each, together with
each January Determination Date, a "Determination Date") and
(C) in each case, a certificate complying with Section 8.1(d)
certifying the Borrower's Consolidated Fixed Charge Coverage
Ratio for the Cumulative Four Fiscal Quarter Period ending as
of any such Determination Date.
(ii) CALCULATION AND DURATION OF ADJUSTMENT. On each Margin
Adjustment Date, the Applicable Revolving Credit Margin shall
be the Applicable Revolving Credit Margin set forth in the
definition of "Applicable Revolving Credit Margin" for
Alternate Base Rate Advances or the LIBOR Rate Advances, as
the case may be, and corresponds to the Borrower's Fixed
Charge Coverage Ratio as of the Determination Date applicable
to such Margin Adjustment Date. The Applicable Revolving
Credit Margin effective as of a particular Margin Adjustment
Date shall remain effective only until the next succeeding
Margin Adjustment Date at which time the Applicable Revolving
Credit Margin shall be recalculated pursuant to this
Subsection (b); PROVIDED, HOWEVER, that:
(A) if an Event of Default shall have occurred which
has not been waived in writing by all of the Banks or
if the Borrower shall not have delivered as of any
Margin Adjustment Date the financial statements
required to have been delivered under Sections 8.1(a)
and 8.1(c), then the
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Applicable Revolving Credit Margin shall be (a) with
respect to Alternate Base Rate Advances, the Alternate
Base Rate plus one percent (1.00%) per annum and (b)
with respect to LIBOR Rate Advances, the London
Interbank Offered Rate PLUS three percent (3.00%) per
annum, and
(B) if an Event of Default shall have occurred which
has not been waived in writing by the Required Banks,
the interest rate shall, upon the request of the
Required Banks, be the interest rate applicable
pursuant to 2.11 of this Agreement.
2.11 DEFAULT INTEREST. If any principal, interest or fees due under
this Agreement shall not be paid when due or if any Note or any amounts due
under any Note shall not be paid at maturity, whether such maturity occurs by
reason of lapse of time or by operation of any provision of acceleration of
maturity therein contained, or if there shall otherwise occur an Event of
Default which has not been waived in writing by the Required Banks, the
principal thereof and the unpaid interest and fees thereon shall, at the
election of the Required Banks, bear interest, payable on demand, at a rate per
annum which shall be equal at all times to three percent (3%) in excess of the
interest rate otherwise then payable pursuant to the terms of this Agreement.
2.12 INTEREST RATE DETERMINATION.
(a) AGENT DETERMINATION; NOTICE. The Agent shall determine the London
Interbank Offered Rate in accordance with the definition of London Interbank
Offered Rate set forth in Section 1.1 of this Agreement. The Agent shall give
prompt notice to each of the Banks and the Borrower of the applicable interest
rate determined by the Agent for purposes of Sections 2.7 and 2.10 of this
Agreement.
(b) FAILURE OF BORROWER TO ELECT. If no Interest Period is specified in
any Credit Request or any Rate Conversion/Continuation Request for any LIBOR
Rate Advances, the Borrower shall be deemed to have selected an Interest Period
with a duration of one month. If the Borrower shall not have given notice in
accordance with Section 2.7 of this Agreement to continue any LIBOR Rate
Advances into a subsequent Interest Period (and shall not have otherwise
delivered a Rate Conversion/Continuation Request in accordance with Section 2.7
of this Agreement to convert such Advances), such LIBOR Rate Advances shall, at
the end of the Interest Period applicable thereto (unless repaid pursuant to the
terms hereof), automatically convert into Alternate Base Rate Advances.
2.13 PAYMENTS AND COMPUTATIONS.
(a) PAYMENTS. In addition to payments otherwise made by or
on behalf of the Borrower by reason of Collections and Remittances
deposited to the Borrower Cash Collateral Account as specified in
Section 5.3, the Borrower shall make any payment to be directly made by
the Borrower under this Agreement and under the Notes with respect to
principal of, interest on, and other amounts relating to Advances, not
later than 12:00 noon (Cleveland, Ohio time) on the day when due by
deposit of Dollars, in
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immediately available funds, to the Agent's account maintained at the
Payment Office of the Agent as specified in this Agreement for
distribution by the Agent to the Banks and application thereof by the
Banks to the Borrower's Loan Account. Payments received by such deposit
of Dollars, in immediately available funds, after 12:00 noon
(Cleveland, Ohio time) shall be deemed to have been received on the
next succeeding Business Day. Except to the extent otherwise provided
in Section 2.4(e)(i) in respect of the settlement of accounts among
the Agent and the Banks on any Settlement Date, after receipt of any
such payment, the Agent will promptly distribute like funds relating to
such payment (other than amounts payable pursuant to 2.9(d) of this
Agreement solely to the Agent and amounts payable pursuant to Section
2.9(c)(ii) of this Agreement solely to the Letter of Credit Bank)
ratably to each of the Banks for the account of its respective Lending
Office.
(b) PAYMENT PROCEDURES. The Control Account of the
Borrower will be charged with all Advances made by the Banks to the
Borrower and all other Obligations of the Borrower under this Agreement
or any other Loan Document. The Borrower hereby authorizes each Bank to
charge the Loan Account of the Borrower with such Obligations. The
Control Account of the Borrower will be credited in accordance with
this Section 2.13(c) with all payments received by the Agent directly
from the Borrower or for the account of the Borrower. The Control
Account of the Borrower will also be credited in accordance with
Section 5.3, to the extent of any outstanding Revolving Credit
Advances, with all Collections and Remittances received by the Agent in
the Borrower Cash Collateral Account. The Agent shall send the Borrower
a monthly statement reflecting the activity in the Control Account.
Absent manifest error, each monthly statement shall be final,
conclusive and binding on the Borrower. The Loan Accounts of each Bank
shall reflect the activity in the Control Account applicable to such
Bank's Loan Account.
(c) APPLICATION OF PAYMENTS. Payments distributed to each
Bank pursuant to Section 2.13(a) above shall in each case be applied by
such Bank in accordance with the terms of this Agreement. Prior to the
occurrence of an Event of Default that has not been waived in
accordance with the terms of this Agreement, all funds received under
this Section 2.13 shall be applied to the Advances in the order that
the Borrower directs. The Borrower shall at the time of making a
payment under this Section 2.13 specify to the Agent the Obligations to
which such payment is to be applied. If the Borrower does not specify
an application or if an Event of Default has occurred that has not been
waived in writing by the Required Banks, the funds will be applied in
the manner described in the second sentence of Section 5.3.
(d) AUTHORIZATION TO CHARGE ACCOUNT. If and to the extent
payment owed to the Agent or any Bank is not made when due hereunder or
under the Notes, the Borrower hereby authorizes the Agent and each Bank
to charge from time to time against the Loan Account maintained by the
Agent or such Bank, as the case may be.
(e) COMPUTATIONS OF INTEREST AND FEES. All computations of
interest, fees and other compensation shall be made by the Agent on the
basis of a year of 360 days
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in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest
or fees are payable. Each determination by the Agent of interest, fees
or other amounts of compensation due hereunder shall be rebuttably
presumed to be correct.
(f) PAYMENT NOT ON BUSINESS DAY. Whenever any payment
hereunder or under the Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding
Business Day. Any such extension of time shall in such case be included
in the computation of payment of interest, fees or other compensation,
as the case may be.
(g) PRESUMPTION OF PAYMENT IN FULL BY THE BORROWER. Unless
the Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date.
In reliance upon such assumption, the Agent may, but shall not be
obligated to, distribute to each Bank on such due date the amount then
due such Bank. If and to the extent the Borrower shall not have made
such payment in full to the Agent, each Bank shall repay to the Agent
promptly upon demand the amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed
to such Bank until the date such Bank repays such amount to the Agent,
at the rate applicable to the Borrower plus the amount of any costs,
expenses, liabilities or losses incurred by the Agent in connection
with its distribution of such funds.
2.14 CHANGE IN LAW; LIBOR RATE ADVANCES UNLAWFUL. Notwithstanding any
other provision of this Agreement, if any Bank determines that any applicable
Law, or any change therein, or any change in the interpretation or
administration of any Law by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Bank (or its Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall make it unlawful or impossible, or any such
governmental authority, central bank or agency asserts that it is unlawful, for
any Bank or its Lending Office to perform its obligations hereunder to make
LIBOR Rate Advances or to fund or maintain LIBOR Rate Advances hereunder, then,
upon notice to the Agent and the Borrower by such Bank: (a) the obligation of
all of the Banks to make, or to convert Advances into, LIBOR Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist and (b) the Borrower shall
immediately, or at such later date, if any, as may thereafter be permitted by
relevant Law, prepay in full the then outstanding principal amount of all LIBOR
Rate Advances of all Banks, together with interest accrued thereon and any other
amounts payable to the Banks hereunder unless the Borrower, within five (5)
Business Days of notice from the Agent, converts all LIBOR Rate Advances of all
Banks then outstanding into Advances of another Type in accordance with Section
2.7 of this Agreement as to which such circumstances do not exist. Any such
payment or Rate Conversion shall be subject to the provisions of Section 13.4 of
this Agreement.
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2.15 UNAVAILABILITY. Notwithstanding any other provision in this
Agreement, if at any time with respect to any LIBOR Rate Advances:
(a) INADEQUATE RATE. Any Bank notifies the Agent that the London
Interbank Offered Rate for any Interest Period for such LIBOR Rate Advances will
not adequately reflect the cost to such Bank of making, funding or maintaining
its LIBOR Rate Advances for such Interest Period, the Agent shall promptly
notify the Borrower and the Banks;
(b) UNAVAILABLE QUOTATIONS. The Agent determines (which determination
shall be conclusive) that quotations of interest rates for Dollar deposits are
not being provided in the relevant amounts or for the relevant maturities to, or
the circumstances affecting the London interbank market of deposits in Dollars
make it impracticable to, determine the London Interbank Offered Rate, or
(c) UNAVAILABLE DEPOSITS. Any Bank determines that Dollar deposits of
the relevant amount for the relevant Interest Period are not available in the
London interbank market of deposits of Dollars for the purpose of funding the
LIBOR Rate Advances, then: (i) each LIBOR Rate Advance will automatically, on
the last day of the then existing Interest Period therefor, convert into an
Alternate Base Rate Advance and (ii) the obligation of the Banks to make or to
convert Advances into LIBOR Rate Advances or continue LIBOR Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist.
2.16 PRO RATA TREATMENT. Except as set forth in Sections 2.4, 2.9(a),
2.9(c)(ii), 2.9(d) or 10.6 of this Agreement, each Borrowing, each payment or
prepayment of principal of any Borrowing, each payment of interest on the
Advances, each payment of the fees provided for hereunder shall be allocated
among the Banks in accordance with each Bank's Ratable Portion thereof.
SECTION 3 CONDITIONS OF LENDING.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCES. The obligation of each
Bank to make an Advance on the occasion of each Borrowing, and the obligation of
the Letter of Credit Bank to issue any Letters of Credit, are subject to the
condition precedent that: (i) the conditions set forth in ANNEX III, attached
hereto and incorporated herein by reference, shall have been satisfied, as
determined by the Agent, in its sole discretion, on or before the Closing Date
of this Agreement and (ii) the Agent shall have received on or before the
Closing Date of this Agreement the documents and deliveries set forth on said
ANNEX III.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of each Bank
to make an Advance on the occasion of each Borrowing, Rate Conversion and Rate
Continuation, and the obligation of the Letter of Credit Bank to issue any
Letter of Credit, are subject to the condition precedent that, as of the date of
any such Advance or issuance, and before and after giving effect thereto:
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(a) REPRESENTATION BRINGDOWN. The representations and
warranties contained in Sections 4, 6 and 7 of this Agreement are true
and correct in all respects on and as of the date of such Credit Event
with the same effect as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an
earlier date; and
(b) NO DEFAULT; COMPLIANCE WITH TERMS. The Borrower shall
be in compliance with all other terms and provisions set forth herein
and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Credit Event,
no Potential Default or Event of Default shall have occurred and be
continuing;
(c) NO MATERIAL ADVERSE CHANGE. There has been no event
which would or which might reasonably be expected to have a Material
Adverse Effect;
(d) CONFIRMATION OF BORROWING BASE. The Borrower shall
have delivered to the Agent a Borrowing Base Certificate for the period
in which such Credit Event occurs; and
(e) OTHER DELIVERIES. The Agent and the Banks shall have
received such other approvals, opinions or documents as the Agent and
the Banks may reasonably request consistent with the terms of this
Agreement.
Each Credit Event shall constitute a representation and warranty by the Borrower
that on the date of such Credit Event, the foregoing statements are true and
correct as of such date.
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL
REQUIREMENTS.
4.1 GRANT OF SECURITY INTEREST. To secure the prompt payment and
performance of the Obligations, and in addition to any other collateral or Lien
securing the Obligations, the Borrower hereby grants to the Agent for itself and
for the benefit of the Banks and the Letter of Credit Bank a continuing security
interest in and to and a pledge of all of the Borrower's right title and
interest in and to the following property, whether now existing or hereafter
arising or acquired: (a) all Accounts, (b) all Inventory, (c) any and all
deposits or other sums at any time credited by or due from the Banks to the
Borrower in the Borrower Cash Collateral Account, (d) all Collateral which now
or hereafter is at any time in the possession or control of any of the Banks or
in transit by mail or carrier to or from any of the Banks or in the possession
of any Person acting in a Bank's behalf, without regard to whether such Bank
received the same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether such Bank had conditionally released the
same, and any and all balances, sums, proceeds and credits of the Borrower with
such Bank, (e) all accessions to, substitutions for, and all replacements,
Products and Proceeds of the herein above-referenced property of the Borrower
described in this Section 4.1, including, but not limited to, proceeds of
insurance policies insuring such property and (f) all books, records, and other
property (including, but not limited to, credit files, printouts, computer
software and programs owned by the Borrower or
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any Subsidiary Guarantor, and disks, magnetic tape and other magnetic media, and
other materials and records) of the Borrower pertaining to any such
above-referenced property of the Borrower.
4.2 PERFECTION. The Borrower shall, and shall cause the Subsidiary
Guarantors to, execute such financing statements provided for by applicable law,
and otherwise take such other action and execute such assignments or other
instruments, control agreements or documents, in each case as the Agent may
request, to evidence, perfect, or record the Agent's security interest in the
Collateral or to enable the Agent to exercise and enforce its rights and
remedies under this Agreement with respect to any Collateral. The Borrower
hereby authorizes the Agent on behalf of the Banks to execute and file any such
financing statement or continuation statement on the Borrower's behalf. The
parties acknowledge that a carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement to the extent permitted
by law.
4.3 GENERAL REPRESENTATIONS AS TO COLLATERAL. The Borrower represents
that the Supplemental Schedule sets forth: (a) the principal place of business
of the Borrower and each of the Subsidiary Guarantors, and the locations of each
of their respective chief executive offices and accounting officers, (b) the
offices where Borrower and the Subsidiary Guarantors keep their respective
records concerning their respective Accounts and General Intangibles, (c) the
location of the Borrower's and each Subsidiary Guarantor's registered office,
(d) each location at which any Inventory of the Borrower or a Subsidiary
Guarantor is located, including, without limitation, the location of any
warehouse or bailee at which such Collateral is located and of any consignee at
which Collateral in excess of Fifty Thousand Dollars ($50,000) is located, (e)
the locations and addresses of all of the Borrower's and each Subsidiary
Guarantor's owned or leased real property, (f) the locations of the Borrower's
and each Subsidiary Guarantor's registered offices, agents, other offices and
places of business during the five (5) years prior to the Closing Date, and (g)
all trade names, assumed names, fictitious names and other names used by
Borrower or any Subsidiary Guarantor during the five (5) years prior to the
Closing Date.
4.4 TITLE TO COLLATERAL; LIENS; TRANSFERS. The Borrower has good,
indefeasible and, in the case of personal property, merchantable title to and
ownership of the Collateral described in Section 4.1, free and clear of all
Liens, except for Liens permitted under Section 8.3(d). Except as permitted by
Section 8.3(d) or 8.3(a) hereof or as otherwise provided herein or in any other
Loan Document, the Borrower shall not encumber, pledge, mortgage, grant a
security interest in, assign, sell, lease or otherwise dispose of or transfer,
whether by sale, merger, consolidation, liquidation, dissolution or otherwise,
any of such Collateral.
4.5 CHANGES AFFECTING PERFECTION. The Borrower shall not, and shall not
permit any of its Subsidiary Guarantors to, without giving the Agent thirty (30)
days prior notice thereof: (a) make any change in any location where Borrower's
or such Subsidiary Guarantor's Inventory is maintained, or locate any of
Borrower's or such Subsidiary Guarantor's Inventory at any new locations (other
than in connection with sales of Inventory in the ordinary course of business),
(b) make any change in the location of its chief executive office, principal
place of business or the office where the Borrower's or such Subsidiary
Guarantor's records pertaining
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to its Accounts are kept, (c) add any new places of business or close any of its
existing places of business, (d) make any change in its name or corporate
structure, adopt new trade names, assumed names or fictitious names or otherwise
add any name under which it does business, (e) make any other change (other than
sales of Inventory in the ordinary course of business) which might affect the
perfection or priority of the Agent's Lien in the Collateral. Neither the
Borrower nor any of the Subsidiary Guarantors shall maintain Inventory at any
consignee in an amount in excess of Fifty Thousand Dollars ($50,000) per
location unless Borrower gives the Agent notice of the location and amount of
such consigned Inventory for each location at which the Inventory exceeds Fifty
Thousand Dollars ($50,000) within five (5) business days after the Inventory is
moved, delivered or taken to such location.
4.6 POWER OF ATTORNEY FOR INSURANCE. The Borrower shall promptly
deliver to the Agent true copies of all reports regarding Collateral in excess
of One Hundred Thousand Dollars ($100,000) made to insurance companies. The
Borrower hereby irrevocably makes, constitutes, and appoints the Agent (and all
officers, employees, or agents designated by the Agent) as its true and lawful
attorney-in-fact and agent, with full power of substitution, such that the Agent
shall have the right and authority to make and adjust claims under such policies
of insurance, receive and endorse the name of the Borrower on, any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and make all determinations and decisions with respect to such
policies of insurance; PROVIDED, HOWEVER, that the Agent may not exercise the
power of attorney granted by this Section 4.6 except after (a) the occurrence of
an Event of Default that has not been waived by the Required Banks, or (b) the
occurrence of an event of loss with respect to which the Agent in good faith
determines that the Borrower is not diligently pursuing its claims. The Borrower
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable. Without waiving or releasing any obligation, Potential
Default or Event of Default by the Borrower under this Agreement, the Agent may
(but shall not be required to) at any time or times thereafter maintain such
action with respect thereto as the Agent deems advisable. All sums disbursed by
the Agent in connection therewith (including, but not limited to, reasonable
attorneys' and paralegals' fees and disbursements, court costs, expenses and
other charges relating thereto) shall be payable on demand and upon the
expiration of five (5) calendar days after such demand the Borrower shall be
deemed to have delivered a Deemed Credit Request in the relevant amount.
4.7 PROTECTION OF COLLATERAL; REIMBURSEMENT. All reasonable insurance
expenses and all expenses of protecting, storing, warehousing, insuring,
handling, maintaining, and shipping any Collateral, any and all excise,
property, sales, use, or other taxes imposed by any state, Federal, or local
authority on any of the Collateral, or in respect of the sale thereof, or
otherwise in respect of the Borrower's or the Subsidiary Guarantor's business
operations which, if unpaid, could result in the imposition of any Lien upon the
Collateral, shall be borne and paid by the Borrower or such Subsidiary
Guarantor, subject to the provisions of Section 8.2(i). If the Borrower or such
Subsidiary Guarantor fails to promptly pay any portion thereof when due, except
as may otherwise be permitted under this Agreement or under any of the other
Loan Documents, the Agent, at its option, may, but shall not be required to, pay
the same. All sums so paid or incurred by the Agent for any of the foregoing and
any and all other sums for which the Borrower may become liable under this
Agreement and all costs and expenses
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(including reasonable attorneys' fees and paralegals' fees, legal expenses, and
court costs, expenses and other charges related thereto) which the Agent may
incur in enforcing or protecting its Liens on or rights and interests in the
Collateral or any of its rights or remedies under this Agreement or any other
agreement between the parties to this Agreement or in respect of any of the
transactions to be had under this Agreement shall be repayable on demand and
upon the expiration of five (5) calendar days after such demand the Borrower
shall be deemed to have delivered a Deemed Credit Request in the relevant
amount. Unless otherwise provided by Law, the Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto or for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever.
4.8 INSPECTION; VERIFICATION. During regular business hours and after
reasonable notice to the Borrower, the Agent and each of the Banks (by any of
its officers, employees, agents, representatives, or designees, including any
Bank) shall have the right to inspect the Borrower's and each Subsidiary
Guarantor's Collateral and to inspect and audit, all books, records, journals,
orders, receipts, or other correspondence related thereto (and to make extracts
or copies thereof as the Agent may desire) and to inspect the premises upon
which any of the Collateral is located for the purpose of verifying the amount,
quality, quantity, value, and condition of, or any other matter relating to, the
Collateral; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
(unless waived in writing in accordance with Section 14.1), the Agent and the
Banks may exercise such access and other rights at any time the Agent or any
Bank deems such action necessary or desirable. In addition to inspections as
outlined above, the Agent or its designee shall have the right, upon reasonable
notice to and consultation with the Borrower, to make test verifications of the
Accounts and other Collateral and physical verifications of the Inventory and
other tangible items of the Collateral at the expense of the Borrower and in any
manner and through any commercially reasonable medium that the Agent considers
advisable, and the Borrower agrees to furnish, and shall cause the Subsidiary
Guarantors to furnish, all such assistance and information as the Agent may
require in connection therewith. The Borrower at its expense will prepare and
deliver to the Agent at any time and from time to time promptly upon the Agent's
request, the following reports: (a) a reconciliation of all its Accounts and the
Subsidiary Guarantor's Accounts, (b) an aging of all its and the Subsidiary
Guarantor's Accounts and accounts payable, (c) trial balances, and (d) a test
verification of such Accounts as the Agent may request. The Agent shall deliver
to each of the Banks copies of each audit report prepared pursuant to this
Section 4.8 and all other reports prepared and delivered to the Agent pursuant
to this Section 4.8.
4.9 ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. On or before the
fifteenth (15th) calendar day of each month from and after the date of this
Agreement, the Borrower shall deliver to the Agent, in form and substance
acceptable to the Agent, a summary aged trial balance of the Borrower's and each
of the Subsidiary Guarantor's Accounts, dated as of the last day of the
preceding month (and upon the Bank's request, a detailed aged trial balance, of
all such then existing Accounts specifying the names, face value and dates of
invoices for each Account Debtor obligated on any Account so listed). In
addition, upon the Agent's request, the Borrower shall furnish the Agent with
copies of proof of delivery and a copy of all documents relating to such
Accounts including, but not limited to, repayment histories and present status
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reports, and such other matters and information relating to the status of then
existing Accounts of the Borrower and each of the Subsidiary Guarantors as the
Agent shall reasonably request. If, upon the occurrence of an Event of Default,
the Agent so requests, the Borrower shall execute and deliver to the Agent, and
shall cause each Subsidiary Guarantor to execute and deliver to the Agent, on
forms supplied by the Agent and at such intervals as the Agent may from time to
time require, written assignments of all of its Accounts after shipment of the
subject goods, together with copies of invoices and/or invoice registers related
thereto. Upon request of a Bank, the Agent shall deliver to such Bank, and shall
cause each of its Subsidiary Guarantors to deliver to such Bank, copies of each
report and all other items delivered pursuant to this Section 4.9.
4.10 REPORTING REGARDING INVENTORY. The Borrower shall report inventory
figures for its Inventory and the Inventory of each of the Subsidiary Guarantors
no later than fifteen (15) calendar days after the end of each month (or more
frequently, if the Agent shall so request, in its reasonable discretion), based
upon month-end balances reconciled to the period end balance sheet. The
Borrower's and the Subsidiary Guarantors' Inventory shall be reported based upon
reconciliation of the financial statements to the perpetual inventory system or
a monthly physical count, as the case may be, and: (a) the Borrower shall
deliver monthly to the Agent and the Banks, inventory records and general ledger
with respect to all Inventory of the Borrower and the Subsidiary Guarantors,
broken down into such detail and with such categories as the Agent shall require
(including, but not limited to, a report indicating the type, location and
amount of raw materials, work-in-process and finished goods and all other
information deemed necessary by the Agent to determine the level of Eligible
Inventory and ineligible Inventory), (b) the values shown on reports of
Inventory shall be at the lower of cost or market value determined in accordance
with the Borrower's and its Subsidiary Guarantors' first-in first-out
accounting, consistently applied and (c) no later than fifteen (15) calendar
days after the end of each month, or more frequently, if the Agent shall so
request, the Borrower shall submit to the Agent an inventory report reconciled
to the Borrowing Base Certificate for the end of such month, the Borrower's and
the Subsidiary Guarantors' perpetual inventory records and each of their general
ledgers, broken down into such detail and with such categories as the Agent
shall require (including, but not limited to, a report indicating the type,
location and amount of raw materials, work-in-process and finished goods, and
all other information deemed necessary by the Agent to determine the level of
Eligible Inventory and ineligible Inventory). Upon request of a Bank, the Agent
shall deliver to such Bank copies of each report and all other items delivered
pursuant to this Section 4.10.
4.11 OTHER COLLATERAL REPORTS. The Borrower shall furnish the Agent
with, on or before the fifteenth (15th) calendar day of each month from and
after the date of this Agreement, a report listing the Borrower's and each
Subsidiary Guarantor's Accounts and a period-end accounts receivable and loan
reconciliation, and such other reports regarding Accounts or other Collateral of
the Borrower or the Subsidiary Guarantors as the Agent from time to time
reasonably may request. The Borrowing Base Certificate and such other reports
shall be on forms requested or provided by the Agent and shall contain such
detailed information as is reasonably satisfactory to the Agent. Upon request of
a Bank, the Agent shall deliver to such Bank copies of each report and all other
items delivered pursuant to this Section 4.11.
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4.12 STATUS OF COLLATERAL. The Borrower agrees to advise the Agent
promptly, in such detail as the Agent shall reasonably require, of any change
relating to the type, quantity or quality of the Collateral, which could have a
Material Adverse Effect.
4.13 REINSTATEMENT. The provisions of Sections 4, 5 and 6 of this
Agreement shall remain in full force and effect and continue to be effective
should any petition be filed by or against the Borrower for liquidation or
reorganization, should the Borrower become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Borrower's assets or should any other Financial
Impairment occur, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
4.14 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL. Upon the
payment in full of all Obligations and the termination of the Commitments of
each of the Banks and all LC Exposure: (a) the security interests and licenses
granted to the Agent under this Agreement and under any other Loan Documents
shall terminate, (b) all rights to the Collateral shall revert to the Borrower
or the applicable Subsidiary Guarantor, as the case may be, (c) the Agent will,
at the Borrower's expense, execute and deliver to the Borrower such documents as
the Borrower may reasonably request to evidence the termination of such security
interests and the release of such Collateral, and (d) this Agreement and all of
the other Loan Documents with the Borrower will be terminated, and the Borrower
will have no further liabilities or obligations thereunder (except any
liabilities and/or obligations which under the terms of this Agreement or any
Loan Document survive termination of such agreements).
SECTION 5 PROCEEDS OF ACCOUNTS AND INVENTORY.
5.1 RECEIPT IN TRUST. All Collections or Remittances received directly
by the Borrower shall be deemed held by the Borrower in trust and as fiduciary
for the Agent for the benefit of the Banks. The Borrower immediately shall
deposit any such Collection or Remittance, in its original form, into the
Borrower Cash Collateral Account. Pending such deposit, the Borrower agrees that
it will not commingle any such Collection or Remittance with any of the
Borrower's other funds or property, but will hold it separate and apart
therefrom in trust and as fiduciary for the Agent until deposit is made into the
Borrower Cash Collateral Account.
5.2 CASH COLLATERAL ACCOUNTS. The Borrower has established the Borrower
Cash Collateral Account with KeyBank National Association. The Subsidiary
Guarantors have each established a Subsidiary Guarantor Cash Collateral Account
with KeyBank National Association. All Collections and Remittances of any kind
deposited in the Borrower Cash Collateral Account are the sole and exclusive
property of the Agent for the benefit of the Banks
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and the Letter of Credit Bank. The Borrower shall cause that all Collections and
Remittances of the Subsidiary Guarantors deposited into the Subsidiary Guarantor
Cash Collateral Accounts shall be swept, to the extent any Advances or other
payment Obligations are then outstanding, to the Borrower Cash Collateral
Account on a daily basis. All funds at any time in the Borrower Cash Collateral
Account or the Guarantor Subsidiary Cash Collateral Accounts shall be deemed to
be the property of the Agent for the benefit of the Banks and shall be subject
only to the signing authority designated from time to time by the Agent. Neither
the Borrower nor any Subsidiary Guarantor shall have any interest therein or
control over such funds. Nevertheless, to the extent funds in the Borrower Cash
Collateral Account are deemed to be the property of the Borrower, the Borrower
hereby grants to the Agent a security interest in all funds held in the Borrower
Cash Collateral Account, as security for the Obligations. No Cash Collateral
Account shall be subject to any deduction, set-off, banker's lien or any other
right in favor of any person or entity other than the Agent.
5.3 APPLICATION OF DEPOSITS TO LOAN ACCOUNT. Prior to the occurrence of
an Event of Default, deposits to the Borrower Cash Collateral Account in respect
of the Borrower shall be credited to the Borrower as follows: (i) FIRST, to the
payment of any fees, expenses or other Obligations due and payable by the
Borrower to the Agent hereunder or under any of the other Loan Documents; (ii)
SECOND, to the payment of any fees or expenses due and payable by the Borrower
to a Letter of Credit Bank hereunder or under any of the other Loan Documents;
(iii) THIRD, to the ratable payment of any fees, expenses or other Obligations
due and payable by the Borrower to the Banks hereunder or under any of the other
Loan Documents other than those Obligations specifically referred to in other
clauses of this Subsection; (iv) FOURTH, to the ratable payment of interest due
on the Advances made to the Borrower, (v) FIFTH, to late charges until paid in
full, (vi) SIXTH, to the outstanding principal amount of any Revolving Credit
Advances as follows: (A) first, to Revolving Credit Advances comprised of Agent
Special Advances, (B) second, to Revolving Credit Advances comprised of
Settlement Advances, and (C) third, to other Revolving Credit Advances in such
order as the Agent may choose in its sole discretion; PROVIDED, HOWEVER, that,
the Agent will use reasonable efforts to avoid applications that would cause
early prepayment of a LIBOR Rate Borrowing prior to expiration of its applicable
Interest Period; and (vii) then, to the extent of any excess not so credited,
such deposits shall be transferred to the Investment Account for use by the
Borrower. Upon the occurrence of an Event of Default which has not been waived
in writing in accordance with Section 14.1, all such deposits to the Borrower
Cash Collateral Account in respect of the Borrower shall be credited to the
Borrower as follows: (i) FIRST, to the payment of any fees, expenses or other
Obligations due and payable by the Borrower to the Agent hereunder or under any
of the other Loan Documents, including advances of Revolving Credit Advances by
the Agent pursuant to Section 2.4 and any other amounts advanced by the Agent on
behalf of the Banks; (ii) SECOND, to the payment of any fees, expenses or other
Obligations due and payable by the Borrower to the Letter of Credit Bank
hereunder or under any of the other Loan Documents; (iii) THIRD, to the ratable
payment of any fees, expenses or other Obligations due and payable by the
Borrower to the Banks hereunder or under any of the other Loan Documents other
than those Obligations specifically referred to in this Subsection; (iv) FOURTH,
to the ratable payment of interest due on the Advances made to the Borrower, (v)
FIFTH, to the outstanding principal amount of any other outstanding Obligations
of the Borrower (other than in respect of the aggregate undrawn amount of any
Letter of Credit outstanding for the account
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of the Borrower) in such order as the Agent may choose in its sole discretion;
and (vi) sixth, as cash collateral security against the aggregate undrawn amount
of any Letter of Credit outstanding for the account of the Borrower and any
other Obligations (whether then or thereafter outstanding) of the Borrower.
5.4 CREDITING OF COLLECTIONS AND REMITTANCES. For the purpose of
calculating in respect of the Borrower interest and determining the aggregate
Advances outstanding and resulting loan availability hereunder, all Collections
and Remittances shall be credited to the Borrower: (i) in the case of
Collections and Remittances received by wire transfer prior to 12:00 noon
(Cleveland, Ohio time), on the same Business Day as received, (ii) in the case
of Collections and Remittances received by wire transfer after 12:00 noon
(Cleveland, Ohio time), on the next succeeding Business Day after such receipt
and (iii) in the case of all other Collections and Remittances received, two
Business Days after the Business Day on which the Agent receives notice of the
deposit of the proceeds of such Collections and Remittances into the Borrower
Cash Collateral Account, and is in good funds with respect thereto prior to
12:00 noon (Cleveland, Ohio time). From time to time, upon advance written
notice to the Borrower, the Agent may adopt such additional or modified
regulations and procedures as it may deem reasonable and appropriate with
respect to the operation of the Borrower Cash Collateral Account and the
services to be provided by the Agent under this Agreement not inconsistent with
the terms of this Agreement.
5.5 COST OF COLLECTION. All reasonable costs of collection of the
Borrower's Accounts, including out-of-pocket expenses, administrative and
record-keeping costs, reasonable attorney's fees, and all service charges and
costs related to the establishment and maintenance of the Borrower Cash
Collateral Account, shall be the sole responsibility of the Borrower, whether
the same are incurred by the Agent or the Borrower, and the Agent, in its sole
discretion, may charge the same against the Borrower, and the same shall be
deemed part of the Obligations hereunder. The Borrower hereby indemnifies and
holds the Agent harmless from and against any loss or damage with respect to any
Collection or Remittance deposited in the Borrower Cash Collateral Account which
is dishonored or returned for any reason. If any Collection or Remittance
deposited in the Borrower Cash Collateral Account is dishonored or returned
unpaid for any reason, the Agent, in its sole discretion, may charge the amount
of such dishonored or returned Collection or Remittance directly against the
Borrower and/or any account maintained by the Borrower with the Agent and such
amount shall be deemed part of the Obligations hereunder. The Agent shall not be
liable for any loss or damage resulting from any error, omission, failure or
negligence on the part of the Agent under this Agreement, except losses or
damages resulting from the Agent's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
5.6 RETURN OF FUNDS. Upon the payment in full of all Obligations and
the termination of the aggregate Commitments and LC Exposure hereunder: (a) the
Agent's security interests and other rights in funds in the Cash Collateral
Accounts under Section 5.2 of this Agreement shall terminate, (b) all rights to
such funds shall revert to the Borrower, and (c) the Agent will, at the
Borrower's expense, take such steps as the Borrower may reasonably request to
evidence the termination of such security interests and to effect the return to
the Borrower of such funds.
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5.7 NOTICE TO ACCOUNT DEBTORS. The Borrower hereby authorizes the
Agent, now and at any time or times hereafter, in accordance with the powers
conferred upon the Agent pursuant to Section 5 or any other applicable provision
of this Agreement, to: (a) notify any or all Account Debtors that the Accounts
have been assigned to the Agent, for the ratable benefit of the Agent, the Banks
and the other holders of the Obligations, and that the Agent has a security
interest therein, and (b) upon the occurrence of an Event of Default (unless
waived in writing in accordance with Section 14.1), direct such Account Debtors
to make all payments due from them to the Borrower upon the Accounts directly to
the Agent or to a lockbox designated by the Agent; PROVIDED, HOWEVER, that the
Agent shall not exercise any of its rights under this sentence unless: (i) the
Borrower has failed to so notify or direct any such Account Debtor following a
request from the Agent to the Borrower for such notification or direction, or
(ii) the Agent reasonably believes that the Borrower has failed to so notify or
direct any such Account Debtor. The Agent shall promptly furnish the Borrower
with a copy of any such notice sent. Any such notice, in the Agent's sole
discretion, may be sent on the Borrower's stationery, in which event the
Borrower shall co-sign such notice with the Agent.
5.8 APPOINTMENT OF ATTORNEY-IN-FACT. The Borrower hereby irrevocably
appoints the Agent (and all persons designated by the Agent) as the Borrower's
true and lawful attorney (and agent-in-fact) to: (a) effectuate, in the
Borrower's name, the Borrower's obligations under this Agreement and (b) upon
the occurrence of an Event of Default (unless appropriately waived in writing in
accordance with Section 14.1), in the Borrower's or Agent's name: (i) demand
payment of the Accounts, (ii) enforce payment of the Accounts, by legal
proceedings or otherwise, (iii) exercise all of the Borrower's rights and
remedies with respect to the collection of the Accounts and any other
Collateral, (iv) settle, adjust, compromise, extend, or renew the Accounts, (v)
settle, adjust, or compromise any legal proceedings brought to collect the
Accounts, (vi) if permitted by applicable law, sell or assign the Accounts and
other Collateral upon such terms, for such amounts, and at such time or times as
the Agent deems advisable, (vii) discharge and release the Accounts and any
other Collateral, (viii) take control, in any manner, of any item of payment or
Proceeds relating to any Collateral, (ix) prepare, file, and sign the Borrower's
name on a proof of claim in bankruptcy or similar document against any Account
Debtor, (x) prepare, file, and sign the Borrower's name on any notice of Lien,
assignment, or satisfaction of Lien or similar document in connection with the
Accounts, (xi) do all acts and things reasonably necessary, in the Agent's good
faith discretion, to fulfill the Borrower's obligations under this Agreement,
(xii) endorse the name of the Borrower upon any of the items of payment or
Proceeds relating to any Collateral and deposit the same to the account of the
Agent on account of the Obligations, (xiii) endorse the name of the Borrower
upon any Chattel Paper, document, Instrument, invoice, freight bill, bill of
lading, or similar document or agreement relating to the Accounts, Inventory and
any other Collateral, (xiv) use the Borrower's stationery and sign the name of
the Borrower to verifications of the Accounts and notices thereof to Account
Debtors, (xv) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Accounts, Inventory, and any other Collateral to which the Borrower has access,
and (xvi) notify post office authorities to change the address for delivery of
the Borrower's mail to an address designated by the Agent, receive and open all
mail addressed to the Borrower, and, after removing all Collections and
Remittances and other Proceeds of Collateral, forward the mail to the Borrower.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to
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be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
SECTION 6 SPECIFIC REPRESENTATIONS, WARRANTIES AND COVENANTS
RELATING TO COLLATERAL.
6.1 REPRESENTATIONS AND WARRANTIES REGARDING ACCOUNTS. The Borrower
agrees and represents that each Account of the Borrower and each of its
Subsidiary Guarantors and each invoice representing any such Account will (a)
cover a bona fide sale or lease and delivery of merchandise usually dealt in by
the Borrower or such Subsidiary Guarantor, or the rendition by the Borrower or
such Subsidiary Guarantor of services to customers in the ordinary course of
business, (b) be for a liquidated amount maturing as stated in the schedule
thereof and in the duplicate invoice covering said sale, and (c) other than the
Agent's security interest therein, not be subject to any lien, or, except for
those asserted by the Account Debtor in the ordinary course of business, any
offset, deduction or counterclaim. None of the Borrower's or any of its
Subsidiary Guarantor's invoices shall be backdated, postdated or redated, and
neither the Borrower nor any of its Subsidiary Guarantors shall make sales on
extended dating or credit terms other than in accordance with past practices as
disclosed to the Agent in writing. The Borrower shall notify the Agent promptly
upon, but in no event later than three (3) Business Days after the Borrower's
learning thereof, in the event any Eligible Account in an amount in excess of
$100,000 falls within any of the exclusions set forth in clauses (b) through (v)
of the definition of "Eligible Accounts" and of the reasons therefore.
6.2 DISPUTES AND CLAIMS REGARDING ACCOUNTS. The Borrower shall, and
shall cause each of its Subsidiary Guarantors to, promptly settle or adjust all
disputes and claims at no expense to the Agent, but no discount, credit or
allowance (other than discounts, credits or allowances that do not exceed
$1,500,000 in the aggregate at any one time outstanding) or material adverse
extension, compromise or settlement shall be granted to any customer or Account
Debtor. No returns of merchandise outside the ordinary course of business (other
than returns that do not exceed $350,000 in the aggregate in any Fiscal Quarter)
shall be accepted by the Borrower or any of its Subsidiary Guarantors without
the Agent's consent which consent shall not be unreasonably withheld or delayed.
6.3 ACCOUNTS. Other than (a) the Guarantor Subsidiary Lockboxes and the
Cash Collateral Accounts and (b) those operating accounts disclosed on the
Supplemental Schedule (which the Borrower and the Subsidiary Guarantors shall
use solely for purposes other than for the collecting or depositing Collections
or Remittances) or which have otherwise been disclosed to the Agent in writing
from time to time after the Closing Date (such operating accounts being referred
to herein as the "Permitted Accounts"), neither the Borrower, nor any of its
Subsidiaries nor any other Person maintains a mailbox, Deposit Account or other
account for the purpose of collecting and depositing Collections or Remittances
or otherwise holding monies of the Borrower or the Subsidiary Guarantors.
6.4 COMPLIANCE WITH TERMS OF ACCOUNTS. The Borrower will perform and
comply, and will cause the Subsidiary Guarantors to perform and comply, (i) in
all material respects with all obligations in respect of Accounts and (ii) under
all other contracts and agreements to
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which it is a party or by which it is bound relating to the Collateral, where
failure to so comply would result in a Material Adverse Effect, unless the
validity thereof is being contested in good faith by appropriate proceedings and
such proceedings do not involve the material danger of the sale, forfeiture or
loss of the Collateral which is the subject of such proceedings or the priority
of the lien in favor of the Agent thereon.
6.5 NO WAIVERS, EXTENSIONS, AMENDMENTS. Other than in the ordinary
course of business and in accordance with its business practices prior to the
execution and delivery of this Agreement, Borrower will not, and will cause the
Subsidiary Guarantors not to, without the Agent's prior written consent, which
consent shall not be unreasonably withheld or delayed, grant any extension of
the time of payment of any of the Accounts, Chattel Paper or Instruments,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon.
6.6 LIEN PRIORITY. From and after the Closing Date, by reason of the
filing of financing statements, assignments of financing statements and
termination statements in all requisite governmental offices, this Agreement and
the other Loan Documents will create and constitute a valid and perfected first
priority security interest (except as permitted by this Agreement) in and Lien
on that portion of the Collateral which can be perfected by such filing, which
security interest will be enforceable against the Borrower, its Subsidiaries and
all other third parties as security for payment of all Obligations.
6.7 LOCATION OF COLLATERAL. All of the locations of the Borrower, its
Subsidiaries and of the Collateral are set forth in the Supplemental Schedule
attached hereto, except for consignee locations permitted under Section 4.3 of
this Agreement. Other than as set forth in the Supplemental Schedule attached
hereto and the consignee locations permitted under Section 4.3 of this
Agreement, neither the Borrower nor any of its Subsidiaries keeps any Collateral
owned by it on any property not owned in fee simple by the Borrower or such
Subsidiary, as the case may be.
6.8 LIEN WAIVERS, LANDLORD WAIVERS, WAREHOUSE RECEIPTS. Neither the
Borrower nor any Subsidiary Guarantor will create, permit or suffer to exist,
and each of the Borrower and the Subsidiary Guarantors will defend the
Collateral against and take such other action as is necessary to remove, any
Lien, claim or right, in or to the Collateral, other than the Liens permitted by
Section 8.3(d) of this Agreement, and will defend the right, title and interest
of the Agent in and to any of the Borrower's or any of its Subsidiary's rights
to the Collateral and in and to the Proceeds and Products thereof against the
claims and demands of all persons whomsoever. In the event any Inventory of the
Borrower or any Subsidiary Guarantor is at any time located on any real property
not owned by the Borrower or such Subsidiary Guarantor and subject to the liens
of this Agreement and the other Loan Documents in favor of the Agent, the
Borrower will obtain and maintain in effect, and will cause its Subsidiary
Guarantors to obtain and maintain in effect, at all times while any such
Inventory is so located valid and effective lien waivers in form and substance
satisfactory to the Agent, whereby each owner, landlord and mortgagee having an
interest in such real property shall disclaim any interest in such Inventory and
shall agree to allow the Agent reasonable access to such real property in
connection with
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any enforcement of the security interest granted hereunder. The Borrower shall
not maintain, and shall not permit any Subsidiary Guarantor to maintain, any
Inventory at any consignee in an amount in excess of Fifty Thousand Dollars
($50,000) per location unless Borrower gives the Agent notice of the location
and amount of such consigned Inventory for each location at which the Inventory
exceeds Fifty Thousand Dollars ($50,000) within five (5) business days after the
Inventory is moved, delivered or taken to such location. The Borrower shall not,
and shall not permit any Subsidiary Guarantor to, store any Inventory with a
bailee, warehouseman or similar party without the Agent's prior written consent
and, if the Agent gives such consent and reasonably requires such action, the
Borrower will concurrently therewith cause any such bailee, warehouseman or
similar party to issue and deliver to the Agent, in form and substance
acceptable to the Agent, warehouse receipts therefor in the Agent's name.
6.9 MAINTENANCE OF INSURANCE. The Borrower will maintain with
financially sound and reputable companies, insurance policies (a) insuring the
Inventory of the Borrower and the Subsidiary Guarantors against loss by fire,
explosion, theft and such other casualties as are usually insured against by
companies engaged in the same or similar businesses, and (b) insuring the
Borrower and the Agent against liability for personal injury and property damage
relating to such Inventory, such policies to be in such form and in such amounts
and coverage as may be reasonably satisfactory to the Agent, with losses payable
to the Borrower and the Agent as their respective interests may appear. All
insurance with respect to such Inventory shall (i) contain a breach of warranty
clause in favor of the Agent, (ii) provide that no cancellation, reduction in
amount, change in coverage or expiration thereof shall be effective until at
least thirty (30) days after written notice to the Agent thereof, and (iii) be
reasonably satisfactory in all respects to the Agent.
6.10 LIMITATIONS ON DISPOSITIONS OF INVENTORY. The Borrower will not,
and will not permit the Subsidiary Guarantors to, sell, transfer, lease or
otherwise dispose of any of the Inventory, or attempt, offer or contract to do
so, except for dispositions of Inventory in the ordinary course of business and
dispositions of up to $750,000 of slow-moving or obsolete Inventory of the
Borrower and the Subsidiary Guarantors during any Fiscal Quarter, in the
aggregate.
SECTION 7 GENERAL REPRESENTATIONS AND WARRANTIES.
So long as the Obligations shall remain outstanding or the Banks shall
have any Commitment or LC Exposure hereunder, the Borrower represents and
warrants to the Agent and the Banks as follows:
7.1 EXISTENCE. The Borrower and the Subsidiary Guarantors are duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. The Borrower has no Subsidiaries other than as listed in the
Supplemental Schedule. The Borrower and its Subsidiaries are duly qualified or
licensed to transact business in the jurisdiction of its organization and in
each additional jurisdiction where such qualification or licensure is necessary,
except where failure to do so will not have a Material Adverse Effect.
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7.2 AUTHORIZATION. The execution, delivery, and performance of this
Agreement and the other Loan Documents to which the Borrower or any of the
Subsidiary Guarantors is a party: (a) are within the Borrower's or such
Subsidiary Guarantor's corporate powers, (b) have been duly authorized, and are
not in contravention of Law or the terms of the Borrower's or such Subsidiary
Guarantor's Certificate of Incorporation or By-Laws or, except as set forth on
the Supplemental Schedule, of any indenture or other document or instrument
evidencing borrowed money or any other agreement or undertaking to which the
Borrower or such Subsidiary Guarantor is a party or by which it or its property
is bound.
7.3 ENFORCEABILITY. This Agreement and the other Loan Documents to
which the Borrower or any of the Subsidiary Guarantors is a party constitute the
legal, valid and binding obligations of such Person, enforceable against such
Person in accordance with the terms thereof, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
7.4 LITIGATION; PROCEEDINGS. Except as set forth in the Supplemental
Schedule, as of the Closing Date there are no actions, suits, investigations or
proceedings, and no orders, writs, injunctions, judgments or decrees, now
pending, existing or, to the knowledge of the Borrower, threatened against the
Borrower or any of the Subsidiary Guarantors, affecting any property of the
Borrower or any of the Subsidiary Guarantors or with respect to this Agreement
or any Loan Document, whether at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any federal, state, local or
foreign government or of any agency or subdivision thereof, or before any
arbitrator or panel of arbitrators. There is no action, suit, investigation,
proceeding, order, writ, injunction, or decree existing at any time on or after
the Closing Date that, when taken singly or with all other actions, suits,
investigations, proceedings, orders, writs, injunctions or decrees, could
reasonably be expected to result in a Material Adverse Effect or has otherwise
resulted, or could reasonably be expected to result, in liabilities or claims
against the Borrower, any Subsidiary Guarantor or the Combined Borrowing
Entities in an amount exceeding One Million Five Hundred Thousand Dollars
($1,500,000), UNLESS, any such amounts owing by Borrower or such Subsidiary
Guarantor resulting from such action, suit, investigation, proceeding, order,
writ, injunction, or decree shall be either (i) insured and the insurance
carrier shall have acknowledged coverage in an amount of the insurance or shall
have been ordered by a court of competent jurisdiction to pay such amounts owing
by the Borrower or such Subsidiary Guarantor resulting from such action, suit,
investigation, proceeding, order, writ, injunction, or decree, or (ii) subject
to the GEC Indemnity, but only to the extent that GEC has acknowledged liability
or has been ordered by a court of competent jurisdiction to pay such amount
owing by the Borrower or such Subsidiary Guarantor from such action, suit,
investigation, proceeding, order, writ, injunction, or decree.
7.5 TAXES. The Borrower and its Subsidiaries have filed all federal,
state and local tax returns which are required to be filed by the Borrower and
such Subsidiaries and, except to the extent permitted by Section 8.2(i) of this
Agreement, have paid all taxes and assessments due as shown on such returns,
including interest, penalties and fees.
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7.6 TITLE. The Borrower and the Subsidiary Guarantors have good title
to the Collateral. All such Collateral is free of all Liens other than those in
favor of the Agent and those otherwise disclosed in the Supplemental Schedule or
permitted by Section 8.3(d) of this Agreement.
7.7 CONSENTS; APPROVALS. Except as set forth on the Supplemental
Schedule, no action, consent or approval of, registration or filing with or any
other action by any governmental authority or other Person is or will be
required in connection with the transactions contemplated by this Agreement and
the other Loan Documents, except such as have been made or obtained and are in
full force and effect.
7.8 LAWFUL OPERATIONS. The operations of the Borrower and its
Subsidiaries are in full compliance with all requirements imposed by Law,
including without limitation, occupational safety and health laws and zoning
ordinances except to the extent any such noncompliance, when taken singly or
with all other such noncompliance, has not resulted, and could not reasonably be
expected to result in a Material Adverse Effect and has not otherwise resulted,
and could not reasonably be expected to result, in liabilities or claims against
the Borrower, any Subsidiary Guarantor or the Combined Borrowing Group in an
amount exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
7.9 ENVIRONMENTAL COMPLIANCE. Each parcel of real property in which the
Borrower or any of its Subsidiaries has a real property interest (whether as fee
owner, operator, lessor (directly or indirectly), lessee (directly or
indirectly), mortgagee or otherwise) (collectively, "Properties") is in
compliance with Environmental Laws except for any noncompliance, when taken
singly or with all other such noncompliance, has not resulted, and could not
reasonably be expected to result, in a Material Adverse Effect and has not
otherwise resulted, and could not reasonably be expected to result, in
liabilities or claims against the Borrower, any Subsidiary Guarantor or the
Combined Borrowing Entities in an amount exceeding One Million Five Hundred
Thousand Dollars ($1,500,000), EXCEPT to the extent any such amounts owing by
Borrower or such Subsidiary Guarantor resulting from such noncompliance are
either (i) insured and the insurance carrier shall have acknowledged coverage in
an amount of the insurance or shall have been ordered by a court of competent
jurisdiction to pay such amounts owing by the Borrower or such Subsidiary
Guarantor resulting from such noncompliance, or (ii) subject to the GEC
Indemnity, but only to the extent that GEC has acknowledged liability or has
been ordered by a court of competent jurisdiction to pay such amount owing by
the Borrower or such Subsidiary Guarantor from such noncompliance. With respect
to each of the Properties, (a) there is no pending or, to the knowledge of the
Borrower, threatened Environmental Claim against the Borrower or any of its
Subsidiaries or any other environmental condition with respect to any Property
which Environmental Claim or condition, when taken singly or with all other such
Environmental Claims or conditions, has resulted, and could reasonably be
expected to result, in a Material Adverse Effect or has otherwise resulted, and
could reasonably be expected to result, in liabilities or claims against the
Borrower, any Subsidiary Guarantor or the Combined Borrowing Entities in an
amount exceeding One Million Five Hundred Thousand Dollars ($1,500,000), EXCEPT
to the extent any such amounts owing by Borrower or such Subsidiary Guarantor
resulting from such Environmental Claims or conditions are either (X) insured
and the insurance carrier shall have
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acknowledged coverage in an amount of the insurance or shall have been ordered
by a court of competent jurisdiction to pay such amounts owing by the Borrower
or such Subsidiary Guarantor resulting from such Environmental Claims or
conditions, or (Y) subject to the GEC Indemnity, but only to the extent that GEC
has acknowledged liability or has been ordered by a court of competent
jurisdiction to pay such amount owing by the Borrower or such Subsidiary
Guarantor from such Environmental Claims or conditions, (b) the Borrower and its
Subsidiaries are in material compliance with all Environmental Permits, and (c)
except as set forth on the Supplemental Schedule, Hazardous Materials have not
been released or disposed of on any such Property or, to the best knowledge of
the Borrower, any property adjoining any such Property, except in compliance
with applicable Environmental Laws. Except as disclosed on the Supplemental
Schedule, no Property is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar federal or
state list of sites requiring investigation or clean-up. Except as disclosed in
the Supplemental Schedule, there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, landfills, lagoons, surface
impoundments, disposal areas or disposal ponds, on or under any Property that
are in violation of any applicable Environmental Law. Except as disclosed on the
Supplemental Schedule, neither the Borrower nor any of its Subsidiaries has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for listing on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar federal or state list or which is the subject of any federal, state or
local enforcement actions or other investigations which may lead to claims
against the Borrower or its Subsidiaries for any remedial work, damage to
natural resources or personal injury, including claims under CERCLA. Except as
disclosed in the Supplemental Schedule, there are no polychlorinated biphenyls
or friable asbestos present at any Property in violation of any applicable
Environmental Law. No condition exists at, on or under any Property, which, with
the passage of time, or the giving of notice or both, would give rise to
liability under any Environmental Law except for such a condition, when taken
singly or with all other such conditions, has not resulted, and could not
reasonably be expected to result, in a Material Adverse Effect and has not
otherwise resulted, and could not reasonably be expected to result, in
liabilities or claims against the Borrower, any Subsidiary Guarantor or the
Combined Borrowing Entities in an amount exceeding Seven Hundred Fifty Thousand
Dollars ($750,000). Except as disclosed in the Supplemental Schedule, no
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any Property. Except
as disclosed in the Supplemental Schedule, the Borrower is not aware of any
prior use of any Property by any Persons that constitutes a violation of any
Environmental Laws or has resulted in a release of Hazardous Materials into the
environment such as would give rise to a cleanup obligation or other
Environmental Claim. Except as disclosed in the Supplemental Schedule, the
Borrower is not aware of any event, condition or activity which may interfere
with or prevent continued compliance by the Borrower or its Subsidiaries with
all Environmental Laws. Except as disclosed in the Supplemental Schedule, there
is no civil, criminal or administrative action, suit, demand, claim, hearing,
notice of violation, proceeding, notice or demand letter pending as of the
Closing Date or, to the best knowledge of the Borrower, threatened involving any
of the Properties relating to violations of Environmental Laws. To the best
knowledge of the Borrower, except as disclosed in the Supplemental Schedule,
there is no pending investigation involving any of the Properties relating to
violations of Environmental Laws.
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7.10 ENVIRONMENTAL LAWS AND PERMITS. Without limiting the
representations made in Section 7.9 above, to the best knowledge of the
Borrower, except as disclosed in the Supplemental Schedule, there are no
circumstances with respect to any Property or the operations of any Borrower or
its Subsidiaries that could reasonably be anticipated: (i) to form the basis of
a Environmental Claim against the Borrower, its Subsidiaries or (ii) to cause
any Property owned, leased or funded by the Borrower or any of its Subsidiaries
to be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law.
7.11 ERISA. The Supplemental Schedule sets forth all of the Employee
Benefit Plans of the Borrower, its Subsidiaries and each ERISA Affiliate thereof
as of the Closing Date. No Accumulated Funding Deficiency exists in respect of
any Employee Benefit Plan of the Borrower, its Subsidiaries or any ERISA
Affiliate thereof. No Reportable Event has occurred in respect of any Employee
Benefit Plan which is continuing and which: (i) constitutes grounds either for
termination of the plan or for court appointment of a trustee for the
administration thereof or (ii) when taken singly or with all other such
Reportable Events, has resulted, or could reasonably be expected to result, in a
Material Adverse Effect and has otherwise resulted, or could reasonably be
expected to result, in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000). No "prohibited transactions"
(as defined in Section 406 of ERISA or Section 4975 of the Code), have occurred
that could cause any Borrower or any of its Subsidiaries or any ERISA Affiliate
thereof to incur a material liability. Neither the Borrower, nor its
Subsidiaries nor any ERISA Affiliate thereof, has: (i) had an obligation to
contribute to any Multiemployer Plan except as disclosed in the Supplemental
Schedule or (ii) incurred or reasonably expects to incur any liability for the
withdrawal from such a Multiemployer Plan.
7.12 AGREEMENTS; ADVERSE OBLIGATIONS; LABOR DISPUTES. The Supplemental
Schedule sets forth a list of all Material Business Agreements of the Borrower
and each of the Subsidiary Guarantors. As of the Closing Date, the Material
Business Agreements of the Borrower and the Subsidiary Guarantors are in full
force and effect and have not been revoked or otherwise modified since the
execution thereof. The Borrower and each of the Subsidiary Guarantors is in full
compliance with the material terms of the Material Business Agreements to which
it is a party. Neither the Borrower, nor any of its Subsidiaries, is subject to
any contract, agreement, corporate restriction which could reasonably be
expected to have a Material Adverse Effect. Neither the Borrower nor any of its
Subsidiaries is a party to any labor dispute (other than grievance disputes
which could, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect or could reasonably be expected to result in
liabilities to the Borrower, any Subsidiary Guarantor or the Combined Borrowing
Entities in an amount exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
There are no material strikes, slow downs, walkouts or other concerted
interruptions of operations by employees of the Borrower or any Subsidiary
Guarantor, whether or not relating to any labor contracts.
7.13 FINANCIAL STATEMENTS. The audited consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries for the Fiscal
Year ending December
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31, 1997, and the related statements of income, shareholder's equity, and cash
flows, and, as applicable, changes in financial position or cash flows for such
Fiscal Years, and the notes to such financial statements, reported upon by Ernst
& Young LLP, certified public accountants: (a) have been prepared in accordance
with GAAP, applied on a consistent basis with the Borrower's financial
statements from prior Fiscal Years and (b) fairly present in all material
respects (subject to routine year-end audit adjustments in the case of the
unaudited financial statements) the financial condition of the Borrower and its
consolidated Subsidiaries as of the respective dates thereof (including a full
disclosure of liabilities, contingent or otherwise, if any, required to be
reported in accordance with GAAP) and the results of its operations for the
respective fiscal periods then ending. As of the Closing Date, neither the
Borrower nor any Subsidiary Guarantor has experienced a Material Adverse Effect
since the December 31, 1997 financial statements, nor has there been any change
in the Borrower's accounting procedures used therein. Except as set forth on the
Supplemental Schedule, the Borrower and its Subsidiaries did not as of December
31, 1997, and will not as of the Closing Date, have any material contingent
liabilities, material liabilities for taxes, unusual and material forward or
long-term commitments or material unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected in said audited
balance sheet.
7.14 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiary
Guarantors owns or has the legal and valid right to use all Intellectual
Property necessary for the operation of its business as presently conducted,
free from any Lien not permitted under Section 8.3(d) and free of any
restrictions material to the operation of its business as presently conducted
except as set forth in the Supplemental Schedule. Except as set forth in the
Supplemental Schedule or as otherwise disclosed to the Agent from time to time
in writing, neither the Borrower nor any of its Subsidiary Guarantors (a) has
any Intellectual Property, (b) licenses any Intellectual Property (whether as
licensor or licensee), or (c) is a party to any Material License Agreement with
respect to Intellectual Property which, in the case of each of clauses (a)-(c)
above, appears or is printed on or is necessary for the manufacture, advertising
for sale and sale of any Collateral.
7.15 INSURANCE. The insurance policies maintained by Borrower and/or
the Subsidiary Guarantors comply with the requirements of Section 6.9 of this
Agreement. The Supplemental Schedule sets forth a true and accurate description
of all insurance policies maintained by the Borrower or any Subsidiary
Guarantor.
7.16 VALUE; SOLVENCY. The Borrower has received fair consideration and
reasonably equivalent value for the obligations and liabilities it has incurred
to the Banks hereunder. The Borrower is Solvent and each of the Subsidiary
Guarantors is Solvent.
7.17 INVESTMENT COMPANY ACT STATUS. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or an "affiliated person" of, or a
"promoter" or "principal underwriter" for an "investment company" (as such terms
are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section
80(a)(1), et seq.).
7.18 REGULATION U/REGULATION X COMPLIANCE. The proceeds of Advances
made to the Borrower pursuant to this Agreement will be used only for the
purposes contemplated by
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Section 8.2(g) hereof. No part of the proceeds of Advances made to the Borrower
pursuant to this Agreement will be used, directly or indirectly, to purchase or
carry any "margin stock" or for a purpose which violates any law, rule, or
regulation including, without limitation, the provisions of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as amended.
Neither the Borrower nor any of its Subsidiaries owns any "margin stock", as
that term is defined in Regulation U and Regulation X of the Board of Governors
of the Federal Reserve System.
7.19 FULL DISCLOSURE. The financial statements referred to in Section
7.13, the warranties and representations and factual disclosures made by the
Borrower and the Subsidiary Guarantors in this Agreement and the other Loan
Documents, and all documents or statements filed with the Securities and
Exchange Commission since December 31, 1997, do not, taken as a whole, contain
any untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not materially misleading. The
Field Exam Materials and the statements contained therein are true and accurate
in all material respects and are not materially misleading in light of the
circumstances and purposes for which such information was provided. The Borrower
has provided all information requested by the Agent and the Banks, and all such
information is complete and accurate in all material respects.
SECTION 8 COVENANTS OF THE BORROWER.
So long as any of the Obligations shall remain outstanding or the Banks
shall have any Commitments or LC Exposure hereunder, the Borrower shall comply,
and, to the extent applicable to its Subsidiaries, will cause each of its
Subsidiaries to comply, with the following provisions unless the Banks shall
otherwise consent in writing:
8.1 REPORTING AND NOTICE COVENANTS.
(a) MONTHLY FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each Bank, as soon as practicable and in any
event within thirty (30) days after the end of each Fiscal Month of the
Borrower, an unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of that Fiscal Month and the related
statements of operations, retained earnings and cash flow for the year
to the end of that monthly period for such Fiscal Month.
(b) QUARTERLY FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each Bank, as soon as practicable and in any
event within forty-five (45) days after the end of each Fiscal Quarter
of the Borrower, commencing with the first Fiscal Quarter ending with
respect to which the Borrower has filed a Form 10-Q with the Securities
and Exchange Commission following effectiveness of the Exchange Offer
Registration Statement of the Borrower in respect of the Senior Note
Offering on Form S-4, an unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of that Fiscal Quarter and
the related statements of operations, retained earnings and cash flow
for the year to the end of that quarterly period for such Fiscal
Quarter, prepared on an unaudited comparative basis with the comparable
period during the prior
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year and in accordance with GAAP, all in reasonable detail and
certified, subject to normal year-end audit adjustments, by a
responsible officer of the Borrower.
(C) ANNUAL FINANCIAL STATEMENTS. The Borrower shall
furnish to the Agent and each of the Banks, (i) as soon as practicable
and in any event within ninety (90) days after the end of each Fiscal
Year of the Borrower, a complete copy of the annual audit report of the
Borrower and its Subsidiaries (including, without limitation, all
consolidated and consolidating financial statements of the Borrower and
notes thereto) for that Fiscal Year, all of which shall be (A) prepared
on a comparative basis with the prior year and in accordance with GAAP,
and (B) audited and certified (without qualification as to GAAP), by
independent public accountants of recognized national standing selected
by the Borrower and acceptable to the Agent and the Banks, and (ii) as
soon as practicable and in any event within one hundred twenty (120)
days after the end of each Fiscal Year of the Borrower, the
accountants' management report and any management letters relating to
the items described in clause (i) above.
(d) OFFICER'S CERTIFICATE. The Borrower shall furnish to
the Banks:
(i) concurrently with the financial statements
delivered in connection with Sections 8.1(b) and 8.1(c) above,
a certificate of a responsible officer of the Borrower, in his
or her capacity as a responsible officer, setting forth the
computations necessary to determine whether the Borrower is in
compliance with Section 8.4 of this Agreement and satisfaction
of the financial standards required in connection with the
determination of the Applicable Revolving Credit Margin and
certifying that: (A) those financial statements fairly present
in all material respects the financial condition and results
of operations of the Borrower subject (in the case of interim
financial statements) to routine year-end audit adjustments
and (B) no Potential Default or Event of Default then exists
or, if any Potential Default or Event of Default does exist, a
brief description of the Potential Default or Event of Default
and the Borrower's intentions in respect thereof, and
(ii) upon Agent's request, and in no event less
frequently than weekly, (i) a certificate reflecting the
calculation of the Borrower's Borrowing Base, substantially in
the form attached hereto as EXHIBIT H (each a "Borrowing Base
Certificate") and satisfactory in substance to the Agent, and
(ii) a written report, in form and substance satisfactory to
the Agent, as to the Inventory and Accounts of the Borrower
and the Subsidiary Guarantors, setting forth the type, amount,
value and location of the Borrower's and each Subsidiary
Guarantor's Inventory and Accounts as at the end of the last
calendar week.
(e) ANNUAL BUSINESS PLAN. No later than one week after
approved by the Borrower's board of directors, but in any event prior
to each of the Borrower's Fiscal Year ends, the Borrower shall provide
the Agent and the Banks with each Subsidiary Guarantor's annual
business plan on a monthly basis, in form and substance reasonably
satisfactory to the Agent and the Banks and containing, at a minimum,
each Subsidiary
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Guarantor's budget, operating profit and cash flow projections for the
following Fiscal Year.
(f) INTERCOMPANY LOANS. Within fifteen (15) days after the
end of each month, the Borrower shall furnish to the Agent a list of
all outstanding balances of each Subsidiary Guarantor's Intercompany
Loan as of the end of such month, together with a list of all debits
and credits with respect thereto, in form and substance acceptable to
the Agent.
(g) OTHER INFORMATION. The Borrower shall furnish to the
Agent, promptly upon the Agent's written request, such other
information about the financial condition, properties and operations of
the Borrower, its Subsidiaries and each of their Employee Benefit Plans
as the Agent or any Bank may from time to time reasonably request.
(h) NOTICES. The Borrower will cause its chief financial
officer, or in his absence another officer designated by the chief
financial officer, to give the Agent and each Bank prompt written
notice whenever (and in any event within ten (10) Business Days after):
(i) the Borrower or any of its Subsidiaries receives notice from any
court, agency or other governmental authority of any alleged
non-compliance with any Law or order which, taken singly or together
with all other alleged non-compliance with Law, could reasonably be
expected to have or result in, if such noncompliance is found to exist,
a Material Adverse Effect or could reasonably be expected to result in
liabilities to the Borrower, any Subsidiary Guarantor or the Combined
Borrowing Entities in an amount exceeding Seven Hundred Fifty Thousand
Dollars ($750,000), (ii) the Internal Revenue Service or any other
federal, state or local taxing authority shall allege any default by
the Borrower or any of its Subsidiaries in the payment of any tax
material in amount or shall threaten or make any assessment in respect
thereof, (iii) any litigation or proceeding shall be brought against
the Borrower or any of its Subsidiaries before any court or
administrative agency which, taken singly or together with other
litigation or proceedings, could, if successful, reasonably be expected
to have or result in a Material Adverse Effect or could reasonably be
expected to result in liabilities to the Borrower, any Subsidiary
Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000), or (iv) any material
adverse change or development in connection with any such litigation
proceeding, or (v) such officer reasonably believes that any Potential
Default or Event of Default has occurred or that any other
representation or warranty made herein shall for any reason have ceased
to be true and complete in any material respect.
(i) NOTICE OF DEFAULT UNDER ERISA. If the Borrower shall
receive notice from any ERISA Regulator or otherwise have actual
knowledge that a Default under ERISA exists with respect to any
Employee Benefit Plan, the Borrower shall notify the Agent and each
Bank of the occurrence of such Default under ERISA, within ten (10)
Business Days after receiving such notice or obtaining such knowledge
(the disclosures contained in the Supplemental Schedule being such
notice of each Default under ERISA disclosed therein to the extent of
the disclosure therein) and shall: (i) so long as the Default under
ERISA has not been corrected to the satisfaction of, or waived in
writing
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by the party giving notice, the Borrower shall thereafter treat as a
current liability (if not otherwise so treated) all liability of
Borrower or its Subsidiaries that would arise by reason of the
termination of or withdrawal from such Employee Benefit Plan if such
plan was then terminated, and (ii) within forty-five (45) days of the
receipt of such notice or obtaining such knowledge, furnish to the
Agent and each Bank a current consolidated balance sheet of Borrower
with the amount of the current liability referred to above.
(j) ENVIRONMENTAL REPORTING. The Borrower shall promptly
deliver to the Agent and each Bank, and in any event within ten (10)
Business Days after receipt or transmittal by the Borrower or any of
its Subsidiaries, as the case may be, copies of all material
communications with any government or governmental agency relating to
Environmental Laws and all material communications with any other
Person relating to Environmental Claims brought against the Borrower or
its Subsidiaries which could reasonably be expected to result in a
Material Adverse Effect.
(k) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. The Borrower
shall (i) once in each calendar year beginning in 1998, request a
current statement of withdrawal liability from any Multiemployer Plan
to which the Borrower or any ERISA Affiliate is or has been obligated
to contribute during such year and (ii) within fifteen (15) days after
the Borrower receives the such current statement, transmit a copy of
such statement to the Agent and each Bank.
8.2 AFFIRMATIVE COVENANTS.
(a) CORPORATE EXISTENCE. The Borrower shall, and shall
cause each of the Subsidiary Guarantors to, at all times maintain its
corporate existence, rights and franchises, except as permitted under
Section 8.3(a), and maintain its good standing in the jurisdiction of
its incorporation. The Borrower shall, and shall cause each of its
Subsidiaries to, qualify as a foreign corporation in each jurisdiction
where failure to qualify could reasonably be expected to result in a
Material Adverse Effect.
(b) FINANCIAL RECORDS. The Borrower shall maintain at all
times, true and complete financial records in accordance with GAAP,
consistently applied, and, without limiting the generality of the
foregoing, make appropriate accruals to reserves for estimated and
contingent losses and liabilities as required under GAAP.
(c) VISITATION. The Borrower shall upon reasonable prior
written or oral notice from the Agent or any Bank permit, and shall
cause each of its Subsidiary Guarantors to permit, the Agent or such
Bank, as the case may be, during normal business hours in the presence
of an officer of the Borrower: (i) to examine, with the guidance and
supervision of the Borrower, the Borrower's or any of the Borrower's
Subsidiary's financial records and to make copies of and extracts from
such records and (ii) to consult with the Borrower's and its Subsidiary
Guarantors' officers, directors, accountants, actuaries, trustees and
plan administrators, as the case may be, in respect of
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the Borrower's and such Subsidiary Guarantor's financial condition,
each of which parties is hereby authorized by the Borrower to make such
information available to the Agent or such Bank, as the case may be, to
the same extent that it would to the Borrower.
(d) COMPLIANCE WITH LAWS. The Borrower will comply, and
will cause each of its Subsidiaries to comply, in all respects with all
applicable provisions of all Laws (whether statutory, administrative,
judicial or other and whether federal, state or local and excluding
Environmental Laws to the extent addressed in Section 8.2(e) of this
Agreement) and every lawful governmental order; PROVIDED, HOWEVER, that
any alleged noncompliance shall not be deemed to be a violation of this
Section 8.2(d) so long as: (i) such noncompliance by the Borrower or
such Subsidiaries, taken singly or in the aggregate with all other
instances of noncompliance, has not resulted and could not reasonably
be expected to result in (A) a Material Adverse Effect, or (B)
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000), and (ii) either (A) appropriate
corrective measures are commenced within thirty (30) days after the
non-compliance becomes apparent or is alleged, and thereafter are being
diligently pursued to the satisfaction of the court, agency or other
governmental authority in question, or (B) the alleged non-compliance
is contested in good faith by timely and appropriate proceedings
effective to stay, during the pendency of such proceedings, the
enforcement thereof, and the Borrower or such Subsidiary has
established appropriate reserves and taken such other appropriate
measures as may be required under GAAP.
(e) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will
use and operate its facilities and properties, and cause each of its
Subsidiaries to use and operate its respective facilities and
properties, in such a manner that no obligation shall arise under any
Environmental Law, including a clean-up obligation, which when taken
singly or with all other such obligations, has resulted or could
reasonably be expected to result in a Material Adverse Effect or has
otherwise resulted or could reasonably be expected to result in
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000); PROVIDED, HOWEVER, that if any
Environmental Claim (even if such claim will not have a Material
Adverse Effect or exceed the liability limitations set forth above) is
made or any such obligation (even if such obligation would not have a
Material Adverse Effect or exceed the liability limitations set forth
above) arises, each of the Borrower and its Subsidiaries shall, at its
own cost and expense, timely satisfy such claim or obligation, provided
that no such claim or obligation need be satisfied if it is being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if appropriate reserves or other
appropriate provision, if any, as shall be required by GAAP have been
made. The Borrower will keep, and will cause each of its Subsidiaries
to keep, all necessary Environmental Permits in effect and remain in
material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws. The
Borrower shall not suffer to exist, and shall not permit any of its
Subsidiaries to suffer to exist, an environmental
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condition which, when taken singly or with all other such conditions,
has resulted or could reasonably be expected to result in a Material
Adverse Effect or has otherwise resulted or could reasonably be
expected to result in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount
exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
(f) PROPERTIES. The Borrower shall maintain, and shall
cause each of the Subsidiary Guarantors to maintain, all assets
necessary to its continuing operations in good working order and
condition, ordinary wear and tear excepted. The Borrower shall refrain,
and shall cause each of the Subsidiary Guarantors to refrain, from
wasting or destroying any such necessary assets or any part thereof.
(g) USE OF PROCEEDS; INTERCOMPANY LOANS. The Borrower
shall use the proceeds of Advances solely: (i) to fund payments of
interest due under the Senior Notes, and (ii) to make Intercompany
Loans to the Subsidiary Guarantors which shall be used by the
Subsidiary Guarantors for the purpose of (A) funding Permitted
Acquisitions, subject to the limitations on Permitted Acquisitions set
forth herein, and (B) supporting the working capital requirements of
such Subsidiary Guarantors. Each Intercompany Loan shall be evidenced
by an Intercompany Note and shall be secured pursuant to an
Intercompany Security Agreement. The Borrower shall establish and
maintain such books and records relating to Intercompany Loans as are
necessary to enable the Agent to trace advances and repayments of
principal of Intercompany Loans.
(h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS. The
Borrower shall perform and observe, and shall cause each of the
Subsidiary Guarantors to perform and observe, all the material terms
and provisions of each material contract to be performed or observed by
it, including, without limitation, all Material License Agreements and
Material Business Agreements to which they are a party. The Borrower
and each Subsidiary Guarantor shall maintain each such material
contract to which it is a party in full force and effect, and enforce,
to the extent that the Borrower or such Subsidiary Guarantor, in its
reasonable judgment, determines to be appropriate, each such material
contract in accordance with its terms.
(i) TAXES. The Borrower shall pay in full, and shall cause
each of its Subsidiaries to pay in full, prior in each case to the date
when penalties for the nonpayment thereof would attach, all taxes,
assessments and governmental charges and levies for which it may be or
become subject and all lawful claims which, if unpaid, might become a
Lien upon its property; PROVIDED, HOWEVER, that no item need be paid so
long as and to the extent that (i) it is contested in good faith and by
timely and appropriate proceedings effective, during the pendency of
such proceedings, to stay the enforcement of such taxes, assessments
and governmental charges and levies, and to prevent the creation of any
Lien, and (ii) appropriate reserves, as required by GAAP, are made on
the books of the Borrower and its Subsidiaries.
(j) INSURANCE. The Borrower shall, on the Closing Date and
within five (5) Business Days of the request by the Agent thereafter,
provide evidence satisfactory to
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the Agent that the Borrower and each of the Subsidiary Guarantors has
adequate personal and real property, casualty, liability, business
interruption and product liability insurance, with the Agent listed as
loss payee and additional insured (as applicable).
(k) LICENSE TO THIRD PARTIES AND SUBSIDIARIES. Except as
disclosed in the Supplemental Schedule, neither the Borrower nor any
Subsidiary Guarantor has any existing license agreements as licensor
with respect to its Intellectual Property that do not provide, and
neither the Borrower nor any such Subsidiary Guarantor will execute any
license agreement as licensor with any Person (including without
limitation any Subsidiary of the Borrower or such Subsidiary Guarantor)
with respect to any of its Intellectual Property that does not provide,
that (i) upon an Event of Default and the acceleration of the
Obligations, such license agreement shall, upon the written request of
the Agent, terminate, and (ii) such agreement may only be amended with
the express written consent of the Agent.
(l) YEAR 2000 COMPLIANCE. On or before July 31, 1999, all
of the Borrower's and each of the Subsidiary Guarantor's computer
hardware and software shall provide, in all material respects, the
following functions: (1) consistently handle date information before,
during and after January 1, 2000, including, but not limited to,
accepting date input, providing date output and performing calculations
on dates or portions of dates; (2) function accurately in accordance
with the specifications of such computer hardware or software and
without interruption before, during and after January 1, 2000, without
any change in operations associated with the advent of the new century;
(3) respond to two-digit date input in a way that resolves any
ambiguity as to century in a disclosed, defined and predetermined
manner; and (4) store and provide output of date information in ways
that are unambiguous as to century.
(m) REFINANCING. The Borrower, the Agent, the Banks and
the Letter of Credit Bank agree to use best efforts to refinance the
Obligations among the same parties, on terms acceptable to each such
party and that provide for the Subsidiary Guarantors to become
borrowing entities, by no later than April 30, 1998; PROVIDED, HOWEVER,
that so long as each party has used its best efforts to the failure of
the parties to reach an agreement in respect of such refinancing, the
failure to effect such a refinancing shall not be deemed a violation of
this Section 8.2(m).
8.3 NEGATIVE COVENANTS.
(a) EQUITY TRANSACTIONS; PERMITTED ACQUISITIONS. The
Borrower shall not, and shall not permit any of its Subsidiary
Guarantors to, without the prior written consent of the Required Banks,
which shall not be unreasonably withheld, (i) merge or consolidate with
or into, or enter into any agreement to merge or consolidate with or
into, any other Person or otherwise be a party to any merger or
consolidation; (ii) purchase all or substantially all of the assets and
business of another Person; or (iii) except as permitted under Section
8.3(d), lease as lessor, sell, sell-leaseback, license or otherwise
transfer (whether in one transaction or a series of transactions, but
excluding transactions involving sales or leases by Curtis of PC+
Products in the
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ordinary course) any of its assets (whether now owned or hereafter
acquired); PROVIDED, HOWEVER, that (A) the Borrower and the Subsidiary
Guarantors may sell or otherwise dispose of (I) Inventory in the
ordinary course of business, (II) to the extent permitted under Section
6.10, Inventory that is slow-moving or obsolete, and (III) Equipment
that is no longer used or useful in the Borrower's or such Subsidiary
Guarantor's business or that is obsolete, PROVIDED, that the Net
Proceeds of any such sales of Inventory or Equipment shall be applied
first to the Obligations in accordance with Section 2.13(c), and (B)
subject to the requirements contained in the definition of Permitted
Acquisition, the Borrower and the Subsidiary Guarantors may from time
to time after the Closing Date effect Permitted Acquisitions.
(b) CREDIT EXTENSIONS. The Borrower shall not, and shall
not permit any of the Subsidiary Guarantors to, (i) make, out of the
proceeds of Advances, prepayments or advances to others (except to the
Agent for the benefit of the Banks in accordance with this Agreement),
except the Borrower and the Subsidiary Guarantors may endorse checks,
drafts, and similar instruments for deposit or collection in the
ordinary course of business, (ii) loan, out of the proceeds of
Advances, any money to any other Person, except for: (A) loans to
non-shareholder employees in the ordinary course of business, the
aggregate outstanding amount of which shall not at any time exceed Two
Hundred Fifty Thousand Dollars ($250,000) at any one time outstanding,
(B) Intercompany Loans from the Borrower to the Subsidiary Guarantors,
and (C) intercompany loans from a Subsidiary Guarantor to the Borrower
pursuant to Section 6(c)(ii) of the applicable Subsidiary Guarantor's
Security Agreement in favor of the Agent, or (iii) except as permitted
under Section 8.3(c), Guaranty or assume any obligation of any other
Person except as a Subsidiary Guarantor of the Obligations or as a
Guarantor of the Senior Notes.
(c) INDEBTEDNESS. The Borrower shall not, and shall not
permit any of its Subsidiary Guarantors to, create, assume, incur,
suffer to exist or have outstanding at any time any Indebtedness or
other debt of any kind, EXCEPT that this Section 8.3(c) shall not
prohibit: (i) the Obligations and the Guaranty by the Subsidiary
Guarantors thereof, (ii) ordinary course trade payables (including
payables of Curtis in connection with the PC+ Products, (iii) the
Indebtedness on the Supplemental Schedule (which Indebtedness shall not
be renewed or increased), (iv) Indebtedness secured by a Lien permitted
by Section 8.3(d) of this Agreement, (v) at all times prior to May 5,
1998, that certain Indenture, dated as of February 4, 1987, between
Curtis and Security Pacific National Bank, or any successor thereto,
(vi) any Indebtedness which results from a Credit Extension permitted
in Section 8.3(b) of this Agreement, (vii) the Senior Notes and the
Guaranty by the Subsidiary Guarantors thereof, (viii) the incurrence by
the Company or any of its Subsidiary Guarantors of Hedging Obligations,
(ix) the incurrence by the Company or any of its U.S. domestic
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding not
to exceed $10,000,000, or (x) the guarantee by the Borrower or any
Subsidiary Guarantor of Indebtedness of the Borrower or a Subsidiary of
the Company that was permitted to be incurred by another provision of
this Agreement. Notwithstanding the foregoing, the Borrower may incur
Indebtedness if the Borrower's
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Consolidated Fixed Charge Coverage Ratio for the 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 2.0 to
1.0, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had
been incurred.
(d) LIENS; LEASES. The Borrower shall not, and shall not
permit any of the Subsidiary Guarantors to, (i) acquire or hold any
property subject to any Lien, (ii) sell or otherwise transfer any
Accounts, whether with or without recourse, or (iii) suffer or permit
any property now owned or hereafter acquired by it to be or become
encumbered by a Lien; PROVIDED, HOWEVER, that this Subsection shall not
prohibit: (A) any lien for a tax, assessment or government charge or
levy for taxes, assessments or charges not yet due and payable, (B) any
lien or deposit securing only workers' compensation, unemployment
insurance or similar obligations, (C) any mechanic's, carrier's,
landlord's or similar common law or statutory lien incurred in the
ordinary course of business which has not been docketed as a judgment,
(D) zoning or deed restrictions, public utility easements, rights or
way, minor title irregularities and similar matters relating to real
property of the Borrower or the Subsidiary Guarantors having, in all
such cases, no adverse affect as a practical matter on the ownership or
use of any of the property in question, (E) any Lien securing or given
in lieu of surety, stay, appeal or performance bonds, or securing
performance of contracts, bids, statutory obligations, surety and
appeal bonds (other than contracts for the payment of Indebtedness for
borrowed money), or deposits required by Law or by any court order,
decree, judgment or rule or as a condition to the transaction of
business or the exercise of any right, privilege or license, (F) any
Lien in favor of the Agent created under the Loan Documents or any
existing Lien fully disclosed in the Supplemental Schedule, (G) any
Lien arising in connection with the incurrence by the Company or a
Subsidiary Guarantor of Indebtedness represented by Capital Lease
Obligations, sale and leaseback transactions, mortgage financings,
purchase money obligations, capital expenditures or similar financing
transactions, in each case incurred for the purpose of financing all or
any part of the purchase price or cost of construction or improvement
of property, plant or Equipment used in the business of the Borrower or
such Guarantor Subsidiary; provided, however, that: (x) in each case,
the Lien is confined to the property in question, (y) in each case, the
Indebtedness secured thereby does not exceed the total cost or purchase
thereof, and (z) the aggregate outstanding principal amount (or
accreted value, as applicable) of Indebtedness of the Borrower and all
of its Subsidiaries secured by such Liens does not at any time exceed
$10,000,000; (H) any Lien which is being contested by Borrower, the
aggregate amount of such contested liens shall not at any time exceed
Two Hundred Fifty Thousand Dollars ($250,000), or (I) liens securing
Intercompany Loans in favor of the Borrower under the Intercompany
Security Agreements.
(e) INVESTMENTS. Other than as disclosed in the
Supplemental Schedule, the Borrower shall not, and shall not permit any
of the Subsidiary Guarantors to, (i) other than in connection with a
Permitted Acquisition, create any Subsidiary after the Closing Date,
(ii) make or hold any investment in any common stocks, bonds or
securities of any kind or any further capital contribution to any
Person other than (x) the common
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stock of its Subsidiaries existing on the Closing Date, together with
the common stock of Subsidiaries created in connection with a Permitted
Acquisition, and such capital contributions as are therein outstanding
as of the Closing Date and as are otherwise permitted under the Senior
Note Indenture, (y) notes or securities issued by a customer of the
Borrower or its Subsidiary Guarantors in connection with a proceeding
in respect of the Financial Impairment of such customer and (z) Cash
Equivalents, (iii) be or become a party to any joint venture or other
partnership, (iv) make or keep outstanding any advance or loan (except
as permitted under Sections 8.3(b) or 8.3(c)), or (v) be or become a
Guarantor of any kind (other than a Subsidiary Guarantor of the
Obligations or a Guarantor of the Senior Notes).
(f) DIVIDENDS; MANAGEMENT FEE. Other than in a writing
made expressly subject to the Agent's written consent under this
Agreement, neither the Borrower nor any Subsidiary Guarantor shall make
or commit itself to make any Distribution (other than stock dividends)
to its shareholders at any time or pay or commit itself to pay any
management fee to any Affiliate of the Borrower at any time; PROVIDED,
HOWEVER, that so long as no Potential Default has occurred and none
would thereupon occur, (i) the Borrower may pay to NESCO, Inc. a
monthly management fee in an amount not to exceed, together with all
other such payments by the Borrower in any Fiscal Year, in the
aggregate five percent (5%) of the Borrower's Consolidated EBITDA
during any Fiscal Year, (ii) to support the Borrower's payment of any
such management fee, each Subsidiary Guarantor may pay to the Borrower,
in accordance with a management agreement among the Borrower and the
Subsidiary Guarantors, an amount, on a monthly basis, that does not,
together with all other such payments by such Subsidiary Guarantor in
any Fiscal Year, exceed such Subsidiary Guarantor's Consolidated EBITDA
for such Fiscal Year, (iii) payments required to be made by the
Borrower and the Subsidiary Guarantors pursuant to a certain Tax
Payment Agreement, dated as of the date hereof, among, INTER ALIA the
Borrower, the Subsidiary Guarantors and the Parent Company, and (iv)
each Subsidiary Guarantors may, on a weekly basis, pay an amount to the
Borrower to support the Borrower's interest payments under the Senior
Notes in an amount not in excess 1/52 of such Subsidiary Guarantor's
ratable portion (based on projected Consolidated EBITDA for the Fiscal
Year in which such payment occurs) of the interest due under the Senior
Notes for the Fiscal Year in which such payment occurs.
(g) CHANGE IN NATURE OF BUSINESS. The Borrower shall not,
and shall not permit any of its Subsidiary Guarantors to, make any
material change in the nature of its business as carried on at the date
hereof.
(h) CHARTER AMENDMENTS. The Borrower shall not, and shall
not permit any of its Subsidiary Guarantors to, amend its Articles of
Incorporation or By-Laws or the Certificate of Incorporation or By-Laws
if such amendment would conflict with this Agreement or any other Loan
Document or cause a Potential Default under this Agreement.
(i) ACCOUNTING CHANGES. Neither the Borrower nor the
Subsidiary Guarantors shall make or permit any material change in
accounting policies or reporting
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practices, except as required by law or as required or permitted by
GAAP applicable to the Borrower.
(j) COMPLIANCE WITH ERISA. The Borrower shall not, and
shall not permit any ERISA Affiliate to: (i) engage in any transaction
in connection with which the Borrower or any ERISA Affiliate could
reasonably be expected to be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of
the Code, terminate or withdraw from any Employee Benefit Plan (other
than a Multiemployer Plan) in a manner, or take any other action with
respect to any such Employee Benefit Plan (including, without
limitation, a substantial cessation of business operations or an
amendment of an Employee Benefit Plan within the meaning of section
4041(e) of ERISA), which could reasonably be expected to result in any
liability of the Borrower or any ERISA Affiliate to the PBGC, to the
Department of Labor or to a trustee appointed under section 4042(b) or
(c) of ERISA, incur any liability to the PBGC on account of a
withdrawal from or a termination of an Employee Benefit Plan under
section 4063 or 4064 of ERISA, incur any liability for post-retirement
benefits under any and all welfare benefit plans (as defined in section
3(1) of ERISA) other than as required by applicable statute, fail to
make full payment when due of all amounts which, under the provisions
of any Employee Benefit Plan or applicable Law, the Borrower or any
ERISA Affiliate is required to pay as contributions thereto, or permit
to exist any Accumulated Funding Deficiency, whether or not waived,
with respect to any Employee Benefit Plan (other than a Multiemployer
Plan); PROVIDED, HOWEVER, that such engagement, termination,
withdrawal, action, incurrence, failure or permitting shall not be
deemed to have violated this clause (i) UNLESS any such engagement,
termination, withdrawal, action, incurrence, failure or permitting (A)
has, taken singly or together with all such engagements, terminations,
withdrawals, actions, incurrences, failures or permittings, resulted or
could reasonably be expected to result in a Material Adverse Effect or
(B) has otherwise resulted or could reasonably be expected to result in
liabilities or claims against the Borrower, any Subsidiary Guarantor or
the Combined Borrowing Entities in an amount exceeding Seven Hundred
Fifty Thousand Dollars ($750,000); (ii) at any time permit the
termination of any defined benefit pension plan intended to be
qualified under section 401(a) and 501(a) of the Code; PROVIDED,
HOWEVER, that such termination shall not be deemed to have violated
this clause (ii) UNLESS (A) the value of any benefit liability (as
defined in section 4001(a)(16) of ERISA) upon the termination date of
any such terminated defined benefit pension plans of the Borrower, its
Subsidiaries and their ERISA Affiliates exceeds the then current value
(as defined in section 3 of ERISA) of all assets in such terminated
defined benefit pension plans by an amount in excess of Seven Hundred
Fifty Thousand Dollars ($750,000), or (B) the payment of such amount
has resulted or could reasonably be expected to result in a Material
Adverse Effect or has resulted or could reasonably be expected to
result in liabilities or claims against the Borrower, any Subsidiary
Guarantor or the Combined Borrowing Entities in an amount exceeding
Seven Hundred Fifty Thousand Dollars ($750,000); or (iii) if the
Borrower or any ERISA Affiliate becomes obligated under a Multiemployer
Plan (except with respect to the potential liabilities now existing as
disclosed in the Supplemental Schedule), effect a complete or partial
withdrawal such that the Borrower, its Subsidiaries or their ERISA
Affiliates incur
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Withdrawal Liability under Title IV of ERISA with respect to
Multiemployer Plans or otherwise have liability under Title IV of
ERISA; PROVIDED, HOWEVER, that the incurrence of such Withdrawal
Liability or other liability under Title IV of ERISA shall not be
deemed to be a violation of this clause (iii) UNLESS (A) the payment by
the Borrower of such Withdrawal Liability or other liability has
resulted or could reasonably be expected to result in a Material
Adverse Effect or (B) has otherwise resulted or could reasonably be
expected to result in liabilities or claims against the Borrower, any
Subsidiary Guarantor or the Combined Borrowing Entities in an amount
exceeding Seven Hundred Fifty Thousand Dollars ($750,000).
(K) ADDITIONAL BANK ACCOUNTS; EXCESS CASH. The Borrower
shall not, and shall not permit the Subsidiary Guarantors to, maintain
or otherwise have any checking, savings, or other account at any bank
or other financial institution, or any other account where money is or
may be deposited or maintained with any Person, other than the Cash
Collateral Accounts, the Subsidiary Guarantor Lockboxes, and the
Permitted Accounts.
(L) REGULATION U COMPLIANCE. Neither the Borrower nor any
Subsidiary Guarantor shall use any portion of the proceeds of any
Advance for the purpose of purchasing or carrying any Margin Stock (as
defined by Regulation U of the Board of Governors of the Federal
Reserve System) or for any other purpose in violation of any
requirement of Law or of the terms and conditions of this Agreement.
(M) ARM'S-LENGTH TRANSACTIONS. The Borrower will not, and
will not permit any of its Subsidiary Guarantors to, enter into or
permit to exist any transaction (including, without limitation, any
transaction involving the investment, purchase, sale, lease, transfer
or exchange of any property or the rendering of any service) with any
Affiliate of the Borrower except in the ordinary course of the business
of the Borrower and such Subsidiary Guarantor and upon fair and
reasonable terms not less favorable to the Borrower or such Subsidiary
Guarantor than would be usual and customary in transactions with
persons who are not such Affiliates; PROVIDED, HOWEVER, that so long as
no Potential Default has occurred and none would thereupon occur, (i)
the Borrower may pay to the Parent Company and/or to its Affiliates an
annual management fee in an amount not to exceed in the aggregate five
percent (5%) of the Borrower's Consolidated EBITDA during any Fiscal
Year, (ii) to support the Borrower's payment of any such annual
management fee, each Subsidiary Guarantor may pay to the Borrower an
amount not in excess of such Subsidiary Guarantor's Consolidated EBITDA
for such Fiscal Year, (iii) the Borrower and the Subsidiary Guarantors
may enter into employment agreements in the ordinary course of business
and consistent with the past practices of the Borrower and the
Subsidiary Guarantors, (iv) the Borrower and the Subsidiary Guarantors
may pay reasonable and customary fees to members of their respective
boards of directors.
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8.4 FINANCIAL COVENANTS.
(a) MINIMUM CONSOLIDATED EBITDA. The Borrower shall not
permit (i) the Consolidated EBITDA of Curtis as at the end of any
Cumulative Four Fiscal Quarter Period ending after the Closing Date to
be less than $5,500,000, and (ii) the Consolidated EBITDA of A.B. Dick
as at the end of any Cumulative Four Fiscal Quarter Period ending after
the Closing Date to be less than $10,250,000
(b) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower
shall not at any time permit (i) the Consolidated Fixed Charge Coverage
Ratio of the Borrower as at the end of any Cumulative Four Fiscal
Quarter Period of the Borrower to be less than 1.20 to 1.0, (ii) the
Consolidated Fixed Charge Coverage Ratio of Curtis as at the end of any
Cumulative Four Fiscal Quarter Period of the Borrower to be less than
1.20 to 1.0, and (iii) the Consolidated Fixed Charge Coverage Ratio of
A.B. Dick as at the end of any Cumulative Four Fiscal Quarter Period of
the Borrower to be less than 1.20 to 1.0
SECTION 9 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
9.1 PAYMENT. (a) Failure by the Borrower to make payment of principal
or interest on the Notes when due, or (b) failure by the Borrower or any
Subsidiary to pay any other Obligation when required to be paid hereunder or
under any Guaranty Agreement or Security Agreement, to the extent such failure
is not remedied within three (3) Business Days after such required date of
payment hereunder or thereunder, or (c) failure by the Borrower or any
Subsidiary Guarantor to remit Collections or deposit Remittances as required by
the terms of this Agreement or any other Loan Document; or
9.2 REPRESENTATIONS AND WARRANTIES. Any warranty or representation made
or deemed made by the Borrower in respect of the Borrower, any Subsidiary of the
Borrower or any Guarantor in this Agreement, in any Loan Document or any
certificate, document or financial or other written statement furnished at any
time in compliance with or in reference to this Agreement shall prove to have
been false or inaccurate in any material respect when made or deemed made; or
9.3 REPORTING AND NOTICE PROVISIONS; VIOLATION OF CERTAIN AFFIRMATIVE
COVENANTS. Failure by the Borrower (in respect of the Borrower, any Subsidiary
of the Borrower or any Guarantor): (a) to perform, keep, or observe any term,
provision, condition or covenant contained in Section 8.1(h) and 8.1(g) of this
Agreement which is required to be performed, kept, or observed by the Borrower
(in respect of the Borrower, any Subsidiary of the Borrower or any such
Guarantor) and such failure shall continue without remedy for a period of ten
(10) Business Days, or (b) to perform, keep or observe any other term,
provision, condition or covenant contained in this Agreement (other than those
provisions, terms or conditions referenced in Sections 9.1, 9.2, 9.4 and of this
Agreement) that is required to be kept or observed by the Borrower (in respect
of the Borrower, any Subsidiary of the Borrower or
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any such Guarantor) and such failure shall continue without remedy for a period
of ten (10) Business Days; or
9.4 VIOLATION OF NEGATIVE COVENANTS AND FINANCIAL COVENANTS. Failure by
the Borrower (in respect of the Borrower, any Subsidiary of the Borrower or any
Guarantor) to perform, keep, or observe any other term, provision, condition or
covenant contained in Section 8.1(a) through 8.1(e) or 8.2(e) 8.2(g), 8.3 or 8.4
of this Agreement which is required to be performed, kept, or observed by the
Borrower (in respect of the Borrower, any Subsidiary of the Borrower or any such
Guarantor); or
9.5 OTHER LOAN DOCUMENTS. Failure by the Borrower, any Subsidiary of
the Borrower or any Guarantor to perform, keep, or observe any other term,
provision, condition or covenant contained in this Agreement, any of the other
Loan Documents which is required to be performed, kept, or observed by the
Borrower, any Subsidiary of the Borrower or any such Guarantor (other than those
provisions, terms or conditions referenced in Sections 9.1 through 9.4 of this
Agreement) and such failure shall continue without remedy for a period of ten
(10) Business Days; or
9.6 CROSS-DEFAULT. Default by the Borrower or any Subsidiary Guarantor
in respect of: (i) any Indebtedness in excess of Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate where such default could permit the holder
of such other Indebtedness to accelerate such Indebtedness or any portion
thereof to the extent such default has not been waived and (ii) any Material
Business Agreement or Material License Agreement; or
9.7 FALSE OR MISLEADING REPORTS. The making or delivering to the Agent
or the Banks by the Borrower or any Subsidiary of the Borrower, or any of their
respective officers, employees, or agents, of any written statement, report,
financial statement, or certificate which is not true and correct in any
material respect when made; or
9.8 DESTRUCTION OF COLLATERAL. Each of: (a) the loss, theft, damage or
destruction of any portion of the Collateral having an aggregate value in excess
of Two Hundred Fifty Thousand Dollars ($250,000), to the extent not adequately
covered by insurance in an amount equal to at least its replacement value (as
required by this Agreement); or
9.9 MATERIAL ADVERSE EFFECT. The occurrence of any Material Adverse
Effect; or
9.10 TERMINATION OF EXISTENCE. The dissolution or termination of
existence of the Borrower or any Guarantor of the Obligations; or
9.11 CONTROL. The occurrence of any Change in Control; or
9.12 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT;
SECURITY. If: (a) any material covenant, material agreement or any Obligation of
the Borrower, any Subsidiary of the Borrower or any Guarantor contained in or
evidenced by this Agreement or any of the other Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms, or (b) the Borrower, any Subsidiary of the
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Borrower or any Guarantor shall deny or disaffirm its obligations under this
Agreement or any of the other Loan Documents or any of the Liens granted in
connection therewith, or (c) any Liens in favor of the Agent or the Banks
granted in this Agreement or any of the other Loan Documents shall be determined
to be void, voidable or invalid, or are subordinated or not otherwise given the
priority contemplated by this Agreement, or (d) any perfected Liens granted in
favor of the Agent or the Banks shall be determined to be unperfected except in
the normal course of the business of the Borrower as expressly contemplated and
permitted by this Agreement and the other Loan Documents, or (e) any Guarantor
of the Obligations of the Borrower shall revoke or default under such
Guarantor's Guaranty; or
9.13 ERISA. If: (a) the Borrower, its Subsidiaries or any of their
ERISA Affiliates or any other Person institutes any steps to terminate an
Employee Benefit Plan of the Borrower, such Subsidiaries or such ERISA
Affiliates and, as a result of such termination, the Borrower, such Subsidiary
or ERISA Affiliate is or could reasonably be expected to be required to make a
contribution to such Employee Benefit Plan the payment of which (i) when taken
together with all like terminations suffered by the Borrower or such Subsidiary
Guarantor, either has resulted or could reasonably be expected to result in a
Material Adverse Effect or (ii) has resulted or could reasonably be expected to
result in liabilities or claims against the Borrower, any Subsidiary Guarantor
or the Combined Borrowing Entities in an amount exceeding Seven Hundred Fifty
Thousand Dollars ($750,000), or (b) the Borrower, such Subsidiary or ERISA
Affiliate fails to make a contribution to any Employee Benefit Plan which
failure would be sufficient to give rise to a Lien under Section 302(f) of
ERISA; or
9.14 JUDGMENTS. Any money judgment, writ or warrant of attachment or
similar process involving an amount in excess of Seven Hundred Fifty Thousand
Dollars ($750,000), individually or in the aggregate, when taken together with
all such judgments, writs, warrants or similar process shall be issued or levied
against the Borrower or any of its Subsidiaries or against any of the Borrower's
or its Subsidiaries' assets and is not released, discharged, vacated, fully
bonded or stayed within thirty (30) days after such judgment, writ or warrant of
attachment or similar proceeding is entered, UNLESS such judgment, writ or
warrant of attachment or other similar proceeding shall (a) have been reserved
on the books of the Borrower or such Subsidiary, as applicable, as required by
GAAP, on the date thereof and such judgment does not exceed Seven Hundred Fifty
Thousand Dollars ($750,000) or (b) be insured and the insurance carrier shall
have acknowledged coverage in the amount of the insurance without any
reservation of rights or shall have been ordered by a court of competent
jurisdiction to pay such judgment; or
9.15 FORFEITURE PROCEEDINGS. An adjudication against the Borrower or a
Subsidiary Guarantor of the Borrower in any criminal proceedings requiring the
Borrower's or such Subsidiary Guarantor's forfeiture of any asset or assets
having, either individually or in the aggregate, a value in excess of Fifty
Thousand Dollars ($50,000); or
9.16 FINANCIAL IMPAIRMENT. The Financial Impairment of the Borrower or
any Subsidiary Guarantor of the Obligations, excluding, for purposes of this
Section 9.16, clause (h) of the definition of "Financial Impairment."
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SECTION 10 REMEDIES.
10.1 OPTIONAL DEFAULTS. Upon the occurrence of an Event of Default
described above in Sections 9.1 through 9.15 above, the Agent shall at the
request of, or may with the consent of, the Required Banks, have the right to:
(a) declare all of the Obligations due or to become due from the Borrower to the
Agent and the Banks, whether under this Agreement, the Notes or otherwise, at
the option of the Banks, immediately due and payable, anything in the Notes or
other evidence of the Obligations or in any of the other Loan Documents to the
contrary notwithstanding, (b) terminate each Bank's Commitments whereupon no
Bank shall have any further obligation to make any Advance hereunder, (c)
terminate each Bank's obligation to participate in the Letter of Credit
Commitment and (d) terminate the Letter of Credit Bank's obligations to issue
Letters of Credit.
10.2 AUTOMATIC DEFAULTS. If any Event of Default referred to in Section
9.16 above shall occur, (a) each Bank's Commitments shall automatically and
immediately terminate (if not already expired or terminated by the Borrower or
terminated pursuant to this Section 10) whereupon no Bank shall have any
obligation thereafter to make any Advance hereunder, (b) the Letter of Credit
Bank's obligation to issue Letters of Credit shall immediately terminate and (c)
all of the Obligations and all other Indebtedness, if any, then owing to the
Banks (other than Indebtedness, if any, already due and payable) shall thereupon
become and thereafter be immediately due and payable in full, all without any
presentment, demand or notice of any kind, which are hereby waived by the
Borrower.
10.3 GENERAL RIGHTS AND REMEDIES OF AGENT AND THE BANKS. With respect
to the Collateral, the Agent shall have all of the rights and remedies of a
secured party under the UCC or under other applicable Law. The Agent and the
Banks shall have all other legal and equitable rights to which the Agent and the
Banks may be entitled, all of which rights and remedies shall be cumulative, and
none of which shall be exclusive, to the extent permitted by law, in addition to
any other rights or remedies contained in this Agreement or in any of the other
Loan Documents. Each Bank hereby expressly agrees that, unless requested by the
Agent, upon the concurrence of the Required Banks, such Bank will not take or
cause to be taken, in respect of the Advances or the other Obligations or the
Collateral, any action or remedy that is independent from the actions or
remedies taken or to be taken by the Agent, except for any actions taken by any
Bank in connection with any Event of Default described in Section 9.16 of this
Agreement.
10.4 ADDITIONAL REMEDIES. Upon the occurrence of an Event of Default
which has not been waived in writing by the Required Banks, to the extent
permitted by applicable law and in addition to any other right or remedy
provided for in this Agreement, the Agent may, after declaring the Obligations
to be immediately due and payable upon direction of the Required Banks pursuant
to Section 10.1, and shall, upon the direction of the Required Banks, exercise
the following rights and remedies:
(a) POSSESSION OF COLLATERAL. The Agent shall have the
right to take immediate possession of the Collateral and all Proceeds
relating to such Collateral and: (i) require the Borrower, at the
Borrower's expense, to assemble the Collateral and
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make it available to the Agent at such manufacturing facilities of the
Borrower and/or the Subsidiary Guarantors as the Agent shall designate
or (ii) enter any of the premises of the Borrower or wherever any
Collateral shall be located and to keep and store the same on such
premises until sold. If the premises on which the Collateral is located
is owned or leased by the Borrower, then the Borrower shall not charge
the Agent for storage of such Collateral on such premises.
(b) FORECLOSURE OF LIENS. The Agent shall have the right
to foreclose the Liens created under this Agreement and each of the
other Loan Documents or under any other agreement relating to the
Collateral.
(c) DISPOSITION OF COLLATERAL. The Agent shall have the
right to sell or to otherwise dispose of all or any Collateral in its
then condition, or after any further manufacturing or processing
thereof, at public or private sale or sales, wholesale dispositions, or
sales pursuant to one or more contracts, with such notice as may be
required by law, in lots or in bulk, for cash or on credit, all as the
Bank, in its discretion, may deem advisable. The Borrower acknowledges
and covenants that ten (10) days written notice to the Borrower of any
public or private sale or other disposition of Collateral shall be
reasonable notice thereof, and such sale shall be at the Borrower's
premises or at such other locations where the Collateral then is
located, or as otherwise determined by the Bank. The Agent shall have
the right to conduct such sales on the Borrower's premises, without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law without further requirement of notice to
the Borrower. Each Bank shall have the right to bid or credit bid any
such sale on its own behalf.
(d) APPLICATION OF COLLATERAL. The Agent, with or without
proceeding with sale or foreclosure or demanding payment of the
Obligations, shall have the right, without notice, at any time, to
appropriate and apply to any Obligations any and all Collateral in the
possession of the Agent or the Banks.
10.5 TERMINATION; EFFECT ON BORROWER OBLIGATIONS. Any termination by
the Agent and/or any Bank pursuant to this Section 10 of its performance shall
not absolve, release, or otherwise affect the liability of the Borrower in
respect of transactions prior to such termination or affect any of the Liens,
rights, powers, and remedies of the Agent or such Bank, which such Liens,
rights, powers and remedies shall, in all events, continue until all Obligations
of the Borrower to the Agent and the Banks are satisfied.
10.6 SET-OFF. Notwithstanding any other provision of this Agreement,
the Agent and each Bank shall have such rights of set-off as are provided under
applicable Law.
10.7 AUTHORITY TO EXECUTE TRANSFERS. Without limitation of any
authorization granted to the Agent hereunder, the Borrower also hereby
authorizes the Agent, upon the occurrence of an Event of Default that has not
been waived in writing by the Required Banks, to execute, in connection with the
exercise by the Agent of its remedies hereunder, any
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endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
10.8 LIMITED LICENSE TO LIQUIDATE. The Borrower hereby grants to the
Agent for the benefit of the Banks: (a) a non-exclusive, royalty-free license or
other right to use, without charge, all of the Borrower's Intellectual Property
(including all rights of use of any name or trade secret) as it pertains to the
Collateral, in manufacturing, advertising for sale and selling any Collateral;
PROVIDED, HOWEVER, that such license and right to use shall be exercisable by
the Agent for the benefit of the Banks only upon request by the Agent after the
occurrence of an Event of Default which has not been waived in writing by the
Required Banks, and (b) to the extent permitted thereunder, all of the
Borrower's rights under all licenses and all franchise agreements which shall
inure to the Agent for the benefit of the Banks without charge but only upon
request by the Agent after the occurrence of an Event of Default which has not
been waived in writing by the Required Banks.
10.9 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. Upon the
occurrence of an Event of Default (unless waived in writing by the Banks
pursuant to this Section 14.1), to the extent that any Letters of Credit have
been issued which then are outstanding, the Agent, for the benefit of the Letter
of Credit Bank and the Banks, may, and upon the direction of the Required Banks
shall (whether in addition to taking any of the actions described in this
Section 10 or otherwise), make demand upon Borrower to, and forthwith upon such
demand the Borrower will, pay to the Agent in same day funds, for deposit in a
special cash collateral account (the "Letter of Credit Collateral Account"), to
secure the obligations of the Borrower in respect of any outstanding Letters of
Credit, to be maintained at such office of the Agent as Agent shall direct, an
amount equal to the maximum amount available to be drawn under the Letters of
Credit. In the event that the Borrower shall not deposit such funds upon demand
by the Agent, the Agent may, in its sole discretion, deposit collections
received pursuant to Section 5 of this Agreement, or any other funds of the
Borrower in the possession of the Agent, to the Letter of Credit Collateral
Account until the amount deposited in such account equals the maximum amount
available to be drawn under the Letters of Credit. The Letter of Credit
Collateral Account shall be in the name of Agent (as a cash collateral account),
but under the sole dominion and control of the Agent and subject to the terms of
this Agreement.
10.10 LETTER OF CREDIT COLLATERAL ACCOUNT.
(a) APPLICATION. The Agent may, at any time or from time
to time after funds are deposited in the Letter of Credit Collateral
Account, apply funds then held in the Letter of Credit Collateral
Account to the payment of any amounts, in such order as the Agent may
elect or shall be directed by the Banks, as shall have become or shall
become due and payable by the Borrower to the Letter of Credit Bank
under this Agreement or any Reimbursement Agreement first, in respect
of the Letters of Credit and second, after the occurrence and during
the continuance of any Event of Default, in respect of all other
amounts constituting Obligations.
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(b) NO BORROWER OR THIRD PARTY CLAIMS. Neither the
Borrower nor any Person claiming on behalf of or through Borrower shall
have any right to withdraw any of the funds held in the Letter of
Credit Collateral Account.
(c) NO LIENS OR TRANSFERS OF ACCOUNT. The Borrower agrees
that it will not: (i) sell or otherwise dispose of any interest in the
Letter of Credit Collateral Account or any funds held therein, or (ii)
create or permit to exist any lien, security interest or other charge
or encumbrances upon or with respect to the Letter of Credit Collateral
Account or any funds held therein, except as provided in or
contemplated by this Agreement.
(d) REASONABLE CARE. The Agent shall exercise reasonable
care in the custody and preservation of any funds held in the Letter of
Credit Collateral Account and shall be deemed to have exercised such
care if such funds are accorded treatment substantially equivalent to
that which the Agent accords its own property, it being understood that
the Agent shall not have any responsibility for taking any necessary
steps to preserve rights against any parties with respect to any such
funds.
10.11 EQUALIZATION. Each Bank agrees with the other Banks that if at
any time it shall obtain any Advantage over the other Banks or any thereof in
respect of the Advances it will purchase from such other Bank or Banks, for cash
and at par, such additional participation in the Advances owing to the other or
others as shall be necessary to nullify the Advantage. If any such Advantage
resulting in the purchase of an additional participation as aforesaid shall be
recovered in whole or in part from the Bank receiving the Advantage, each such
purchase shall be rescinded, and the purchase price restored (with interest and
other charges if and to the extent actually incurred by the Bank receiving the
Advantage) ratably to the extent of the recovery. During the existence of any
Potential Default, any payment (whether made voluntarily or involuntarily, by
offset of any deposit or other indebtedness or otherwise) of any Indebtedness
owing by the Borrower to any Bank shall be applied to the Obligations owing to
that Bank until the same shall have been paid in full before any thereof shall
be applied to other Indebtedness owing to that Bank.
10.12 REMEDIES CUMULATIVE. The above-stated remedies are not intended
to be exhaustive and the full or partial exercise of any of such remedies shall
not preclude the full or partial exercise of any other remedy by the Agent under
this Agreement, under any Loan Document, or at equity or under law.
SECTION 11 THE AGENT.
11.1 THE AGENT. Each Bank irrevocably appoints the Agent to act as
agent under this Agreement and the other Loan Documents for the benefit of such
Bank, with full authority to take such actions, and to exercise such powers, on
behalf of the Banks in respect of this Agreement and the other Loan Documents as
are herein and therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. The Agent in such capacity shall be deemed
to be an independent contractor of the Banks. Each Bank and the Letter of Credit
Bank hereby expressly agrees that, unless requested by the Agent upon the
concurrence of the Required Banks, none of the Banks or the Letter of Credit
Bank will take or
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cause to be taken, in respect of the Advances or the other Obligations or the
Collateral, any action or remedy that is independent from the actions or
remedies taken or to be taken by the Agent, except for any actions taken by any
Bank or the Letter of Credit Bank in connection with any Event of Default
described in Section 9.16.
11.2 NATURE OF APPOINTMENT. The Agent shall have no fiduciary
relationship with any Bank by reason of this Agreement and the other Loan
Documents. The Agent shall not have any duty or responsibility whatsoever to any
Bank except those expressly set forth in this Agreement and the other Loan
Documents. Without limiting the generality of the foregoing, each Bank
acknowledges that the Agent is acting as such solely as a convenience to the
Banks and not as a manager of the commitments or the Obligations evidenced by
the Notes. This Section 11 does not confer any rights upon the Borrower or
anyone else (except the Banks), whether as a third party beneficiary or
otherwise.
11.3 AGENT AS A BANK; OTHER TRANSACTIONS. The Agent's rights as a Bank
under this Agreement and the other Loan Documents shall not be affected by its
serving as the Agent. The Agent and its Affiliates may generally transact any
banking, financial, trust, advisory or other business with the Borrower
(including, without limitation, the acceptance of deposits, the extension of
credit and the acceptance of fiduciary appointments) without notice to the
Banks, without accounting to the Banks, and without prejudice to the Agent's
rights as a Bank under this Agreement and the other Loan Documents except as may
be expressly required under this Agreement.
11.4 INSTRUCTIONS FROM BANKS. The Agent shall not be required to
exercise any discretion or take any action as to matters not expressly provided
for by this Agreement and the other Loan Documents (including, without
limitation, collection and enforcement actions in respect of any Obligations
under the Notes or this Agreement and any collateral therefor) EXCEPT that the
Agent shall take such action (or omit to take such action) other than actions
referred to in Section 12.1 of this Agreement, as may be reasonably requested of
it in writing by the Required Banks with instructions and which actions and
omissions shall be binding upon all of the Banks; PROVIDED, HOWEVER, that the
Agent shall not be required to act (or omit any act) if, in its judgment, any
such action or omission might expose the Agent to personal liability or might be
contrary to this Agreement, any Loan Document or any applicable Law.
11.5 BANK'S DILIGENCE. Each Bank: (a) represents and warrants that it
has made its decision to enter into this Agreement and the other Loan Documents
and (b) agrees that it will make its own decision as to taking or not taking
future actions in respect of this Agreement and the other Loan Documents; in
each case without reliance on the Agent or any other Bank and on the basis of
its independent credit analysis and its independent examination of and inquiry
into such documents and other matters as it deems relevant and material.
11.6 NO IMPLIED REPRESENTATIONS. The Agent shall not be liable for any
representation, warranty, agreement or obligation of any kind of any other party
to this Agreement or anyone else, whether made or implied by the Borrower in
this Agreement or in any Loan Document or by a Bank in any notice or other
communication or by anyone else or otherwise.
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11.7 SUB-AGENTS. The Agent may employ agents and shall not be liable
(except as to money or property received by it or its agents) for any negligence
or wilful misconduct of any such agent selected by it with reasonable care.
11.8 AGENT'S DILIGENCE. The Agent shall not be required: (a) to keep
itself informed as to anyone's compliance with any provision of this Agreement
or any Loan Document, (b) to make any inquiry into the properties, financial
condition or operation of the Borrower or any other matter relating to this
Agreement or any Loan Document, (c) to report to any Bank any information (other
than which this Agreement or any Loan Document expressly requires to be so
reported) that the Agent or any of its Affiliates may have or acquire in respect
of the properties, business or financial condition of the Borrower or any other
matter relating to this Agreement or any Loan Document or (d) to inquire into
the validity, effectiveness or genuineness of this Agreement or any Loan
Document.
11.9 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
of any Potential Default or Event of Default unless and until it shall have
received a written notice describing it and citing the relevant provision of
this Agreement or any Loan Document. The Agent shall give each Bank reasonably
prompt notice of any such written notice except, of course, to any Bank that
shall have given the written notice.
11.10 AGENT'S LIABILITY. Neither the Agent nor any of its directors,
officers, employees, attorneys, and other agents shall be liable to any Bank for
any action or omission on their respective parts except for gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (a) may treat the payee of any Note as the holder thereof until the Agent
receives a fully executed copy of any assignment with respect thereto, signed by
such payee and in form satisfactory to the Agent; (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice or such counsel, accountants or experts which
have been selected by the Agent with reasonable care; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document, including, without limitation, the truth
of the statements made in any certificate delivered by the Borrower under
Sections 2, 3, or 5 of this Agreement or in any Credit Request, Rate
Continuation/Conversion Request, Reimbursement Agreement or any other similar
notice or delivery, the Agent being entitled for the purposes of determining
fulfillment of the conditions set forth therein to rely conclusively upon such
certificates; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, the Notes or any other Loan Document or to inspect the property
(including the books and records) of the Borrower; (e) shall not be responsible
to any Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, or collateral covered by
any agreement or any other Loan Document and (f) shall incur no liability under
or in respect of this Agreement, the Notes or any other Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, telecopy, cable or telex) believed by it in good faith to be
genuine and correct and signed or sent by the proper party or parties.
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Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrower on account of
the failure of or delay in performance or breach by any Bank of any of its
obligations hereunder or to any Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of their
respective obligations hereunder or under any Loan Document or in connection
herewith or therewith. The Banks each hereby acknowledge that the Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement, the Notes or any other Loan
Document unless it shall be requested in writing to do so by the Required Banks.
11.11 AGENT'S INDEMNITY. The Banks shall indemnify the Agent, in its
capacity as Agent (to the extent the Agent is not reimbursed by the Borrower),
from and against: (a) any loss or liability (other than any caused by the
Agent's gross negligence or willful misconduct) incurred by the Agent as such in
respect of this Agreement, the Notes or any Loan Document (as the Agent) and (b)
any out-of-pocket expenses incurred in defending itself or otherwise related to
this Agreement, the Notes or any Loan Document (other than any caused by the
Agent's gross negligence or willful misconduct) including, without limitation,
reasonable fees and disbursements of legal counsel of its own selection
(including, without limitation, the reasonable interdepartmental charges of its
salaried attorneys) in the defense of any claim against it or in the prosecution
of its rights and remedies as the Agent (other than the loss, liability or costs
incurred by the Agent in the defense of any claim against it by the Banks
arising in connection with its actions in its capacity as Agent); PROVIDED,
HOWEVER, that each Bank shall be liable for only its Ratable Portion of the
whole loss or liability.
11.12 RESIGNATION OR REMOVAL OF AGENT. The Agent may resign as Agent
effective ten (10) Business Days after giving notice thereof to the Banks for
any reason, and the Agent may be removed at the unanimous election of all of the
Banks (other than the Bank that is also the Agent) for any reason. If the Agent
shall resign or be removed as Agent under this Agreement, the Required Banks
shall appoint from among the Banks (other than the Bank that has resigned or was
removed) a successor agent for the Banks, which successor agent shall be
reasonably acceptable to the Borrower. If, however, in the case of resignation
by the Agent, no successor agent shall have been appointed by the time such
resignation becomes effective, then the retiring Agent may, on behalf of the
Banks, appoint a successor agent from among the remaining Banks. Upon
appointment (whether effected by the Required Banks or the retiring Agent on
behalf of the Banks), the successor agent shall succeed to the rights, powers
and duties of the Agent, and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any holder
of the Notes. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of Section 11.11 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 12 TRANSFERS AND ASSIGNMENTS.
12.1 TRANSFER OF COMMITMENTS. Each Bank shall have the right at any
time or times to transfer to another financial institution that is an Eligible
Assignee, without recourse,
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all, or if less than all, any constant ratable percentage of all, of such Bank's
rights and obligations under this Agreement and the other Loan Documents,
including without limitation such Bank's Commitments, any Advance made by such
Bank, any Note executed in favor of such Bank, any participations in Letters of
Credit and any participations, if any, purchased by the Bank pursuant to Section
10.11 of this Agreement; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) PRIOR CONSENT. Transfers (including transfers by any
Bank to any Affiliate of such Bank) to any Eligible Assignee may be
consummated pursuant to this Section 12: (i) with the prior written
consent of the Borrower and the Agent, which consents shall not be
unreasonably withheld. Notwithstanding anything to the contrary, any
Bank may at any time assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank, and no such
assignment shall release such assigning Bank from its obligations
hereunder.
(b) AGREEMENT; TRANSFER FEE. The transferor: (i) shall
remit to the Agent an administrative fee of Four Thousand Five Hundred
Dollars ($4,500) and (ii) shall cause the transferee to execute and
deliver to the Borrower, the Agent and each Bank (A) an Assignment
Agreement, substantially in the form of EXHIBIT K attached hereto, and
otherwise in form and substance satisfactory to the Agent and its
counsel (an "Assignment Agreement"), together with the consents and
releases referenced therein and (B) such additional amendments,
assurances and other writings as the Agent may reasonably require to
effect such transfer.
(c) NOTES. The Borrower shall execute and deliver: (i) to
the Agent, the transferor and the transferee, any consent or release
(of all or a portion of the obligations of the transferor) to be
delivered in connection with the Assignment Agreement, (ii) if a Bank's
entire interest in its Commitments and in all of its Advances have been
transferred, to the transferee appropriate Notes against return of the
Notes (each marked "replaced") held by the transferor and (iii) if only
a portion of a Bank's interest in its Commitments and Advances has been
transferred, new Notes to each of the transferor and the transferee
against return of the original such Notes of the transferor (each
marked "replaced") held by the transferor.
(d) PARTIES. Upon satisfaction of the requirements of this
Section 12.1, including the payment of the fee and the delivery of the
documents set forth in Section 12.1(b) above, (i) the transferee shall
become and thereafter be deemed to be a "Bank" for the purposes of
this Agreement and (ii) the transferor (A) shall continue to be a
"Bank" for the purposes of this Agreement only if and to the extent
that the transfer shall not have been a transfer of its entire
interest in its Commitments and Advances, (B) shall cease to be and
thereafter shall no longer be deemed to be a "Bank" in the case of any
transfer of its entire interest in its Commitments and Advances and
(C) the signature pages hereto and Annex I hereto shall be
automatically amended, without further action, to reflect the result of
any such transfer.
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12.2 SALE OF PARTICIPATIONS. Each Bank shall have the right at any time
or times to sell one or more participations or subparticipations to a financial
institution which is an Eligible Assignee in all or, if less than all, any part
of such Bank's Commitments, any Advance made by such Bank, any Note executed in
favor of such Bank, any participation by such Bank in a Letter of Credit and any
participations, if any, purchased by such Bank pursuant to Section 10.11 of this
Agreement or this Section 12; PROVIDED, HOWEVER, in each such case, that the
transferor and the transferee shall have complied with the following
requirements:
(a) BENEFITS OF PARTICIPANT. The provisions of Section 13
of this Agreement shall inure to the benefit of each purchaser of a
participation or subparticipation (provided that each such participant
shall look solely to the seller of its participation for those benefits
and the Borrower's liabilities, if any, under any of those sections
shall not be increased as a result of the sale of any such
participation) and Agent shall continue to distribute payments pursuant
to this Agreement as if no participation has been sold.
(b) RIGHTS RESERVED. In the event any Bank shall sell any
participation or subparticipation, that Bank shall, as between itself
and the purchaser, retain all of its rights (including, without
limitation, rights to enforce against the Borrower this Agreement and
the other Loan Documents) and duties pursuant to this Agreement and the
other Loan Documents, including, without limitation, that Bank's right
to approve any waiver, consent or amendment pursuant to Section 14.1 of
this Agreement, EXCEPT if and to the extent that any such waiver,
consent or amendment would (A) reduce any fee or commission allocated
to the participation or subparticipation, as the case may be, (B)
reduce the amount of any principal payment on any Advance allocated to
the participation or subparticipation, as the case may be, or reduce
the principal amount of any Advance so allocated or the rate of
interest payable thereon, or (C) extend the time for payment of any
amount allocated to the participation or subparticipation, as the case
may be.
(c) NO DELEGATION. No participation or subparticipation
shall operate as a delegation of any duty of the seller thereof. Under
no circumstance shall any participation or subparticipation be deemed a
novation in respect of all or any part of the seller's obligations
pursuant to this Agreement.
12.3 CONFIDENTIALITY. The Agent, the Letter of Credit Bank and each
Bank hereby: (a) acknowledge that the Borrower and its Subsidiaries have trade
secrets and financial, environmental and other data and information the
confidentiality of which is important to their businesses and (b) agree to use
all reasonable efforts to keep confidential any such trade secret, data or
information conveyed to them and appropriately designated in writing by the
Borrower or any of its Subsidiaries as being confidential information, EXCEPT
that this Section shall not be binding on the Agent, the Letter of Credit Bank
and Banks after the expiration of four years after the termination of this
Agreement and shall not preclude the Agent, the Letter of Credit Bank or any
Bank from furnishing any such confidential information: (i) subject to the
Borrower's receipt of prior notice from the Agent, the Letter of Credit Bank or
such Bank, as the case may be, if permitted under applicable law and such legal
proceedings, to the extent which may be required by subpoena or similar order of
any court of competent jurisdiction,
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(ii) to the extent such information is required to be disclosed to any
regulatory or administrative governmental agency or commission having any
regulatory authority over the Agent, the Letter of Credit Bank or such Bank or
its securities, (iii) to any other party to this Agreement, (iv) to any
Affiliate of the Agent, the Letter of Credit Bank or such Bank, so long as such
Affiliate agrees to be bound in by the provisions of this Section 12.3, (v) to
any actual or prospective transferee, participant or subparticipant of all or
part of a Bank's rights arising out of or in connection with this Agreement and
the other Loan Documents (or any of them), so long as such prospective
transferee, participant or subparticipant to whom disclosure is made agrees in
writing to be bound by the provisions of this Section 12.3 (a copy of which
writing shall be delivered promptly to the Borrower), (vi) to anyone if it shall
have been already publicly disclosed (other than by the Agent, the Letter of
Credit Bank or such Bank, as the case may be, in contravention of this Section
12.3) prior to the time of such disclosure, (vii) to the extent reasonably
required in connection with the exercise of any right or remedy under this
Agreement or any other Loan Document, (viii) to the Agent's, the Letter of
Credit Bank's or such Bank's legal counsel, auditors, professional advisors and
consultants, and accountants and (ix) to the extent reasonably required in
connection with any legal proceedings instituted by or against the Agent, the
Letter of Credit Bank or any Bank in its respective capacities as the Agent,
Letter of Credit Bank or a Bank under this Agreement; PROVIDED, HOWEVER that for
any disclosure pursuant to clauses (i), (ii), (vii) or (ix) hereof, the Agent,
the Letter of Credit Bank or the disclosing Bank, as the case may be, shall use
reasonable efforts to disclose only that portion of the confidential information
as it is legally required, in the opinion of counsel, to disclose. Each of the
Agent, the Letter of Credit Bank and the Banks agrees that it will promptly upon
Borrower's request after the termination of this Agreement return to the
Borrower any information in its possession which the Borrower has designated as
"confidential." The Borrower agrees: (x) to disclose information relating to the
Borrower or any Subsidiary Guarantor deemed by the Borrower to be confidential
information only in response to a written request from the Agent for itself or
on behalf of a Bank and only to the extent an appropriate written designation of
such confidentiality is delivered to the Agent prior to the time of disclosure
of such information to the Agent, (y) to designate information as "confidential"
only to the extent it reasonably believes such information is confidential and
(z) that the obligation of the Agent, the Letter of Credit Bank and the Banks
pursuant to this Section 12.3 is not binding with respect to information
disclosed to the Agent, a Letter of Credit Bank or any Bank without request
therefor or without requirement therefor under this Agreement or the other Loan
Documents, unless the Borrower has given written notice to the Agent of the
Borrower's designation of such information as being "confidential" information
prior to the time of such disclosure to the Agent or such Letter of Credit Bank
or Bank.
SECTION 13 INDEMNITIES.
13.1 INCREASED COSTS. If after the date of this Agreement (a) the
introduction of or any change in or in the interpretation of any Law or
regulation or (b) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of Law)
shall increase the cost to any Bank (other than any increase in the cost of such
Bank's overhead) of agreeing to make or making, funding or maintaining Revolving
Credit Advances, then the Borrower shall from time to time, upon demand by such
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Bank (with a copy of such demand to the Agent), pay to the Agent for the account
of such Bank additional amounts sufficient to indemnify such Bank for such
increased cost.
13.2 RISK-BASED CAPITAL. If any Bank determines that: (a) compliance
with any Law or regulation or any interpretation thereof or (b) compliance with
any guideline or request from any central bank or other governmental authority
(whether or not having the force of Law) affects or would affect the amount of
capital required or expected to be maintained by such Bank or any corporation
controlling such Bank and that the amount of such capital required to be so
maintained is increased by or based upon the existence of such Bank's
Commitments to lend hereunder and other commitments of this type, then, upon
demand by such Bank (with a copy of such demand to the Agent), the Borrower
shall immediately pay to the Agent for the account of such Bank, from time to
time as specified by such Bank, additional amounts sufficient to indemnify such
Bank or such corporation, to the extent that such Bank reasonably determines
such increase in capital to be allocable to the existence of such Bank's
Commitments to lend hereunder.
13.3 TAXES.
(a) TAXES; WITHHOLDING. Any and all payments by the
Borrower hereunder, under the Notes or the other Loan Documents shall
be made, in accordance with the provisions of Section 2, free and clear
of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, EXCLUDING, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Bank is organized or is doing
business, or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by Law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Bank or the Agent: (i)
the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 13.3) such Bank receives an
amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law. All
such Taxes shall be paid by the Borrower prior to the date on which
penalties attach thereto or interest accrues thereon; PROVIDED,
HOWEVER, that, if any such penalties or interest become due, the
Borrower shall make prompt payment thereof to the appropriate
governmental authority. The Borrower shall indemnify each Bank for the
full amount of such Taxes (including any Taxes on amounts payable under
this Section 13.3(a) paid by the Bank and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.
Any indemnification payment shall be made within thirty (30) days from
the date the Bank makes written demand therefor.
(b) STAMP TAXES. The Borrower agrees to pay, and will
indemnify each Bank and the Agent for, any present or future stamp or
documentary taxes or any other
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excise or property taxes, charges or similar levies which arise from
any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) OTHER TAXES. Except as specifically limited by Section
13.3(a), the Borrower will indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section 13.3) paid by such Bank or the Agent (as the case
may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted. Any indemnification
payment shall be made within 30 days from the date such Bank or the
Agent (as the case may be) makes written demand therefor.
(d) REQUEST FOR REFUND. At the reasonable request of the
Borrower, a Bank or the Agent shall apply at the Borrower's expense for
a refund in respect of Taxes or Other Taxes previously paid by the
Borrower pursuant to this Section 13.3 if in the opinion of such Bank
or the Agent there is a reasonable basis for such refund.
Notwithstanding the foregoing, none of the Banks or the Agent shall be
obligated to pursue such refund if, in its sole good faith judgment,
such action would be disadvantageous to it. If any Bank subsequently
receives from a taxing authority a refund of any Tax previously paid by
the Borrower and for which the Borrower has indemnified the Bank
pursuant to this Section 13.3, such Bank shall within thirty (30) days
after receipt of such refund, and to the extent permitted by applicable
law, pay to the Borrower the net amount of any such recovery after
deducting taxes and expenses attributable thereto.
(e) EXEMPTION CERTIFICATE. Not later than: (a) the Closing
Date, (b) in the case of any bank or financial institution that becomes
a Bank after the Closing Date, the date of the instrument of assignment
pursuant to which such bank or financial institution became a Bank, (c)
annually on each Anniversary Date thereafter or (d) such other times as
the Agent or the Borrower may reasonably request: (i) each Bank
organized under the laws of a jurisdiction outside the United States
shall provide the Agent and the Borrower with duly completed copies of
Form 1001 or Form 4224 or any successor form prescribed by the Internal
Revenue Service of the United States certifying that such Bank is
exempt from United States withholding taxes with respect to all
payments to be made to such Bank hereunder or other document
satisfactory to the Borrower and the Agent indicating that all payments
to be made to such Bank hereunder are not subject to such taxes and
(ii) each other Bank shall provide the Agent and the Borrower with a
written statement which certifies that such Bank is not a non-resident
alien or foreign corporation and which otherwise satisfies Treasury
Regulation Section 1.1441-5(b) or any successor regulation under the
Internal Revenue Code (each such certificate or statement, an
"Exemption Certificate"). Unless the Agent and the Borrower have
received an Exemption Certificate from such Bank, the Borrower, or the
Agent if the Borrower has not withheld, may withhold taxes from such
payments at the applicable
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statutory rate (subject, in the case of the Borrower to the
requirements of Section 13.3(a) above); PROVIDED, HOWEVER, that if the
Borrower has withheld the Borrower shall so notify the Agent. If the
Borrower is required to pay additional amounts to any Bank pursuant to
this Section 13.3, such Bank shall use reasonable efforts to designate
a different Lending Office if such designation will thereafter avoid
the need for any additional payments under this Section 13.3 and will
not, in the sole judgment of such Bank, be otherwise disadvantageous to
such Bank. A Bank which ceases to be exempt from United States
withholding taxes shall notify the Agent and the Borrower promptly
thereof.
(f) FURNISHING OF CERTIFICATE. Within 30 days after the
date of any payment of Taxes, the Borrower will furnish to the Agent,
at its address referred to in Section 14.13 of this Agreement, the
original or a certified copy of a receipt evidencing payment thereof.
If Taxes ever become payable in respect of any payment hereunder or
under the Notes made during a Fiscal Quarter, thereafter the Borrower
will furnish to the Agent, within thirty (30) days after the end of
such Fiscal Quarter, at such address, a certificate from the Borrower
stating that any payments made during such Fiscal Quarter are exempt
from or not subject to Taxes.
(g) SURVIVAL OF PROVISION. Without prejudice to the
survival of any other agreement of the Borrower hereunder, the
agreements and liabilities of the Borrower contained in this Section
13.3 shall survive the payment in full of the Obligations.
13.4 LOSSES. If any payment of principal of, or Rate Conversion or Rate
Continuation of, any LIBOR Rate Advance is not paid when due or is made on a day
other than on the last day of an Interest Period relating to such Advance, as a
result of a payment or Rate Conversion or Rate Continuation pursuant to the
provisions of Section 2.7 of this Agreement or acceleration of the maturity of
the Revolving Credit Notes pursuant to Section 10 of this Agreement or for any
other reason (other than by reason of a mandatory prepayment under Section
2.6(e)), the Borrower shall, upon demand by any Bank (with a copy of such demand
to the Agent), pay to the Agent for the account of such Bank any amounts
required to compensate such Bank for any additional losses, costs or expenses
which it may reasonably incur as a result of such payment or Rate Conversion or
Rate Continuation, including, without limitation, any loss, cost or expense
(other than any expenses directly attributable to loan origination efforts)
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain such Advance.
13.5 INDEMNIFICATION FOR REQUESTS. Whenever the Borrower: (a) shall
revoke any Credit Request, any Rate Conversion/Continuation Request involving
any LIBOR Rate Advance, (b) shall for any other reason fail to borrow pursuant
to any such Rate Conversion/Continuation Request or otherwise comply therewith,
(c) shall fail to fulfill, on or before the date specified in any such request,
the applicable conditions set forth in Section 3 of this Agreement or (d) shall
fail to honor any prepayment notice with respect to LIBOR Rate Advances, then,
in each case on any Bank's demand, the Borrower shall indemnify each Bank and
the Agent against any loss, cost or expense incurred by such Bank or the Agent
as a result of any such failure by the Borrower, including, without limitation,
any loss, cost or expense
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<PAGE> 79
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank or the Agent to fund the LIBOR Rate Advance to be made by
such Bank or the Agent in connection with such request when such LIBOR Rate
Advance, as a result of such failure by the Borrower, is not made on such date.
13.6 GENERAL INDEMNITY. The Borrower shall indemnify and hold harmless
the Agent and each Bank, and the respective directors, officers, employees and
Affiliates thereof, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever including, without limitation,
reasonable fees and disbursements of counsel and settlements costs, which may be
imposed on, incurred by, or asserted against the Agent, any Bank or the
respective directors, officers, employees and Affiliates thereof in any in
connection with any investigative, administrative or judicial proceeding
(whether the Agent or such Bank is or is not designated as a party thereto)
relating to or arising out of this Agreement or any other Loan Document, the
transactions contemplated thereby, or any actual or proposed use of proceeds
hereunder or thereunder, except that neither the Agent nor any Bank nor any such
directors, officers, employees and Affiliates thereof shall have the right to be
indemnified hereunder for its own negligence or willful misconduct as determined
by a court of competent jurisdiction.
13.7 CERTIFICATE FOR INDEMNIFICATION. Each demand by Agent or a Bank
for payment pursuant to this Section 13 shall be accompanied by a certificate
setting forth the reason for the payment, the amount to be paid, and the
computations and assumptions in determining the amount, which certificate shall
be presumed to be correct. In determining the amount of any such payment
thereunder, each Bank may use reasonable averaging and attribution methods.
13.8 DUTY TO MITIGATE; STANDARD TREATMENT. Each Bank seeking payment
pursuant to this Section 13 shall use reasonable efforts and take all reasonable
actions to avoid the cause of the payment and to minimize the amount thereof.
Each Bank agrees that it will not seek compensation or reimbursement provided
for in this Section 13 unless such Bank as a matter of policy intends generally
to seek comparable compensation or reimbursement from other borrowers similarly
situated and similarly documented financial accommodations.
SECTION 14 GENERAL.
This Agreement and the other Loan Documents shall be governed
by the following provisions:
14.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or the Notes or 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 Required Banks (or, if unanimous consent of all
Banks is required as hereinafter provided, all of the Banks), the Agent, the
Borrower, and, only with respect to amendments and waivers of, or consents
regarding, provisions of this Agreement directly affecting the rights of the
Letter of Credit Bank, the Letter of Credit Bank, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Unanimous consent of all Banks shall be
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<PAGE> 80
required with respect to (a) the extension of maturity of any Note, or the
extension of the payment date for interest, principal and/or fees thereunder, or
(b) any reduction in the rate of interest on the Notes, or in any amount of
principal or interest due on any Note, or in the manner of pro rata application
of any payments made by the Borrower to the Banks hereunder, or (c) any change
in any percentage voting requirement in this Agreement, or (d) any change in the
dollar amount or percentage of the Banks' Commitments or any Bank's Commitment,
or (e) any change in the amount of, or extension of the payment date for, any
fees payable under Section 2.9 of this Agreement, or (f) any change in the
definitions "Collateral" or "Required Banks" under this Agreement, or (g)
subject to the Agent's exercise of its Permitted Discretion pursuant to Section
2.2, any change in the definitions of "Eligible Inventory" or "Eligible
Accounts" under this Agreement, or (h) any change in any provision of this
Agreement which requires all of the Banks to take any action under such
provision, or (i) any increase in the percentages stated as advance rates in the
definition of "Borrowing Base", or (j) any change in Section 11, 12.1, 12.2 or
this Section 14.1 itself. Notice of amendments or consents ratified by the Banks
hereunder shall immediately be forwarded by the Borrower to all Banks. Each Bank
or other holder of a Note shall be bound by any amendment, waiver or consent
obtained as authorized by this Section 14.1, regardless of its failure to agree
thereto.
14.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT. In addition to the
provisions of Sections 4.6 and 5.8 of this Agreement, the Borrower hereby
irrevocably constitutes and appoints the Agent and any officer or agent thereof,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Borrower and
in the name of the Borrower or in its own name, from time to time following the
occurrence of an Event of Default (unless waived in writing by the Required
Banks pursuant to this Agreement), in the Agent's reasonable discretion, for the
purpose of carrying out the terms of this Agreement, without notice (except as
specifically provided herein) to or assent by the Borrower, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
including, without limiting the generality of the foregoing, the power and
right, on behalf of the Borrower, to do the following, upon notice to the
Borrower: (a) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance, called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs thereof, and
otherwise to itself perform or comply with, or otherwise cause performance or
compliance with, any of the covenants or other agreements of the Borrower
contained in this Agreement which the Borrower has failed to perform or with
which the Borrower has not complied; (b) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (c) to defend any suit, action or
proceeding brought against the Borrower with respect to any Collateral; (d) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Agent may
deem appropriate; and (e) to generally sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Agent were the absolute owner thereof for all
purposes; and to do, at the Agent's option and the Borrower's expense, at any
time, or from time to time, all acts and things which the Agent deems necessary
to protect, preserve or realize upon the Collateral and the Agent's security
interest therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Borrower
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<PAGE> 81
might do. The Borrower hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(a) AGENT NOT LIABLE. The powers conferred on the Agent
hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to
the Borrower for any act or failure to act, except for its own gross
negligence or willful misconduct.
(b) PERFORMANCE BY AGENT OF THE BORROWER'S OBLIGATIONS. If
the Borrower fails to perform or comply with any of its agreements
contained herein and the Agent shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
expenses of the Agent incurred in connection with such performance or
compliance, together with interest thereon at the highest rate of
interest that would from time to time apply to any Type of Borrowing
under Section 2.11, shall be payable by the Borrower to the Agent on
demand and upon the expiration of five (5) calendar days after such
demand the Borrower shall be deemed to have delivered a Deemed Credit
Request in the relevant amounts. The Agent will notify the Borrower as
soon as it is practicable of any action taken by it of the nature
referred to herein.
14.3 CUMULATIVE PROVISIONS. Each right, power or privilege specified or
referred to in this Agreement is in addition to and not in limitation of any
other rights, powers and privileges that the Agent and the Banks may otherwise
have or acquire by operation of Law, by other contract or otherwise.
14.4 BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by the Borrower and shall be binding upon and inure to
the benefit of the Borrower, the Agent, the Banks 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 Agent and the Banks.
14.5 COSTS AND EXPENSES. The Borrower agrees to pay on demand all
reasonable costs and expenses of: (a) the Agent (including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Agent) in
connection with (i) the preparation, execution, delivery, administration,
modification, amendment and waiver of this Agreement or the other Loan
Documents, and (ii) the arrangement on or after the Closing Date of a syndicate
of lenders to purchase a portion of the Commitments, and (b) the Agent, the
Letter of Credit Bank and the Banks (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, the Letter
of Credit Bank and the Banks) in connection with the enforcement of, the
exercise of remedies under, or the preservation of rights and remedies under
this Agreement or any of the other Loan Documents (including any collection,
bankruptcy or other enforcement proceedings arising with respect to the
Borrower, this Agreement, or any Event of Default under this Agreement).
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<PAGE> 82
14.6 SURVIVAL OF PROVISIONS. All representations and warranties made in
or pursuant to this Agreement shall survive the execution and delivery of this
Agreement and of the Notes. The provisions of Sections 12.3 and 13 of this
Agreement shall survive the payment of the Obligations and any other
Indebtedness owed by the Borrower hereunder and the termination of this
Agreement (whether by acceleration or otherwise).
14.7 IMMEDIATE U.S. FUNDS. Unless specifically designated otherwise,
any reference to money is a reference to lawful money of the United States
which, if in the form of credits, shall be in immediately available funds.
14.8 CAPTIONS. The several captions to different Sections and the
respective subsections thereof are inserted for convenience only and shall be
ignored in interpreting the provisions of this Agreement.
14.9 SHARING OF INFORMATION. Subject to the provisions of Section 12.3,
each Bank shall have the right to furnish to its Affiliates, its accountants,
its employees, its officers, its directors, its legal counsel, potential
participants, and to any governmental agency having jurisdiction over such Bank,
information concerning the business, financial condition, and property of the
Borrower, the amount of the Advances of the Borrower hereunder, and the terms,
conditions and other provisions applicable to the respective parts thereof.
14.10 INTEREST RATE LIMITATION. Notwithstanding anything herein to the
contrary, if at any time the applicable interest rate, together with all fees
and charges that are treated as interest under applicable law as provided for
herein or in any other document executed in connection herewith, or otherwise
contracted for, charged, taken, received or reserved by the Bank, shall exceed
the maximum lawful rate that may be contracted for, charged, taken, received or
reserved by the Bank in accordance with applicable law (the "Maximum Lawful
Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate
of the rate of interest and all such charges payable, contracted for, charged,
taken, received or reserved in respect of the Advances of the Banks to the
Borrower shall be equal to the Maximum Lawful Rate; PROVIDED, that, if any time
thereafter the applicable interest rate, together with all fees and charges that
are treated as interest under applicable law as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, taken, received or reserved by the Banks shall be less than the Maximum
Lawful Rate, the Borrower shall continue to pay such interest and fees hereunder
at the Maximum Lawful Rate until such time as the total interest received by the
Agent for the benefit of the Banks, is equal to the total interest and fees that
would have been received had the interest rate payable hereunder been (but for
the operation of this Section 14.10) the interest rate payable since the Closing
Date as otherwise provided in this Agreement. Thereafter, interest payable
hereunder shall be paid at the rate(s) of interest and the charges provided in
Sections 2.10 of this Agreement, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, and at that time this Section 14.10 shall again
apply. In no event shall the total interest, together with all fees and charges
that are treated like interest, received by any Bank pursuant to the terms
hereof exceed the amount which such Bank could lawfully have received had the
interest and such fees and charges due hereunder been calculated for the full
term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at the daily rate
equal to the Maximum Lawful Rate divided by the number of days in
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<PAGE> 83
the year in which such calculation is made. If, notwithstanding the provisions
of this Section 14.10, a court of competent jurisdiction shall finally determine
that a Bank has received interest, or fees and charges that are treated like
interest, hereunder in excess of the Maximum Lawful Rate, the Agent shall, to
the extent permitted by applicable Law, promptly apply such excess to the
principal amounts owing to such Bank and thereafter shall refund any excess to
the Borrower or as a court of competent jurisdiction may otherwise order.
14.11 LIMITATION OF LIABILITY. To the extent permitted by applicable
law, no claim may be made by the Borrower, the Agent, the Letter of Credit Bank,
any Bank or any other Person against the Agent, the Letter of Credit Bank or any
Bank or the Affiliates, directors, officers, employees, agents, attorneys and
consultants of any of them for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
the Agent, the Letter of Credit Bank, the Borrower and the Banks hereby waive,
release and agree not to sue upon any claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
14.12 ILLEGALITY. If any provision in this Agreement or any other Loan
Document shall for any reason be or become illegal, void or unenforceable, that
illegality, voidness or unenforceability shall not affect any other provision.
14.13 NOTICES. All notices, requests, demands and other communications
provided for hereunder shall be in writing and shall be given solely: (a) by
hand delivery or by overnight courier delivery service, with all charges paid,
(b) by facsimile transmission, if confirmed same day in writing by first class
mail mailed, or (c) by registered or certified mail, postage prepaid and
addressed to the parties. For the purposes of this Agreement, such notices shall
be deemed to be given and received: (i) if by hand or by overnight courier
service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of
machine-generated confirmation of such transmission (and provided the
above-stated written confirmation is sent) or (iii) if by registered or
certified mail, upon the first to occur of actual receipt or the expiration of
48 hours after deposit with the U.S. Postal Service; PROVIDED, HOWEVER, that
notices from the Borrower to Agent or the Banks pursuant to any of the
provisions hereof, including without limitation Sections 2 and 8.1 of this
Agreement, shall not be effective until actually received by the Agent or the
Banks, as the case may be. Notices or other communications hereunder shall be
addressed, if to the Borrower, at the address specified on the signature pages
of this Agreement; if to the Agent, at the address of the Agent specified on the
signature pages of this Agreement; if to a Bank, at the address of such Bank
specified on the signature pages of this Agreement; and, if to the Letter of
Credit Bank, at the address of the Letter of Credit Bank specified on the
signature pages of this Agreement.
14.14 GOVERNING LAW. This Agreement and the other Loan Documents and
the respective rights and obligations of the parties hereto shall be governed by
and construed in accordance with the internal laws of the State of Ohio (without
giving effect to the conflict of laws rules thereof).
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14.15 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
referred to in or otherwise contemplated by this Agreement set forth the entire
agreement of the parties as to the transactions contemplated by this Agreement.
14.16 JURY TRIAL WAIVER. EACH OF THE BORROWER, THE AGENT, THE LETTER OF
CREDIT BANK AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
THE BORROWER, THE AGENT, THE LETTER OF CREDIT BANK AND THE BANKS, OR ANY
THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
14.17 JURISDICTION; VENUE; INCONVENIENT FORUM.
(a) JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED
STATED OF AMERICA SITTING IN CUYAHOGA COUNTY, OHIO, AND ANY APPELLATE COURT FROM
ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY
MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT,
THE NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION.
(b) VENUE; INCONVENIENT FORUM. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY
LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO
STATE OR FEDERAL COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
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COURT. THE BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE
INFORMED AND FREELY MADE.
14.18 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so Executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
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<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized, as of
the date first above written.
PARAGON CORPORATE HOLDINGS INC.
/s/ Frank J. Rzicznek
--------------------------------------------------
By: Frank J. Rzicznek
Its: Chief Financial Officer
Address for notices:
5700 West Touhy
Niles, Illinois 60714
Attention: President
Telecopy: 847-647-0634
With a copy to:
Paragon Corporate Holdings Inc.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: Chief Financial Officer
Telecopy: 440-449-3111
With a copy to:
Squire, Sanders & Dempsey LLP
127 Public Square
Cleveland, Ohio 44114
Attention: David A. Zagore
Telecopy: 216-479-8780
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KEY CORPORATE CAPITAL INC., as Agent
/s/ David R. Baker
--------------------------------------------------
By: David R. Baker
Its: Senior Vice President
127 Public Square
Cleveland, Ohio 44114
Attention: Manager
Telecopy: (216) 689-4077
Payment Office:
127 Public Square
Cleveland, Ohio 44114
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BANKS
KEY CORPORATE CAPITAL INC., as a Bank
/s/ David R. Baker
--------------------------------------------------
By: David R. Baker
Title: Senior Vice President
Address for Notices:
127 Public Square
Cleveland, Ohio 44114
Attention: Manager
Telecopy: (216) 689-4077
Lending Office:
127 Public Square
Cleveland, Ohio 44114
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<PAGE> 89
LETTER OF CREDIT BANK
---------------------
KEY CORPORATE CAPITAL INC., as Letter
of Credit Bank
/s/ David R. Baker
--------------------------------------------------
By: David R. Baker
Its: Senior Vice President
127 Public Square
Cleveland, Ohio 44114
Attention: Manager
Telecopy: (216) 689-4077
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<PAGE> 90
Annex I
CREDIT AND SECURITY AGREEMENT, DATED AS OF APRIL 1, 1998,
AMONG PARAGON CORPORATE HOLDINGS INC., THE AGENT, THE LETTER OF CREDIT BANK
AND THE BANKS
COMMITMENTS AND PERCENTAGES OF THE BANKS
<TABLE>
<CAPTION>
===============================================================================
Ratable
Revolving Credit Portion
Name of Bank Commitment (percent)
- ------------ ----------
===============================================================================
<S> <C> <C>
Key Corporate Capital
Inc. $32,000,000 100%
- -------------------------------------------------------------------------------
===============================================================================
Total Commitment $32,000,000 100%
- ----------------
===============================================================================
</TABLE>
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ANNEX II
TO
CREDIT AND SECURITY AGREEMENT
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"A.B. DICK" means A.B. Dick Company, a Delaware corporation
and a wholly-owned Subsidiary of the Borrower.
"A.B. DICK ACCUMULATED DEPRECIATION INVENTORY" means Inventory
of A.B. Dick that is the subject of an excess inventory reserve,
obsolete inventory reserve or accumulated depreciation reserve.
"A.B. DICK ELIGIBLE ACCOUNTS" means Eligible Accounts of A.B.
Dick.
"A.B. DICK ELIGIBLE INVENTORY" means Eligible Inventory owned
by A.B. Dick.
"A.B. DICK GUARANTY AGREEMENT" means that certain Subsidiary
Guaranty, dated as of the date hereof, executed by A.B. Dick in favor
of the Agent for the benefit of the Banks and the Letter of Credit
Bank, substantially in the form of EXHIBIT E hereto.
"A.B. DICK INTERCOMPANY LOANS" means the loans from the
Borrower to A.B. Dick using the proceeds of the Advances hereunder.
"ACCOUNTS" means "accounts" (as defined in the UCC) including,
without limitation, all present and future rights to payment for goods
sold or leased or for services rendered, which are not evidenced by
Instruments or Chattel Paper, and whether or not they have been earned
by performance.
"ACCOUNT CREDITOR" means any Person to whom an Account Debtor
is or becomes obligated under, with respect to, or on account of an
Account.
"ACCOUNT DEBTOR" means any Person who is or becomes obligated
to an Account Creditor under, with respect to, or on account of an
Account.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed
thereto in section 302(a)(2) of ERISA.
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"ACQUISITION" means any transaction or series of transactions
pursuant to or as a result of which a Subsidiary Guarantor merges or
consolidates with or otherwise acquires any Person or all or a
substantial portion of the ownership interests or assets or properties
of any Person or of a going concern business (as defined in accordance
with GAAP).
"ACQUISITION CONSIDERATION" means, with respect to any
Acquisition, the aggregate consideration (whether in cash or stock or
other securities) and transaction costs payable in connection
therewith, including customary indemnities and holdbacks and any debt
owed to the seller.
"ADVANCE" means a Revolving Credit Advance.
"ADVANTAGE" means any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other Indebtedness or
otherwise) received by a Bank in respect of the Obligations if the
payment results in any other Bank's having more than its Ratable
Portion of the Obligations in question.
"AFFILIATE" means, with respect to a specified Person, any
other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such specified Person, (b) which beneficially owns or
holds with power to vote five percent (5%) or more of any class of the
voting stock of such specified Person, (c) five percent (5%) or more of
the voting stock of which other Person is beneficially owned or held by
such specified Person, or (d) who is an executive officer or director
of such specified Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGENT" means Key Corporate Capital Inc., a Michigan
corporation, in its capacity as agent for the Banks.
"AGENT SPECIAL ADVANCES" has the meaning specified in Section
2.4(d).
"AGREEMENT" means this Credit and Security Agreement and each
amendment, supplement or modification, if any, to this Credit and
Security Agreement.
"ALTERNATE BASE RATE" means, for any day, a rate per annum
equal to the higher of: (a) the rate of interest which is established
from time to time by KCCI at its principal office in Cleveland, Ohio as
its "prime rate" or "base rate" in effect, such rate to be adjusted
automatically, without notice, as of the opening of business on the
effective date of any change in such rate (it being agreed that: (i)
such rate is not necessarily the lowest rate of interest then available
from KCCI on fluctuating rate loans and (ii) such rate may be
established by KCCI by public announcement or
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<PAGE> 93
otherwise) and (b) the Federal Funds Rate in effect on such day plus
one half of one percent (1/2 of 1%) per annum.
"ALTERNATE BASE RATE ADVANCE" means an Advance which bears
interest as provided in Section 2.10(a)(i) of this Agreement.
"ALTERNATE BASE RATE BORROWING" means a Borrowing consisting
of Alternate Base Rate Advances.
"APPLICABLE REVOLVING CREDIT MARGIN" means (i) from the
Closing Date until July 1, 1998, 2.75% per annum with respect to LIBOR
Rate Advances and 0.75% per annum with respect to Alternate Base Rate
Advances, and (ii) with respect to any Margin Adjustment Date after the
Closing Date, the percentage applicable to a LIBOR Rate Advance
corresponding to the Consolidated Fixed Charge Coverage Ratio of the
Borrower set forth below (determined on the basis of the Consolidated
Fixed Charge Coverage Ratio for the Cumulative Four Fiscal Quarter
Period ending on the Determination Date applicable to such Margin
Adjustment Date and calculated in accordance with Section 2.10(b) of
this Agreement):
<TABLE>
<CAPTION>
================================================================================
Consolidated Alternate
Fixed Charge LIBOR Rate Base Rate
Coverage Ratio Advance Advance
================================================================================
<S> <C> <C>
* = 1.2 to 1.0 but 3.00% 1.00%
** 1.4 to 1.0
- --------------------------------------------------------------------------------
* = 1.4 to 1.0 but 2.75% 0.75%
** 1.6 to 1.0
- --------------------------------------------------------------------------------
* = 1.6 to 1.0 but 2.50% 0.50%
** 1.8 to 1.0
- --------------------------------------------------------------------------------
* = 1.8 to 1.0 2.25% 0.25%
================================================================================
<FN>
* Greater than or equal to
** Less than
</TABLE>
"ASSIGNMENT AGREEMENT" has the meaning specified in Section
12.1(b).
"AVERAGE COMMITMENTS" means, as at any date of determination,
an amount equal to the average amount for the twelve (12) months (or
such shorter period as shall commence with the Closing Date) ending
prior to such date of determination of the aggregate Revolving Credit
Commitments of the Banks.
"BANKS" means the financial institutions listed on the
signature pages hereof as "Banks" and the successors thereto and
assignees thereof.
"BORROWER" means Paragon Corporate Holdings Inc., a Delaware
corporation.
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<PAGE> 94
"BORROWER CASH COLLATERAL ACCOUNT" means that certain
commercial deposit account, Account No. _____________ at KeyBank
National Association, Cleveland, Ohio, in the name of the Agent for the
benefit of the Banks, designated as the "Paragon Corporate Holdings
Inc. Cash Collateral Account for the benefit of Key Corporate Capital
Inc., as Agent for the benefit of the Banks" which shall be: (a)
maintained by the Borrower with KeyBank National Association pursuant
to the Restricted Account Agreement, without liability by the Agent or
KeyBank National Association to pay interest thereon, and (b) from
which account the Agent shall have the irrevocable and exclusive right
to withdraw funds until all of the Obligations are paid, performed,
satisfied and enforced in full.
"BORROWING" means a group of Advances of a single Type made by
the Banks on a single date and as to which a single Interest Period is
in effect (I.E., any group of Advances made by the Banks of a different
Type, or having a different Interest Period (regardless of whether such
Interest Period commences on the same date as another Interest Period),
or made on a different date shall be considered to comprise a different
Borrowing).
"BORROWING BASE" means, at any date of determination, an
amount not in excess of the difference of the following:
(a) the sum of:
(i) eighty-five percent (85%) of the amount due
and owing on the Curtis Eligible Accounts;
PLUS
(ii) eighty percent (80%) of the amount due and
owing on the A.B. Dick Eligible Accounts;
PLUS
(iii) the lesser of:
(x) Six Million Four Hundred Thousand
Dollars ($6,400,000) or
(y) sixty percent (60%) of the cost or
market value (whichever is lower) of the
Curtis Eligible Inventory; PLUS
(iv) the lesser of:
(x) Nine Million Six Hundred Thousand
Dollars ($9,600,000) or
(y) sixty percent (60%) of the cost or
market value (whichever is lower) of the
A.B. Dick Eligible Inventory; PLUS
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<PAGE> 95
(v) ten percent (10%) of the cost or market
value (whichever is lower) of the A.B. Dick
Accumulated Depreciation Inventory; MINUS
(b) the Reserve Amount.
"BORROWING BASE CERTIFICATE" has the meaning specified in
Section 8.1Z(d)(ii) of this Agreement.
"BUSINESS DAY" means: (i) a day of the year on which banks are
not required or authorized to close in Cleveland, Ohio and (ii) if the
applicable Business Day relates to LIBOR Rate Advances, a day of the
year which is a Business Day described in clause (i) above and which is
also a day on which dealings in Dollar deposits are carried on in the
London interbank market and banks are open for business in London.
"CAPITAL EXPENDITURES" means any and all amounts invested,
expended or incurred (including Indebtedness under Capitalized Leases)
by a Person in respect of the purchase, acquisition, improvement,
renovation or expansion of any land and depreciable or amortizable
property of such Person (including, without limitation, expenditures
required to be capitalized in accordance with GAAP), each as determined
on a consolidated basis in accordance with GAAP.
"CAPITALIZED LEASES" means, in respect of any Person, any
lease of property imposing obligations on such Person, as lessee of
such property, which are required in accordance with GAAP to be
capitalized on a balance sheet of such Person.
"CASH COLLATERAL ACCOUNTS" means the Borrower Cash Collateral
Account and each of the Subsidiary Guarantor Cash Collateral Accounts.
"CASH EQUIVALENTS" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the
date of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case, with any Bank or
with any domestic commercial bank having capital and surplus in excess
of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper
having the highest rating obtainable from Moody's Investors Service,
Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds at
least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) through (v) above. Notwithstanding the
foregoing, up to 40% of the Cash Equivalents
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<PAGE> 96
of the kinds described in clauses (ii), (iii) and (v) above at any one
time held by the Borrower or any Subsidiary Guarantor may be invested
in securities, certificates of deposit, eurodollar time deposits,
bankers' acceptances and commercial paper having maturities of not more
than one year after the date of acquisition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 ET
SEQ.
"CHANGE IN CONTROL" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation) in one or a
series of related transactions, of all or substantially all of the
assets of the Borrower and its Subsidiaries taken as a whole to any
"person" (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934) other than Robert J. Tomsich or his Related
Parties, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Borrower, (iii) the consummation of the first
transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined
above) becomes the "beneficial owner" (as such term is used in Section
13(d)(3) of the Securities Exchange Act of 1934), directly or
indirectly, of more of the voting stock of the Borrower (measured by
voting power rather than number of shares) than is at the time
"beneficially owned" (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) by Robert J. Tomsich and his Related
Parties in the aggregate, (iv) the first day on which a majority of the
members of the Board of Directors of the Borrower are not Continuing
Directors or (v) the failure of the Borrower to "beneficially own" (as
defined above) one hundred percent (100%) of the voting stock of any
Subsidiary Guarantor.
"CHATTEL PAPER" means "chattel paper" as defined in the UCC.
"CLOSING DATE" means the date and the time as of which the
initial Revolving Credit Borrowing is advanced under this Agreement.
"COLLATERAL" means (i) all assets of the Borrower in which a
security interest or Lien is granted to the Agent for the benefit of
the Banks and the Letter of Credit Bank pursuant to Section 4.1 hereof
and (ii) all other property of the Borrower or the Subsidiary
Guarantors that is subject to any Lien in favor of the Agent for the
benefit of the Banks and the Letter of Credit Bank from time to time
which secures the repayment of the Obligations.
"COLLECTIONS" means all payments to the Borrower from Account
Debtors in respect of Accounts.
"COMBINED BORROWING ENTITIES" means, collectively, the
Borrower and each of the Subsidiary Guarantors.
"COMMITMENTS" means, with respect to any Bank, such Bank's
Revolving Credit Commitment and Letter of Credit Commitment.
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<PAGE> 97
"CONSOLIDATED CAPITAL EXPENDITURES" means, with respect to any
Person and for any period, all Capital Expenditures of such Person and
its Subsidiaries during such period, as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED EBITDA" means, with respect to any Person and
for any cumulative fiscal period, the Consolidated Net Income of such
Person and its Subsidiaries for such period PLUS Consolidated Interest
Expense of such Person and its Subsidiaries for such period PLUS
federal, state and local taxes of such Person and its Subsidiaries for
such period PLUS depreciation of such Person and its Subsidiaries for
such period PLUS amortization of such Person and its Subsidiaries for
such period, each as determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, for any
Cumulative Four Quarter Fiscal Period, the ratio of: (a) the sum of (i)
the Consolidated EBITDA LESS (ii) the Consolidated Capital Expenditures
to (b) the sum of (i) Consolidated Interest Expense PLUS, (ii) the
scheduled principal payments in respect of Consolidated Senior Debt and
Consolidated Subordinated Debt as at the Fiscal Quarter ending
immediately prior to the Cumulative Four Quarter Fiscal Period in
question, PLUS (iv) cash Distributions made by such Person to its
shareholders.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person and for any period, the net amount of interest expense of such
Person and its Subsidiaries for such period on the aggregate principal
amount of the Indebtedness of such Person and its Subsidiaries plus any
capitalized interest of such Person or its Subsidiaries which accrued
during such period, each as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person
and for any period, net income (or loss) of such Person and its
Subsidiaries for such period (after taxes and extraordinary items but
without giving effect to any gain from re-appraisal or write-up of
assets after January 31, 1996), as determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED SENIOR DEBT" means, with respect to any Person
and as at any date of determination, all Indebtedness for borrowed
money of such Person and its Subsidiaries outstanding at such date
including, without limitation, all Capitalized Leases and all then
outstanding Obligations owing to the Banks under this Agreement, each
as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SUBORDINATED DEBT" means, with respect to any
Person and as at any date of determination, all Indebtedness for
borrowed money constituting Subordinated Indebtedness of such Person
and its Subsidiaries outstanding as of such date, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED UNFUNDED CAPITAL EXPENDITURES" means, with
respect to any Person and for any period, all Capital Expenditures of
such Person and its Subsidiaries
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<PAGE> 98
during such period (other than those funded by purchase money
Indebtedness or Indebtedness for borrowed money other than under the
Revolving Credit Commitment), as determined on a consolidated basis in
accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination,
any member of the Board of Directors of the Borrower who (i) was a
member of such Board of Directors on the Closing Date or (ii) was
nominated for election or elected to such Board of Directors with the
approval of Robert J. Tomsich or a majority of the Continuing Directors
who were members of such Board of Directors at the time of such
nomination or election.
"CONTRACT RECEIVABLES" means Accounts of Curtis with respect
to Account Debtors who have been granted extended payment terms by
Curtis and as to which the Agent has agreed from time to time.
"CONTROL ACCOUNT" has the meaning set forth in Section 2.1(d)
of this Agreement.
"CREDIT EVENT" means: (a) the incurrence of the obligation of:
(i) each Bank to make or participate in a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing, (ii) the Letter of
Credit Bank to issue any Letter of Credit, or (iii) any Bank to
participate in the risk of any Letter of Credit, (b) the making of a
Revolving Credit Advance by any Bank, (c) the issuance of any Letter of
Credit by the Letter of Credit Bank and the participation by the Banks
in the risk thereof, (d) the delivery by the Borrower of (x) a Credit
Request requesting a Revolving Credit Borrowing or a Letter of Credit
or (y) a Rate Conversion/Continuation Request requesting the conversion
or continuation of a LIBOR Borrowing, (e) a Rate Conversion or Rate
Continuation, or (f) the receipt or acceptance by or on behalf of the
Borrower of proceeds of any Revolving Credit Borrowing.
"CREDIT REQUEST" has the meaning specified in Section 2.3(a)
of this Agreement.
"CUMULATIVE FOUR QUARTER FISCAL PERIOD" means a period
consisting of four consecutive Fiscal Quarters, whether or not in the
same Fiscal Year of the Borrower.
"CURTIS" means Curtis Industries, Inc., a Delaware
corporation.
"CURTIS ELIGIBLE ACCOUNTS" means Eligible Accounts of Curtis.
"CURTIS ELIGIBLE INVENTORY" means Eligible Inventory owned by
Curtis.
"CURTIS GUARANTY AGREEMENT" means that certain Subsidiary
Guaranty, dated as of the date hereof, executed by Curtis in favor of
the Agent for the benefit of the Banks and the Letter of Credit Bank,
substantially in the form of EXHIBIT E hereto.
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<PAGE> 99
"CURTIS INTERCOMPANY LOANS" means loans from the Borrower to
Curtis using the proceeds of Advances hereunder.
"DEEMED CREDIT REQUEST" has the meaning specified in Section
2.3(b) of this Agreement.
"DEFAULT UNDER ERISA" means: (a) the occurrence or existence
of a material Accumulated Funding Deficiency in respect of any Employee
Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any
failure by Borrower or any Subsidiary to make a full and timely payment
of premiums required by Section 4001 of ERISA in respect of any
Employee Benefit Plan, or (c) the occurrence or existence of any
material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or
4243 of ERISA in respect of any Employee Benefit Plan, or (d) the
occurrence or existence of any material breach of any other law or
regulation in respect of any such Employee Benefit Plan, or (e) the
institution or existence of any action for the forcible termination of
any such Employee Benefit Plan which is within the scope of Section
4001(a)(3) or (15) of ERISA.
"DEPOSIT ACCOUNT" means (a) any deposit account and (b) any
demand, time, savings, passbook, or a similar account, in either case
maintained with any Person by the Borrower or any of its Affiliates,
other than an account evidenced by a certificate of deposit.
"DISTRIBUTION" means, in respect of a Person, a payment made,
liability incurred or other consideration given by such Person for the
purchase, acquisition, redemption or retirement of any capital stock
(whether added to treasury or otherwise) of such Person or as a
dividend, return of capital or other distribution in respect of the
capital stock of such Person (other than any stock dividend or stock
split payable solely in capital stock of such Person).
"DOLLARS" and the sign "$" each means lawful money of the
United States.
"ELIGIBLE ACCOUNTS" means, with respect to any Person, only
such Accounts of such Person as the Agent, in its reasonable
discretion, shall from time to time consider to be Eligible Accounts
and, by way of example and not limitation, excluding Accounts which:
(a) either: (i) remain unpaid more than ninety (90)
days after the original invoice date or (ii) have an original
due date greater than ninety (90) days after the original date
of invoice, PROVIDED, HOWEVER, that, in respect of Curtis,
Contract Receivables shall be deemed to be Eligible Accounts
in an amount not to exceed, in the aggregate, Two Hundred
Fifty Thousand Dollars ($250,000);
(b) have arisen from services performed by the
Account Creditor to or for the Account Debtor outside the
ordinary course of business;
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<PAGE> 100
(c) have arisen from the sale by the Account Creditor
of goods where such goods have not been shipped or delivered
to the Account Debtor;
(d) have arisen from transactions which are not
complete, are not bona fide, or require further acts on the
part of the Account Creditor to make such Account payable by
the Account Debtor;
(e) have arisen in connection with sales of goods
which were shipped or delivered to the Account Debtor on other
than an absolute sale basis, such as shipments or deliveries
made on consignment, a sale or return basis, a guaranteed sale
basis, a bill and hold basis, or on the basis of any similar
understanding;
(f) have arisen in connection with sales of goods
which were, at the time of sale thereof, subject to any Lien,
except the security interest in favor of the Agent created by
the Loan Documents;
(g) are subject to any provision prohibiting
assignment or requiring notice of or consent to such
assignment;
(h) are subject to any Lien other than the Lien in
favor of the Agent;
(i) are Accounts with respect to which the Account
Debtor is currently asserting setoff, counterclaim, defense,
allowance, dispute, or adjustment rights, or are Accounts that
have arisen in connection with the sale of goods which have
been returned, rejected, repossessed, lost or damaged;
(j) are owed from an Account Debtor about which the
Account Creditor has received notice that such Account Debtor
is the subject of Financial Impairment or has suspended normal
business operations, dissolved, liquidated or terminated its
existence;
(k) are owed by any Account Debtor located in New
Jersey or Minnesota unless the Account Creditor has filed all
legally required Notice of Business Activities Reports with
the New Jersey Department of Taxation or the Minnesota
Department of Revenue, respectively;
(l) are Accounts with respect to which the Account
Debtor is located in any jurisdiction which requires that the
Account Creditor, in order to sue any Person in such
jurisdiction's courts, either (i) qualify to do business in
such jurisdiction or (ii) file a report with the taxation
division of such jurisdiction for the then current year,
unless the Account Creditor has fulfilled such requirements to
the extent applicable for the then current year;
(m) are evidenced by Chattel Paper or any Instrument
of any kind (including, without limitation, any promissory
notes);
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<PAGE> 101
(n) are Accounts with respect to which any of the
representations, warranties, covenants and agreements
contained in this Agreement or any of the other Loan Documents
are not or have ceased to be complete and correct or have been
breached;
(o) are Accounts with respect to which the Account
Debtor is also a supplier or creditor of the Account Creditor,
except to the extent that the aggregate amount owed to the
Account Creditor by such Account Debtor exceeds the aggregate
amount owed to such Account Debtor by the Account Creditor;
(p) are Accounts with respect to which the Agent does
not have a first priority, perfected security interest;
(q) represent a progress billing or have had the time
for payment extended by the Account Creditor without the
consent of the Agent (for the purposes hereof, "progress
billing" means any invoice for goods sold or leased or
services rendered under a contract or agreement pursuant to
which the Account Debtor's obligation to pay such invoice is
conditioned upon the Account Creditor's completion of any
further performance under the contract or agreement);
(r) are owed by a Person that is not a citizen of or
organized under the laws of the United States or any State or
are owed by any Person located outside of the United States
unless (i) such Accounts are owed by an Account Debtor located
in Canada and the Agent has a first priority lien perfected to
its satisfaction in such Accounts, or (ii) payment of such
Accounts is guaranteed by a letter of credit in form and
substance and issued by a financial institution satisfactory
to the Agent, in its sole discretion, and which has been
transferred or assigned to the Agent as security for the
Obligations.
(s) are owed any government or any department,
agency, or instrumentality thereof;
(t) are owed by any State or any department, agency,
or instrumentality thereof unless the Account Creditor has
complied with any applicable statutory or regulatory
requirements thereof in respect of the Agent's security
interest therein as granted hereunder;
(u) are owed by an Affiliate of the Account Creditor;
(v) are owed by an Account Debtor with respect to
which more than fifty percent (50%) of the balances then
outstanding on Accounts owed by such Account Debtor and its
Affiliates to the Account Creditor has remained unpaid for
more than ninety (90) days from the dates of their original
due dates, as applicable; or
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<PAGE> 102
(w) are, in the Agent's reasonable credit judgment,
Accounts of an Account Debtor which is deemed to be an
unacceptable credit risk or Accounts which are otherwise
deemed unacceptable. The Agent shall use reasonable efforts to
notify the Borrower of any such determination under this
clause (v), but shall not be liable for any damages arising
out of any failure to so notify the Borrower.
"ELIGIBLE ASSIGNEE" means (i) a Bank or any Affiliate thereof;
(ii) a commercial bank having total assets in excess of $1,000,000,000;
(iii) a finance company, insurance company, other financial institution
or fund, reasonably acceptable to the Agent and approved by the
Borrower, which is regularly engaged in making, purchasing or investing
in loans; (iv) a savings and loan association or savings bank organized
under the laws of the United States or any state thereof having total
assets in excess of $1,000,000,000; or (v) a finance company, insurance
company, bank, other financial institution or fund reasonably
acceptable to the Agent and the Borrower.
"ELIGIBLE INVENTORY" means, with respect to any Person, only
such Inventory of such Person, valued at the lower of cost (on a first
in, first out basis) or market, as the Agent, in its reasonable
discretion, shall from time to time consider to be Eligible Inventory
and, by way of example and not limitation, excluding Inventory which:
(a) consists of obsolete, damaged, defective,
unmerchantable, spoiled, outdated or unsalable items;
(b) consists of goods not held for sale, such as work
in process, any labels, any maintenance items, any supplies
and packaging, and any Inventory used in connection with
research and development; PROVIDED, that (i) raw materials
shall be considered goods not held for sale under this clause
(b) and (ii) work in process consisting of replacement parts
of A.B. Dick shall not be considered goods not held for sale
under this clause (b);
(c) is "R3500 Inventory" of A.B. Dick or is subject
to a Lien other than in favor of the Agent;
(d) is not subject to a first priority, perfected
security interest in favor of the Agent;
(e) is located at a location not owned by the Person
owning such Inventory and for which such Person has not
delivered to the Agent an appropriate landlord or
warehouseman's waiver, in form and substance satisfactory to
the Agent;
(f) is in the possession of a bailee or other third
Person including Inventory held by a third party for
processing or Inventory purchased by but not yet delivered to
such Person and for which such Person has not delivered to
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<PAGE> 103
the Agent an appropriate bailee's waiver, in form and
substance satisfactory to the Agent;
(g) is held by such Person on consignment or
Inventory held by or placed into the possession of a third
Person for sale or display by that third Person;
(h) is located outside of the United States;
(i) is manufactured, produced or purchased pursuant
to any contract with the United States government, any agency
or instrumentality thereof or prime contractor thereof, which
contract provides for progress or advance payments to the
extent such Inventory is identified to such contract; or
(j) is, in the Agent's reasonable credit judgment,
Inventory which is otherwise deemed ineligible.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as
defined in Section 3(3) of ERISA of the Borrower or any of its ERISA
Affiliates or any "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA or any "pension plan" as defined in Section 3(2) of ERISA or
any "welfare plan" as defined in Section 3(1) of ERISA.
"ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
complaints, liens, notices of non-compliance, requests for information,
investigations, proceedings, consent orders or consent agreements
relating in any way to any Environmental Law or any Environmental
Permit, instituted by any Person, including, without limitation, (a) by
governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law or (b) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health or the environment.
"ENVIRONMENTAL LAWS" means any federal, state or local law,
regulation, ordinance, or order pertaining to the protection of the
environment and the health and safety of the public, including (but not
limited to) CERCLA, RCRA, the Hazardous Materials Transportation Act,
49 USC Section 1801 et seq., the Federal Water Pollution Control Act
(33 USC Section 1251 et seq.), the Toxic Substances Control Act (15 USC
Section 2601 et seq.) and the Occupational Safety and Health Act (29
USC Section 651 et seq.), and all similar state, regional or local
laws, treaties, regulations, statutes or ordinances, common law, civil
laws, or any case precedents, rulings, requirements, directives or
requests having the force of law of any foreign or domestic
governmental authority, agency or tribunal, and all foreign equivalents
thereof, as the same have been or hereafter may be amended, and any and
all analogous future laws, treaties, regulations, statutes or
ordinances, common law, civil laws, or any case precedents, rulings,
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<PAGE> 104
requirements, directives or requests having the force of law of any
foreign or domestic governmental authority, agency or tribunal and the
regulations promulgated pursuant thereto, which governs: (a) the
existence, cleanup and/or remedy of contamination on property; (b) the
emission or discharge of Hazardous Materials into the environment; (c)
the control of hazardous wastes; (d) the use, generation, transport,
treatment, storage, disposal, removal or recovery of Hazardous
Materials; or (e) the maintenance and development of wetlands.
"ENVIRONMENTAL PERMITS" means all permits, approvals,
certificates, notifications, identification numbers, licenses and other
authorizations required under any applicable Environmental Laws or
necessary for the conduct of business.
"ENVIRONMENTAL REMEDIATION" means any curative measure taken
in respect of any non-compliance with, or otherwise related to, any
Environmental Law.
"EQUIPMENT" means "equipment" (as defined in the UCC) and
fixtures (as defined in the UCC) including, without limitation, all
machinery, equipment, furniture, furnishings, fixtures, and packaging
production equipment, parts, material handling equipment, supplies, and
motor vehicles (titled and untitled) of every kind and description, now
or hereafter owned by the Borrower, or in which the Borrower may have
or may hereafter acquire any interest, wheresoever located.
"ERISA" means the Employee Retirement Income Security Act of
1974 (Public Law 93-406), as amended, and in the event of any amendment
affecting any section thereof referred to in this Agreement, that
reference shall be a reference to that section as amended,
supplemented, replaced or otherwise modified.
"ERISA AFFILIATE" of any Person means any other Person that
for purposes of Title IV of ERISA is a member of such Person's
controlled group, or under common control with such Person, within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended
from time to time.
"ERISA REGULATOR" means any governmental agency (such as the
Department of Labor, the Internal Revenue Service and the Pension
Benefit Guaranty Corporation) having any regulatory authority over any
Employee Benefit Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest
Period in respect of any LIBOR Rate Advance, as of any date of
determination, the aggregate of the then stated maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves), expressed as a decimal, applicable to such Interest Period
(if more than one such percentage is applicable, the daily average of
such percentages for those days in such Interest Period during which
any such percentages shall be so
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<PAGE> 105
applicable) by the Board of Governors of the Federal Reserve System,
any successor thereto, or any other banking authority, domestic or
foreign, to which the Agent or any Bank may be subject in respect to
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Federal Reserve Board) or in
respect of any other category of liabilities including deposits by
reference to which the interest rate on LIBOR Rate Advances is
determined or any category of extension of credit or other assets that
include the LIBOR Rate Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under
Regulation D of the Federal Reserve Board and the LIBOR Rate Advances
shall be deemed to constitute Eurocurrency Liabilities subject to such
reserve requirements without benefit of credits for proration,
exceptions or offsets which may be available from time to time to any
Bank under said Regulation D.
"EVENT OF DEFAULT" has the meaning specified in Section 9 of
this Agreement.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest one hundredth of one
percent (1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Cleveland on the Business Day
next succeeding such day, PROVIDED that: (a) if the day for which such
rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such a rate on such transactions on the
immediately preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for
any Business Day, the Federal Funds Rate for such Business Day shall be
the average of quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing
selected by the Agent.
"FIELD EXAM MATERIALS" means the following materials delivered
to the Agent prior to the Closing Date and from time to time thereafter
under this Agreement: accounts receivable reconciliation report, daily
service and non-service billings report, accounts payable agings,
past-due reports, credit memo analysis documents, shipping
documentation, invoices, purchase orders, gross margin reports,
inventory turn analysis reports, inventory summary reports,
availability calculations, inventory-by-location reports, reserve
analysis and unit placement report (slow moving report).
"FINANCIAL IMPAIRMENT" means, in respect of a Person, the
distressed economic condition of such Person manifested by any one or
more of the following events:
(a) the discontinuation of the business of the
Person;
(b) the adjudication of the Person as a debtor or
having an order for relief under Title 11 of the United States
Code entered against the Person;
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(c) the Person ceases or is unable or admits in
writing its inability, to make timely payment upon the
Person's debts, obligations, or liabilities as they mature or
come due;
(d) assignment by the Person for the benefit of
creditors;
(e) voluntary institution by the Person or consent
granted by the Person to the involuntary institution (whether
by petition, complaint, application, default, answer
(including, without limitation, an answer or any other
permissible or required responsive pleading admitting: (i) the
jurisdiction of the forum or (ii) any material allegations of
the petition, complaint, application, or other writing to
which such answer serves as a responsive pleading thereto), or
otherwise) of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation,
receivership, trusteeship, or similar proceeding pursuant to
or purporting to be pursuant to any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation, receivership, trusteeship, or
similar law of any jurisdiction;
(f) voluntary application by the Person for or
consent granted by the Person to the involuntary appointment
of any receiver, trustee, or similar officer (i) for the
Person or (ii) of or for all or any substantial part of the
Person's property;
(g) the commencement or filing against a Person,
without such Person's application, approval or consent, of an
involuntary proceeding or an involuntary petition seeking: (a)
liquidation, reorganization or other relief in respect of such
Person, its debts or all or a substantial part of its assets
under any Federal, state or foreign bankruptcy, insolvency,
receivership, or similar law now or hereafter in effect or (b)
the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for such Person
or for a substantial part of its assets, and, in any such
case, either (i) such proceeding or petition shall continue
undismissed for sixty (60) days or (ii) an order or decree
approving or ordering any of the foregoing shall be entered;
or
(h) any judgment, writ, warrant of attachment,
execution, or similar process is issued or levied involving an
amount which is deemed by the Agent to be material, against
any Person or against such Person's assets and such judgment,
writ, warrant of attachment, execution, or similar process is
not released, vacated, or fully bonded within thirty (30) days
after it is issued, levied or rendered.
"FISCAL MONTH" means any of the twelve consecutive monthly
fiscal accounting periods collectively forming a Fiscal Year of the
Borrower.
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"FISCAL QUARTER" means any of the four consecutive three-month
fiscal accounting periods collectively forming a Fiscal Year of the
Borrower and ending on March 31, June 30, September 30 and December 31
of each calendar year.
"FISCAL YEAR" means the Borrower's regular annual accounting
period for federal income tax purposes ending on December 31 of each
calendar year.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board or in such other statements by
such other entity as may be in general use by significant segments of
the accounting profession and which have been applied in the
preparation of the financial statements referred to in Section 1.3 of
this Agreement and otherwise consistently applied.
"GEC" means General Electric Company, Ltd.
"GEC INDEMNITY" means the indemnification obligations of GEC
to the Borrower or any Subsidiary Guarantor under a certain Purchase
Agreement between the Borrower and GEC, dated January 17, 1997.
"GENERAL INTANGIBLES" means all "general intangibles" (as
defined in the UCC) of the Borrower including, without limitation, all
present and future choses in action, causes of action and all other
intangible personal property of the Borrower of every kind and nature
(other than Accounts), now or hereafter arising, all corporate or other
business records; inventions, designs, blueprints, patents and patent
applications, trademarks and trademark applications, trade names, trade
secrets, goodwill, registrations, copyrights, licenses, franchises,
customer lists, tax refunds, tax refund claims, rights and claims
against carriers and shippers, and rights to indemnification.
"GUARANTOR" means a Person who pledges his credit or property
in any manner for the payment or other performance of Indebtedness,
agreements or other obligation of another Person including, without
limitation, any guarantor (whether of collection or payment), any
obligor in respect of a standby letter of credit or surety bond issued
for the account of another Person, any surety, any co-maker, any
endorser, and any Person who agrees conditionally or otherwise to make
any loan, purchase or investment in order thereby to enable another
Person to prevent or correct a default of any kind.
"GUARANTY" means the obligation of a Guarantor.
"GUARANTY AGREEMENT" means, collectively, the A.B. Dick
Guaranty Agreement, the Curtis Guaranty Agreement, and the agreements
of any Guarantor(s) of the Obligations incurred after the Closing Date.
"HAZARDOUS MATERIAL" means and includes: (a) any asbestos or
other material composed of or containing asbestos which is, or may
become, even if properly
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managed, friable, (b) petroleum and any petroleum product, including
crude oil or any fraction thereof, and natural gas or synthetic natural
gas liquids or mixtures thereof, (c) any hazardous, toxic or dangerous
waste, substance or material defined as such in (or for purposes of)
CERCLA or RCRA, any so-called "Superfund" or "Superlien" law, or any
other applicable Environmental Laws, and (d) any other substance whose
generation, handling, transportation, treatment or disposal is
regulated pursuant to any Environmental Laws.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii)
other agreements or arrangements designed to protect such Person
against fluctuations in interest rates and (iii) agreements entered
into for the purpose of fixing or hedging the risks associated with
fluctuations in foreign exchange rates.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) indebtedness for borrowed money, (b) obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations of such Person for the deferred purchase
price of property or services (other than accrued liabilities incurred
in the ordinary course of business), (d) obligations of such Person as
lessee under Capitalized Leases, (e) all obligations of such Person as
an account party in respect of letters of credit or banker's
acceptances, (f) liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA, (g)
obligations of a third party secured by any Lien on the properties or
assets of such Person, (h) obligations of such Person in respect of
currency or interest rate swap or interest rate cap or comparable
transactions, (i) obligations secured by any Lien on the properties or
assets of such Person and (j) obligations under any direct or indirect
Guaranty in respect of indebtedness or obligations of a third party of
the kinds referred to in clauses (a) through (i) above.
"INSTRUMENTS" means "instruments" as defined by the UCC.
"INTELLECTUAL PROPERTY" means all inventions, designs,
patents, and applications therefor, trademarks, service marks, trade
names, and registrations and applications therefor, copyrights, any
registrations therefor, and any licenses thereof, whether now owned or
existing or hereafter arising or acquired.
"INTERCOMPANY LOANS" means loans from the Borrower to a
Subsidiary Guarantor using the proceeds of Advances hereunder and
includes, as of the Closing Date, A.B. Dick Intercompany Loans and
Curtis Intercompany Loans. All funds downstreamed by the Borrower to a
Subsidiary Guarantor using the proceeds of Advances hereunder are
deemed to be Intercompany Loans.
"INTERCOMPANY NOTE" means, in respect of any Intercompany
Loan, the promissory note evidencing such Intercompany Loan,
substantially in the form of EXHIBIT L-1.
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"INTERCOMPANY SECURITY AGREEMENT" means, in respect of any
Intercompany Loan, the security agreement securing such Intercompany
Loan, substantially in the form of EXHIBIT L-2.
"INTEREST PERIOD" means, for each LIBOR Rate Advance
comprising a Borrowing, the period commencing on the date of such LIBOR
Rate Advance or the date of the Rate Conversion or Rate Continuation of
any Advances into such LIBOR Rate Advance and ending on the numerically
corresponding day of the period selected by the Borrower pursuant to
the provisions hereof and each subsequent period commencing on the last
day of the immediately preceding Interest Period in respect of such
LIBOR Rate Advance and ending on the last day of the period selected by
the Borrower pursuant to the provisions hereof; PROVIDED, HOWEVER, that
the duration of each such Interest Period shall be one, two, three or
six months, in each case as the Borrower may select by delivery to the
Agent of a Credit Request therefor in accordance with Section 2.3(a) of
this Agreement and; PROVIDED, FURTHER, that:
(i) the Interest Period for each LIBOR Rate
Advance comprising part of the same
Borrowing shall be of the same duration;
(ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a
Business Day, the last day of such Interest
Period shall be extended to occur on the
next succeeding Business Day; PROVIDED,
HOWEVER, that, if such extension would cause
the last day of such Interest Period to
occur in the next following calendar month,
the last day of such Interest Period shall
occur on the immediately preceding Business
Day;
(iii) if the Interest Period commences on a
Business Day for which there is no numerical
equivalent in the calendar month in which
the Interest Period is to end, such Interest
Period shall end on the last Business Day of
that calendar month; and
(iv) with respect to LIBOR Rate Advances
comprising any Revolving Credit Borrowing,
no Interest Period may end on a date later
than the Revolving Credit Termination Date.
"INVENTORY" means all "inventory" (as defined in the UCC) now
owned or hereafter acquired by the Borrower including, without
limitation, all goods, merchandise, work-in-process, raw materials,
finished goods, and inventory held for lease to other Persons, all
other materials, supplies, and tangible personal property of any kind,
nature, or description held for sale or lease or for display or
demonstration, or furnished or to be furnished under contracts of
service, or which are or which might be used or consumed in connection
with the manufacturing, packing, shipping, advertising, selling,
leasing, or furnishing of such goods, merchandise, or other personal
property, all documents of title or other documents pertaining thereto,
and all proceeds of the foregoing.
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"INVESTMENT ACCOUNT" means Account No. _____________ at
KeyBank National Association, Cleveland, Ohio, or such other account(s)
as the Borrower shall from time to time designate to the Agent in
writing.
"INVESTMENT PROPERTY" means all "Investment Property" (as
defined in the UCC from and after January 1, 1998) now or hereafter
acquired by the Borrower.
"KCCI" means Key Corporate Capital Inc., a Michigan
corporation.
"LAW" means any law, treaty, regulation, statute or ordinance,
common law, civil law, or any case precedent, ruling, requirement,
directive or request having the force of law of any foreign or domestic
governmental authority, agency or tribunal.
"LC EXPOSURE" means, with respect to any Bank, at any time of
determination, such Bank's Ratable Portion of the sum of: (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such
time, PLUS (b) the aggregate amount that has been drawn under such
Letters of Credit for which the Letter of Credit Bank or the Banks, as
the case may be, have not at such time been reimbursed by the Borrower.
"LENDING OFFICE" means, with respect to any Bank, the office
of such Bank specified as its "Lending Office" under its name on the
signature pages hereto, or such other office of such Bank as such Bank
may from time to time specify in writing to the Borrower and the Agent
as the office at which Advances are to be made and maintained.
"LETTER OF CREDIT" means each Trade Letter of Credit or
Standby Letter of Credit.
"LETTER OF CREDIT BANK" means Key Corporate Capital Inc., a
Michigan corporation and its successors and assigns.
"LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning set
forth in Section 10.9.
"LETTER OF CREDIT COMMITMENT" means the commitment of the
Letter of Credit Bank to issue Letters of Credit for the account of the
Borrower in an undrawn face amount of up to Three Million Dollars
($3,000,000).
"LIBOR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.10(a)(ii) of this Agreement.
"LIBOR RATE BORROWING" means a Borrowing consisting of LIBOR
Rate Advances.
"LIEN" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the
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lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"LOAN ACCOUNT" has the meaning set forth in Section 2.1(c).
"LOAN DOCUMENTS" means this Agreement, any note, mortgage,
security agreement, or other lien instrument, reimbursement agreement,
financial statement, audit report, environmental audit, notice, request
of advance, interest rate swap or hedge agreement, cash management
agreement, officer's certificate or other writing of any kind which is
now or hereafter required to be delivered by or on behalf of the
Borrower to the Agent, the Letter of Credit Bank or the Banks (or any
of their respective Affiliates) in connection with this Agreement,
including, without limitation, the Revolving Credit Notes and the other
writings referred to in Sections 2 and 3 of this Agreement.
"LONDON INTERBANK OFFERED RATE" means, for any Interest Period
with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards,
if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of: (x) the per annum rate of interest, determined by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) as of approximately 11:00 a.m.
(London time) two Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Rate Advance, appearing on Page 3750 of
the Telerate Service (or any successor or substitute page of such
Service, or any successor to or substitute for such Service providing
rate quotations comparable to those currently provided on such page of
such Service, as determined by the Agent from time to time for purposes
of providing quotations of interest rates applicable to Dollar deposits
in the London interbank market) as the rate in the London interbank
market for Dollar deposits in immediately available funds with a
maturity comparable to such Interest Period DIVIDED BY (y) a number
equal to 1.00 MINUS the Eurocurrency Reserve Percentage. In the event
that such rate quotation is not available for any reason, then the rate
(for purposes of clause (x) hereof) shall be the rate, determined by
the Agent as of approximately 11:00 a.m. (London time) two Business
Days prior to the beginning of such Interest Period pertaining to such
LIBOR Rate Advance, to be the average (rounded upwards, if necessary,
to the nearest one sixteenth of one percent (1/16th of 1%) of the per
annum rates at which Dollar deposits in immediately available funds in
an amount comparable to KCCI's Ratable Portion of such LIBOR Borrowing
and with a maturity comparable to such Interest Period are offered to
the prime banks by leading banks in the London interbank market. The
London Interbank Offered Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurocurrency Reserve
Percentage.
"LONG-TERM DEBT" means long-term debt of the Borrower and its
Subsidiaries, as determined on a consolidated basis in accordance with
GAAP.
"MARGIN ADJUSTMENT DATE" has the meaning specified in Section
2.10(b) of this Agreement.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on:
(a) the business, properties, operations or condition (financial or
otherwise) of the Borrower or any Subsidiary Guarantor, (b) a material
portion of the Collateral, (c) the Borrower's ability to repay the
Obligations, (d) the Agent's security interest and lien or the priority
thereof, or (e) the legality, validity or enforceability of this
Agreement, the other Loan Documents or any Lien created hereby or
thereby.
"MATERIAL BUSINESS AGREEMENT" means each agreement of the
Borrower (not including Material License Agreements) set forth on the
Supplemental Schedule as being an agreement the termination of which
could reasonably be expected to result in liabilities or losses in
excess of $300,000.
"MATERIAL LICENSE AGREEMENT" means each license agreement of
the Borrower in respect of Third Party Intellectual Property set forth
on the Supplemental Schedule as being a license agreement the
termination of which could reasonably be expected to result in
liabilities or losses in excess of $300,000.
"MAXIMUM LAWFUL RATE" has the meaning specified in Section
14.10.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is
a "multiemployer plan" as such term is defined in section 4001(a)(3) of
ERISA.
"NET PROCEEDS" means (i) the cash proceeds (including cash
proceeds subsequently received in respect of non-cash consideration
initially received) from any sale, transfer or other disposition (other
than (A) any sale of inventory in the ordinary course, (B) the sale of
up to $250,000 of Equipment that is obsolete or otherwise no longer
used or useful during any Fiscal Year and (C) proceeds from the sale of
assets of A.B. Dick resulting from the relocation of A.B. Dick's
offices and manufacturing facilities during 1998) of any asset of the
Borrower or any of its Subsidiaries to any Person (other than the
Borrower or any other Subsidiary of the Borrower) net of selling
expenses, including any reasonable broker's fees or commissions, costs
of discontinuing operations associated with such assets and sales,
transfer and similar taxes and (ii) the cash proceeds from the issuance
and/or sale of equity or debt securities of the Borrower or any of its
Subsidiaries pursuant to any public offering or issuance or sale of any
equity securities of the Borrower or any of its Subsidiaries pursuant
to any private placement (other than the Senior Note Offering), net of
transaction costs.
"NOTES" means, collectively, each of the Revolving Credit
Notes executed and delivered by the Borrower to the Banks under this
Agreement.
"OBLIGATIONS" means the present and future obligations of the
Borrower and/or its Subsidiaries to the Banks under this Agreement or
any Loan Document including, without limitation, the outstanding
principal and accrued interest in respect of any Revolving Credit
Advances and LC Exposure (including interest accruing after a petition
for relief under the federal bankruptcy laws has been filed), the
reimbursement
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obligation in respect of the LC Exposure, all fees owing to the Letter
of Credit Bank, the Banks or the Agent under this Agreement and the
other Loan Documents, any amounts owing under any Reimbursement
Agreement, the amounts owing by the Borrower and/or its Subsidiaries
under any interest rate cap or hedge agreement, the reimbursement
obligations of the Borrower under Letters of Credit, the Related
Expenses, and any expenses, taxes, Other Taxes, compensation,
indemnification obligations or other amounts owing by the Borrower to
the Agent, the Letter of Credit Bank or any Bank under this Agreement,
the Notes or any Loan Document.
"OPERATING ACCOUNT" means account no._________________,
maintained by and in the name of the Borrower with KeyBank National
Association for the purposes of disbursing the proceeds of Revolving
Credit Advances, which account shall in no case be a payroll account.
"OTHER TAXES" has the meaning specified in Section 13.3(b) of
this Agreement.
"PARENT COMPANY" means NES Group, Inc., a Delaware
corporation.
"PAYMENT OFFICE" means such office of the Agent specified as
its "payment office" under its name on the signature pages hereto, or
such other office as the Agent may from time to time specify in writing
to the Borrower and the Banks as the office to which payments are to be
made by the Borrower or the Banks, as the case may be.
"PBGC" means the Pension Benefit Guaranty Corporation or any
other governmental authority succeeding to any of its functions.
"PC+ PRODUCTS" means all products and services sold or leased
by Curtis in connection with the PC+ product.
"PERMITTED ACCOUNT" has the meaning set forth in Section 6.3.
"PERMITTED ACQUISITION" means:
(i) with respect to any Acquisition which will be funded, in
whole or in part, with Advances or proceeds of Advances, an Acquisition
by a Subsidiary Guarantor (or a Subsidiary of such a Subsidiary
Guarantor organized for the purpose of effecting such Acquisition) with
respect to which all of the conditions set forth below shall have been
satisfied in full:
(a) the primary business activity of the Acquisition
target is the same or substantially similar to the business
activities of the acquiring Person;
(b)(i) Neither the Borrower nor any of its
Subsidiaries shall have assumed or agreed to remain liable
with respect to any Indebtedness (including any material tax
or ERISA liability) of the Acquisition target, except (A) to
the extent permitted under Section 8.3(c) and (B) obligations
of the Acquisition
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target incurred in the ordinary course of business and
necessary or desirable to the continued operation of the
underlying properties, and (ii) any other such liabilities or
obligations not permitted to be assumed or otherwise supported
by the Borrower or its Subsidiaries hereunder shall be paid in
full or released as to the assets being so acquired on or
before the consummation of such Acquisition;
(c) no Event of Default or Potential Default exists
immediately prior to such Acquisition or would occur
immediately after giving effect thereto;
(d) the Agent and the Banks are satisfied that, after
giving effect to the proposed Acquisition, the Borrower and
each of its Subsidiary Guarantors shall be in compliance with
the provisions of Section 8.4, determined on a pro forma basis
giving effect to the proposed Acquisition; and
(e) if such Acquisition has Acquisition Consideration
exceeding $20,000,000, such Acquisition shall have been
approved in writing by the Required Banks, in their reasonable
discretion; and
(ii) with respect to any Acquisition funded other than as
described in clause (a) above, an Acquisition of the Borrower or a
Subsidiary Guarantor that is permitted by the Senior Note Documents, so
long as no Event of Default or Potential Default exists immediately
prior to such Acquisition or would occur immediately after giving
effect thereto.
"PERMITTED DISCRETION" means the good faith judgment or good
faith exercise of discretion by the Agent to the extent based upon any
factor or circumstance which the Agent believes in good faith (the
burden of establishing lack of good faith being on the Borrower): (a)
will or could reasonably be expected to adversely affect the value of
any Collateral (ordinary wear and tear excepted), the enforceability or
priority of the Agent's Liens thereon in favor of the Banks or the
amount which the Agent and the Banks would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral; (b) suggests that any collateral
report or financial information delivered to the Agent by any Person on
behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (c) could reasonably be expected to increase
materially the likelihood of a bankruptcy, reorganization or other
insolvency proceeding involving the Borrower or to which any of the
Collateral is subject; or (d) creates or could reasonably be expected
to create a Potential Default or Event of Default. In exercising such
judgment, the Agent may consider in good faith such factors or
circumstances already included in or tested by the definition of
Eligible Accounts or Eligible Inventory, as well as any of the
following: (i) the financial and business condition of the Borrower,
(ii) changes in collection history and dilution with respect to the
Accounts, (iii) material changes in demand for, and changes in pricing
of, Inventory, (iv) changes in any concentration of risk with respect
to Accounts or Inventory, (v) any other factors or circumstances that
will or could reasonably be expected to have a Material Adverse Effect,
(vi) history of
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charge-backs or other credit adjustments, and (vii) any other factors
that change or could reasonably be expected to materially change the
credit risk of lending to any of the Borrowers on the security of the
Accounts or the Inventory.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"POTENTIAL DEFAULT" means an event, condition or thing which
with the lapse of any applicable grace period or with the giving of
notice or both would constitute, an Event of Default referred to in
Section 9 of this Agreement and which has not been appropriately waived
in writing in accordance with this Agreement or fully corrected, prior
to becoming an actual Event of Default.
"PROCEEDS" means all "proceeds" (as defined in the UCC) of any
and all of the Collateral made or due and payable to the Borrower from
time to time including, without limitation, all proceeds in connection
with any requisition, confiscation, condemnation, seizure or forfeiture
of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any Person acting under color of
governmental authority) and, to the extent not otherwise included, all
payments under insurance (whether or not the Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the Collateral.
"PRODUCTS" means property directly or indirectly resulting
from any manufacturing, processing, assembling or commingling of any
Inventory.
"PROPERTIES" has the meaning specified in Section 7.9 of this
Agreement.
"RATABLE PORTION" means, in respect of any Bank, the quotient
(expressed as a percentage) obtained at any time by dividing: (x) such
Bank's Revolving Credit Commitment at such time BY (y) the aggregate
amount of the Revolving Credit Commitments of all of the Banks;
PROVIDED, HOWEVER, that if all of the Revolving Credit Commitments are
terminated pursuant to the terms hereof, then, Ratable Portion means
the quotient (expressed as a percentage) obtained by dividing (x) the
aggregate amount of such Bank's Advances by (y) the aggregate amount of
Advances of all of the Banks outstanding at such time.
"RATE CONTINUATION" means a continuation of LIBOR Rate
Advances having a particular Interest Period as LIBOR Rate Advances
having an Interest Period of the same duration pursuant to Section 2.7
of this Agreement.
"RATE CONVERSION" means a conversion pursuant to Section 2.7
of this Agreement of Advances of one Type into Advances of another Type
and, with respect
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to LIBOR Rate Advances, from one permissible Interest Period to another
permissible Interest Period.
"RATE CONVERSION/CONTINUATION REQUEST" has the meaning
specified in Section 2.7 of this Agreement.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ.
"REGULATORY CHANGE" means, as to any Bank, any change in
United States federal, state or foreign Laws or regulations or the
adoption or making of any interpretations, directives or requests of or
under any United States federal, state or foreign Laws or regulations
(whether or not having the force of Law) by any court or governmental
authority charged with the interpretation or administration thereof.
"REIMBURSEMENT AGREEMENT" has the meaning set forth in Section
2.8(b) of this Agreement.
"RELATED PARTY" means, with respect to any Person, (A) any 80%
(or more) owned Subsidiary, or spouse or immediate family member (in
the case of an individual) of such Person; or (B) any trust,
corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or other Persons beneficially holding an
80% or more controlling interest of which consist of such Person and/or
such other Persons referred to in the immediately preceding clause (A);
or (C) the estate of such Person until such estate is distributed
pursuant to his will or applicable state law.
"REMITTANCES" means, in respect of any Person, all payments of
every kind (other than Collections in respect of Accounts) to such
Person, including, without limitation, payments on Indebtedness owing
to such Person (including Intercompany Loans), cash payments in respect
of Inventory sales, payments in respect of other dispositions of
Collateral (other than Inventory in the ordinary course of business)
and real property of such Person, insurance proceeds, condemnation
awards and tax refunds.
"REPORTABLE EVENT" means any of the events set forth in
Section 4043 of ERISA excluding those events for which the requirement
of notice has been waived by the PBGC.
"REQUIRED BANKS" means, at any time, Banks having at least
sixty percent (60%) of the aggregate amount of the Revolving Credit
Commitments of all of the Banks at such time; PROVIDED, HOWEVER, that
if all of the Revolving Credit Commitments are terminated pursuant to
the terms hereof, then, Required Banks means Banks having at least
sixty percent (60%) of the aggregate amount of Advances of all of the
Banks outstanding at such time.
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"RESERVE AMOUNT" means an amount determined by the Agent, in
its Permitted Discretion, as a reserve against Collateral values and
potential or anticipated obligations of the Borrower but without
duplication of amounts already reserved against the value of Collateral
under the definitions of "Eligible Inventory" or "Eligible Accounts."
Without limiting the generality of the foregoing, the Reserve Amount
shall include: (a) tax liabilities and other obligations owing to
governmental entities, (b) litigation liabilities, (c) amounts that are
required to be expended in order for Borrower and each of Borrower's
operations and property to comply with Environmental Laws or in order
to correct any violation by Borrower or each of Borrower's operations
or property of Environmental Laws, (d) the anticipated costs and
expenses relating to the liquidation of Collateral, (e) unpaid sales
taxes, (f) liabilities and other obligations owing by Borrower to any
lessor of real property leased by Borrower or to any warehouseman, and
(g) reserves for any claims asserted or likely to be asserted (in
Agent's sole determination) that have resulted or would result in Liens
on the Collateral.
"RESTRICTED ACCOUNT AGREEMENT" means that certain _________
Agreement, dated as of April 1, 1998, between the Borrower, the Agent
and KeyBank National Association.
"REVOLVING CREDIT ADVANCE" means an Advance made by a Bank to
the Borrower pursuant to Section 2.1 of this Agreement (whether an
Advance made by a Bank pursuant to a Credit Request or an Advance made
by a Bank by reason of a Deemed Credit Request), including Settlement
Advances and Agent Special Advances;
"REVOLVING CREDIT BORROWING" means a Borrowing consisting of
Revolving Credit Advances.
"REVOLVING CREDIT COMMITMENT" means, in respect of any Bank,
the commitment of such Bank to advance Revolving Credit Advances up to
the amount set forth in Annex I.
"REVOLVING CREDIT NOTE" means a promissory note of the
Borrower payable to the order of a Bank, in substantially the form of
EXHIBIT A-1 hereto, and in the original principal amount of such Bank's
Revolving Credit Commitment, evidencing the aggregate indebtedness of
the Borrower to such Bank resulting from the Revolving Credit Advances
made by such Bank.
"REVOLVING CREDIT TERMINATION DATE" means April 1, 2003, or
earlier if terminated pursuant to the terms of this Agreement.
"SENIOR NOTES" means the 9-5/8% Series A Senior Notes due 2008
issued by the Borrower in an aggregate principal amount of up to
$150,000,000 in connection with the Senior Note Offering.
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"SENIOR NOTE INDENTURE" means that certain Senior Note
Indenture between the Borrower and Norwest Bank Minnesota, National
Association, as Trustee, dated April 1, 1998.
"SENIOR NOTE OFFERING" means the offering by the Borrower of
its Senior Notes pursuant to the Senior Note Indenture.
"SENIOR NOTE OFFERING DOCUMENTS" means each agreement,
instrument, report, statement or other document or writing executed or
delivered in connection with the consummation of the Senior Note
Offering.
"SETTLEMENT" has the meaning set forth in Section 2.4(e) of
this Agreement.
"SETTLEMENT DATE" has the meaning set forth in Section
2.4(e)(i) of this Agreement.
"SETTLEMENT ADVANCE" has the meaning set forth in Section
2.4(e) of this Agreement.
"SOLVENT" means, with respect to any Person, as of any date of
determination, that: (a) the fair value of the property of the Person
as of such date is greater than the total amount of the liabilities
(including contingent liabilities computed at the amount that, in light
of all the facts and circumstances existing as of such date, represents
the amount that can reasonably be expected to become an actual or
matured liability) of the Person, (b) the present fair salable value of
the assets of the Person as of such date is not less than the amount
that will be required to pay the probable liabilities of the Person on
its debts as they become absolute and matured, (c) the Person is able
to pay all liabilities of the Person as those liabilities mature, and
(d) the Person does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in
which it is about to engage. The determination of whether a Person is
Solvent shall take into account all such Person's Properties and
liabilities regardless of whether, or the amount at which, any such
Property or liability is included on a balance sheet of such Person
prepared in accordance with GAAP, including Properties such as
contingent contribution or subrogation rights, business prospects,
distribution channels and goodwill. The determination of the sum of a
Person's Properties at a fair valuation or the present fair saleable
value of a Person's Properties shall be made on a going concern basis
unless, at the time of such determination, the liquidation of the
business in which such Properties are used or useful is in process or
is demonstrably imminent. In computing the amount of contingent or
unrealized Properties or contingent or unliquidated liabilities at any
time, such Properties and liabilities will be computed at the amounts
which, in light of all the facts and circumstances existing at such
time, represent the amount that reasonably can be expected to become
realized Properties or matured liabilities, as the case may be. In
computing the amount that would be required to pay a Person's probable
liability on its existing debts as they become absolute and matured,
reasonable valuation techniques, including a present value analysis,
shall be applied using such rates over such periods as are appropriate
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under the circumstances, and it is understood that, in appropriate
circumstances, the present value of contingent liabilities may be zero.
"STANDBY LETTER OF CREDIT" means any letter of credit issued
by the Letter of Credit Bank from time to time at the request of the
Borrower pursuant to the terms of this Agreement that is not a Trade
Letter of Credit.
"SUBORDINATED INDEBTEDNESS" means, with respect to a specified
Person, any and all Indebtedness owing by such specified Person to any
other Person, now or hereafter existing, that is expressly subordinated
and made junior to the payment and performance in full of the
Obligations and which subordination is evidenced by a written agreement
in form and substance satisfactory to the Agent and the Banks.
"SUBSIDIARY" means, in respect of a corporate Person at any
time, a corporation or other business entity the shares constituting a
majority of the outstanding capital stock (or other form of ownership)
or constituting a majority of the voting power in any election of
directors (or shares constituting both majorities) of which are (or
upon the exercise of any outstanding warrants, options or other rights
would be) owned directly or indirectly at such time by such Person or
another subsidiary of such Person or any combination of the foregoing.
"SUBSIDIARY GUARANTOR" means any Subsidiary that is also a
Guarantor of the Borrower's Obligations under this Agreement, and
includes, as of the Closing Date, Curtis and A.B. Dick.
"SUBSIDIARY GUARANTOR BLOCKED ACCOUNT" means the blocked
account established by each Subsidiary Guarantor with KeyBank National
Association pursuant to the security agreement executed by such
Subsidiary Guarantor in favor of the Agent.
"SUBSIDIARY GUARANTOR CASH COLLATERAL ACCOUNT" means the cash
collateral account established by each Subsidiary Guarantor with
KeyBank National Association pursuant to the security agreement
executed by such Subsidiary Guarantor in favor of the Agent.
"SUBSIDIARY GUARANTOR LOCKBOX" means the lockbox established
by each Subsidiary Guarantor pursuant to the security agreement
executed by such Subsidiary Guarantor in favor of the Agent.
"SUPPLEMENTAL SCHEDULE" means the schedule which is attached
hereto as Annex II and is incorporated into this Agreement.
"THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual
Property not owned by the Borrower or a Subsidiary.
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"TRADE LETTER OF CREDIT" means any letter of credit used for
the purchase of goods in the ordinary course of the account party's
business, issued by the Letter of Credit Bank from time to time at the
request of the Borrower pursuant to the terms of this Agreement.
"TYPE" means, when used in respect of any Advance, the LIBOR
Rate or the Alternate Base Rate in effect in respect of such Advance.
"UCC" means the Uniform Commercial Code in effect in the State
of Ohio from time to time.
"UNITED STATES" and "U.S." each means United States of
America.
"WITHDRAWAL LIABILITY" means (in respect of the Borrower, its
Subsidiaries and their ERISA Affiliates and for the purposes of clause
(iii) of Section 8.3(j) of this Agreement), at any date of
determination, the amount equal to the aggregate present value (as
defined in section 3 of ERISA) at such date of the amount claimed to
have been incurred as a result of a withdrawal LESS any portion thereof
as to which the Borrower reasonably believes, after appropriate
consideration of the possible adjustments arising under subtitle E of
Title IV of ERISA, the Borrower, its Subsidiaries and their ERISA
Affiliates will have no liability; PROVIDED; HOWEVER, that the Borrower
shall obtain promptly written advice from independent actuarial
consultants supporting such determination.
111
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ANNEX III
TO
CREDIT AND SECURITY AGREEMENT
CONDITIONS PRECEDENT TO INITIAL ADVANCES
<PAGE> 122
ANNEX IV
TO
CREDIT AND SECURITY AGREEMENT
SUPPLEMENTAL SCHEDULE
<PAGE> 1
EXHIBIT 5
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
April 30, 1998
Paragon Corporate Holdings Inc. A.B. Dick Company
5700 West Touhy Avenue 5700 West Touhy Avenue
Niles, Illinois 60714 Niles, Illinois 60714
Curtis Industries, Inc. Itek Graphix Corp.
6140 Parkland Boulevard 5700 West Touhy Avenue
Mayfield Heights, Ohio 44124 Niles, Illinois 60714
Curtis Sub, Inc.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Paragon Corporate Holdings Inc. (the
"Company") and by A.B. Dick Company, Curtis Industries, Inc., Itek Graphix Corp.
and Curtis Sub, Inc. (collectively, the "Subsidiary Guarantors") under the
Securities Act of 1933, as amended (the "Securities Act"), in connection with
the Company's offer to exchange up to $115,000,000 aggregate principal amount of
its 9-5/8% Series B Senior Notes due 2008 ("Series B Notes") for an equal
principal amount of its outstanding 9-5/8% Series A Senior Notes due 2008
("Series A Notes") and the related guarantee by the Subsidiary Guarantors of the
Series B Notes. The Series A Notes were issued, and the Series B Notes are
issuable, pursuant to an Indenture, dated as of April 1, 1998, among the
Company, the Subsidiary Guarantors and Norwest Bank Minnesota, National
Association, as Trustee (the "Indenture"). We have examined the Indenture, the
Series A Notes, the form of the Series B Notes and such other documents and
matters of law as we have deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Series B Notes, when executed by the Company and authenticated
by the Trustee in accordance with the provisions of the Indenture, and when
issued in exchange for Series A Notes as
<PAGE> 2
Paragon Corporate Holdings Inc.
A.B. Dick Company
Curtis Industries, Inc.
Itek Graphix Corp.
Curtis Sub, Inc.
April 28, 1998
Page 2
contemplated in the Registration Statement, will constitute legally valid and
binding obligations of the Company and will be entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or similar laws affecting the enforcement of
creditors' rights generally and subject to general principles of equity (whether
considered in a proceeding at law or in equity).
2. The guarantees by the Subsidiary Guarantors of the Series B Notes,
when executed by the Subsidiary Guarantors in accordance with the provisions of
the Indenture and when issued as contemplated in the Registration Statement,
will constitute legally valid and binding obligations of the Subsidiary
Guarantors, respectively, and will be entitled to the benefits of the Indenture,
subject to applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent transfer or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity (whether considered
in a proceeding at law or in equity).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus contained therein.
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
EXHIBIT 8
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
April 30, 1998
Paragon Corporate Holdings Inc. A.B. Dick Company
5700 West Touhy Avenue 5700 West Touhy Avenue
Niles, Illinois 60714 Niles, Illinois 60714
Curtis Industries, Inc. Itek Graphix Corp.
6140 Parkland Boulevard 5700 West Touhy Avenue
Mayfield Heights, Ohio 44124 Niles, Illinois 60714
Curtis Sub, Inc.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed by Paragon Corporate Holdings Inc. (the
"Company") and by A.B. Dick Company, Curtis Industries, Inc., Itek Graphix Corp.
and Curtis Sub, Inc. (collectively, the "Subsidiary Guarantors) under the
Securities Act of 1933, as amended (the "Securities Act"), in connection with
the Company's offer to exchange (the "Exchange Offer") up to $115,000,000
aggregate principal amount of the Company's 9-5/8% Series B Senior Notes due
2008 ("Series B Notes") for an equal principal amount of its outstanding 9-5/8%
Series A Senior Notes due 2008 ("Series A Notes") and the related guarantee by
the Subsidiary Guarantors of the Series B Notes (which guarantee is
substantially the same as the guarantee by the Subsidiary Guarantors of the
Series A Notes). The Series A Notes were issued, and the Series B Notes are
issuable, pursuant to an Indenture, dated as of April 1, 1998, among the
Company, the Subsidiary Guarantors and Norwest Bank Minnesota, National
Association, as Trustee (the "Indenture"). We have examined the Indenture, the
Series A Notes, the form of the Series B Notes and such other documents and
matters of law as we have deemed necessary for purposes of this opinion.
<PAGE> 2
Paragon Corporate Holdings Inc.
A.B. Dick Company
Curtis Industries, Inc.
Itek Graphix Corp.
Curtis Sub, Inc.
April 28 1998
Page 2
Based upon the foregoing, we are of the opinion that:
1. The discussion set forth in the Registration Statement under the
caption "Certain Federal Income Tax Considerations" describes the material
federal income tax consequences expected to result to the holders whose Series A
Notes are exchanged for Series B Notes in the Exchange Offer.
2. Under existing law, the exchange of the Series A Notes for the
Series B Notes pursuant to the Exchange Offer will not be a taxable event to
either the Company or the holders of the Series A Notes for federal income tax
purposes. A holder's holding period for Series B Notes will include the holding
period for Series A Notes.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the prospectus
contained therein under the captions "Certain Federal Income Tax Considerations"
and "Legal Matters."
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
EXHIBIT 10.1
------------
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 6th
day of November, 1997, among PARAGON CORPORATE HOLDINGS, INC., a Delaware
corporation ("Parent"), CURTIS ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("Newco"), and CURTIS INDUSTRIES, INC., a
Delaware corporation ("Curtis").
RECITAL:
The respective Boards of Directors of Parent, Curtis and Newco deem it
advisable and in the best interests of their respective stockholders to effect a
merger (the "Merger") of Newco into Curtis on the terms and conditions
hereinafter set forth in accordance with the applicable provisions of the laws
of the State of Delaware and the provisions of this Agreement, with the result
that the holders of shares of Curtis' Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock" and,
together with the Series A Preferred Stock, the "Preferred Stock") and Common
Stock, par value $.01 per share (the "Common Stock"), will receive pursuant to
the Merger the consideration specified herein, and Curtis will become a wholly
owned subsidiary of Parent.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Parent, Newco and Curtis hereby agree as follows:
ARTICLE I
MERGER
1.1 Effect of Merger. At the Effective Date (as defined in Section 1.3
below), Newco shall be merged with and into Curtis in accordance with the
Delaware General Corporation Law (the "Delaware Law"). Upon the effectiveness of
the Merger:
(a) Curtis shall be the surviving corporation (the "Surviving
Corporation"), the separate existence of Newco shall cease, and the
existence of Curtis shall continue unaffected and unimpaired by the
Merger (except as otherwise provided in this Agreement), with all
rights, privileges, immunities and powers, and subject to all the duties
and liabilities of a corporation formed under the Delaware Law;
(b) The Surviving Corporation, without further action, shall
succeed to and possess and enjoy all the rights, privileges, powers and
franchises, as well of a public as of a private nature, and be subject
to all the restrictions, disabilities and duties of each of Curtis and
Newco; and all and singular, the rights, privileges, powers and
franchises of Curtis and Newco, and all property, real, personal and
mixed, and all debts due to either Curtis or Newco on whatever account,
as well for stock subscriptions as all other things in action or
belonging to each of Curtis and Newco shall be vested in the Surviving
Corporation; and all
2
<PAGE> 2
property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of Curtis or Newco, and the title to
any real estate vested by deed or otherwise, under the Delaware Law, in
either Curtis or Newco, shall not revert or be in any way impaired by
reason of the Merger; but all rights of creditors and all liens upon any
property of either Curtis or Newco shall be preserved unimpaired, and
the respective debts, liabilities and duties of Curtis and Newco shall
thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it. Any action or proceeding, whether
civil, criminal or administrative, pending by or against Curtis or Newco
may be prosecuted as if the Merger had not taken place, and shall bind
the Surviving Corporation, or the Surviving Corporation may be proceeded
against or substituted in its place;
(c) The Certificate of Incorporation of the Surviving
Corporation following the Effective Date, until the same may be altered
or amended, shall be restated to be identical to the Certificate of
Incorporation of Newco as in effect on the date hereof, with the
exception of the name of the corporation. A copy of the form of Restated
Certificate of Incorporation of Curtis (the Surviving Corporation) is
attached hereto as EXHIBIT A;
(d) The By-laws of Newco as in effect on the date hereof shall
be the By-laws of the Surviving Corporation until the same shall be
altered or amended. A copy of the form of By-laws is attached hereto as
EXHIBIT B; and
(e) The directors and the officers of the Surviving Corporation
shall be those persons set forth on SCHEDULE 1.1(e), in each case until
their successors are elected and qualified.
1.2 Conversion of Common Stock, Preferred Stock and Newco Stock. On the
Effective Date, by virtue of the Merger and without any action on the part of
Parent, Newco, Curtis or the holder of any of the Common Stock or Preferred
Stock:
(a) Each share of Common Stock issued and outstanding
immediately prior to the Effective Date will be canceled and
extinguished and be converted into and become a right to receive $6.18
in cash;
(b) Each share of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Date will be canceled and
extinguished and be converted into and become a right to receive $6.18
in cash;
(c) Each share of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Date will be canceled and
extinguished and be converted into and become a right to receive the
amounts in cash and in promissory notes set forth on SCHEDULE 1.4. The
promissory notes shall be in the form and containing terms satisfactory
to Noel Group, Inc. ("Noel") and Livio Borghese ("Borghese"), the
principal stockholders of Curtis (the "Promissory Note(s)"), each of
which Promissory Notes shall be fully
2
<PAGE> 3
guaranteed by a Letter of Credit (the "Letter(s) of Credit") in form,
containing terms and issued by a financial institution, satisfactory to
Noel and Borghese; and
(d) Each outstanding share of common stock of Newco will be
automatically converted into and become one share of common stock of the
Surviving Corporation.
1.3 Certificate of Merger. As part of the Closing (as defined in Article
IX below), Newco and Curtis shall cause a Certificate of Merger, prepared by
counsel for Parent, to be executed and filed in accordance with the applicable
requirements of the laws of the State of Delaware. The Merger shall be effected
upon the filing of such certificate with the Secretary of State of the State of
Delaware, and the date and time of such filing is referred to in this Agreement
as the "Effective Date."
1.4 Payment for Shares of Common Stock and Preferred Stock.
(a) At the Closing, concurrently with the filing of the
Certificate of Merger, Parent shall deliver to the Surviving Corporation
(i) cashier's checks or other checks in a form selected by Parent,
providing immediately available funds equal to the cash amounts due to
each holder of Common Stock (other than a holder who also holds
Preferred Stock) pursuant to the provisions of Section 1.2, and (ii)
Promissory Notes and Letters of Credit due to each holder of Series B
Preferred Stock pursuant to the provisions of Section 1.2. Parent shall
pay to holders of Preferred Stock all cash amounts due to such holders
by wire transfer of immediately available funds if such holders provide
wire transfer instructions to Parent at least three business days prior
to Closing. The allocation of all payments is set forth on Schedule 1.4.
The Surviving Corporation shall deliver checks, Promissory Notes,
Letters of Credit and wire transfers as applicable to each holder of
Common Stock or Preferred Stock that has surrendered to Curtis the duly
endorsed certificate or certificates representing such stock,
accompanied by a Letter of Transmittal and Internal Revenue Service Form
W-9 in a form reasonably acceptable to Parent.
(b) After the Effective Date, there will be no transfers on the
stock transfer books of the Surviving Corporation of any shares of
Common Stock or Preferred Stock or rights, options or warrants to
purchase Common Stock or Preferred Stock that were outstanding
immediately prior to the Effective Date.
1.5 Further Action. If, at any time after the Effective Date, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Curtis, the officers of the Surviving Corporation are fully authorized to take
all such necessary or desirable action.
3
<PAGE> 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CURTIS
Curtis represents and warrants, as of the date of this Agreement, to
Parent and Newco as follows, and Curtis acknowledges that Parent and Newco are
relying on such representations and warranties in connection with their
agreements contained in this Agreement:
2.1 Organization and Standing. Curtis is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power and authority to own or lease and to operate its
assets at and in the places where such assets are now owned or leased and
operated by it, and to carry on its business as and where now being conducted by
it. Curtis is duly qualified to do business as a foreign corporation in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary.
2.2 Subsidiaries The only direct or indirect subsidiaries of Curtis are
those named on Schedule 2.2 to this Agreement. Except as set forth on SCHEDULE
2.2, Curtis is, directly or indirectly, the record and beneficial owner of all
of the outstanding shares of capital stock of each of its subsidiaries and there
are no outstanding options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any subsidiary, is or may be bound to issue additional
shares of its capital stock, or options, warrants or rights to purchase or
acquire any additional shares of its capital stock or securities convertible
into or exchangeable for such shares. All of the outstanding shares of capital
stock of such subsidiaries are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth on Schedule 2.2, all such shares of each of
its subsidiaries owned by Curtis are owned by it free and clear of any claim,
lien, encumbrance or agreement with respect to such shares and were not issued
in violation of any preemptive or any other rights, including any rights under
any federal or state securities laws, of any shareholder. Each subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has full corporate power and authority
to own or lease and to operate its assets at and in the places where such assets
are now owned or leased and operated by it, and to carry on its business as and
where now being conducted by it.
2.3 Capital Stock. The authorized capital stock of Curtis consists of
Five Hundred Thousand (500,000) shares of Common Stock, par value $.01 per
share, of which Two Hundred Sixty-three Thousand Three Hundred Forty-one
(263,341) are issued and outstanding; One Thousand Six Hundred Nineteen (1,619)
shares of Series A Convertible Preferred Stock, par value $.01 per share, all of
which are issued and outstanding; and Two Hundred Eleven Thousand Nine Hundred
Thirty (211,930) shares of Series B Convertible Preferred Stock, par value $.01
per share, all of which are issued and outstanding. All of the issued and
outstanding shares were duly authorized and validly issued, are fully paid and
non-assessable and were not issued in violation of preemptive or any other
rights, including any rights under any federal or state securities laws, of any
stockholder. There are no other shares of capital stock or other equity
securities of Curtis outstanding, and, except for
4
<PAGE> 5
options and warrants, all of which are required to be canceled as a condition
precedent to Closing, there are no other outstanding options, warrants, rights
to subscribe to, calls or commitments of any character whatsoever to which
Curtis is a party or by which it is bound, requiring the issuance or sale of, or
securities or rights convertible into or exchangeable for, such shares of any
capital stock of Curtis, and there are no contracts, commitments,
understandings, or arrangements by which Curtis is or may become bound to issue
additional shares of its capital stock or securities convertible into or
exchangeable for such shares, or options, warrants or rights to purchase or
acquire any additional shares of its capital stock or securities convertible
into or exchangeable for such shares.
2.4 Authority of Curtis. The execution, delivery and consummation of
this Agreement by Curtis has been duly authorized and approved by its Board of
Directors, and after obtaining the approval of its stockholders as required by
law, Curtis will have the full corporate power and authority to carry out the
transactions contemplated by this Agreement, and no further corporate action
will be necessary on the part of Curtis or its stockholders to make this
Agreement valid and legally binding on Curtis. The execution, delivery and
consummation of this Agreement by Curtis will not violate any provision of its
Certificate of Incorporation or its By-laws or those of its subsidiaries. Except
as set forth on SCHEDULE 2.4, neither the execution and delivery, nor the
consummation of this Agreement by Curtis will, with the passage of time, the
giving of notice, or otherwise, result in a violation or breach of, or
constitute a default or forfeiture, or give any right to terminate, modify or
accelerate, or to penalize Curtis or any of its subsidiaries, under any material
indenture, license, mortgage, deed of trust, lease, obligation, note, guaranty,
contract, agreement or other instrument, understanding, rule, regulation, law or
other restriction, or any order, judgment, or decree, to which Curtis or any of
its subsidiaries is a party or to or by which Curtis or any of its subsidiaries,
or any assets of any of them is subject or otherwise bound.
2.5 Financial Statements; Absence of Certain Changes
(a) Attached as SCHEDULE 2.5(a) are copies of the consolidated
balance sheet dated as of December 28, 1996 and consolidated statements
of operations and cash flows of Curtis and its subsidiaries for the year
ended December 28, 1996. All such financial statements (including, in
each case, any related notes or schedules thereto) were prepared in
accordance with generally accepted accounting principles, consistently
applied (except as may be indicated therein or in the notes thereto),
and fairly present in all material respects the consolidated financial
position of Curtis and its consolidated subsidiaries at the date thereof
and the consolidated results of its operations and cash flows for the
periods indicated.
(b) Except as set forth on SCHEDULE 2.5(a) or as disclosed in
the monthly financial information described on said Schedule or
otherwise provided to Parent, since December 28, 1996, there has not
been any material adverse change in the condition (financial or
otherwise), results of operations, assets or liabilities of Curtis and
its subsidiaries, taken as a whole, nor, to the knowledge of Curtis and
its subsidiaries, is any event threatened which, in the reasonable
judgment of Curtis, would cause such an adverse change, nor has there
occurred any event or governmental regulation or order restricting in
any material respect the business of Curtis or any of its subsidiaries,
nor, to the knowledge of Curtis and its subsidiaries, is any such event,
regulation or order threatened. Statements made in this Agreement as
being to
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the knowledge of Curtis mean to the knowledge of its officers listed on
SCHEDULE 2.5(b) in the normal course of performing their duties, without
any independent investigation being made for purposes of this Agreement
or otherwise.
2.6 Certain Fees. Neither Curtis nor any of its officers, directors or
employees has employed any financial advisor, broker or finder or incurred any
liability for any financial advisory, brokerage or finders' fees or commissions
in connection with the transactions contemplated by this Agreement.
2.7 Taxes.
(a) To the knowledge of Curtis, Curtis and its subsidiaries have
duly filed all income tax returns required to be filed by them, all such
returns are accurate in all material respects and Curtis and its
subsidiaries have duly paid all amounts shown as due and payable
pursuant to such returns or pursuant to any final, written assessment,
or have made adequate provision for any such liability not yet payable,
with respect to taxes in any jurisdiction, except where the failure to
have filed or paid or made adequate provision for taxes could not be
reasonably expected to have a material adverse effect on the condition
(financial or otherwise), results of operations, assets or liabilities
of Curtis and its subsidiaries taken as a whole. To Curtis' knowledge,
any deficiencies asserted as a result of examinations by any income
taxing authority have been paid or fully settled, and there are no
pending claims asserted for taxes of Curtis or its subsidiaries or
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of Curtis or a subsidiary of
Curtis for any period.
(b) To the knowledge of Curtis, Curtis and its subsidiaries have
(i) duly filed all returns required to be filed by them relating to
withholding taxes with respect to payments to employees and others, and
relating to sales, use and value added taxes, and have paid all amounts
shown as due and payable thereon, and (ii) made all required filings and
paid all amounts shown to be due thereon, or otherwise known to be due
and payable, for workers' compensation and unemployment compensation
premiums due to date.
2.8 Environmental Compliance. To the knowledge of Curtis, Curtis (i)
has obtained all material permits and licenses which are required to be obtained
under all applicable federal, state or local laws or any regulation, code,
order, decree or judgment, issued, entered or promulgated thereunder relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic wastes into ambient air, surface water,
ground water, or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants or hazardous or toxic materials or wastes by Curtis or
its subsidiaries (or their respective agents) ("Environmental Laws"); (ii) is in
compliance with all terms and conditions of such required permits, licenses and
authorizations, and also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws, except to the extent any
failure of compliance does not
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and will not have a material adverse effect on Curtis and its subsidiaries
taken as a whole; (iii) as of the date hereof, has not received actual notice of
any past or present violations of Environmental Laws or any event, condition,
circumstance, activity, practice or incident, which could reasonably form the
basis of any material claim, action, suit or proceeding, against Curtis or any
of its subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste; and (iv) has taken all
reasonable actions necessary under applicable Environmental Laws to register any
products or materials with governmental authorities required to be registered by
Curtis or its subsidiaries (or any of their respective agents) thereunder.
SCHEDULE 2.8 describes all environmental matters currently in existence to
Curtis' knowledge and being remediated by Curtis.
2.9 Litigation. SCHEDULE 2.9 lists all of the pending claims of Curtis
as of the date hereof. To Curtis' knowledge, there is currently no action,
threatened or pending, or any inquiry, claim or investigation that could lead to
an action, suit or proceeding against Curtis that could be reasonably expected
to have a material adverse effect on the condition (financial or otherwise),
results of operations, assets or liabilities of Curtis and its subsidiaries,
taken as a whole.
2.10 Compliance with Laws and Permits.
(a) To the knowledge of Curtis, the business and operations of
Curtis are conducted in all material respects in compliance with all
laws and orders of all governmental authorities having jurisdiction over
Curtis and with all permits relating to any of its properties or
applicable to its business.
(b) To the knowledge of Curtis, (i) Curtis possesses all permits
necessary to own and operate its property and assets and to conduct its
business as it is currently conducted, (ii) such permits are valid and
subsisting in full force and effect, (iii) Curtis has fulfilled its
material obligations under each of the permits, and (iv) no event has
occurred or condition or state of facts exists which constitutes or,
after notice or lapse of time or both, would constitute a default or
violation under any of the permits or would permit revocation or
termination of any of the permits. No proceeding which might involve the
revocation or termination of any such permits is pending or, to the
knowledge of Curtis, threatened.
(c) Except for documents to be filed in connection with the
Merger, Curtis has made all material filings and received all approvals
relating to the permits which are necessary in order for Curtis to
legally and validly own and operate its property and assets and to
conduct its business after the Merger as it is currently and has
heretofore been conducted.
2.11 Customers and Suppliers. Attached as SCHEDULE 2.11 is a list of
Curtis' ten (10) largest customers ("Material Customers"). Neither Curtis nor,
to the knowledge of Curtis, its Material Customers or material suppliers are in
default under any material contract relating to Curtis' business. To the
knowledge of Curtis, no Material Customer or material supplier of Curtis or its
subsidiaries intends to cancel or otherwise terminate its relationship with
Curtis or its subsidiaries or
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to materially decrease its services or supplies to Curtis or its
subsidiaries or its usage of the services or products of Curtis or its
subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco jointly and severally represent and warrant, as of the
date of this Agreement, to Curtis and its stockholders as follows, and Parent
and Newco acknowledge that Curtis and its stockholders are relying on such
representations and warranties in connection with this Agreement:
3.1 Organization and Standing. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Parent has the full corporate power and
authority to own or lease and operate its assets at and in the places where such
assets are now owned or leased and operated by it, and to carry on its business
as and where now being conducted by it. Newco is a newly formed corporation and
is not currently conducting business.
3.2 Capital Stock and Subsidiaries. The authorized capital stock of
Newco consists of One Thousand Five Hundred (1,500) shares of Common Stock, no
par value, of which One Hundred (100) shares are issued and outstanding. All of
the issued and outstanding shares of Newco are owned by Parent, were duly
authorized and validly issued, are fully paid and non-assessable and were not
issued in violation of preemptive or any other rights, including any rights
under any federal or state securities laws, of any stockholder. There are no
other shares of capital stock or other equity securities of Newco outstanding,
and there are no other outstanding options, warrants, rights to subscribe to,
calls or commitments of any character whatsoever to which Newco is a party or by
which it may be bound, requiring the issuance or sale of, or securities or
rights convertible into or exchangeable for, shares of any capital stock of
Newco, and there are no contracts, commitments, understandings, or arrangements
by which Newco is or may become bound to issue additional shares of capital
stock or securities convertible into or exchangeable for such shares, or
options, warrants or rights to purchase or acquire any additional shares of
stock or securities convertible into or exchangeable for such shares.
3.3 Authority of Parent and Newco. The execution, delivery and
consummation of this Agreement by Parent and Newco have been duly authorized
and approved by the respective Boards of Directors of Parent and Newco, and
after obtaining the approval of Parent as sole stockholder of Newco, no further
corporate action will be necessary on the part of either Parent or Newco or
their respective stockholders to make this Agreement valid and legally binding
on Parent and Newco The execution, delivery and consummation of this Agreement
by Parent and Newco will not violate any provision of the Certificates of
Incorporation or By-laws of either. Neither the execution, delivery nor
consummation of this Agreement by Parent or Newco will, with the passage of
time, the giving of notice, or otherwise, result in a violation or breach of, or
constitute a default or forfeiture, or give
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any right to terminate, modify or accelerate or to penalize Parent or Newco,
under any term or provision of any material indenture, license, mortgage, deed
of trust, lease, obligation, note, guaranty, contract, agreement or other
instrument, understanding, rule, regulation, law or other restriction or any
order, judgement or decree to which or by which Parent or Newco is a party or to
or by which either of them or any of their respective assets is subject or
otherwise bound, nor will it result in the creation of any lien or other charge
upon any of the shares of capital stock of Parent or Newco, or any material
assets of Parent and Newco.
3.4 Certain Fees. None of Parent, Newco, or any of their respective
officers, directors or employees, has employed any financial advisor, broker or
finder or incurred any liability for any financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated by
this Agreement.
ARTICLE IV
COVENANTS OF CURTIS
Curtis covenants that from the date hereof to the Closing:
4.1 Preservation of Business. Curtis shall use all reasonable efforts,
consistent with operating its business in the ordinary course, to (i) preserve
intact its present business organization and personnel, (ii) preserve its
present goodwill and advantageous relationships with all persons having business
dealings with it, (iii) preserve and maintain in force all of its licenses,
certificates, leases, contracts, permits, registrations, franchises,
confidential information, patents, trademarks, trade names and copyrights, and
applications for any of same, bonds and other similar rights, and (iv) maintain
its assets. Except as otherwise provided in this Agreement, Curtis shall not
enter into any new employment or consulting agreements with any of its present
officers, management personnel or consultants, or any other employment or
consulting agreement with any other person, other than in the ordinary course of
its business. Curtis shall maintain in force all property, casualty, crime,
life, directors, officers and other forms of insurance and bonds which it
presently carries, and, except with the written consent of Parent, Curtis shall
not cancel or assign any existing insurance coverage.
4.2 Ordinary Course. Curtis shall operate its business, and shall cause
its subsidiaries to operate their respective businesses, only in the usual,
regular and ordinary course and manner, and, except with the written consent of
Parent, Curtis shall not, and shall not permit any of its subsidiaries to, (i)
sell or agree to sell any capital stock, (ii) except in the ordinary course of
business, encumber any property or assets or terminate or modify any lease or
incur any obligation (contingent or otherwise), (iii) make or enter into any
material contract or commitment, or enter into any material modification of
same, except in the ordinary course of business or as contemplated by this
Agreement, or (iv) make capital expenditures, except expenditures, which in the
aggregate, do not exceed the capital expenditures provided for in the 1997
Business Plan, a copy of which has been provided to Parent.
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4.3 Books and Records. Curtis shall use all reasonable efforts to (i)
maintain its books, accounts and records in the usual, regular and ordinary
mariner, (ii) comply with all laws applicable to it or to the conduct of its
business, and (iii) cause each of its subsidiaries to do the same.
4.4 No Organic Change. Curtis shall not, and shall not permit its
subsidiaries to, make any amendments to their respective Certificate of
Incorporation or By-laws or make any changes in their capital stock, whether by
reclassification, subdivision, reorganization or otherwise or merge or
consolidate with any other corporation, trust or entity, or change the character
of their respective businesses, except to the extent Curtis deems such actions
to be necessary to further the transactions contemplated by this Agreement and
obtains consent from Parent, which consent may not be withheld unreasonably.
4.5 No Dividends, Etc. Without the prior written consent of Parent or
Newco, Curtis shall not declare, pay or set aside any dividends or other
distributions or payments with respect to its capital stock or redeem any shares
of such capital stock.
4.6 Consents and Approvals. Curtis shall use all reasonable efforts to
obtain all necessary consents and approvals of all persons, firms, entities and
governmental authorities to the consummation of the transactions contemplated by
this Agreement; provided, that Curtis shall not obtain the consent of the
holders of the Senior Secured Subordinated Notes due 1999 (the "Senior Notes")
or of Fleet Capital Corporation, both of which will be paid in full by the
Surviving Corporation on the Effective Date. Promptly after the execution of
this Agreement, Curtis shall cause a written consent of its stockholders to be
distributed for execution by its stockholders for the purpose of approving the
Merger and the adoption of this Agreement.
4.7 No Issuance of Shares, Options, Etc. Curtis shall not change the
number or kind of shares of capital stock issued and outstanding, or grant any
options, warrants or other rights to purchase or to convert any obligation into
its capital stock.
4.8 No Discussions with Another Purchaser. Between the date of this
Agreement and December 5, 1997, unless extended in writing by Curtis, Curtis
shall not enter into nor conduct any discussions nor distribute information on
its business with any other prospective purchaser, except for distributions of
information in the ordinary course of business.
ARTICLE V
COVENANTS OF PARENT AND NEWCO
From and after the Closing, Parent and the Surviving Corporation,
jointly and severally, covenant and agree to indemnify and hold harmless each
of the directors, officers and stockholders of Curtis as of the date of this
Agreement (collectively, the "Indemnitees" and individually, an "Indemnitee")
from any and all costs, expenses, losses, damages and liabilities incurred or
suffered by any of them (including reasonable legal fees and costs) resulting
from or attributable to (a) the breach of any one or more of the representations
or warranties of Parent or Newco made in or
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pursuant to this Agreement or (b) the conduct of Curtis' business, including but
not limited to, any debt, liability or obligation of Curtis whatsoever,
regardless of when such debt, liability or obligation arose or arises, provided,
however, that this provision is not intended to indemnify any director or
officer, in his or her capacity as such, with respect to matters for which
indemnification would not be available under Curtis' Certificate of
Incorporation or By-laws, as in effect as of the date of this Agreement, or
under law. In the event of any proceeding (whether arising before or after the
Effective Date) relating to an indemnification obligation hereunder, Parent or
the Surviving Corporation, as the case may be, will assume the defense of any
such matter; provided, that if neither Parent nor the Surviving Corporation
assumes such defense, then they will be jointly and severally liable to the
affected Indemnitee or Indemnitees for all fees and costs associated with such
defense, including, without limitation, counsel fees and the cost of any
settlement. The Indemnitees, in the event of a conflict of interest (under
applicable standards of professional conduct) on any significant issue between
the positions of any Indemnitee, on one hand, and any other Indemnitee or Parent
or the Surviving Corporation, on the other hand, are entitled to such number of
counsel as are necessary to eliminate all conflicts of the type referred to
above, at the expense of Parent and the Surviving Corporation. Such additional
counsel may be selected by Parent or the Surviving Corporation, with the consent
of the party being represented by such counsel, which consent may not be
withheld unreasonably. If Parent or the Surviving Corporation fails to select
counsel within 10 days after request from an Indemnitee, such Indemnitee may
choose his or her own counsel. This Section shall survive the Merger, shall
continue without time limit and is intended to benefit each of the Indemnitees,
each of whom shall be entitled to enforce this Section against Parent or the
Surviving Corporation, as the case may be. For purposes of this Section, the
term "proceeding" means any threatened, pending or completed action, suit or
proceeding, and any inquiry, claim or investigation that could lead to such an
action, suit or proceeding.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Additional Undertakings. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use, and to cause their
respective officers, employees and agents (as well as those of their respective
subsidiaries) to use, all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing, including, but not limited to:
(a) using reasonable efforts to obtain all necessary consents,
approvals and authorizations as are required under any federal, state or
local laws or regulations, to defend all lawsuits or other legal
proceedings challenging this Agreement, or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; and
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(b) effecting as promptly as practicable all contractually
required notices and all necessary registrations and filings, including, but not
limited to, all submissions of information requested by other governmental
authorities whose approval of the transactions contemplated hereby is required,
and, in the event requests for further information thereunder are received, to
provide such information as is requested as promptly as practicable following
such request.
6.2 Notification of Certain Matters. Parent and Newco shall give prompt
notice to Curtis, and Curtis shall give prompt notice to Parent and Newco, of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty made by, such
party contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Date, and (ii) any
material failure of Parent and Newco, or Curtis, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that no such notification shall
affect the representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
6.3 Confidential Nature of Information. Whether or not the Closing
occurs, each of the parties will treat in confidence all documents, materials
and other information disclosed by any other party that is not its affiliate,
whether during the course of the negotiations leading to the execution of this
Agreement or thereafter, in its investigation of the other parties and in the
preparation of agreements, schedules and other documents relating to the
consummation of such transactions. Prior to the Closing, and in the event that
this Agreement is terminated, then at any time, none of the parties will use any
information furnished by any other party that is not its affiliate in its or any
of its affiliate's businesses. If this Agreement is terminated, each of the
parties will use its reasonable efforts to return to the other parties all
originals and copies of non-public documents and materials of the type provided
for in this Section 6.3 which have been furnished in connection with this
Agreement. The parties shall cooperate with each other in the development and
distribution of all news or other public disclosures relating to this proposed
transaction and any material matters incident thereto. Neither party shall issue
any press release or make any other public disclosures without the prior written
consent of the other party; provided that parties acknowledge that Noel may,
without causing a violation of this Agreement, issue press releases or make
other public disclosures when it is advised by counsel that such releases or
disclosures are necessary to comply with Noel's legal requirements, and provided
that it is understood that Noel will give Parent notice, reasonable under the
circumstances, of any such release or disclosure.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND NEWCO
The obligations of Parent and Newco under this Agreement are, at
Parent's option, subject to satisfaction of the following conditions at or prior
to the Closing:
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7.1 Representations and Warranties of Curtis. The representations and
warranties of Curtis set forth in this Agreement shall be true and complete in
all material respects on and as of the Closing to the same extent and with the
same force and effect as if made on such date.
7.2 Consents. All necessary approvals or consents shall have been
obtained from any and all federal departments and agencies, and from all other
commissions, boards and agencies and from any other persons, including the
stockholders of Curtis, firms or entities whose approval or consent is
necessary to the consummation of the transactions contemplated by this
Agreement, except that no consents or approvals will be obtained from the
holders of the Senior Notes or Fleet Capital Corporation. Curtis shall have
obtained a Supplemental Indenture executed by Security Pacific National Bank
("SPNB"), as Trustee under the Indenture, dated February 4, 1987, between
Curtis and SPNB, relating to Curtis' 13-1/8% Subordinated Debentures Due 2002.
No order shall have been entered and remain in effect in any action or
proceeding before any foreign, federal or state court or governmental,
regulatory or administrative authority or agency that would prevent or make
illegal the consummation of the Merger.
7.3 Performance. Curtis shall have duly performed all obligations,
covenants and agreements undertaken by it herein and complied with all terms and
conditions applicable to it hereunder to be performed or complied with prior to
the Closing.
7.4 Hart-Scott-Rodino. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired.
7.5 Documents to be Delivered to Parent. Parent shall have received:
(a) a certificate, dated as of the Closing, and executed by the
Chief Executive Officer of Curtis, certifying as to the fulfillment
of the matters contained in Sections 7.1, 7.2 and 7.3 of this Agreement;
(b) a favorable written opinion from Benesch, Friedlander,
Coplan & Aronoff LLP, counsel for Curtis, dated as of the Closing,
addressed to Parent and Newco opining as to the due authorization of the
Merger by Curtis and its stockholders;
(c) a copy of a resolution duly adopted by the Board of
Directors of Curtis, certified by its Secretary, authorizing the
execution, delivery and performance of this Agreement, and directing the
submission thereof to approval of the stockholders of Curtis;
(d) a certificate dated as of the Closing, and executed by the
Secretary of Curtis, certifying as to the adoption of this Agreement by
holders of at least a majority of the shares of Common Stock and of the
Series A Preferred Stock, and by at least 80% of the shares of Series B
Preferred Stock, entitled to vote thereon;
(e) written confirmation, in form satisfactory to Parent, that
each outstanding option and warrant to purchase Common Stock shall
have been canceled, which cancellation is acknowledged by the holder
thereof;
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(f) duly endorsed stock certificates with related Letters of
Transmittal and IRS Forms W-9, representing 100% of the outstanding
Common Stock and Preferred Stock of Curtis, together with Curtis' stock
ledger; and
(g) such other documents or instruments as Parent may reasonably
request, in form and substance reasonably requested by Parent, in order
to consummate the transactions described in this Agreement.
7.6. Dissenters' Rights. Parent shall be satisfied that no holder of
Common Stock or Preferred Stock has sought or will seek appraisal for such stock
in accordance with the provisions of Section 262 of the Delaware Law.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CURTIS
The obligations of Curtis under this Agreement are, at its option,
subject to satisfaction of the following conditions at or prior to the Closing:
8.1 Representations and Warranties. The representations and warranties
of Parent and Newco set forth in this Agreement shall be true and complete in
all material respects on and as of the Closing to the same extent and with the
same force and effect as if made on such date.
8.2 Consents. All necessary approvals or consents shall have been
obtained from any and all federal departments and agencies, and from all other
commissions, boards and agencies, and from any other persons, including the
Executive Committee of Noel and the other stockholders of Curtis, firms or
entities whose approval or consent is necessary to the consummation of the
transactions contemplated by this Agreement, except that no consents or
approvals shall be obtained from the holders of the Senior Notes or Fleet
Capital Corporation. No order shall have been entered and remain in effect in
any action or proceeding before any foreign, federal or state court or
governmental, regulatory or administrative authority or agency that would
prevent or make illegal the consummation of the Merger.
8.3 Performance by Parent and Newco. Parent and Newco shall have duly
performed all obligations, covenants and agreements undertaken by them herein to
be performed at or prior to the Closing and complied with all terms and
conditions applicable to them hereunder to be performed or complied with at or
prior to the Closing.
8.4 Hart-Scott-Rodino. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired.
8.5 Retirement of Notes. Parent shall have made arrangements for funds
to be available at Closing sufficient to pay in full all of Curtis' obligations
under the Senior Notes.
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8.6 Documents to be Delivered to Curtis, Noel and Borghese. Curtis,
Noel and Borghese shall have received:
(a) certificates, dated as of the Closing, and executed by an
officer of Parent and Newco, respectively, certifying as to the
fulfillment of the matters contained in Sections 8.1, 8.2 and 8.3 of
this Agreement;
(b) a favorable opinion from counsel for Parent and Newco, in
form and content, and from counsel, reasonably satisfactory to Noel and
Borghese;
(c) copies of resolutions duly adopted by the respective Boards
of Directors of Parent and Newco, certified by their authorized
officers, authorizing the execution, delivery and performance of this
Agreement;
(d) a copy of a resolution duly adopted by Parent, as sole
stockholder of Newco, certified by its authorized officer, approving
this Agreement;
(e) the forms of Promissory Notes and Letters of Credit,
acceptable in form and substance to Noel and Borghese, in their sole
discretion; and
(f) such other documents or instruments as Curtis, Noel or
Borghese reasonably request in order to consummate the transactions
described in this Agreement.
ARTICLE IX
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Benesch, Friedlander, Coplan &
Aronoff LLP, located at 2300 BP Tower, 200 Public Square, Cleveland, Ohio, on
November 25, 1997, or on such other date as may be agreed upon by the parties,
which date shall be within thirty (30) days after the later of the satisfaction
or waiver of all conditions to the obligations of each party under this
Agreement, but in no event later than December 5, 1997, unless otherwise agreed
by the parties. Unless the parties otherwise agree in writing, if the Closing
does not take place by the last date fixed in accordance with this Article IX,
then this Agreement shall be deemed to have been terminated and abandoned
subject to the right of any party arising Out of any other party's breach of the
provisions hereof.
Notwithstanding the approval of the stockholders of Curtis, this
Agreement may be terminated, and the Merger may be abandoned, at any time prior
to the date of the Closing by the mutual written consent of Curtis, Parent and
Newco, duly authorized by their respective Boards of Directors.
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ARTICLE X
TERMINATION OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Curtis contained in this Agreement
or in any certificate, schedule, chart, list, letter, compilation or other
document delivered pursuant hereto, shall terminate as of the Closing. The
representations and warranties of Parent and Newco contained in this Agreement,
shall survive the Closing and shall terminate on the payment in full of the
Promissory Notes.
ARTICLE XI
INFORMATION
Parent shall, prior to the Effective Date, through its representatives,
make such investigation of the properties and assets of Curtis and of its
financial and legal condition as it deems necessary or advisable, and, upon
reasonable notice, have access during normal business hours to all personnel,
properties, books, records, contracts and documents of Curtis. Any such
investigation shall not, however, affect or mitigate the representations and
warranties hereunder. Any holder of Common Stock or Preferred Stock shall, after
the Effective Date, have access during normal business hours, and upon
reasonable notice, to information concerning Curtis and relating to periods
ending prior to the Closing, including copies of books, records and documents of
Curtis, reasonably necessary to assist such holder in its federal securities law
reporting.
ARTICLE XII
ASSIGNMENT, THIRD PARTIES, BINDING EFFECT
The rights under this Agreement shall not be assignable nor the duties
delegable by any party without the written consent of all parties hereto having
been obtained thereto; provided, however, that Newco may assign its respective
rights and delegate its duties to any direct or indirect wholly owned subsidiary
of Parent. All covenants, agreements, representations and warranties of the
parties contained herein shall be binding upon Curtis, Parent and Newco and
their respective successors and permitted assigns and shall inure to the
benefit, respectively, of Curtis, its directors, officers and stockholders, and
Parent and Newco, as well as all of their respective successors and assigns.
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ARTICLE XIII
ABANDONMENT
In the event the transactions contemplated hereby are terminated or
abandoned by mutual agreement of the parties hereto, or without fault of a party
pursuant to Article IX hereof, there shall be no liability on the part of any
of the parties by reason of such termination or abandonment.
ARTICLE XIV
EXPENSES
The parties shall each bear all of their own respective expenses,
including, but not limited to, counsel and accoutants' fees, in connection with
the transactions contemplated by this Agreement, if the Merger is not
consummated. If the Merger is consummated, the Surviving Corporation shall be
responsible for any fees or expenses incurred by Parent, Newco, Curtis, and the
directors and officers of Curtis (in such capacities), including all fees of
Benesch, Friedlander, Coplan & Aronoff LLP, relating to the Merger not paid at
or prior to the Closing.
ARTICLE XV
NOTICES
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, telecopied with receipt confirmed or deposited in the United States
mail, certified or registered, return receipt requested, postage prepaid,
addressed to the parties or their permitted assignees, at the following
addresses (or at such other address as shall be given in writing by any party to
the other) as follows:
(a) To Parent or Newco: Paragon Corporate Holdings, Inc
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: President
Telecopier number: (440) 449-3112
(b) To Curtis: Curtis Industries, Inc.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Attention: Maurice P. Andrien, President
Telecopier number: (440) 446-0555
17
<PAGE> 18
With a copy to: Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Patricia M. Inglis, Esq.
Telecopier number: (216) 363-4588
And to: Noel Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021
Attention: Joseph S. DiMartino
Telecopier number: (212) 758-8531
ARTICLE XVI
DAMAGES; REMEDIES NOT EXCLUSIVE
No party (or its Affiliates) shall, in any event, be liable to the
other party (or its Affiliates) for any consequential damages, including, but
not limited to, loss of revenue or income, cost of capital, or loss of business
reputation or opportunity relating to the termination of this Agreement. Each
party agrees that it will not seek punitive damages as to any matter under,
relating to or arising out of the transactions contemplated under this
Agreement.
No remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every remedy given hereunder or now or
hereafter existing, at law or in equity, by statute or otherwise. The election
of any one or more remedies by any of the parties shall not constitute a waiver
of the right to pursue other available remedies.
ARTICLE XVII
COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
18
<PAGE> 19
provided, however, that after approval of the Merger by the stockholders of
Curtis, no amendment may be made which (a) alters or changes the amount of
consideration to be received in exchange for or on conversion of all or any of
the shares of Common Stock or Preferred Stock as provided in Section 1.2, (b)
alters or changes any terms of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (c) alters or changes any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the stockholders of Curtis, without the further approval of the
stockholders of Curtis in compliance with the Delaware Law.
ARTICLE XXIII
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
ARTICLE XXIV
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without regard to principles of
conflicts of laws thereof.
20
<PAGE> 20
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
PARAGON CORPORATE HOLDINGS, INC. CURTIS INDUSTRIES, INC.
By /s/ Frank J. Rzicznek By: /s/ Maurice P. Andrien, Jr., President
----------------------------- ---------------------------------------
Name: Frank J. Rzicznek Maurice P. Andrien, Jr. President
-----------------------
Title: Vice President
----------------------
CURTIS ACQUISITION CORP.
By /s/ Frank J. Rzicznek
-----------------------------
Name: Frank J. Rzicznek
-----------------------------
Title: Vice President
The undersigned stockholders of Curtis Industries, Inc. agree to vote
their shares of capital stock of Curtis Industries, Inc. in favor of the Merger
NOEL GROUP, INC.
By /s/ Joseph S. DiMartino /s/ Livio M. Borghese
------------------------------- ------------------------------
Joseph S. DiMartino, President Livio M. Borghese
21
<PAGE> 1
EXHIBIT 10.2
------------
-----------------------------------
STOCK PURCHASE AGREEMENT
-----------------------------------
DATED AS OF DECEMBER 19, 1996
BETWEEN
GEC INCORPORATED, AS SELLER
AND
PARAGON CORPORATE HOLDINGS, INC., AS PURCHASER
-----------------------------------
OF ALL OUTSTANDING SHARES OF
A. B. DICK COMPANY
-----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS.......................................................................... 1
SECTION 1.01. Certain Defined Terms....................................................... 1
ARTICLE II PURCHASE AND SALE.................................................................... 8
SECTION 2.01. Purchase and Sale........................................................... 8
SECTION 2.02. Purchase Price.............................................................. 8
SECTION 2.03. Closing..................................................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER............................................. 10
SECTION 3.01. Incorporation and Authority of Seller....................................... 10
SECTION 3.02. Incorporation and Qualification of A. B. Dick............................... 10
SECTION 3.03. Capital Stock of A. B. Dick................................................. 11
SECTION 3.04. Subsidiaries................................................................ 11
SECTION 3.05. No Conflict................................................................. 12
SECTION 3.06. Consents and Approvals...................................................... 12
SECTION 3.07. Financial Information....................................................... 12
SECTION 3.08. Intentionally Omitted....................................................... 12
SECTION 3.09. Absence of Litigation....................................................... 13
SECTION 3.10. Compliance with Laws........................................................ 13
SECTION 3.11. Licenses and Permits........................................................ 13
SECTION 3.12. Brokers..................................................................... 13
SECTION 3.13. Absence of Certain Changes.................................................. 13
SECTION 3.14. Taxes....................................................................... 15
SECTION 3.15. Proprietary Rights.......................................................... 16
SECTION 3.16. Title to and Condition of Properties........................................ 17
SECTION 3.17. Environmental Matters....................................................... 18
SECTION 3.18. Employee Benefit Plans...................................................... 20
SECTION 3.19. Contracts................................................................... 22
SECTION 3.20. Accounts Receivable......................................................... 23
SECTION 3.21. Labor Relations............................................................. 23
SECTION 3.22. Business of A. B. Dick...................................................... 23
SECTION 3.23. Customers................................................................... 23
SECTION 3.24. Suppliers................................................................... 24
SECTION 3.25. Product Liability........................................................... 24
SECTION 3.26. Credit Terms; Product Warranties............................................ 24
SECTION 3.27. Insurance................................................................... 24
SECTION 3.28. Projections................................................................. 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................... 25
SECTION 4.01. Incorporation and Authority of Purchaser.................................... 25
SECTION 4.02. No Conflict................................................................. 25
SECTION 4.03. Consents and Approvals...................................................... 25
SECTION 4.04. Absence of Litigation....................................................... 25
SECTION 4.05. Brokers..................................................................... 26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V ADDITIONAL AGREEMENTS................................................................ 26
SECTION 5.01. Conduct of Business Prior to the Closing.................................... 26
SECTION 5.02. Confidentiality............................................................. 26
SECTION 5.03. Regulatory and Other Authorizations; Consents............................... 27
SECTION 5.04. Pre-Closing Transfer of Assets.............................................. 27
SECTION 5.05. U.S. Accounts Receivable.................................................... 28
SECTION 5.06. Relocation Cost Reimbursement............................................... 30
SECTION 5.07. Intra-Company Accounts...................................................... 30
SECTION 5.08A. U.S. Pension Plans.......................................................... 30
SECTION 5.08B. Non-U.S. Pension Plans...................................................... 31
SECTION 5.09A. U.S. Welfare Plans and Other Benefit Plans.................................. 32
SECTION 5.09B. Non-U.S. Welfare Plans and Other Benefit Plans.............................. 33
SECTION 5.10. Severance Allowance......................................................... 34
SECTION 5.11. Additional Agreements....................................................... 34
SECTION 5.12. Environmental Permit Transfers.............................................. 35
SECTION 5.13. Further Action.............................................................. 35
SECTION 5.14. Accounts Receivable......................................................... 35
SECTION 5.15. Tax Sharing Agreement....................................................... 35
SECTION 5.16. Pre-Closing Claims by A.B. Dick............................................. 35
SECTION 5.17. GEC plc Guarantee........................................................... 36
SECTION 5.18. 3500 Inventory.............................................................. 36
ARTICLE VI TAX MATTERS.......................................................................... 37
SECTION 6.01. Tax Indemnities............................................................. 37
SECTION 6.02. Refunds and Tax Benefits.................................................... 39
SECTION 6.03. Contests.................................................................... 39
SECTION 6.04. Preparation of Tax Returns.................................................. 40
SECTION 6.05. Section 338(h)(10) Election................................................. 41
SECTION 6.06. Cooperation and Exchange of Information..................................... 42
SECTION 6.07. Conveyance Taxes............................................................ 42
SECTION 6.08. Miscellaneous............................................................... 43
ARTICLE VII CONDITIONS TO CLOSING................................................................ 43
SECTION 7.01. Conditions to Obligations of Seller......................................... 43
SECTION 7.02. Conditions to Obligations of Purchaser...................................... 44
ARTICLE VIII INDEMNIFICATION...................................................................... 45
SECTION 8.01. Survival.................................................................... 45
SECTION 8.02. Indemnification by Purchaser................................................ 46
SECTION 8.03. Indemnification by Seller................................................... 48
SECTION 8.04. Environmental Indemnification............................................... 50
SECTION 8.05. Indemnification by Seller for Liabilities Relating to Pension
Plans, Other Benefit Plans, Retiree Medical Benefits and
Breach of Employee Benefit Plan Representations............................. 54
SECTION 8.06. Exclusive Remedies; Waiver.................................................. 55
ARTICLE IX TERMINATION AND WAIVER............................................................... 55
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.01. Termination................................................................. 55
SECTION 9.02. Effect of Termination....................................................... 56
SECTION 9.03. Waiver...................................................................... 56
ARTICLE X GENERAL PROVISIONS................................................................... 57
SECTION 10.01. Expenses.................................................................... 57
SECTION 10.02. Notices..................................................................... 57
SECTION 10.03. Public Announcements........................................................ 58
SECTION 10.04. Headings.................................................................... 58
SECTION 10.05. Severability................................................................ 58
SECTION 10.06. Entire Agreement............................................................ 58
SECTION 10.07. Assignment; Binding Effect.................................................. 58
SECTION 10.08. No Third-Party Beneficiaries................................................ 59
SECTION 10.09. Amendment................................................................... 59
SECTION 10.10. Governing Law............................................................... 59
SECTION 10.11. Arbitration................................................................. 59
SECTION 10.12. Counterparts................................................................ 60
SECTION 10.13. Waiver of Jury Trial........................................................ 60
</TABLE>
EXHIBITS
Exhibit 2.02(a) Note
Exhibit 5.04(a) Transfer Agreement
Exhibit 5.11(a)(i) Distributor Agreement
Exhibit 5.11(b) Distributor Agreement
Exhibit 5.11(c) Distributor Agreement
Exhibit 5.11(d) Supply Agreement
Exhibit 5.17 GEC plc Guarantee
Exhibit 7.01(e) Form of Opinion of Purchaser's Counsel
Exhibit 7.02(d) Lease of Niles Facility
Exhibit 7.02(h)(i) Form of Opinion of Seller's Counsel
Exhibit 7.02(h)(ii) Form of Opinion of GEC plc's Counsel
Exhibit 7.02(i) Assumption Agreement
DISCLOSURE SCHEDULE
1.01(b) Seller's Accounting Policies
2.02(b)(A) Reference Statement
2.02(b)(B) Interim Working Capital
3.02 Incorporation and Qualification
3.04 Subsidiaries
3.06 Consents and Approvals
3.07 Company's Financial Data
iii
<PAGE> 5
3.09 Absence of Litigation
3.10 Compliance with Laws
3.13 Absence of Certain Changes
3.14 Taxes
3.15 Proprietary Rights
3.16 Title To and Condition Of Property
3.17 Environmental Matters
3.18A ERISA Compliance
3.18B A. B. Dick Non-U.S. Benefit Plans
3.19 Contracts
3.20 Accounts Receivable
3.21 Labor Relations
3.23 Customers
3.24 Suppliers
3.25 Product Liability
3.26 Credit Terms
3.27 Insurance
5.01 Conduct of Business Prior to the Closing
5.03(b) Certain Contracts
5.04(c) Niles Personal Property Retained
5.04(d) Transfer of Other Assets
5.09A(c) A. B. Dick Welfare Plans Retained by A. B. Dick
5.09B(c) A. B. Dick Non-U.S. Welfare Plans Retained by
Purchaser Retained Subsidiaries
6.05 Allocation of Purchase Price
9.01(b) Immaterial Obligations
iv
<PAGE> 6
THIS STOCK PURCHASE AGREEMENT, dated as of December 19, 1996,
between GEC INCORPORATED, a Delaware corporation ("Seller"), and PARAGON
CORPORATE HOLDINGS, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns all the issued and outstanding shares of
capital stock (the "Shares") of A. B. Dick Company ("A. B. Dick"), a Delaware
corporation; and
WHEREAS, Seller desires to sell the shares on the terms
hereinafter expressed, and Purchaser desires to purchase the shares on the terms
hereinafter expressed;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, Purchaser and Seller
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings:
"3500 INVENTORY" means all raw material, work-in-progress and
finished goods inventory relating to the Century 3500S, 3500W and 3500SW series
of printing presses.
"A. B. DICK" has the meaning specified in the recitals of this
Agreement.
"A. B. DICK BENEFIT PLANS" has the meaning specified in
Section 3.18(a).
"A. B. DICK PENSION PLANS" has the meaning specified in
Section 3.18(a).
"A. B. DICK WELFARE PLANS" has the meaning specified in
Section 3.18(a).
"AFFILIATE" means, when used with respect to a specified
Person, another Person that either directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified and, for purposes of Article VIII only, their respective
owners.
"AGREEMENT" means this Stock Purchase Agreement, dated as of
December 19, 1996, between Seller and Purchaser (including the Disclosure
Schedule).
"ALLOCATION" has the meaning specified in Section 6.05(c).
"ASSUMPTION AGREEMENT" has the meaning specified in Section
7.02(i).
<PAGE> 7
"BUSINESS" means the business of A. B. Dick and the Purchaser
Retained Subsidiaries as conducted as of the date hereof, after giving effect to
the transfers provided for in Section 5.04.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
the City of Chicago.
"CERCLIS" has the meaning specified in Section 3.17(a)(ii).
"CLOSING" has the meaning specified in Section 2.03(a).
"CLOSING DATE" has the meaning specified in Section 2.03(a).
"COMMONLY CONTROLLED ENTITY" has the meaning specified in
Section 3.18(a).
"CONFIDENTIALITY AGREEMENT" has the meaning specified in
Section 5.02.
"CONSEQUENTIAL DAMAGES" means any consequential, incidental,
special, punitive or exemplary damages including, but not limited to, lost
profits, loss of revenue and loss of use or diminution in value of property.
"CONTEST" has the meaning specified in Section 6.03(b).
"DESIGNATED LIABILITIES" means the following liabilities of A.
B. Dick and the Purchaser Retained Subsidiaries:
(a) all liabilities reflected in Final Working Capital
(including (i) subject to clause (iv) below, all Reserves therein, but only up
to the aggregate amount of all such Reserves, (ii) the Tax Basket, but only up
to the amount of such Tax Basket, (iii) the Service Liability reflected therein,
but only up to the amount of such Service Liability and (iv) all other
liabilities reflected in the Final Working Capital but, except as set forth in
clause (e), only to the extent of the amount of such liability included in the
Final Working Capital);
(b) obligations under the agreements listed in Schedule 3.19
and purchase orders, sales orders and Other Contracts entered into in the
ordinary course of operating the Business, but excluding therefrom, subject to
clause (a) above, any damages resulting from any default occurring prior to
Closing or any default resulting from the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement;
(c) all liabilities relating to claims for severance asserted
against A. B. Dick or Seller or its Affiliates by employees of A. B. Dick or the
Purchaser Retained Subsidiaries who are terminated from employment after the
Closing; and
(d) liabilities to the extent arising as a result of the
operation of the Business by A.B. Dick and the Purchaser Retained Subsidiaries,
or any other occurrence with regard to A. B. Dick and the Purchaser Retained
Subsidiaries, after the Closing; provided, however, that Designated Liabilities
shall exclude:
2
<PAGE> 8
(i) all liabilities covered by Seller's indemnity
obligations under Article VI, Section 8.04 and Section 8.05,
(ii) all liabilities relating to conditions of the
businesses of A. B. Dick or any Subsidiary to the extent any such
condition is in existence prior to the Closing to the extent such
liabilities are not included in clause (a) or clause (b) above, or
(iii) subject to clause (a) above and clause (e) below,
all liabilities for claims made by third parties for injury or
damages including, but not limited to, product liability and
worker's compensation claims, with respect to A. B. Dick and the
Subsidiaries, in existence prior to the Closing or to the extent
arising from any event taking place or arising prior to the Closing
(including any liability relating to products sold prior to the
Closing except to the extent such liability relates to damages
caused by modifications made or instructed to be made by A. B. Dick
or any of its Affiliates after the Closing); or
(iv) all past, present and future liabilities of A.B.
Dick and the Subsidiaries, whether fixed or contingent, known or
unknown, or of any nature whatsoever, in any way related to the
Niles Facility or the Seller Retained Subsidiaries, other than
obligations specifically assumed by Purchaser pursuant to the Lease
and, subject to clause (i), (ii) and (iii) above, other than
liabilities related to the Niles Facility resulting from the
operations of A. B. Dick after the Closing.
(e) all liabilities for product warranty claims for damage to,
or repair or replacement of, products sold by A. B. Dick or any Purchaser
Retained Subsidiary but excluding any liability for injury or damage to Persons
or other property.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as
of the date hereof delivered to Purchaser by Seller.
"DISTRIBUTOR AGREEMENTS" means the agreements to be entered
into pursuant to Sections 5.11(a), (b), (c) and (d).
"ENVIRONMENTAL LAWS" has the meaning specified in Section
3.17(b).
"ENVIRONMENTAL LOSS" has the meaning specified in Section
8.04(a).
"ENVIRONMENTAL PERMITS" has the meaning specified in Section
3.17(a)(i).
"ERISA" has the meaning specified in Section 3.18(a).
"ESTIMATED WORKING CAPITAL ADJUSTMENT" means an adjustment to
the consideration paid by Purchaser in connection with the transactions
contemplated hereby equal to the Interim Working Capital less the Reference
Working Capital.
"EXCLUDED LIABILITIES" means:
3
<PAGE> 9
(a) all past and present liabilities of A. B. Dick and the
Purchaser Retained Subsidiaries, whether fixed or contingent, known or unknown,
or of any nature whatsoever, other than the Designated Liabilities;
(b) all past, present and future liabilities of A.B. Dick and
the Subsidiaries, whether fixed or contingent, known or unknown, or of any
nature whatsoever, relating to
(i) all liabilities covered by Seller's indemnity
obligations under Article VI, Section 8.04 and Section 8.05, and
(ii) the Niles Facility, other than obligations
specifically assumed by Purchaser pursuant to the Lease and as set
forth in clause (d)(iv) of the definition of Designated Liabilities;
(c) all liabilities relating to claims asserted against
Purchaser, A. B. Dick, the Purchaser Retained Subsidiaries or their respective
Affiliates by employees of A. B. Dick or the Purchaser Retained Subsidiaries who
are terminated from employment prior to Closing or who claim rights to severance
solely from the transfer of the Shares by Seller to Purchaser under this
Agreement; and
(d) all past, present and future liabilities whether fixed or
contingent, known or unknown, or of any nature whatsoever, of or relating to the
Seller Retained Subsidiaries.
Seller and Purchaser hereby acknowledge and agree that
Seller's indemnification obligation with respect to those Excluded Liabilities
identified in clause (b)(i) above shall be governed by Section Article VI,
Section 8.04 and Section 8.05, respectively, and shall not be governed by
Section 8.03(a)(iv).
"FINAL 3500 INVENTORY" shall mean the book value of the 3500
Inventory under Seller's Accounting Policies as reflected in the Final Working
Capital, not taking into account the adjustments described in Section
2.02(b)(i). Even though for purposes of the Final Working Capital Adjustment the
Final 3500 Inventory shall be deemed to be zero, the parties shall determine
such value under Seller's Accounting Policies pursuant to the procedures set
forth in Section 2.02(c).
"FINAL WORKING CAPITAL" means Working Capital calculated as of
the open of business on the Closing Date; provided, however, that such
calculation shall be made on a "roll forward" basis from March 31, 1996 to the
open of business on the Closing Date, it being agreed that Working Capital was
$30,514,000 at March 31, 1996 as set forth on the Reference Statement after
making the adjustments described in Section 2.02(b); and provided further that,
with respect to any adjustment required under Seller's Accounting Policies to be
made at the end of the March 31 fiscal year, the Closing Date shall be treated
as the end of the fiscal year for purposes of such calculation of Final Working
Capital.
"FINAL WORKING CAPITAL ADJUSTMENT" means an adjustment to the
consideration paid by Purchaser in connection with the transactions contemplated
hereby equal to Final Working Capital less Interim Working Capital.
4
<PAGE> 10
"HAZARDOUS SUBSTANCES" has the meaning specified in Section
3.17(c).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"INTERIM WORKING CAPITAL" has the meaning specified in Section
2.02(b).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE OF PURCHASER" means the knowledge, after reasonable
inquiry, of Robert J. Tomsich, John H. Fountain and David M. Sweeney.
"KNOWLEDGE OF SELLER" means the knowledge, after reasonable
inquiry, of the Chief Executive Officer, Chief Legal Officer, and Chief
Financial Officer of A. B. Dick, the Vice President and Secretary of Seller,
Fred Wood, David LeSage and Phillippe Gilles.
"LEASE" means the lease agreement described in Section
7.02(d).
"LOSSES" of a Person means any and all losses, liabilities,
damages (excluding Consequential Damages), claims, awards, judgments, costs and
expenses (including reasonable attorneys' and consultants' fees) actually
suffered or incurred by such Person.
"NILES FACILITY" means the real property, plant and office
facility located at 5700 West Touhy Avenue, Niles, Illinois.
"NOTE" has the meaning specified in Section 2.02(a).
"OTHER CONTRACTS" means (a) all written contracts of A. B.
Dick or any Purchaser Retained Subsidiary (other than the contracts required to
be set forth in Schedule 3.19), (b) oral contracts of A. B. Dick or any
Purchaser Retained Subsidiary requiring payments or assumption of liability by
A. B. Dick or any Purchaser Retained Subsidiary of less than $15,000 in the
aggregate with respect to any individual oral contract and $150,000 in the
aggregate with respect to all such oral contracts and (c) any oral contract that
may be terminated by A. B. Dick immediately upon delivery of notice to the other
party. Notwithstanding the foregoing, subject to clause (a) of the definition of
Designated Liabilities, Other Contracts shall not include any agreement with
respect to any claim by a third party for damages as a result of any occurrence
prior to the Closing Date.
"PCBS" has the meaning specified in Section 3.17(a)(i).
"PERMITTED ENCUMBRANCES" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable; (b) encumbrances imposed by law, such
as materialmen's, mechanics', carriers', workmen's and repairmen's liens and
other similar liens, arising in the ordinary course of business and reflecting
5
<PAGE> 11
items not yet due and payable; (c) pledges or deposits to secure obligations
under workers' compensation laws or similar legislation or to secure statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) were not
incurred in connection with any indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually or in
the aggregate, materially adversely affect the use of such property for its
current purposes.
"PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, trust, association, governmental
or regulatory body or other entity.
"PRE-CLOSING TAX PERIOD" shall mean all taxable periods ending
on or before the Closing Date and, in the case of any taxable period that begins
before the Closing Date but does not end on or prior to the Closing Date, the
portion of such period ending on the Closing Date.
"PROPRIETARY RIGHTS" has the meaning specified in Section
3.15(a)(ii).
"PURCHASER" has the meaning specified in the preamble to this
Agreement.
"PURCHASER RETAINED SUBSIDIARY" means any Subsidiary that is
not a Seller Retained Subsidiary.
"PURCHASER'S THRESHOLD AMOUNT" has the meaning specified in
Section 8.02(b).
"REAL PROPERTY" has the meaning specified in Section 3.16(a).
"REFERENCE STATEMENT" has the meaning specified in Section
2.02(b).
"REFERENCE WORKING CAPITAL" has the meaning specified in
Section 2.02(b).
"REMEDIAL ACTIVITIES" has the meaning specified in Section
8.04.
"REMOVED ASSETS" has the meaning specified in Section 3.13(i).
"RESERVES" means all reserves, accruals or provisions
reflected in Working Capital, excluding the Tax Basket, Service Liability, trade
accounts payable, liability for capital leases and any reserves, accruals or
provisions relating to product warranty, and any other items that the parties
agree in writing will be treated as separate items and not aggregated for
purposes of clause (a) of the definition of Designated Liabilities. As part of
the computation of Final Working Capital, the parties shall use the procedures
set forth in Section 2.02(c) to determine the aggregate amount of Reserves as of
the Closing.
"SECTION 338 ELECTIONS" has the meaning specified in Section
6.05(a).
"SELLER" has the meaning specified in the preamble to this
Agreement.
"SELLER RETAINED SUBSIDIARIES" has the meaning specified in
Section 5.04(b).
6
<PAGE> 12
"SELLER'S ACCOUNTING POLICIES" means the accounting
principles, policies, practices, bases, methods, judgments and estimations used
by A. B. Dick and the Purchaser Retained Subsidiaries for the preparation of the
Reference Statement which, as to the matters set forth in Section 1.01(b) of the
Disclosure Schedule, are as set forth on the Disclosure Schedule to the extent
set forth therein; provided, however, that any accounting principle, policy,
practice, base, method, judgment or estimation not disclosed in Section 1.01(b)
of the Disclosure Schedule shall not conflict with the principles, policies,
practices, bases, methods, judgments and estimations set forth in such Section
for purposes of this definition.
"SELLER'S THRESHOLD AMOUNT" has the meaning specified in
Section 8.03(b).
"SERVICE LIABILITY" means the account maintained for
prepayments received under customer service contracts for services to be
performed in the future.
"SHARES" has the meaning specified in the recitals to this
Agreement.
"SUBSIDIARY" or "SUBSIDIARIES" means any and all corporations,
partnerships, joint ventures, associations, and other entities in which the
majority of voting common stock or other equity interest is held or controlled
by A. B. Dick directly or indirectly through one or more intermediaries.
"TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property, transfer or other taxes, fees, stamp
taxes and duties, contributions, assessments or charges of any kind whatsoever
(whether payable directly or by withholding), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"TAX ASSET" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes);
"TAX BASKET" has the meaning specified in Section 6.01(a).
"THIRD-PARTY CLAIMS" has the meaning specified in Section
8.04(f).
"UK SUBSIDIARY" means A. B. Dick-Itek Limited.
"U. S. ACCOUNTS RECEIVABLE" has the meaning specified in
Section 5.04(a).
"UNOCCUPIED LEASED PROPERTIES" means the real property that is
not occupied by A.B. Dick or any Purchaser Retained Subsidiary but is leased by
A. B. Dick or a Purchaser Retained Subsidiary pursuant to the leases identified
in or required to be identified in Section 3.16 of the Disclosure Schedule.
"WORKING CAPITAL" means, subject to Section 2.02(b), the
excess of (a) all current assets of A. B. Dick and the Purchaser Retained
Subsidiaries (or the long-term portion of such
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assets to the extent taken into account in connection with the preparation of
the Reference Statement) other than the Removed Assets, but including all U. S.
Accounts Receivable (except for intra-GEC accounts) excluding the $1,500,000
required to be in a cash account pursuant to Section 5.10, over (b) the current
portion of all Designated Liabilities (or the long-term portion of such
Designated Liabilities to the extent taken into account in connection with the
preparation of the Reference Statement). Working Capital shall be calculated
using Seller's Accounting Policies and the same level of prudence actually used
by A. B. Dick for the preparation of the Reference Statement.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. Upon the terms and subject to
the conditions set forth in this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, the Shares.
SECTION 2.02. PURCHASE PRICE. (a) In consideration of the
transfer of the Shares and the assumption of liabilities and indemnifications
undertaken by Seller in the Assumption Agreement; and in addition to the
retention of U. S. Accounts Receivable hereinafter provided for by Seller,
Purchaser shall at Closing deliver to Seller an unsecured promissory note in the
principal amount of Six Million Dollars ($6,000,000.00) in the form attached
hereto as Exhibit 2.02(a) (the "Note"). The consideration for the Shares shall
be adjusted as provided below.
(b) Section 2.02(b)(A) of the Disclosure Schedule attached
hereto (the "Reference Statement") contains a calculation of Working Capital as
of March 31, 1996 ("Reference Working Capital"). Attached hereto as Section
2.02(b)(B) of the Disclosure Schedule is a calculation of Working Capital as of
October 26, 1996 with respect to A. B. Dick and as of October 31, 1996 with
respect to the Purchaser Retained Subsidiaries ("Interim Working Capital"). For
purposes of calculating the Estimated Working Capital Adjustment and the Final
Working Capital Adjustment, the Reference Working Capital and the Interim
Working Capital were prepared, and the Final Working Capital shall be prepared,
subject to the following adjustments:
(i) The parties agree that solely for purposes of
computing the Estimated Working Capital Adjustment and the Final
Working Capital Adjustment, the value of the 3500 Inventory in the
Interim Working Capital and the Final Working Capital shall be deemed
to be zero.
(ii) The parties agree that the Service Liability
shall be included in the Reference Working Capital, the Interim Working
Capital and the Final Working Capital for all purposes of computing the
adjustments described in Section 2.02(c). The parties acknowledge that
the Service Liability amount included in the Reference Working Capital
is $9,099,000 and that such amount shall be utilized in the Reference
Working Capital for purposes of computing the Estimated and Final
Working Capital Adjustments. If the parties determine, utilizing the
procedures set forth in Section 2.02(c), prior to the final
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and binding determination of the Final Working Capital Adjustment, that
the amount of the Service Liability that should have been included in
the Reference Working Capital is greater than $9,099,000 under Seller's
Accounting Policies, the outstanding principal balance of the Note
shall be reduced by treating the amount of such excess as a prepayment
under the Note; provided, however, that the amount of such reduction
shall not exceed $1,000,000.
(iii) The Reference Working Capital and the Interim
Working Capital excluded, and the Final Working Capital shall exclude,
(A) all Excluded Liabilities, including, but not limited to, any
accrued liability for real estate taxes with respect to the Niles
Facility, any accrued liability or reserve for retiree medical benefits
or pension benefits, or any accrued liability or reserves for
environmental matters for which Seller is required to indemnify
Purchaser and its Affiliates pursuant to Section 8.04, (B) all
inter-GEC accounts, including (1) any inter-GEC debts or accounts
payable described in Section 5.07 including, without limitation any
inter-GEC debts or accounts payable which arise in the ordinary course
of business, and (2) any inter-GEC receivables described in Section
5.04(d) of the Disclosure Schedule and any inter-GEC receivables which
arise in the ordinary course of business, it being understood that no
amounts in respect thereof shall be owing between A. B. Dick and its
Affiliates, on one hand, and Seller and its Affiliates, on the other
hand, immediately after the Closing, (C) estimated and prepaid Taxes,
and (D) any refund or credit of Taxes payable to Seller pursuant to
Section 6.02.
(iv) Cash has been excluded for purposes of computing
the Reference Working Capital and Interim Working Capital, but shall be
included in computing Final Working Capital to the extent not removed
by Seller prior to the Closing. A liability for the A.B. Dick Company
Executive Share Unit Plan, the A.B. Dick Company Executive Compensation
Plan and the A. B. Dick Company Contingent Compensation Plan has been
excluded for purposes of computing the Reference Working Capital and
Interim Working Capital, but the accrued liability for such plans in an
amount not to exceed $60,000 shall be taken into account to compute the
Final Working Capital.
(c) At the Closing, a cash settlement will be made in the
amount of the Estimated Working Capital Adjustment, which is $6,679,000 by
Seller to Purchaser. As soon as practicable, but not later than 60 days after
the Closing Date, Seller shall provide Purchaser with a calculation of the Final
Working Capital and the Final Working Capital Adjustment (including the
calculation provided for in Section 5.05(a)). The Final Working Capital
calculation and the Final Working Capital Adjustment calculation shall be
conclusive and binding on the parties hereto unless Purchaser shall deliver to
Seller notice in writing of an objection to any item within 30 days following
Purchaser's receipt of such calculations. In the event of such a dispute,
Purchaser, Seller and their respective accountants shall negotiate in good faith
among themselves for a period of 15 Business Days in an attempt to resolve such
dispute. If no resolution is reached within such period, Purchaser and Seller
shall submit such disputed items for arbitration by KPMG Peat Marwick (Chicago),
or such other public accounting firm jointly selected by Purchaser and Seller,
as arbitrator (the "Arbitrator"), within five Business Days after the end of
that period and the decision of the Arbitrator shall be given within 30 days
thereafter and will be conclusive and binding on the parties. The decision of
the Arbitrator shall constitute an arbitral award that is final, binding and
unappealable and upon which a judgment may be
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entered by any court having jurisdiction thereof. Purchaser and Seller will each
pay one-half of the fees and expenses charged by the Arbitrator in connection
therewith. Upon the later of (i) 30 days following Purchaser's receipt of the
Final Working Capital calculation and the Final Working Capital Adjustment
calculation, or (ii) two Business Days following resolution of any dispute or
receipt of the final decision of the Arbitrator, a final cash settlement will be
made in the amount of the Final Working Capital Adjustment by Purchaser to
Seller, if positive, and by Seller to Purchaser, if negative. In connection with
the foregoing, Purchaser shall provide Seller with reasonable access during
normal business hours to records, work papers and personnel of A. B. Dick.
SECTION 2.03. CLOSING. (a) Subject to the terms and conditions
of this Agreement, the sale and purchase of the Shares contemplated hereby shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, no
later than January 17, 1997 at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, IL or at such other time or on such other date or at
such other place as Seller and Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
(b) At the Closing, Seller shall deliver or cause to be
delivered to Purchaser (i) stock certificates evidencing the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, (ii)
the opinions, certificates and other documents required to be delivered pursuant
to Section 7.02, (iii) the Assumption Agreement, (iv) the Distributor
Agreements, and (v) the Lease.
(c) At the Closing, Purchaser shall deliver to Seller (i) the
Note, (ii) the Distributor Agreements, (iii) the Lease and (iv) the opinions,
certificates and other documents required to be delivered pursuant to Section
7.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 3.01. INCORPORATION AND AUTHORITY OF SELLER. Seller is
a corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all necessary corporate power and authority to enter
into this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Seller, the performance by Seller of its obligations hereunder and
the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller, and (assuming due
authorization, execution and delivery by Purchaser) this Agreement constitutes a
legal, valid and binding obligation of Seller enforceable against Seller in
accordance with its terms.
SECTION 3.02. INCORPORATION AND QUALIFICATION OF A. B. DICK.
A. B. Dick is a corporation duly organized, validly existing and in good
standing under the laws of Delaware
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and has the corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by A. B. Dick. A. B. Dick is
duly qualified, licensed or registered as a foreign corporation to do business
and is in good standing, to the extent applicable, in each jurisdiction listed
in Section 3.02 of the Disclosure Schedule and is duly qualified, licensed or
registered as a foreign corporation to do business and is in good standing, to
the extent applicable, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification, license or registration necessary.
SECTION 3.03. CAPITAL STOCK OF A. B. DICK. The Shares
constitute all the authorized, issued and outstanding shares of capital stock of
A. B. Dick. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation of any preemptive
rights. There are no options, warrants or rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital stock of A. B.
Dick obligating A. B. Dick to issue or sell any of its shares of capital stock.
Seller owns the Shares free and clear of all pledges, security interests and all
other liens, encumbrances and adverse claims, except for any liens, encumbrances
or adverse claims arising out of, under or in connection with this Agreement.
There are no voting trusts, stockholder agreements, proxies or other agreements
in effect with respect to the voting or transfer of the Shares.
SECTION 3.04. SUBSIDIARIES. Section 3.04 of the Disclosure
Schedule sets forth a true and complete list of all Subsidiaries, listing for
each Subsidiary its name, the jurisdiction of its incorporation or organization,
and, in addition, for each Purchaser Retained Subsidiary, the type of entity,
its authorized capital stock, partnership capital or equivalent, the number and
type of its issued and outstanding shares of capital stock, partnership
interests or similar ownership interests and A. B. Dick's current ownership of
such shares, partnership interests or similar ownership interests. There are no
options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital stock of any Purchaser
Retained Subsidiary obligating any Purchaser Retained Subsidiary to issue or
sell any of its shares of capital stock. Except for the nominee share set forth
in Schedule 3.04 of the Disclosure Schedule, which shall be transferred at
Closing to Buyer for no additional consideration in accordance with Section
7.02(j), A. B. Dick owns all of the outstanding shares of capital stock of each
Purchaser Retained Subsidiary, free and clear of all pledges, security interests
and all other liens, encumbrances or adverse claims, except for liens,
encumbrances or adverse claims arising out of, under or in connection with this
Agreement. There are no voting trusts, stockholder agreements, proxies or other
agreements in effect with respect to the voting or transfer of the shares of
capital stock of any Purchaser Retained Subsidiary. Each Purchaser Retained
Subsidiary listed in Section 3.04 of the Disclosure Schedule is duly organized
and validly existing under the laws of its respective jurisdiction of
organization and has the requisite power and authority to own, operate or lease
the properties and assets now owned, operated or leased by such Purchaser
Retained Subsidiary and to carry on its business as currently conducted by such
Subsidiary. Section 3.04 of the Disclosure Schedule lists all jurisdictions in
which each Purchaser Retained Subsidiary is qualified to do business. Each
Purchaser Retained Subsidiary is qualified, licensed or registered to do
business and is in good standing, to the extent applicable, in each jurisdiction
where the character of its properties owned, operated or leased or the nature of
its activities makes such qualification, license or registration necessary.
Except as set forth in Section 3.04 of the Disclosure Schedule, neither A. B.
Dick nor any Purchaser Retained Subsidiary is subject to any obligation or
requirement
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to make any investment in or advance to (in the form of a loan, capital
contribution, other contribution or otherwise) any Person. Seller has heretofore
delivered to Purchaser complete and correct copies of the charter, articles or
by-laws (which terms shall be deemed to also include comparable governing
instruments with different names) of each Purchaser Retained Subsidiary, as
amended and presently in effect, and no Purchaser Retained Subsidiary is in
default in the performance, observation or fulfillment of its charter, articles
or by-laws.
SECTION 3.05. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to Purchaser, the execution, delivery and
performance of this Agreement by Seller does not and will not (a) violate or
conflict with the certificate of incorporation or by-laws (or similar
organizational documents) of Seller, (b) conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to Seller, A. B. Dick, the Business or any Purchaser Retained
Subsidiary or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien or other
encumbrance on the Shares or on any of the assets or properties of A. B. Dick or
any Purchaser Retained Subsidiary pursuant to any note, bond, mortgage or
indenture, or pursuant to any material contract, agreement, lease, license,
permit, franchise or other instrument relating to such assets or properties to
which Seller, A. B. Dick or any Purchaser Retained Subsidiary are a party or by
which any of such assets or properties is bound or affected.
SECTION 3.06. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement by Seller does not, and the performance of this
Agreement by Seller will not, require any consent, approval, authorization or
other action by, or filing with or notification to, any governmental or
regulatory authority, except (a) as described in Section 3.06 of the Disclosure
Schedule, (b) the notification requirements of the HSR Act, and (c) as may be
necessary as a result of any facts or circumstances relating solely to
Purchaser.
SECTION 3.07. FINANCIAL INFORMATION. Attached hereto as
Section 3.07 of the Disclosure Schedule is a true and complete copy of a
financial internal report on the standard form of Seller from A. B. Dick and the
Purchaser Retained Subsidiaries setting forth their data for the fiscal years
ended March 31, 1995 and 1996 (hereinafter called the "Company's Financial
Data"). The Company's Financial Data has been prepared for incorporation in the
financial statements of Seller's parent which are prepared in accordance with
U.K. generally accepted accounting principles ("U.K. GAAP"). The Company's
Financial Data presents in accordance with U.K. GAAP the financial position and
the assets and liabilities of A. B. Dick and the Purchaser Retained Subsidiaries
as of the dates reflected therein, and of the income, expenses and results of
the operations of A. B. Dick and the Purchaser Retained Subsidiaries for the
periods reflected therein. Seller has also delivered to Buyer a financial
schedule setting forth the Company's Financial Data for the year ended March 31,
1996, as adjusted for the matters identified in such schedule.
SECTION 3.08. INTENTIONALLY OMITTED.
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SECTION 3.09. ABSENCE OF LITIGATION. Except as set forth in
Section 3.09 of the Disclosure Schedule, there are no material claims, actions,
proceedings or investigations pending (or, to the Knowledge of Seller,
threatened) against A. B. Dick or any Purchaser Retained Subsidiary or any of
the assets or properties of A. B. Dick or any Purchaser Retained Subsidiary,
before any court, arbitrator or administrative, governmental or regulatory
authority or body. Except as set forth in Section 3.09 of the Disclosure
Schedule, neither A. B. Dick nor any Purchaser Retained Subsidiary nor any of
their respective assets or properties are subject to any order, writ, judgment,
injunction, decree, determination or award. No claim, action, proceeding or
investigation involving Seller or any Seller Retained Subsidiary is pending (or,
to the Knowledge of Seller, is threatened) before any court, arbitrator or
administrative, governmental or regulatory authority or body which seeks to
delay or prevent the consummation of the transactions contemplated hereby or
which would be reasonably likely to materially and adversely affect or restrict
Seller's ability to consummate the transactions contemplated hereby.
SECTION 3.10. COMPLIANCE WITH LAWS. Neither A. B. Dick nor any
Purchaser Retained Subsidiary is in violation of any material law, rule,
regulation, order, judgment or decree applicable to A. B. Dick or any Purchaser
Retained Subsidiary or by which any of the properties of A. B. Dick or any
Purchaser Retained Subsidiary is bound or affected, except as set forth in
Section 3.10 of the Disclosure Schedule. This Section shall not apply to
environmental matters which are exclusively the subject of Section 3.17.
SECTION 3.11. LICENSES AND PERMITS. A. B. Dick and the
Purchaser Retained Subsidiaries hold all permits (excluding Environmental
Permits), franchises, licenses, consents, authorizations, approvals and
certificates of any regulatory, administrative or other governmental agency or
body material to and used primarily in conducting the Business required to
conduct the Business in compliance with material applicable law (collectively,
the "Permits"). To the knowledge of Seller each of the Permits is currently
valid and in full force and effect. A. B. Dick and the Purchaser Retained
Subsidiaries have been in material compliance with the Permits. There is no
pending or, to the Knowledge of Seller, threatened proceeding against A. B. Dick
or any Purchaser Retained Subsidiaries or change in law or regulation which
could reasonably be expected to result in the revocation or cancellation of, or
inability of A. B. Dick or any Purchaser Retained Subsidiary to renew, or comply
with any Permit. True and complete copies of all Permits with respect to the
Niles Facility, the Roxdale, Ontario facility and the Rochester, New York
facility have been delivered to or made available for review by Purchaser.
SECTION 3.12. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller.
SECTION 3.13. ABSENCE OF CERTAIN CHANGES. Except as set forth
in Section 3.13 of the Disclosure Schedule, since the date of the Reference
Statement, neither A. B. Dick nor any Purchaser Retained Subsidiary has:
(i) granted any material pledge, lien, security
interest, mortgage, charge, adverse claim of ownership or use, or
other encumbrance of any kind on any properties or assets (whether
tangible or intangible) of A. B. Dick or any Purchaser Retained
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Subsidiary other than the properties or assets to be removed prior
to Closing as contemplated by Section 5.04 (the "Removed Assets");
(ii) established or materially increased any bonus,
insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan, or otherwise materially increased the compensation
payable to or to become payable to any officers or key employees of
A. B. Dick or any Purchaser Retained Subsidiary, except in any case
described above as may be required by law or applicable collective
bargaining agreement or covered by Seller's indemnity obligations
set forth in Section 8.05;
(iii) entered into any material employment or severance
agreement with any of the employees of A. B. Dick or any Purchaser
Retained Subsidiary;
(iv) sold, assigned, transferred, leased or otherwise
disposed of any fixed assets of A. B. Dick or any Purchaser Retained
Subsidiary having an aggregate value exceeding $100,000 or any of
the other assets or properties of A. B. Dick or any Purchaser
Retained Subsidiary having an aggregate value exceeding $75,000,
other than the Removed Assets (including Scriptomatic Inc.,
Scriptomatic S.A., Refac Marketing Services, Inc. and Itek Graphix
Pty. Limited), sales of inventory in the usual and ordinary course
of business and payments of cash;
(v) (A) acquired (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof, (B) incurred any
indebtedness for borrowed money or issued any debt securities or
assumed, granted, guaranteed or endorsed, or otherwise as an
accommodation become responsible for, the obligations of any person
(other than by A. B. Dick with respect to obligations of its
Purchaser Retained Subsidiaries), (C) made loans or advances (other
than by A. B. Dick to the Subsidiaries), or (D) declared, set aside
or paid any dividend or distribution (in cash or in kind) other than
those contemplated by this Agreement or made any direct or indirect
redemption, purchase or other acquisition of any of its capital
stock or entered into any option, right, warrant or agreement to
purchase or acquire such stock, the aggregate value of any matter
set forth in this Section 3.13(v) which exceeds $50,000;
(vi) materially changed any method of accounting or
accounting practice used by A. B. Dick or any Purchaser Retained
Subsidiary other than such changes as were required by generally
accepted accounting principles;
(vii) issued or sold any additional shares of the
capital stock of, or other equity interests in, A. B. Dick or any
Purchaser Retained Subsidiary, or securities convertible into or
exchangeable for such shares or equity interests, issued or granted
any options, warrants, calls, subscription rights or other rights of
any kind to acquire additional shares of such capital stock, such
other equity interests, or such securities, capitalized any
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profits or reserves in the form of shares or debt or redeemed or
purchased any shares of such capital stock;
(viii) amended A. B. Dick's certificate of incorporation
or by-laws or amended the certificate of incorporation, by-laws or
other organizational documents of any Purchaser Retained Subsidiary;
(ix) entered into an agreement to do any of the
foregoing;
(x) made any purchase of or any agreement to purchase
assets (other than materials, supplies and inventory purchased in
the ordinary course of business) for an amount in excess of $50,000
for any one purchase or $250,000 for all such purchases or entered
into any lease or any agreement to lease, as lessor or lessee, any
capital assets with payments over the term thereof to be made by A.
B. Dick or any Purchaser Retained Subsidiary exceeding an aggregate
of $75,000;
(xi) made or agreed to any material modification,
waiver, change, amendment, release, rescission or termination of, or
accord and satisfaction with respect to, any contract, agreement,
license or other instrument identified in Section 3.19 of the
Disclosure Schedule, other than any satisfaction by performance in
accordance with the terms thereof in the usual and ordinary course
of business.
SECTION 3.14. TAXES. (a) Except as set forth in Schedule 3.14,
(i) Seller has duly filed all federal, state, local and foreign tax returns and
tax reports required to be filed with respect to A. B. Dick and its
Subsidiaries, (ii) all taxes, assessments, fees and other governmental charges
of A. B. Dick or any Subsidiary shown to be payable under such returns and
reports have been fully paid or are not delinquent and are fully accrued as
liabilities in the Reference Statement and (iii) no written claim has been made
by authorities in any jurisdiction where Seller did not file tax returns that A.
B. Dick or any Subsidiary is or may be subject to taxation therein.
(b) Seller has delivered to Purchaser copies of all federal,
state, local, and foreign income tax returns filed with respect to A. B. Dick or
any Purchaser Retained Subsidiary for taxable periods ended on or after March
31, 1993. Section 3.14 of the Disclosure Schedule sets forth the dates and
results of any and all audits and investigations finalized within the last year
and for which a payment was made. No waivers of any applicable statute of
limitations for the filing of any tax returns or payment of any taxes or
assessments of any deficient or unpaid taxes are outstanding. Except as
disclosed in Section 3.14 of the Disclosure Schedule, all deficiencies proposed
as a result of any audits and investigations have been paid or settled. There is
no pending or, to the Knowledge of Seller, threatened federal, state, local or
foreign tax audit or assessment of Seller, A. B. Dick or any Subsidiary and
except as disclosed in Section 3.14 of the Disclosure Schedule, there is no
agreement with any federal, state, local or foreign taxing authority that may
affect the subsequent tax liabilities of Seller, A. B. Dick or any Subsidiary.
(c) In relation to the UK Subsidiary only:
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(i) The UK Subsidiary is resident in the United Kingdom for
Tax purposes and will be so resident at Closing and is not and never
has been during the past six (6) years resident for Tax purposes in any
other territory and does not have and has never had any taxable branch,
agency or permanent establishment in any other country;
(ii) No Tax Asset has been claimed by and/or given to the UK
Subsidiary, or taken into account in determining the provision or
amount stated in respect of Tax in the Reference Statement or the
audited accounts of the UK Subsidiary for the accounting period ended
31st March 1996, which could be withdrawn, postponed or restricted as a
result of any act, omission, or circumstance arising or occurring at or
at any time after Closing, unless caused by an action taken after the
Closing by Purchaser, Purchaser's Affiliates, A.B. Dick or the
Purchaser Retained Subsidiaries, other than any action taken by
Purchaser or its Affiliates pursuant to this Agreement;
(iii) No debt owed by the UK Subsidiary has been waived or
released in whole or in part since 31st March 1996 nor is it entitled
to such a waiver or release; and
(iv) The Company: (A) has been separately registered for the
purposes of value added tax since November 24, 1996, and was registered
as a member of a VAT group before November 24, 1996, and such
registrations are not subject to any conditions imposed by or agreed
with HM Customs and Excise, and (B) has complied with the value added
tax legislation in all material respects and has maintained and
obtained at all time complete, correct and up to date records, invoices
and other documents appropriate or requisite for the purposes of value
added tax and has retained such records, invoices and other documents
as required by the applicable legislation.
(d) Neither A.B. Dick nor any Purchaser Retained Subsidiary
(other than the UK Subsidiary) is (or has been at any time during the past two
(2) years) resident in the United Kingdom for any Tax purpose and none of them
has (or has at any time during the past two (2) years) any branch, agency or
permanent establishment in the United Kingdom for any Tax purpose.
(e) A.B. Dick is not a member of a Value Added Tax Group.
SECTION 3.15. PROPRIETARY RIGHTS. (a) Section 3.15 of the
Disclosure Schedule sets forth:
(i) All patents, trademarks, trade names, service marks,
logos and copyrights and franchises and licenses, sublicenses or
material agreements in respect thereof which A. B. Dick or any
Purchaser Retained Subsidiary owns or has the right to use or to
which A. B. Dick or any Purchaser Retained Subsidiary is a party;
and
(ii) all registrations or issuances (or applications therefor)
of any of the foregoing with or by any federal, state, local or foreign
regulatory, administrative or governmental office or offices (all items
in (i) and (ii) of this Section 3.15(a) collectively, "Proprietary
Rights").
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(b) Except as disclosed in Section 3.15 of the Disclosure
Schedule, (i) all of the Proprietary Rights are owned by or licensed to A. B.
Dick or a Purchaser Retained Subsidiary; (ii) no person or entity has a right to
receive a royalty or similar payment in respect of any Proprietary Rights
pursuant to any arrangements entered into by A. B. Dick or any Purchaser
Retained Subsidiary; and (iii) no claim, action, suit or proceeding has been
made during the last year or is pending (or, to the Knowledge of Seller,
threatened) against A. B. Dick or any Purchaser Retained Subsidiary either (A)
challenging or seeking to deny or restrict the use by A. B. Dick or any
Purchaser Retained Subsidiary of any of the Proprietary Rights or (B) alleging
that any services are being provided or products are being manufactured or sold,
or Proprietary Rights are being used, by A. B. Dick or any Purchaser Retained
Subsidiary, in violation of any intellectual property rights of any third
Person. Except as disclosed in Section 3.15 of the Disclosure Schedule, (x)
there are no uses of the Proprietary Rights in the ordinary course of the
Business that, to the Knowledge of Seller, materially violate or materially
infringe upon any intellectual property right owned by any third Person (y)
Seller is not aware of any infringement or violation of A. B. Dick's or any
Subsidiary's rights in or to the Proprietary Rights by any third Person and (z)
other than the Proprietary Rights, to the Knowledge of Seller there are no items
or rights of the nature of those included in the Proprietary Rights that are
necessary for the operation of the Business in the manner in which the Business
is currently conducted.
(c) Except as disclosed on Section 3.15 of the Disclosure
Schedule, neither Seller nor any of its Affiliates (other than A. B. Dick and
the Purchaser Retained Subsidiaries) owns or has any interest in any Proprietary
Rights used by A. B. Dick or the Purchaser Retained Subsidiaries in connection
with the Business.
SECTION 3.16. TITLE TO AND CONDITION OF PROPERTIES. (a) Except
as set forth in Section 3.16 of the Disclosure Schedule, A. B. Dick or a
Purchaser Retained Subsidiary has valid and subsisting leasehold estates in all
Real Property leased by A. B. Dick or any Purchaser Retained Subsidiary and
owns, leases or has legal right to use all of its other assets and properties of
every kind, nature and description, tangible or intangible, wherever located,
which constitute all of the material property now used in its business as
presently conducted (including, without limitation, all property and assets
shown or reflected on the Reference Working Capital, except inventory sold in
the ordinary course of business and other assets sold in compliance with this
Agreement). Except as set forth in Section 3.16 of the Disclosure Schedule and
except for Permitted Encumbrances, all Real Property owned by A. B. Dick or a
Purchaser Retained Subsidiary is held free and clear of all mortgages, pledges,
liens, security interests, encumbrances and similar restrictions. Except as set
forth in Section 3.16 of the Disclosure Schedule, the Real Property is usable
for its current uses without violating any material federal, state, local,
foreign or other governmental building, zoning, health, safety, platting,
subdivision or other material law, ordinance or regulation, or any applicable
material private restriction, and such uses are legal conforming uses in all
material aspects and neither A. B. Dick nor any Purchaser Retained Subsidiary
has received in the last year any written notice of any such violation or
noncompliance nor are there any such continuing unresolved violations or
noncompliances. Section 3.16 of the Disclosure Schedule contains a complete and
accurate list of all real property, other than the Niles Facility, currently
owned or leased by A. B. Dick or any Purchaser Retained Subsidiary in the
conduct of its business (all such real property other than the Niles Facility,
collectively the "Real Property") and identifies any real property leased
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as of the date hereof by A.B. Dick or any Purchaser Retained Subsidiary that is
not currently occupied by A.B. Dick or any Purchaser Retained Subsidiary.
(b) Except as set forth in Section 3.16 of the Disclosure Schedule, to
the Knowledge of Seller, all Real Property and the structures and other
improvements thereon and all machinery and equipment and tangible personal
property owned or leased by A. B. Dick or any Purchaser Retained Subsidiary
(other than the Removed Assets) and material to the operation of the Business
are suitable for the purpose or purposes for which they are being used and are
in reasonable condition and repair in light of their age and prior use. To the
Knowledge of Seller, without conducting any inquiry, except as set forth on
Section 3.16 of the Disclosure Schedule, there are no material structural
defects in the exterior walls or the interior bearing walls, the foundation or
the roof of any plant, building, garage or other such structure owned by A. B.
Dick or any Purchaser Retained Subsidiary and material to the operation of the
Business, and the electrical, plumbing, heating systems, and air-conditioning
systems of any such plant, building, garage or structure are in reasonable
operating condition in light of their age and prior use. The utilities servicing
the Real Property are adequate to permit the continued operation of the business
of A. B. Dick or such Purchaser Retained Subsidiary, as the case may be, and
there are no pending or, to the Knowledge of Seller, threatened zoning,
condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would materially affect such
continued operation. Seller has furnished or made available to Purchaser copies
of, all material engineering, geologic and environmental reports with respect to
the Real Property of which A. B. Dick or any Purchaser Retained Subsidiary has a
copy.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) (i) Except as
disclosed in Section 3.17 of the Disclosure Schedule, A. B. Dick and its
Purchaser Retained Subsidiaries are in compliance in all material respects with,
and conduct their operations and processes in compliance in all material
respects with, Environmental Laws (defined below); to the Knowledge of Seller,
there is no condition on, under or in any Real Property or personal property
owned, operated or leased or used by A. B. Dick which would give rise to a
material liability; no lien has been attached to any real or personal property
of A. B. Dick or any Purchaser Retained Subsidiary pursuant to any Environmental
Laws; to the Knowledge of Seller, A. B. Dick and its Purchaser Retained
Subsidiaries have utilized only haulers and transporters which are in possession
of all applicable authorizations or permits to operate to dispose of any
Hazardous Substance (as defined below); to the Knowledge of Seller, there has
been no treatment, storage, disposal or release of any Hazardous Substance by
any person on any property which currently or at any time was owned, operated or
leased by A. B. Dick or any Purchaser Retained Subsidiary in any manner that
could reasonably be expected to lead to a material liability of A. B. Dick or
any Purchaser Retained Subsidiary; there are no sites or locations at which A.
B. Dick or any Purchaser Retained Subsidiary is currently undertaking, or has
completed, any investigation, assessment, remedial or response action relating
to the treatment, storage, disposal or release of any Hazardous Substance that
could reasonably be expected to lead to a material liability; A. B. Dick and its
Purchaser Retained Subsidiaries have obtained, and are in compliance with, all
material permits, licenses, authorizations, registrations and other governmental
consents required by Environmental Laws ("Environmental Permits"); neither A. B.
Dick nor any Purchaser Retained Subsidiary has received written notice of any
civil, criminal or administrative claims, actions, suits, hearings,
investigations, or proceedings pending or threatened that are based on or
related to any Environmental Laws (including without limitation
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written notices regarding requests for information or potentially responsible
party designations, in each case, in connection with the off-site disposal of
Hazardous Substances); all underground storage tanks and solid waste disposal
facilities regulated pursuant to Environmental Laws and owned or operated by or
under the control of A. B. Dick or any Purchaser Retained Subsidiary are used
and operated in compliance in all material respects with all Environmental Laws;
to Seller's knowledge there are no sites, locations or operations at which A. B.
Dick or any Purchaser Retained Subsidiary is currently undertaking or has
completed an underground storage tank removal or remediation or a closure or
remediation of a solid waste disposal facility regulated pursuant to
Environmental Laws; there are no polychlorinated biphenyls ("PCBs") in any
article, container or equipment on, about, under or within the Real Property in
violation of Environmental Laws or which would subject Purchaser, A. B. Dick or
any Purchaser Retained Subsidiary to material liability; and to the Knowledge of
Seller, there is no friable asbestos at, on, about, under or within the Real
Property in violation of applicable Environmental Laws.
(ii) Section 3.17 of the Disclosure Schedule sets forth every
site that is listed on either (A) the Comprehensive Environmental Response,
Compensation and Liability Act Information System ("CERCLIS") database or (B) a
similar state, provincial, regional, territorial, municipal, local or foreign
law list with respect to which A. B. Dick or any Purchaser Retained Subsidiary
has received notice from the United States Environmental Protection Agency or a
state, provincial, regional, territorial, municipal, local or foreign agency
that it is or may be considered to be a potentially responsible party.
(b) For the purposes of this Section 3.17, the term "Environmental
Laws" means any applicable federal, state, provincial, regional, territorial,
county, municipal, local or foreign statute, code, ordinance, rule, regulation,
common law doctrine, enforceable policy or guideline, and any permit, consent,
approval, license, judgment, order, writ, decree or consent order, injunction or
other authorization, including the requirement to register underground storage
tanks, relating to any environmental, health or safety matter, in each case as
currently in effect or as hereafter amended or adopted, including but not
limited to those related to:
(i) emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment, including, without
limitation, into air, soil, sediments, land surface or subsurface,
buildings or facilities, surface water, groundwater, publicly-owned
treatment works, septic systems or land;
(ii) the generation, treatment, storage, disposal, use,
handling, manufacture, transportation or shipment of Hazardous
Substances; or
(iii) the pollution or protection of health or safety or the
environment including without limitation the Occupational Health &
Safety Act, 29 U.S.C. Section 651 ET SEQ., and any state, provincial,
regional, territorial, county, municipal or local counterpart thereof,
solid waste handling, treatment or disposal of mine waste, or operation
or reclamation of mines, operation of drinking water supplies, dredging
or filling of wetlands or testing of chemicals prior to their entry
into commerce.
(c) The term "Hazardous Substances" means (i) hazardous materials,
contaminants, pollutants, constituents, solid wastes, hazardous wastes,
hazardous substances and toxic
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substances as those terms are defined in the following statutes and their
implementing regulations, as amended: the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 ET SEQ.; the Resource Conversation and Recovery Act,
42 U.S.C. Section 6901 ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Clean Air
Act, 42 U.S.C. ss. 7401 ET SEQ.; the Clean Water Act, 33 U.S.C. Section 1251 ET
SEQ.; and, the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.;
(ii) petroleum, including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas and any mixtures thereof; (iv) asbestos and/or
asbestos-containing materials; (v) PCBs, or PCB-containing materials or fluids;
and (vi) any other substance subject to regulation under Environmental Law.
SECTION 3.18. EMPLOYEE BENEFIT PLANS. (a) Section 3.18A of the
Disclosure Schedule contains a list of each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and hereinafter an "A. B. Dick Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA, and hereinafter an
"A. B. Dick Welfare Plan"), stock option, stock purchase, deferred compensation
plan or arrangement, and other employee fringe benefit plan or arrangement
maintained, contributed to or required to be maintained or contributed to by A.
B. Dick or any other person or entity that, together with A. B. Dick, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code (each a "Commonly Controlled Entity") for the benefit of any
present or former officers, employees, directors or independent contractors of
A. B. Dick in the United States as of the date of this Agreement (all the
foregoing being herein called "A. B. Dick Benefit Plans"). Seller has made
available to Purchaser true, complete and correct copies of (i) each A. B. Dick
Benefit Plan (or, in the case of any unwritten A. B. Dick Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each A. B. Dick Benefit Plan
(if any such report was required by applicable law), (iii) the most recent
summary plan description for each A. B. Dick Benefit Plan for which such a
summary plan description is required by applicable law or was otherwise provided
to plan participants and (iv) each trust agreement and insurance or annuity
contract relating to any A. B. Dick Benefit Plan. Section 3.18B of the
Disclosure Schedule contains a list of each retirement plan (providing benefits
similar to those described in Section 3(2) of ERISA, and hereinafter an "A. B.
Dick Non-U.S. Pension Plan"), welfare benefit plan (providing benefits similar
to those described in Section 3(1) of ERISA, and hereinafter an "A. B. Dick
Non-U.S. Welfare Plan"), stock option, stock purchase, deferred compensation
plan or arrangement, and other employee fringe benefit plan or arrangement
(other than a governmental plan) maintained or contributed to by any Purchaser
Retained Subsidiary for any present or former officers, employees, directors or
independent contractors of the Purchaser Retained Subsidiaries outside of the
United States as of the date of this Agreement (all the foregoing being herein
called "A. B. Dick Non-U.S. Benefit Plans").
(b) Each A. B. Dick Benefit Plan has been administered in all
material respects in accordance with its terms and in compliance in all material
respects with the applicable provisions of ERISA and the Internal Revenue Code,
as well as any other applicable laws of any jurisdiction. There are no
investigations by any governmental agency, termination proceedings or other
claims (except claim for benefits payable in the normal operation of the A. B.
Dick Benefit Plans), suits or proceedings against or involving any A. B. Dick
Benefit Plan or asserting any rights or claims to benefits under any A. B. Dick
Benefit Plan that could give
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rise to any material liability, and there are not any facts that could
reasonably be expected to give rise to any material liability to A. B. Dick or
Purchaser in the event of any such investigation, claim, suit or proceeding.
(c) Except as disclosed in Section 3.18A of the Disclosure
Schedule, (i) all contributions to, and payments from, the A. B. Dick Benefit
Plans that may have been required to be made in accordance with the terms of the
A. B. Dick Benefit Plans, any applicable collective bargaining agreement and,
when applicable, Section 302 of ERISA or Section 412 of the Internal Revenue
Code or any other applicable laws, have been timely made, (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Internal Revenue Code with respect to any A. B. Dick Pension Plan,
and (iii) no A. B. Dick Pension Plan had an "accumulated funding deficiency"
within the meaning of Section 412(a) of the Internal Revenue Code as of the end
of the most recently completed plan year.
(d) Section 3.18A of the Disclosure Schedule discloses
whether: (i) any "prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA) has occurred to the Knowledge of
Seller that involves the assets of any A. B. Dick Benefit Plan; (ii) any
prohibited transaction has occurred that could reasonably be expected to subject
A. B. Dick or any of its employees, or, to the Knowledge of Seller, a trustee,
administrator or other fiduciary of any trust created under any A. B. Dick
Benefit Plan to any material tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under Title I of ERISA; and
(iii) any of the A. B. Dick Pension Plans has been terminated or has been the
subject of a "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder).
(e) No Commonly Controlled Entity has incurred any material
liability to an A. B. Dick Pension Plan (other than for contributions not yet
due) or to the Pension Benefit Guaranty Corporation (other than for the payment
of premiums not yet due), which material liability has not been fully paid as of
the date hereof.
(f) No Commonly Controlled Entity has (i) engaged in a
transaction described in Section 4069 of ERISA that could reasonably be expected
to subject A. B. Dick or Purchaser to material liability at any time after the
date hereof or (ii) acted in a manner that could, or failed to act so as to,
result in material fines, penalties, taxes or related charges under (A) Section
502(c), (i) or (1) of ERISA, (B) Section 4071 of ERISA or (C) Chapter 43 of the
Internal Revenue Code, that could reasonably be expected to be imposed on A. B.
Dick or Purchaser.
(g) Except as disclosed in Section 3.18A of the Disclosure
Schedule, A. B. Dick has not incurred, nor could it reasonably be expected to
incur, any material withdrawal liability with respect to a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA).
(h) The list of A. B. Dick Welfare Plans described in the
Disclosure Schedule discloses whether each A. B. Dick Welfare Plan is (i)
unfunded, (ii) funded through a "welfare benefit fund," as such term is defined
in Section 419(e) of the Internal Revenue Code, or other funding mechanism, or
(iii) insured. A. B. Dick complies in all material respects with the applicable
requirements of Section 4980B(f) of the Internal Revenue Code with respect to
each
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A. B. Dick Welfare Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Internal Revenue Code.
(i) Except as described in Sections 5.08A(a)(ii) and 5.09A(b)
of this Agreement, no employee of A. B. Dick will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any A. B. Dick Benefit Plan solely as a result of the transactions
contemplated by this Agreement.
(j) Seller has provided Purchaser with an estimate of the
liability of A. B. Dick and, if applicable, each Purchaser Retained Subsidiary
for post-retirement health care benefits as described in Financial Accounting
Standards No. 106 as of March 31, 1996.
(k) In case of each A. B. Dick Non-U.S. Benefit Plan which is
subject to the laws of any foreign country, such A. B. Dick Non-U.S. Benefit
Plan is in compliance in all material respects with all applicable laws of such
foreign jurisdiction. Except as disclosed in Section 3.18B of the Disclosure
Schedule, (i) all contributions to, and payments from, each A. B. Dick Non-U.S.
Benefit Plan that may have been required to be made in accordance with the terms
of the A. B. Dick Non-U.S. Benefit Plan, any applicable labor agreement and any
applicable law, have been timely made; and (ii) except as described in Section
5.08B(b) of this Agreement, no employee of any Purchaser Retained Subsidiary
will be entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any A. B. Dick Non-U.S. Benefit Plan
solely as a result of the transactions contemplated by this Agreement.
SECTION 3.19. CONTRACTS. Section 3.19 of the Disclosure
Schedule lists all contracts, agreements, leases, executory commitments,
arrangements and understandings (written or, to the Knowledge of Seller, oral)
to which A. B. Dick or any Purchaser Retained Subsidiary is a party, including
all amendments and supplements thereto, (a) that require payments in excess of
$75,000, extend beyond one year from Closing or are otherwise material to the
condition, operations, assets or business of A. B. Dick or any Purchaser
Retained Subsidiary (other than unfilled purchase orders to purchase goods of A.
B. Dick or any Purchaser Retained Subsidiary), unless cancelable on 60 or fewer
days' notice without any liability, penalty or premium, (b) with any present or
former stockholder, director or officer of A. B. Dick or any Purchaser Retained
Subsidiary, or any Person controlling, controlled by or under common control
with any such person, or with any employee, agent or consultant of A. B. Dick or
any Purchaser Retained Subsidiary (or any person related by family to any such
person) not terminable at will, (c) which provide for the future purchase in
excess of $100,000 by A. B. Dick or any Purchaser Retained Subsidiary of any
materials, equipment, services or supplies, which continue for a period of more
than twelve months (including periods covered by any option to renew by either
party) unless cancelable on 60 or fewer days' notice without any liability,
penalty or premium or (d) which involve any of the following: (i) any borrowing
or guarantees of any amount in excess of $100,000; (ii) any contracts containing
covenants purporting to limit the freedom of A. B. Dick or any Purchaser
Retained Subsidiary to compete in any line of business in any geographic area;
or (iii) any material obligation or commitment providing for indemnification or
responsibility for the obligations or losses of any person. Except as set forth
in Section 3.19 of the Disclosure Schedule, all of such contracts, agreements,
leases, commitments, arrangements and understandings are valid and binding, in
full force and effect and enforceable in accordance
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with their respective provisions against A. B. Dick or the Purchaser Retained
Subsidiaries. Neither A. B. Dick or the Purchaser Retained Subsidiaries nor, to
the Knowledge of Seller, any other party thereto is in violation of, in default
in respect of nor has there occurred an event or condition with respect to A.B.
Dick or the Purchaser Retained Subsidiaries or, to the Knowledge of Seller, any
other party thereto which, with the passage of time or giving of notice (or
both) would constitute a default of any such contract, agreement, lease,
commitment, arrangement or understanding.
SECTION 3.20. ACCOUNTS RECEIVABLE. Except as set forth in
Section 3.20 of the Disclosure Schedule, all accounts and notes receivable of A.
B. Dick and each Purchaser Retained Subsidiary as of the Closing Date (other
than the U.S. Accounts Receivable) will be valid and subsisting and will
represent sales actually made (net of all applicable credits and/or rebates) in
the ordinary course of business.
SECTION 3.21. LABOR RELATIONS. Except as set forth in Section
3.21 of the Disclosure Schedule, A. B. Dick and each Purchaser Retained
Subsidiary has complied in all respects with all applicable material federal,
state, local or foreign laws, rules, regulations and Executive Orders relating
to employment, and all applicable material laws, rules and regulations governing
payment of minimum wages and overtime rates, and withholding and payment of
taxes from compensation of employees and the payment of premiums or benefits
under applicable worker compensation laws. Except as set forth in Section 3.21
of the Disclosure Schedule, there is no unfair labor practice complaint against
A. B. Dick or any Purchaser Retained Subsidiary pending before the National
Labor Relations Board. There is no labor strike, collectively organized dispute,
slowdown or stoppage, or any union organizing campaign actually pending or, to
the Knowledge of Seller, threatened against or involving A. B. Dick or any
Purchaser Retained Subsidiary. Except as set forth in Section 3.21 of the
Disclosure Schedule, no labor grievance has been filed with A. B. Dick or any
Purchaser Retained Subsidiary during the last year or is pending, and no
arbitration proceeding has arisen out of or under a collective bargaining or
other labor agreement and is pending and no claim therefor has been asserted
during the last year. Except as set forth in Section 3.21 of the Disclosure
Schedule, no collective bargaining or other labor agreement is currently being
negotiated by A. B. Dick or any Purchaser Retained Subsidiary and no union or
collective bargaining unit represents any of the employees of A. B. Dick or any
Purchaser Retained Subsidiary. Except as set forth in Section 3.21 of the
Disclosure Schedule, neither A. B. Dick nor any Purchaser Retained Subsidiary
has experienced, nor (to the Knowledge of the Sellers) has been threatened with,
any work stoppage or slow down during the past five years.
SECTION 3.22. BUSINESS OF A. B. DICK. A. B. Dick and the
Purchaser Retained Subsidiaries are engaged in the business of developing,
manufacturing, distributing and marketing a broad range of equipment, supplies
and services for use in the reprographics and graphic arts industries including
but not limited to products and services for the pre-press, press and post-press
applications, copiers and digital duplicators.
SECTION 3.23. CUSTOMERS. Section 3.23 of the Disclosure
Schedule lists the 20 largest customers or groups of related customers of the
Business for the 12-month period ended March 31, 1996, together with the amount
of revenue of the Business generated by each such customer during that period.
Neither A. B. Dick nor any Purchaser Retained Subsidiary
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has received, as of the date hereof, any written notice or, to the Knowledge of
Seller, oral notice, that any such customer intends to terminate or materially
reduce its business with A. B. Dick or any Purchaser Retained Subsidiary.
SECTION 3.24. SUPPLIERS. Section 3.24 of the Disclosure
Schedule lists each supplier from which A. B. Dick and the Purchaser Retained
Subsidiaries purchased at least 10% of the goods and services supplied to A. B.
Dick and the Purchaser Retained Subsidiaries in connection with the Business
during the 12-month period ended March 31, 1996, together with amount of goods
and services purchased by A. B. Dick and the Purchaser Retained Subsidiaries
from each such supplier during that period.
SECTION 3.25. PRODUCT LIABILITY. Except as disclosed on
Section 3.25 of the Disclosure Schedule, no party has made any written, or to
the Knowledge of Seller, oral product liability claim with respect to any actual
or alleged injury to person or property as a result of the ownership, possession
or use of any product sold by A. B. Dick or any Purchaser Retained Subsidiary.
SECTION 3.26. CREDIT TERMS; PRODUCT WARRANTIES. Section 3.26
of the Disclosure Schedule, to the Knowledge of Seller, sets forth all the terms
and conditions of credit greater than "net 30" given to any customer of A. B.
Dick or any Purchaser Retained Subsidiary and all extraordinary discounts given
by A. B. Dick or any Purchaser Retained Subsidiary to their respective
customers. Seller has made available to Purchaser a copy of the standard
warranties and guarantees of A. B. Dick and the Purchaser Retained Subsidiaries
and, to the Knowledge of Seller, any material departures therefrom.
SECTION 3.27. INSURANCE. Section 3.27 of the Disclosure
Schedule sets forth a true, correct and complete list of all insurance policies
and bonds currently maintained in which A. B. Dick or any Purchaser Retained
Subsidiary is named as an insured party, or for which A. B. Dick or any
Purchaser Retained Subsidiary has paid any premiums, and the Disclosure Schedule
correctly states the name of the insurer, type and amount of coverage,
deductible amounts, if any, expiration date and amount of premium paid annually
for each such policy. Except as disclosed on the Disclosure Schedule, all such
policies or bonds are currently in full force and effect and neither A. B. Dick
nor any Purchaser Retained Subsidiary has received during the past year any
notice from any such insurer cancelling or threatening to cancel any such
insurance. A. B. Dick and each Purchaser Retained Subsidiary will continue all
of such insurance in full force and effect up to the Closing (but on and after
the Closing Purchaser shall be responsible for its own insurance for A.B. Dick
and the Purchaser Retained Subsidiaries). All premiums due and payable on such
policies have been paid.
SECTION 3.28. PROJECTIONS. Although management of A. B. Dick
has provided to Purchaser projections for A. B. Dick, Purchaser acknowledges
that such projections and budget information, do not constitute a representation
or warranty by Seller and that such projections and budget information are not
being relied upon by Purchaser.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF PURCHASER.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all necessary
corporate power and authority to enter into this Agreement, the Lease and the
Note, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Lease and the Note by Purchaser, the performance by
Purchaser of its obligations hereunder and thereunder and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been, and the Note and the Lease will be, duly executed and
delivered by Purchaser, and (assuming due authorization, execution and delivery
of this Agreement and the Lease, as applicable, by Seller) constitutes and, with
respect to the Note and the Lease, will constitute legal, valid and binding
obligations of Purchaser enforceable against Purchaser in accordance with their
terms.
SECTION 4.02. NO CONFLICT. Except as may result from any facts
or circumstances relating solely to Seller, the execution, delivery and
performance of this Agreement, the Lease and the Note by Purchaser do not and
will not (a) violate or conflict with the certificate of incorporation or
by-laws (or similar organizational documents) of Purchaser, (b) conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to Purchaser, or (c) result in any breach of,
or constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien or other encumbrance on any of the assets or properties of
Purchaser pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument relating to
such assets or properties to which Purchaser or any of its subsidiaries is a
party or by which any of such assets or properties is bound or affected, except
as would not, individually or in the aggregate, have a material adverse effect
on the ability of Purchaser to consummate the transactions contemplated by this
Agreement, the Lease and the Note.
SECTION 4.03. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement, the Lease and the Note by Purchaser do not, and the
performance of this Agreement, the Lease and the Note by Purchaser will not,
require any consent, approval, authorization or other action by, or filing with
or notification to, any governmental or regulatory authority, except (a) as
described in a writing delivered to Seller by Purchaser on the date hereof, (b)
the notification requirements of the HSR Act and (c) as may be necessary as a
result of any facts or circumstances relating solely to Seller.
SECTION 4.04. ABSENCE OF LITIGATION. No claim, action,
proceeding or investigation involving Purchaser is pending (or, to the Knowledge
of Purchaser, is threatened) before any court, arbitrator or administrative,
governmental or regulatory authority or body
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which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to materially and
adversely affect or restrict Purchaser's ability to consummate the transactions
contemplated hereby.
SECTION 4.05. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or Nesco.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING. (a)
Unless Purchaser otherwise agrees in writing and except as otherwise set forth
herein or in the Disclosure Schedule (including Section 5.01 thereof), between
the date of this Agreement and the Closing Date, Seller will cause A. B. Dick
and the Purchaser Retained Subsidiaries to (i) conduct the Business only in the
ordinary course and not enter into any transaction that could reasonably be
expected to change materially the amount of accounts receivable, inventory or
accounts payable set forth on the Reference Statement, (ii) preserve
substantially intact the business organization of the Business, (iii) use
reasonable efforts to keep available to Purchaser the services of the present
officers and key employees of A. B. Dick and the Purchaser Retained Subsidiaries
(other than the chief executive officer and chief financial officer of A. B.
Dick and the employees in the legal department of A. B. Dick), which shall not
require the payment of any stay bonus or other amount not payable in the
ordinary course, (iv) use reasonable efforts to preserve the current
relationships of A. B. Dick and the Purchaser Retained Subsidiaries with their
respective customers, suppliers, distributors and other persons with which A. B.
Dick and the Purchaser Retained Subsidiaries have significant business
relationships and (v) use reasonable efforts to preserve, insure and protect the
assets of the Business against loss, theft, damage, destruction, infringement or
other injury.
(b) Except as expressly provided in this Agreement or the
Disclosure Schedule (including Section 5.01 thereof) between the date of this
Agreement and the Closing Date, Seller will cause A. B. Dick and the Purchaser
Retained Subsidiaries not to take any of the actions enumerated in clauses (i)
through (ix) of Section 3.13 without the prior written consent of Purchaser
(which consent, in the case of clauses (i) - (iii) thereof, shall not be
unreasonably withheld and shall be deemed granted if Purchaser fails to respond
to any written request by Seller for consent within three (3) business days of
Purchaser's receipt of any such written request).
SECTION 5.02. CONFIDENTIALITY. The terms regarding
confidentiality and public release of information in the letter agreement dated
as of May 13, 1996 (the "Confidentiality Agreement") are hereby incorporated
herein by reference, shall apply to Purchaser as well as to all the other
parties hereto and shall continue in full force and effect until the Closing, at
which time such Confidentiality Agreement and the obligations of Purchaser under
this Section 5.02 shall terminate; PROVIDED, HOWEVER, that the Confidentiality
Agreement shall terminate only
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in respect of that portion of the Confidential Information (as defined in the
Confidentiality Agreement) exclusively relating to the transactions contemplated
by this Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement shall continue in full force and effect.
SECTION 5.03. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each party hereto shall use all reasonable efforts as soon as practicable
following the date of this Agreement to obtain all authorizations, consents,
orders and approvals of all federal, state, local and foreign regulatory bodies
and officials that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto has filed a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby, in response to which the Federal Trade
Commission granted early termination of the waiting period with respect thereto.
The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals.
Notwithstanding anything to the contrary herein, neither party hereto shall be
required to divest or otherwise impair its rights with respect to any business
or property in order to obtain any such authorization, consent, order or
approval.
(b) Except with respect to the contracts set forth in Section
5.03(b) of the Disclosure Schedule, each party hereto shall use all reasonable
efforts to obtain any other consents and approvals under any contract set forth
in Schedule 3.19 which may be required in connection with its consummation of
the transactions contemplated by this Agreement, and the other party shall
cooperate in those efforts (which cooperation shall not, however, include the
payment of any fee or other amount in order to obtain any such consent).
SECTION 5.04. PRE-CLOSING TRANSFER OF ASSETS. (a) PRE-CLOSING
U.S. ACCOUNTS RECEIVABLE. No later than immediately prior to the Closing, Seller
shall cause A. B. Dick to transfer to Seller or any of its Affiliates the
accounts receivable generated by operations in the United States of the type and
nature included in the account labeled "U.S. Accounts Receivable- net" in the
Reference Statement, outstanding at the close of business on the date
immediately prior to the Closing Date (the "U.S. Accounts Receivable"). From and
after such transfer, the U.S. Accounts Receivable shall belong to Seller or any
such Affiliate. By the Closing Date, A. B. Dick and Seller shall enter into a
transfer agreement with regard to the U.S. Accounts Receivable in the form of
Exhibit 5.04(a).
(b) PRE-CLOSING TRANSFER OF SUBSIDIARIES. Prior to the
Closing, Seller shall cause A. B. Dick to transfer or sell to Seller or any of
its Affiliates all the outstanding capital stock of the following Subsidiaries
that A. B. Dick owns directly or indirectly: A. B. Dick Holland BV, A. B. Dick
(Japan) Ltd., Itek Graphix Pty. Limited (Australia), Scriptomatic, Inc. (USA),
Refac Marketing Services Inc. (USA), Scriptomatic S.A. (Switzerland), Videojet
Systems International, Inc. (USA), Videojet Japan Inc., Videojet GmbH, A. B.
Dick Holdings Limited (UK), Cheshire Mailing Limited (UK), Videojet Limited
(UK), A. B. Dick Limited (UK), and A. B. Dick Co. Pension Trustees (S.A.)
Limited (the "Seller Retained Subsidiaries"). Prior to the Closing, Seller shall
provide Purchaser with a summary of each such transfer, together with copies of
the documents used to effect such transfers. The cost of each transfer shall be
wholly
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borne by Seller or its Affiliate and not charged against the operations of A. B.
Dick or any Purchaser Retained Subsidiary.
(c) PRE-CLOSING TRANSFER OF NILES FACILITY. Prior to the
Closing Seller shall cause A. B. Dick to transfer to Seller or any of its
Affiliates A. B. Dick's entire ownership interest in the Niles Facility. All
items of personal property shall remain assets of A. B. Dick, except as set
forth in Section 5.04(c) of the Disclosure Schedule. As an express undertaking
related to the transfer of the real property, Seller or its Affiliate shall
assume direct liability for all liabilities relative to the real property, in
any way, including but not limited to any liability arising under Environmental
Law, real property taxes and assessments, insurance, maintenance, repairs,
capital expenditures, utilities and other direct or indirect, fixed or
contingent, known or unknown, liabilities associated therewith, subject to the
Lease and to this Agreement. Prior to the transfer of the real property Seller
shall keep Purchaser informed as to the steps to be taken and documents to be
used to effect this transfer. The cost and expenses of the transfer shall be
wholly borne by Seller or its Affiliate and not charged against the operations
of A. B. Dick or any Purchaser Retained Subsidiary.
(d) PRE-CLOSING TRANSFER OF OTHER ASSETS. Prior to the Closing
Seller shall cause A. B. Dick to transfer to Seller or its Affiliates the assets
described in Section 5.04(d) of the Disclosure Schedule.
(e) TAX LIQUIDATION PLAN. Purchaser acknowledges that A. B.
Dick will adopt a plan of liquidation for the purposes of Section 332 of the
Code (and the analogous provisions of state and local tax law) only, such plan
to be effective on or before the Closing Date, and A. B. Dick will distribute
the certain assets described in this Section 5.04 to Seller in pursuance of such
plan before the Closing.
(f) POST-CLOSING RETURN OF RECORDS. To the extent after the
Closing that A.B. Dick has physical possession of records relating to the
business of Seller or its Affiliates, Purchaser shall, upon Seller's request,
cause A.B. Dick to return to Seller, or provide Seller, after receipt of
reasonable notice, with reasonable access during normal business hours to, such
records. To the extent after the Closing that Seller has physical possession of
records relating to the business of A. B. Dick or any Purchaser Retained
Subsidiary, Seller shall, upon Purchaser's request, return to Purchaser, or
provide Purchaser, after receipt of reasonable notice, with reasonable access
during normal business hours to such records.
SECTION 5.05. U.S. ACCOUNTS RECEIVABLE. (a) ADJUSTMENT.
Promptly after the Closing, Purchaser shall cause A.B. Dick to deliver to Seller
a list of the U.S. Accounts Receivable transferred in accordance with Section
5.04(a), including the book value thereof at the close of business on the day
immediately prior to the Closing Date and any accounting provision for bad or
doubtful accounts in existence at such time relative thereto. Purchaser shall
also cause A.B. Dick to provide Seller access to the supporting documentation
for the U.S. Accounts Receivable and to preserve such documentation for Seller.
If the aggregate book value of all U.S. Accounts Receivable
transferred to Seller or its Affiliate, less any accounting provision for bad or
doubtful accounts in existence at such time, is less than $20,000,000 at
Closing, then at the end of 30 days following the delivery of
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the list referred to above, Purchaser shall pay to Seller a lump sum in cash
equal to the difference of such amounts. If the aggregate book value of all U.S.
Accounts Receivable transferred to Seller or its Affiliate, less any accounting
provision for bad or doubtful accounts in existence at the open of business on
the Closing Date, is more than $20,000,000, then at the end of 30 days from the
Closing, Seller shall pay to A. B. Dick a lump sum in cash equal to the
difference of such amounts. The amount of any accounting provision for bad or
doubtful accounts shall reflect prior practices and experience and shall be
reasonable and if disputed shall be resolved as part of the Final Working
Capital arbitration provided for in Section 2.02(c).
(b) COLLECTION. Purchaser shall cause A. B. Dick to use the
reasonable efforts of A. B. Dick to collect in good faith the U.S. Accounts
Receivable on behalf and as agent of Seller as described in this paragraph,
through its usual, customary and commercially reasonable collection practices,
and Seller shall reimburse Purchaser for any out-of-pocket expenses incurred by
A.B. Dick in connection therewith upon its invoice. The U.S. Accounts Receivable
shall be collected on a FIFO basis relative to other accounts receivable of A.B.
Dick of the relevant obligor (unless otherwise specified in writing by such
obligor, which A.B. Dick shall not take any action to cause). Until the U. S.
Accounts Receivable have been collected in full or such earlier time agreed to
by the parties hereto, the mail of A. B. Dick shall be opened every business day
together by a representative of A. B. Dick and a representative of Seller. Any
mail received over a weekend or on a holiday will be opened by such
representatives on the following business day. The representatives will also
review a list of collections received under any lockbox arrangement and instruct
the lockbox agent to disburse such collections in accordance with the provisions
of this Agreement. Purchaser shall cause checks received each day by A. B. Dick
representing payment for U. S. Accounts Receivable to be endorsed by the A. B.
Dick representative to Seller and as so endorsed to be given to Seller at the
time the mail is so opened each day. Purchaser shall cause funds received each
day by A. B. Dick in any lockbox account of A. B. Dick representing payment for
U.S. Accounts Receivable to be transferred by the lockbox agent to Seller no
later than the third business day after such funds are received; provided,
however, that any such funds that ultimately do not constitute collected funds
shall either be returned by Seller to Purchaser or offset against obligations of
Purchaser under this Section 5.05(b). If a check or collection from a customer
contains amounts remitted to both Seller and A. B. Dick pursuant to the terms of
this Agreement, A. B. Dick shall remit to Seller the amount owed to Seller on
the business day on which such amount shall constitute collected funds. If a
customer specifically designates a payment to be applied to an invoice already
deemed paid under the FIFO method, the FIFO method shall be applied with respect
to such payment without regard to such designation by the customer. All payments
to Seller hereunder shall be without deduction, counterclaim or offset of any
kind. A. B. Dick shall only institute third-party collection activity (i.e., via
lawsuits or collection agency), upon written instruction and approval of Seller
and all out-of-pocket expense for such third-party collection activity shall be
borne by Seller. Seller shall not, either directly or indirectly, through its
agents, take extraordinary collection action which would injure the customer
relationship between A. B. Dick and any U.S. Accounts Receivable customer. For
the purpose hereof, extraordinary collection activity shall refer to the
collection practices more severe than those customarily undertaken by A. B. Dick
prior to the Closing, it being understood that those customarily undertaken by
A.B. Dick prior to the Closing include utilizing collection agencies and
bringing lawsuits. In the event Seller does bring any suit in accordance with
the foregoing, A.B. Dick shall not thereafter be required to continue any
collection action against the relevant obligor hereunder.
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SECTION 5.06. RELOCATION COST REIMBURSEMENT. Seller or any of
its Affiliates will pay to Purchaser, against submission of invoices therefor,
up to $2,000,000 of expenses actually incurred by Purchaser or A.B. Dick in
connection with moving out of the Niles Facility and in connection with making
leasehold improvements in and moving into a replacement facility. All such
invoices submitted shall be paid by Seller or any of its Affiliates to A.B. Dick
within 10 days of receipt by Seller; provided, however, that in no event shall
Seller or any of its Affiliates be obligated to reimburse such costs in an
amount exceeding $2,000,000. Purchaser and Seller agree to treat any amounts
paid by Seller pursuant to this Section 5.06 as an adjustment to the
consideration for the Shares paid pursuant to Section 2.02 for all Tax purposes.
SECTION 5.07. INTRA-COMPANY ACCOUNTS. At the time of Closing,
Seller will cause A. B. Dick and the Purchaser Retained Subsidiaries to pay or
otherwise satisfy all debts or accounts payable from A. B. Dick and the
Purchaser Retained Subsidiaries to Seller or any Affiliate, including those
debts or accounts payable which arise in the ordinary course of business from
the purchase by A. B. Dick or the Purchaser Retained Subsidiaries of goods and
services from Seller or any of its Affiliates.
SECTION 5.08A. U.S. PENSION PLANS. (a) Prior to Closing,
Seller shall take any and all actions necessary to cause each of the following
to occur, as applicable, with respect to each A. B. Dick Pension Plan:
(i) Remove A. B. Dick as the contributing sponsor, as defined
in section 4001(a)(13) of ERISA, the plan sponsor, as defined in
section 3(16)(B) of ERISA, and the plan administrator, as defined in
section 3(16)(A) of ERISA and section 414(g) of the Internal Revenue
Code; and
(ii) In the case of all participants employed by A. B. Dick on
the Closing Date, vest said participants in their full accrued benefits
under each A. B. Dick Pension Plan and terminate all future benefit
accruals.
A.B. Dick shall continue to maintain, and shall be solely responsible and liable
for, the A.B. Dick Company Executive Share Unit Plan, the A.B. Dick Company
Executive Compensation Plan, and the A.B. Dick Company Contingent Compensation
Plan after the Closing Date, with such plans being continued only as frozen
plans, without new benefit accruals, to distribute previously earned benefits.
(b) With respect to all A. B. Dick Pension Plans that are
defined benefit pension plans and are or were maintained by A. B. Dick at any
time prior to the Closing, Seller shall indemnify Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates against, and
hold them harmless from, any liability for any future benefits, and any costs or
expenses related to any claims for future benefits, of all such employees,
former employees and beneficiaries who establish their entitlement to such
benefits pursuant to such plans at any time, whether before or after the
Closing.
(c) As soon as practicable following the Closing Date,
Purchaser shall cause A. B. Dick to establish a defined contribution pension
plan, as described in section 3(34) of ERISA,
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that satisfies the requirements of sections 401(a) and 401(k) of the Internal
Revenue Code. The terms of such plan shall be determined exclusively by
Purchaser, provided that such plan shall accept rollover contributions from the
GEC-USA Employees' Savings and Investment Plan (the "GEC Savings Plan"). Except
as provided in this Section 5.08A(c) or otherwise expressly determined by
Purchaser, on and after the Closing Date, A. B. Dick shall not maintain or
contribute to any pension plan, within the meaning of section 3(2) of ERISA, or
other retirement program or deferred compensation arrangement. A. B. Dick and
Purchaser shall be solely responsible and liable for any plan established by A.
B. Dick or Purchaser on or after the Closing, and Seller shall have no liability
whatsoever with respect to any such plan. Purchaser shall, and shall cause A. B.
Dick to, indemnify Seller and its Affiliates against, and hold them harmless
from, any liability related to any such plan established by A. B. Dick or
Purchaser.
SECTION 5.08B. NON-U.S. PENSION PLANS. (a) Seller shall take
any and all actions necessary to cease participation by the U. K. Subsidiary in
The GEC Plan and Selected Benefit Scheme and The GEC 1992 Savings-Related Share
Option Scheme (the "U.K. Pension Schemes"), effective as of the Closing Date or
as soon as practicable thereafter. The UK Subsidiary and Purchaser shall take
any necessary actions requested by Seller to effect the cessation of the UK
Subsidiary's participation in the U.K. Pension Schemes.
(b) As soon as practicable after the Closing Date, Seller
shall take any and all actions necessary to "wind up" (terminate) the A.B. Dick
Company of Canada, Ltd. Pension Plan (the "Canadian Pension Plan"). All
participants employed by A.B. Dick Company of Canada, Ltd. (the "Canadian
Subsidiary") on the Closing Date shall be fully vested in their full accrued
benefits under the Canadian Pension Plan. The Canadian Subsidiary and Purchaser
shall take any necessary actions requested by Seller to wind up the Canadian
Pension Plan. Prior to the wind up of the Canadian Pension Plan, the Canadian
Subsidiary and Purchaser shall not take any actions to modify the Canadian
Pension Plan, unless agreed to in writing by Seller. The Canadian Subsidiary,
Purchaser, and/or the Affiliates of Purchaser shall have no right to, or
interest in, the assets of the Canadian Pension Plan. Any assets of the Canadian
Pension Plan that revert to the Canadian Subsidiary, Purchaser, an Affiliate of
Purchaser, Seller, or an Affiliate of Seller shall belong solely to Seller and
its Affiliates. Purchaser shall, or shall cause the Canadian Subsidiary to,
promptly pay to Seller or an Affiliate of Seller an amount equal to any
reversion received by the Canadian Subsidiary, Purchaser, or an Affiliate of
Purchaser from the Canadian Pension Plan, less an amount equal to all taxes
payable by the Canadian Subsidiary, Purchaser, or any Affiliate of Purchaser
which are attributable to the reversion. Purchaser and the Canadian Subsidiary
shall cooperate with Seller and its Affiliates in any negotiations with
employees of the Canadian Subsidiary concerning the Canadian Pension Plan.
(c) A.B. Dick, S.A. shall retain the A.B. Dick, S.A. Pension
Plan (the "Belgian Pension Plan") after the Closing Date.
(d) With respect to any and all A. B. Dick Non-U.S. Pension
Plans, other than the Belgian Pension Plan, that are or were maintained by each
Purchaser Retained Subsidiary at any time prior to the Closing, Seller shall
indemnify each Purchaser Retained Subsidiary, A. B. Dick, Purchaser and their
respective Affiliates against, and hold them harmless from, the following:
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(i) Any liability for any future benefits, and any costs or
expenses related to any claims for future benefits, of all such
employees, former employees and beneficiaries who establish their
entitlement to such benefits pursuant to such plans at any time,
whether before or after the Closing; and
(ii) Any liability, costs or expenses relating to completing
the actions described in Sections 5.08B(a) and 5.08B(b) above.
SECTION 5.09A. U.S. WELFARE PLANS AND OTHER BENEFIT PLANS. (a)
Prior to Closing, Seller shall take any and all actions necessary to relieve A.
B. Dick and Purchaser from any future or past liability or responsibility
whatsoever for providing any type of retiree medical benefit coverage for
employees or former employees of A. B. Dick (and their beneficiaries) in the
United States (any and all such benefits hereinafter are referred to as "retiree
medical benefits") under all A. B. Dick Benefit Plans providing retiree medical
benefits at any time prior to the Closing (including benefits described in
Section 5.09A(b)). With respect to all A. B. Dick Benefit Plans providing
retiree medical benefits for employees (and their beneficiaries) in the United
States at any time prior to the Closing (including benefits described in Section
5.09A(b)), Seller shall remain liable for future benefits, and any costs or
expenses related to any claims for future benefits, of all such employees,
former employees and beneficiaries who establish their entitlement to such
benefits pursuant to such plans at any time, whether before or after the
Closing. After the Closing, A. B. Dick and Purchaser shall not have any
liability or responsibility whatsoever with respect to any such retiree medical
benefits, unless such benefits arise under a plan established or maintained by
Purchaser after the Closing Date; and Purchaser shall, and shall cause A. B.
Dick to, indemnify Seller and its Affiliates against, and hold them harmless
from, any liability related to any such plan established or maintained by A. B.
Dick or Purchaser. Nothing in this Agreement shall limit any right Seller and
its Affiliates otherwise may have to amend or terminate, in whole or in part,
the retiree medical benefits provided under the GEC-USA Employees' Welfare
Benefit Plan (or any other plan or arrangement maintained by Seller or its
Affiliates at any time).
(b) Seller shall continue to offer retiree medical benefits to
employees of A. B. Dick (and their beneficiaries) in the United States on the
Closing Date whose employment by A. B. Dick terminates permanently and who meet
the eligibility requirements for such benefits during the six month period
following the Closing. Such retiree medical benefits shall be offered under the
same terms and conditions applicable on the date of this Agreement except that
(i) an additional two years shall be added to the age and years of service of
each such employee at the time of his termination of employment (provided that
such termination occurs within the six month period following the Closing) to
determine his eligibility for retiree medical benefits and his share of the cost
of such benefits, and (ii) such employee shall be entitled to receive retiree
medical benefits notwithstanding his receipt of severance pay from A. B. Dick.
The retiree medical benefits described in this Section 5.09A(b) shall be
provided exclusively by Seller or an Affiliate of Seller under a benefit plan
sponsored and administered by Seller or an Affiliate of Seller and shall not be,
nor be deemed to be, provided by A. B. Dick or Purchaser or a benefit plan of A.
B. Dick or Purchaser. The provisions of Sections 5.09A(a) and 8.05 shall be
fully applicable to the retiree medical benefits described in this Section
5.09A(b).
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(c) A. B. Dick shall retain the A. B. Dick Welfare Plans
listed in Schedule 5.09A(c), but Seller shall cause any and all other A. B. Dick
Welfare Plans, or A. B. Dick's participation thereunder, to be terminated
immediately prior to, or as of, the Closing Date without any liability, cost or
expense to A. B. Dick or Purchaser. After the Closing, A. B. Dick and Purchaser
shall be solely responsible and liable for the A. B. Dick Welfare Plans listed
in Section 5.09A(c) of the Disclosure Schedule, and Seller shall have no
liability whatsoever with respect to such plans after the Closing; and Purchaser
shall, and shall cause A. B. Dick to, indemnify Seller and its Affiliates
against, and hold them harmless from, any liability related to such plans or any
benefits arising under such plans, whether the claim for liability or benefits
arose before or after the Closing. Except as provided in Section 5.09A(c) of the
Disclosure Schedule, each A. B. Dick Welfare Plan listed in Section 5.09A(c) of
the Disclosure Schedule reserves to A. B. Dick the right to amend or terminate
such plan.
(d) Employees of A. B. Dick shall continue to participate in
the GEC-USA Employees' Welfare Benefit Plan (the "GEC Welfare Plan") through
midnight of the Closing Date, at which time coverage under the GEC Welfare Plan
shall cease for employees of A. B. Dick and their eligible dependents.
(e) Effective as of 12:01 a.m. immediately following the
Closing Date, A. B. Dick (or Purchaser for employees of A. B. Dick) shall
establish such new employee welfare benefit plans (as defined in section 3(1) of
ERISA) as it may desire; provided, however, that A. B. Dick (or Purchaser for
employees of A. B. Dick) shall, effective as of 12:01 a.m. immediately following
the Closing Date, establish a group health plan (as defined in section 607(1) of
ERISA) for active employees of A. B. Dick, which plan shall waive any
pre-existing conditions and evidence of insurability requirements with respect
to employees of A. B. Dick (and, if applicable, count total service with A. B.
Dick both before and after the Closing for eligibility purposes), except for
such pre-existing conditions and evidence of insurability requirements as are
contained in the GEC Welfare Plan on the Closing Date which could have been
imposed had coverage under the GEC Welfare Plan continued. A. B. Dick and
Purchaser shall be solely responsible and liable for such employee welfare
benefit plans, and Seller shall have no liability whatsoever with respect to
such plans; and Purchaser shall, and shall cause A. B. Dick to, indemnify Seller
and its Affiliates against, and hold them harmless from, any liability related
to any such plans established or maintained by A. B. Dick or Purchaser.
SECTION 5.09B. NON-U.S. WELFARE PLANS AND OTHER BENEFIT PLANS.
(a) Prior to Closing, Seller shall take any and all actions necessary to relieve
each Purchaser Retained Subsidiary, A. B. Dick and Purchaser from any future or
past liability or responsibility whatsoever for providing any type of retiree
medical benefit coverage for employees or former employees of each Purchaser
Retained Subsidiary (and their beneficiaries) (any and all such benefits
hereinafter are referred to as "retiree medical benefits") under all A. B. Dick
Non-U.S. Benefit Plans providing retiree medical benefits at any time prior to
the Closing. With respect to all A. B. Dick Non-U.S. Benefit Plans providing
retiree medical benefits for employees (and their beneficiaries) at any time
prior to the Closing, Seller shall remain liable for future benefits, and any
costs or expenses related to any claims for future benefits, of all such
employees, former employees and beneficiaries who establish their entitlement to
such benefits pursuant to such plans at any time, whether before or after the
Closing. After the Closing, the Purchaser Retained Subsidiaries, A. B. Dick and
Purchaser shall not have any liability or responsibility
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whatsoever with respect to any such retiree medical benefits, unless such
benefits arise under a plan established or maintained by the Purchaser Retained
Subsidiaries after the Closing Date; and Purchaser shall, and shall cause the
Purchaser Retained Subsidiaries to, indemnify Seller and its Affiliates against,
and hold them harmless from, any liability related to any such plan established
or maintained by the Purchaser Retained Subsidiaries or Purchaser. Nothing in
this Agreement shall limit any right Seller and its Affiliates otherwise may
have to amend or terminate, in whole or in part, the retiree medical benefits
described in this Section 5.09B(a)
(b) Intentionally omitted.
(c) The Purchaser Retained Subsidiaries shall retain the A. B.
Dick Non-U.S. Welfare Plans listed in Section 5.09B(c) of the Disclosure
Schedule, but Seller shall cause any and all other A.B. Dick Non-U.S. Welfare
Plans, or the Purchaser Retained Subsidiaries' participation thereunder, to be
terminated immediately prior to, or as of, the Closing Date without any
liability, cost or expense to the Purchaser Retained Subsidiaries or Purchaser.
After the Closing, the Purchaser Retained Subsidiaries and Purchaser shall be
solely responsible and liable for the A.B. Dick Non-U.S. Welfare Plans listed in
Section 5.09B(c) of the Disclosure Schedule, except that, in the case of any
benefits which are self-insured, Seller shall be liable for the run-out of all
claims and expenses incurred prior to the Closing, and Seller shall have no
other liability whatsoever with respect to such plans after the Closing; and the
Purchaser shall, and shall cause the Purchaser Retained Subsidiaries to,
indemnify Seller and its Affiliates against, and hold them harmless from, any
liability related to such plans or any benefits arising under such plans,
whether the claim for liability or benefits arose before or after the Closing
(but, in the case of any benefits which are self-insured, excluding liability
for the run-out of all claims and expenses incurred prior to the Closing).
Except as provided in Section 5.09B(c) of the Disclosure Schedule, each A.B.
Dick Non-U.S. Welfare Plan listed in Section 5.09B(c) of the Disclosure Schedule
reserves to each Purchaser Retained Subsidiary the right to amend or terminate
such plan.
SECTION 5.10. SEVERANCE ALLOWANCE. At the time of Closing,
Seller shall cause a cash account of A. B. Dick to have cash of $1,500,000.00 to
reimburse Purchaser and A. B. Dick for post-Closing Date severance liabilities
related to A. B. Dick's and the Purchaser Retained Subsidiaries' employees.
SECTION 5.11. ADDITIONAL AGREEMENTS.
(a) At the time of Closing, Seller will cause A.B. Dick
Holland BV, subject to written confirmation by Purchaser, to execute (i) a
distributor agreement in the form as provided on Exhibit 5.11(a)(i), and to
serve as a distributor in the Netherlands of A. B. Dick in the territories
designated therein and (ii) a manufacturing, warehousing and shipping services
agreement (the "Manufacturing Agreement"). Seller and Purchaser agree to
negotiate in good faith prior to the Closing with respect to the terms of the
Manufacturing Agreement.
(b) At the time of Closing, Seller will cause Itek Graphix
Pty. Limited, subject to written confirmation by Purchaser, to execute a
distributor agreement in the form as provided on Exhibit 5.11(b), and to serve
as a distributor in Australia of A. B. Dick in the territories designated
therein.
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(c) At the time of Closing, Seller will cause Videojet Systems
International Inc. ("Videojet") to execute a distributor agreement in the form
as provided on Exhibit 5.11(c) pursuant to which A.B. Dick Company of Canada
Ltd. will become a distributor of Videojet products and services.
(d) At the time of Closing, Seller will cause Videojet to
execute a capsule ink supply agreement with A. B. Dick in the form as provided
on Exhibit 5.11(d).
(e) Walter Seiler is an employee on the payroll of G. E. C.
France S. A. who has been regularly assigned to work for the UK Subsidiary. Mr.
Seiler is scheduled to retire in April, 1997 and to continue to receive salary
until June, 1997. Purchaser agrees to reimburse Seller or Seller's appropriate
Affiliate on demand for the compensation and benefit expenses incurred directly
for Mr. Seiler through June, 1997.
(f) Willem van Sanbliet is an employee on the payroll of A. B.
Dick Holland BV who has been regularly assigned to work for A. B. Dick in its
DeMeern operations. Such assignment described in the foregoing sentence shall
terminate no later than six (6) months following the Closing. Until other
suitable arrangements are agreed upon between the parties, Purchaser will, or
will cause A. B. Dick to, reimburse Seller or Seller's appropriate Affiliate on
demand for the compensation and benefit expenses incurred directly for Mr.
Sanbliet. Such suitable arrangements shall include payments of compensation,
duties and benefits comparable to Mr. Sanbliet's current arrangements.
SECTION 5.12. ENVIRONMENTAL PERMIT TRANSFERS. Seller agrees to
cooperate reasonably with Purchaser in transferring any transferable, existing
Environmental Permits to A. B. Dick or Purchaser.
SECTION 5.13. FURTHER ACTION. Each of the parties hereto shall
execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions hereof and
give effect to the transactions contemplated hereby.
SECTION 5.14. ACCOUNTS RECEIVABLE. Except as otherwise
provided in this Agreement, from the date of this Agreement through the Closing
Date, no accounts receivable of A. B. Dick will be converted to notes
receivable, written off (except against already established reserves) or, except
in the ordinary course, otherwise extended, without the prior written consent of
Purchaser.
SECTION 5.15. TAX SHARING AGREEMENT. The tax sharing
arrangement between A.B. Dick and Seller shall be terminated as of the Closing
and all amounts payable thereunder shall be cancelled in full.
SECTION 5.16. PRE-CLOSING CLAIMS BY A.B. DICK. All recoveries
or reimbursements received by A.B. Dick or any of the Purchaser Retained
Subsidiaries after the Closing in respect of claims made prior to Closing by any
of them from any governmental authorities in respect of any environmental
matters or under insurance policies in respect of any matters shall belong to
Seller, except to the extent included in Final Working Capital or set-off
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from any indemnity owed by Seller hereunder. Accordingly and subject to the
preceding sentence, upon receipt by Purchaser, A.B. Dick or any Purchaser
Retained Subsidiary of any such recoveries or reimbursements, they shall
immediately be paid over in full to Seller. Purchaser shall cause A.B. Dick to
cooperate with reasonable requests by Seller to assist it in obtaining such
recoveries and reimbursements.
SECTION 5.17. GEC PLC GUARANTEE. The General Electric Company
plc ("GEC plc") shall at the Closing execute and deliver to Purchaser a
guarantee in the form of Exhibit 5.17.
SECTION 5.18. 3500 INVENTORY. (a) With respect to the 3500
Inventory, Purchaser shall cause A. B. Dick to pay to Seller after the Closing
50% of all gross proceeds actually received by A. B. Dick or its Affiliates as
collected funds (net of any sales or transfer taxes) after the Closing in
connection with the sales, rental or lease of any 3500 Inventory; provided,
however, that such obligation to make payments shall cease and Purchaser and A.
B. Dick shall not be obligated to make any further payments under this Section
5.18 at such time that Seller has received in the aggregate an amount in respect
of such payments equal to the Final 3500 Inventory.
(b) If any negative adjustment (the"Negative Adjustment") is
made from the amount originally proposed by Seller as the Final 3500 Inventory
pursuant to Section 2.02(c) and Purchaser has made payments pursuant to Section
5.18(a) which in the aggregate are equal to Final 3500 Inventory as adjusted,
Purchaser shall pay to Seller 25% of any additional gross proceeds actually
received by A.B. Dick or its Affiliates as collected funds (net of any sales or
transfer taxes) in connection with the sales of 3500 Inventory; provided,
however, that such obligation to make payments shall cease and Purchaser and
A.B. Dick shall not be obligated to make any further payments under this Section
5.18(b) at such time that Seller has received in the aggregate an amount in
respect of such payments equal to the Negative Adjustment.
(c) The payments described in this Section 5.18 shall be made
by A. B. Dick to Seller within two (2) business days after any such proceeds are
received by A. B. Dick as collected funds. Until such time as Seller has
received an amount equal to the amount originally proposed by Seller as the
amount of the Final 3500 Inventory, it shall have the right to audit from time
to time, at its sole cost and expense during normal business hours upon
reasonable notice, the books and records of A. B. Dick and the Purchaser
Retained Subsidiaries relating to the sales, rentals or leases of 3500
Inventory. Purchaser and Seller agree to treat any amounts paid by Seller
pursuant to this Section 5.18 as an adjustment to the consideration for the
Shares paid pursuant to Section 2.02 for all Tax purposes. The gross proceeds
derived from any rental agreement or lease shall be reduced by the amount of any
financing charges and service charges provided for in such rental agreement or
lease. If a rental agreement or lease does not specify the amount of the
applicable financing charges, the gross proceeds shall be reduced by an amount
equal to the financing charge for a comparable agreement.
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ARTICLE VI
TAX MATTERS
SECTION 6.01. TAX INDEMNITIES. (a) From and after the Closing
Date, Seller shall indemnify Purchaser and its Affiliates, without gross-up for
Taxes, against and hold them harmless from all Taxes (i) imposed on Seller, the
Seller Retained Subsidiaries or any Affiliate with which Seller files a
consolidated or combined income tax return (other than A. B. Dick or any
Purchaser Retained Subsidiary) with respect to any taxable period that ends on,
before or after the Closing Date, (ii) imposed on A. B. Dick or any of the
Purchaser Retained Subsidiaries with respect to any taxable period that ends on
or before the Closing Date, and, in the case of any taxable period beginning
before (but not ending on or before) the Closing Date, any Taxes of A. B. Dick
or any Purchaser Retained Subsidiary that are allocable, pursuant to Section
6.01(d), to the portion of such period ending on the Closing Date, (iii) imposed
as a result of the Section 338 Elections (as defined in Section 6.05(a)), (iv)
imposed as a result of the liquidating distributions made by A. B. Dick pursuant
to Section 5.04 of this Agreement, and (v) imposed on the UK Subsidiary under
Section 179 Taxation of Chargeable Gains Act 1992 of the United Kingdom;
provided, however, that Seller shall have no obligation to make any payment
pursuant to this Section 6.01 until the aggregate amount of claims arising
pursuant hereto exceeds the Tax Basket (defined below), in which case Purchaser
and its Affiliates shall be entitled to indemnity for the amount of such claim
in excess of the Tax Basket and all claims made thereafter. From and after the
Closing Date, Seller shall indemnify Purchaser and its Affiliates against and
hold them harmless from all reasonable costs and expenses (including reasonable
attorneys' and consultants' fees) incurred by Purchaser or any of its Affiliates
in connection with enforcing their rights under this Article VI. Estimated Taxes
paid by or on behalf of A. B. Dick or any Purchaser Retained Subsidiary on or
prior to the Closing Date shall be credited to Taxes with respect to the
Pre-Closing Tax Period. "Tax Basket" means the reserve for Taxes included in the
calculation of Final Working Capital.
(b) From and after the Closing Date, Purchaser and A. B. Dick
shall indemnify Seller and its Affiliates, without gross-up for Taxes, against
and hold them harmless from all Taxes imposed on or with respect to A. B. Dick
or any of its Purchaser Retained Subsidiaries that are not subject to
indemnification pursuant to paragraph (a) of this Section 6.01, including, but
not limited to, Taxes resulting from any transaction of A. B. Dick or any of its
Purchaser Retained Subsidiaries occurring on the Closing Date but after the
Closing. From and after the Closing Date, Purchaser and A. B. Dick agree to
indemnify Seller and its Affiliates against and hold them harmless from all
costs and expenses (including reasonable attorneys' and consultants' fees)
incurred by Seller or any of its Affiliates in connection with enforcing their
rights under this Article VI.
(c) Payment by the indemnitor of any amount due under this
Section 6.01 shall be made within ten Business Days following written notice by
the indemnitee that payment of such amounts to the appropriate tax authority is
due, provided that the indemnitor shall not be required to make any payment
earlier than two Business Days (or, in the case of non-US Taxes, five (5)
Business Days) before it is due to the appropriate tax authority. If Seller
receives an assessment or other notice of Tax due with respect to A. B. Dick or
any of its Subsidiaries for any period ending on or before the Closing Date for
which Seller is not responsible, in whole
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or in part, pursuant to paragraph (a) of this Section 6.01, because all or a
part of such Tax does not exceed the amount reserved for Taxes in the books and
records of A. B. Dick and its Subsidiaries as of the Closing Date or otherwise,
and Seller pays such Tax, then Purchaser or A. B. Dick shall pay to Seller, in
accordance with the first sentence of this Section 6.01(c), the amount of such
Tax for which Seller is not responsible. In the case of a Tax that is contested
in accordance with the provisions of Section 6.03, payment of the Tax to the
appropriate tax authority will not be considered to be due earlier than the date
a final determination to such effect is made by the appropriate taxing authority
or a court unless such payment is necessary to contest such Tax.
(d) For purposes of this Agreement, in the case of any Tax
that is imposed on a periodic basis and is payable for a period that begins
before the Closing Date and ends after the Closing Date, the portion of such
Taxes payable for the period ending on the Closing Date shall be (i) in the case
of any Tax other than a Tax based upon or measured by income, the amount of such
Tax for the entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and the denominator
of which is the number of days in the entire period and (ii) in the case of any
Tax based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit shall be prorated based upon
the fraction employed in clause (i) of the preceding sentence. In the case of
any Tax based upon or measured by capital (including net worth or long-term
debt) or intangibles, any amount thereof required to be allocated under this
Section 6.01(d) shall be computed by reference to the level of such items on the
Closing Date.
(e) Purchaser covenants that without the prior consent of
Seller, it will not and will not cause or permit A. B. Dick, the Purchaser
Retained Subsidiaries, or any Affiliate of Purchaser, to (i) take any action on
the Closing Date, other than in the ordinary course of business or pursuant to
the Section 338 Elections that results in any increased Tax liability or
reduction of any Tax Asset of Seller or its Affiliates or indemnification
obligation of Seller under Section 6.01 of this Agreement, or (ii) make or
change any Tax election, amend any Tax return or take any position on any Tax
return, or take any other action (other than in the ordinary course of business
or pursuant to the Section 338 Elections) that results in any increased Tax
liability or reduction of any Tax Asset of Seller or any of its Affiliates.
Purchaser agrees that Seller and Seller's Affiliates are to have no liability
for Taxes resulting from any action referred to in the preceding sentence, and
agrees to indemnify and hold harmless the Seller and its Affiliates against such
Tax or reduction of Tax Asset.
(f) Seller covenants that without the prior written consent of
Purchaser, Seller will not take and will not cause or permit any Affiliate of
Seller to take any action on the Closing Date, other than any action in the
ordinary course of business or pursuant to the Section 338 Elections, that
results in any increased Tax liability or reduction of any Tax Asset of
Purchaser, A. B. Dick or their respective Affiliates. Seller agrees that
Purchaser, A. B. Dick and their respective Affiliates are to have no liability
for Taxes resulting from any action referred to in the preceding sentence and
agrees to indemnify and hold harmless Purchaser, A. B. Dick and their respective
Affiliates against any such Tax or reduction of Tax Asset.
(g) Seller will indemnify Purchaser against and hold it
harmless from (i) any liability of the UK Subsidiary to repay the whole or any
part of any payment received for group
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relief under Sections 402-413 Income and Corporation Taxes Act 1988 and (ii) any
non-receipt of any payment for group relief included in the calculation of Final
Working Capital.
(h) Seller will indemnify Purchaser against and hold it
harmless from any United Kingdom Tax or Value Added Tax liability of the UK
Subsidiary which is properly attributable to Seller or any Seller Retained
Subsidiary.
(i) Purchaser hereby covenants with Seller to pay to Seller,
by way of adjustment to the consideration for the sale of the Shares, an amount
equal to any Tax for which Seller or any other person falling within section
767A(2) of the Income and Corporation Taxes Act 1988 (Taxes Act) becomes liable
by virtue of the operation of section 767A and 767B of the Taxes Act in
circumstances where the taxpayer company (as referred to in section 767A (1)) is
the U.K. Subsidiary.
(j) The covenant contained in Section 6.02(i) shall:
(i) extend to any reasonable out-of-pocket costs
incurred by the Seller or such other person
in connection with such Tax or a claim under
Section 6.02(i);
(ii) not apply to Tax which has been recovered
under section 767B(2) of the Taxes Act or
any other relevant statutory provision (and
the Seller shall procure that no such
recovery is sought to the extent that
payment is made hereunder)
(iii) apply only to a Tax described in Section
6.02(i) with respect to which Purchaser is
not entitled to make a claim for indemnity
under Article VI.
SECTION 6.02. REFUNDS AND TAX BENEFITS. Purchaser shall
promptly pay to Seller any refund or credit (including any interest paid or
credited with respect thereto) received by A. B. Dick or any of its Subsidiaries
of Taxes (i) relating to Pre-Closing Tax Periods or (ii) attributable to an
amount paid by Seller under Section 6.01 hereof. Purchaser shall, if Seller so
requests and at Seller's expense, cause the relevant entity to file for and
obtain any refund to which Seller is entitled under this Section 6.02. Purchaser
shall permit Seller to control (at Seller's expense) the prosecution of any such
refund claimed, and shall cause the relevant entity to authorize by appropriate
power of attorney such persons as Seller shall designate to represent such
entity with respect to such refund claimed. In the event that any refund or
credit of Taxes for which a payment has been made pursuant to this Section 6.02
is subsequently reduced or disallowed, Seller shall indemnify and hold harmless
the payor for any Tax liability, including interest and penalties, assessed
against such payor by reason of the reduction or disallowance.
SECTION 6.03. CONTESTS. (a) After the Closing, Purchaser shall
promptly notify Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on A. B. Dick
which, if determined adversely to the taxpayer or after the lapse of time, would
be grounds for indemnification under Section 6.01. Such notice shall contain
factual information (to the extent known to A. B. Dick) describing the
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asserted Tax liability in reasonable detail and shall include copies of any
notice or other document received from any taxing authority in respect of any
such asserted Tax liability. If Purchaser fails to give Seller prompt notice of
an asserted Tax liability as required by this Section 6.03, then (i) if Seller
is precluded by the failure to give prompt notice from contesting the asserted
Tax liability in both the administrative and judicial forums, Seller shall not
have any obligation to indemnify for any Loss arising out of such asserted Tax
liability, and (ii) if Seller is not so precluded from contesting but such
failure to give prompt notice results in a detriment to Seller, any amount which
Seller is otherwise required to pay Purchaser pursuant to Section 6.01 with
respect to such liability shall be reduced by the amount of such detriment.
(b) Seller may elect to control, through counsel of its own
choosing and at its own expense, any audit, claim for refund and administrative
or judicial proceeding involving any asserted liability with respect to which
indemnity may be sought under Section 6.01 (any such audit, claim for refund or
proceeding relating to an asserted Tax liability is referred to herein as a
"Contest"). If Seller elects to control a Contest, it shall, within 30 calendar
days of receipt of the notice of asserted Tax liability, notify Purchaser of its
intent to do so, and Purchaser shall cooperate and shall cause its Affiliates to
cooperate, at the expense of Seller, in each phase of such Contest. If Seller
elects not to control the Contest, fails to notify Purchaser of its election as
herein provided or contests its obligation to indemnify under Section 6.01,
Purchaser or A. B. Dick may pay, compromise or contest, at its own expense, such
asserted liability. However, in such case, neither Purchaser nor A. B. Dick may
settle or compromise any asserted liability over the objection of Seller;
PROVIDED, HOWEVER, that consent to settlement or compromise shall not be
unreasonably withheld or delayed. In any event, Seller may participate, at its
own expense, in the Contest. If Seller chooses to control the Contest, Purchaser
shall promptly empower and shall cause its Affiliates promptly to empower (by
power of attorney and such other documentation as may be appropriate) such
representatives of Seller as it may designate to represent Purchaser, A. B. Dick
any Purchaser Retained Subsidiary or any of their Affiliates in the Contest
insofar as the Contest involves an asserted Tax liability for which Seller would
be liable under Section 6.01.
SECTION 6.04. PREPARATION OF TAX RETURNS. Seller shall prepare
and file (a) United States federal, state and local income and franchise tax
returns and schedules relating to A. B. Dick and its Subsidiaries for any Tax
period ending on or prior to the Closing Date and which are required to be filed
after the Closing Date, and (b) any United Kingdom or Belgian tax returns for
taxable periods ending on or prior to March 31, 1996. With respect to any
returns for which Seller has filing responsibility pursuant to the preceding
sentence, A. B. Dick and its Subsidiaries will be included in the consolidated,
combined or unitary tax returns of Seller or an Affiliate of Seller on a basis
consistent with prior tax years unless a different treatment is required by an
intervening change in law. The parties agree that if A. B. Dick or any of its
Subsidiaries is permitted, but not required, under applicable state or local
income or franchise tax laws to treat the Closing Date as the last day of a Tax
period, they will treat the Tax period as ending on the Closing Date. Seller
shall prepare and file all other returns of Taxes for any period ending on or
prior to the Closing Date to the extent Seller or an Affiliate of Seller (other
than A. B. Dick or any of the Purchaser Retained Subsidiaries) previously was
responsible for the preparation and filing of such returns for the immediately
preceding Tax period. Purchaser shall prepare or cause to be prepared all
returns of Taxes for A. B. Dick and the Purchaser Retained Subsidiaries for
which Seller is not responsible pursuant to this Section
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6.04 (the "Purchaser Returns"). Such Purchaser Returns shall, to the extent they
include any Pre-Closing Tax Period, (i) be prepared on a basis consistent with
those prepared for prior tax years, including depreciation methods and other
accounting methods which may be elected or adopted annually, unless a different
treatment of any item is required by an intervening change in law and (ii) shall
be submitted by Purchaser to Seller (together with schedules, statements and, to
the extent requested by Seller, supporting documentation) at least 40 days prior
to the due date (including extensions) for filing. If Seller objects to any item
on such Purchaser Return, it shall, within 10 days after delivery of such
Return, notify Purchaser in writing that it so objects, specifying with
particularity any such item and stating the specific factual or legal basis for
any such objection. If a notice of objection shall be duly delivered, Purchaser
and Seller shall negotiate in good faith and use their best efforts to resolve
such items. If Purchaser and Seller are unable to reach such agreement within 5
days after receipt by Purchaser of such notice, the disputed items shall be
resolved by a nationally recognized accounting firm with no material
relationship with Purchaser, Seller or their Affiliates (the "Accounting
Referee"), chosen and mutually acceptable to both Purchaser and Seller within
five days of the date on which the need to choose the Accounting Referee arises.
The Accounting Referee shall resolve any disputed items within 20 days of having
the item referred to it pursuant to such procedures as it may require. The
costs, fees and expenses of the Accounting Referee shall be borne equally by
Purchaser and Seller. Purchaser will deliver to Seller a complete and accurate
copy of each return required to be filed by Purchaser, A. B. Dick or any
Purchaser Retained Subsidiary under this Section 6.04 for Tax periods that
include the Closing Date, and any amendment to such return, within 10 Business
Days of the date such return is filed with the appropriate tax agency.
SECTION 6.05. SECTION 338(h)(10) ELECTION. (a) The parties
agree that in connection with the sale contemplated hereby, the parties shall
cause an express election pursuant to Section 338(h)(10) of the Internal Revenue
Code and any similar elections under any applicable state or local income tax
laws to be made for A. B. Dick and Itek Graphix Corporation (the "Section 338
Elections"), and shall comply with the rules and regulations applicable to the
Section 338 Elections.
(b) For purposes of executing the Section 338 Elections, on or
prior to the Closing Date, Purchaser and Seller (and other entities as
necessary) jointly shall execute four copies (three for Purchaser and one for
Seller) of IRS Form 8023 and all attachments required to be filed therewith
pursuant to applicable Treasury regulations and any other forms required to be
filed under state or local law with respect to Section 338 Elections. The forms
relating to the Section 338 Elections for federal, state and local Tax purposes
hereinafter shall be referred to as the "Forms". The Forms shall be filed with
the appropriate tax authorities not earlier than 90 days before the latest date
for the filing thereof. As soon as practicable, but not later than 30 days
following Seller's calculation of Final Working Capital, Seller shall submit to
Purchaser any necessary corrections, amendments or supplements (the
"Adjustments") to such Form and the attachments thereto, as executed by
Purchaser and Seller (and other entities as necessary) on or before the Closing
Date. Seller's Adjustments shall be binding on the parties hereto unless
Purchaser shall deliver to Seller notice in writing of an objection to any item
within 30 days following Purchaser's receipt of such calculations. In the event
of such a dispute, Purchaser and Seller shall negotiate in good faith among
themselves for a period of 15 Business Days in an attempt to resolve such
dispute. If no resolution is reached within such
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period, Purchaser and Seller shall submit such disputed items to KPMG Peat
Marwick within two Business Days after the end of that period and the decision
of such accounting firm shall be given within 30 days thereafter and will be
conclusive and binding on the parties. Purchaser and Seller will each pay one
half of the fees and expenses charged by KPMG Peat Marwick in connection
therewith. The fees and expenses of the accounting firm shall be shared equally
between Purchaser and Seller. In any event, however, the Forms must be filed on
or before their due date.
(c) For purposes of making the Section 338 Elections, Section
6.05 of the Disclosure Schedule shall set forth an allocation of Purchaser's
"adjusted grossed-up basis" in the shares of A. B. Dick and the Purchaser
Retained Subsidiaries (within the meaning of the Treasury regulations under
Section 338 of the Internal Revenue Code) to the classes of tangible and
intangible assets of A. B. Dick and the Purchaser Retained Subsidiaries as of
the Closing Date as required by Form 8023-A (the "Allocation"). The Allocation
shall be modified to reflect an Adjustment made pursuant to Section 6.05(b)
above. The Allocation shall be binding upon Purchaser and Seller for purposes of
allocating the "deemed selling price" (within the meaning of the Treasury
regulations) among the assets of A. B. Dick and its Subsidiaries. Neither party
shall file any Tax return, or take a position with a Tax authority, that is
inconsistent with the Allocation. The parties also agree to use reasonable
efforts prior to Closing to agree to an allocation of purchase price with
respect to each asset deemed purchased, and if such an agreement is reached,
such allocation shall be treated as an Allocation for purposes of this
Agreement.
SECTION 6.06. COOPERATION AND EXCHANGE OF INFORMATION. Seller
and Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of another in filing any Tax return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each party will retain all
returns, schedules and work papers and all material records or other documents
relating to Tax matters of A. B. Dick and the Purchaser Retained Subsidiaries
for its taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (a) the expiration of the statute of
limitations of the taxable periods to which such returns and other documents
relate, without regard to extensions except to the extent notified by another
party in writing of such extensions for the respective Tax periods, or (b) six
years following the due date (without extension) for such returns. Any
information obtained under this Section 6.06 shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting an audit or other proceeding.
SECTION 6.07. CONVEYANCE TAXES. Purchaser agrees to assume
liability for and to pay all sales, transfer, stamp, real property transfer and
similar Taxes incurred as a result of the sale of the Shares contemplated
hereby. In addition, Purchaser agrees to indemnify Seller and its Affiliates for
any and all Losses incurred by Seller and its Affiliates arising out of
Purchaser's failure to make timely or full payments of such Taxes.
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SECTION 6.08. MISCELLANEOUS. (a) The parties agree to treat
all payments made under this Article VI or Article VIII as adjustments to the
purchase price for Tax purposes.
(b) Except as expressly provided otherwise, this Article VI
shall be the sole provision governing Tax matters and indemnities therefor under
this Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF SELLER. The
obligations of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another date, and
the covenants contained in this Agreement to be complied with by
Purchaser on or before the Closing shall have been complied with in all
material respects, and Seller shall have received a certificate of
Purchaser to such effect signed by a duly authorized officer thereof;
(b) NO ORDER. No United States, state or foreign governmental
authority or other agency or commission or United States, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and the parties hereto shall use all reasonable efforts to have any
such order or injunction entered prior to the Closing vacated;
(c) RESOLUTIONS. Seller shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Purchaser, of the resolutions duly and validly adopted by the board of
directors of Purchaser evidencing its authorization of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(d) INCUMBENCY CERTIFICATE. Seller shall have received a
certificate of the Secretary or an Assistant Secretary of Purchaser
certifying the names and signatures of the officers of Purchaser
authorized to sign this Agreement and the other documents to be
delivered hereunder; and
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(e) LEGAL OPINION. Seller shall have received a legal opinion,
addressed to Seller and dated the Closing Date, substantially in the
form of Exhibit 7.01(e).
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PURCHASER. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another date and
except for any such failures to be true and correct that would not be
reasonably expected to have a material adverse effect individually or
in the aggregate on the Business, each material covenant contained in
this Agreement to be complied with by Seller on or before the Closing
shall have been complied with in all material respects (with respect to
this Section 7.02(a) the covenants listed in Section 9.01(b) of the
Disclosure Schedule shall be deemed to be immaterial covenants and all
other covenants to be complied with hereunder shall be deemed to be
material), and Purchaser shall have received a certificate of Seller to
such effect signed by a duly authorized officer thereof; provided,
however, that Purchaser shall be entitled to indemnification after the
Closing pursuant to Section 8.03(a)(i) with respect to any
representation or warranty of Seller that is not true and accurate in
all respects at the Closing and with respect to any representation or
warranty of Seller that is not true and accurate in all respects as if
any such representation or warranty were made by Seller as of the
Closing Date;
(b) MATERIAL ADVERSE CHANGE. Subsequent to the date hereof,
there shall not have occurred and be continuing any act, event or
condition which is reasonably likely to prevent or impair the ability
of the Business to be conducted in substantially the same manner as
conducted immediately before the Closing.
(c) NO ORDER. No United States, state or foreign governmental
authority or other agency or commission or United States, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and the parties hereto shall use all reasonable efforts to have any
such order or injunction entered prior to the Closing vacated;
(d) NILES LEASE. Seller or its Affiliate and A. B. Dick shall
have executed and delivered a real property lease for the Niles
Facility in the form attached hereto as Exhibit 7.02(d) (the "Lease").
(e) RESIGNATIONS. Each director (other than those remaining
with A. B. Dick or such subsidiary after Closing) of A. B. Dick and
the Purchaser Retained Subsidiary shall have resigned effective as
of the Closing Date;
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(f) RESOLUTIONS. Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Seller, of the resolutions duly and validly adopted by the board of
directors of Seller evidencing its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(g) INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate of the Secretary or an Assistant Secretary of Seller
certifying the names and signatures of the officers of Seller
authorized to sign this Agreement and the other documents to be
delivered hereunder;
(h) LEGAL OPINION. Purchaser shall have received legal
opinions, addressed to Purchaser and dated the Closing Date,
substantially in the forms of Exhibit 7.02(h)(i) and Exhibit
7.02(h)(ii);
(i) ASSUMPTION AGREEMENT. Seller shall have executed and
delivered to Purchaser an assumption agreement in the form of
Exhibit 7.02(i) hereto (the "Assumption Agreement");
(j) NOMINEE SHARES. Any nominee shares in any Purchaser
Retained Subsidiary shall have been transferred, without any additional
consideration, to Purchaser or its nominee; and
(k) RELEASE OF LIENS. All liens, encumbrances and charges
against A. B. Dick, any Purchaser Retained Subsidiary or the Real
Property relating only to the Excluded Liabilities shall have been
released.
(l) GEC PLC GUARANTEE. GEC plc shall have delivered to
Purchaser the guarantee described in Section 5.17.
(m) MANUFACTURING AGREEMENT. A.B. Dick Holland BV shall have
executed and delivered to Purchaser the Manufacturing Agreement in a
form reasonably satisfactory to Purchaser.
Purchaser's obligations hereunder are not subject to any third party financing.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. SURVIVAL. Subject to the limitations and other
provisions of this Agreement and subject to Sections 8.04 and 8.05, (a) the
representations and warranties of the parties hereto contained herein shall
survive the Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of Seller or Purchaser until March 31, 1998
(other than the representations and warranties contained in Section 3.14,
Section 3.17 and Section 3.18 which shall survive the closing in full force and
effect and shall be governed by
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Article VI, Section 8.04 and Section 8.05, respectively) and (b) each covenant
and agreement of each party hereto (including its indemnification obligations
other than those based upon its representations and warranties) shall survive
the Closing and shall remain in full force and effect, in each case regardless
of any investigation made by or on behalf of any party hereto for a period equal
to the specific statute of limitations period applicable to that covenant or
agreement, if any, and if there is no limitation and in any case with respect to
clause (iii) of Section 8.02(a) and clause (iii) of Section 8.03(a), then such
indemnification shall survive indefinitely.
SECTION 8.02. INDEMNIFICATION BY PURCHASER. (a) Purchaser
agrees, subject to the other terms and conditions of this Agreement and without
gross-up for Taxes, to indemnify Seller and its Affiliates against and hold it
harmless from all Losses arising out of (i) the breach of any representation or
warranty of Purchaser herein (other than any covered by Article VI), (ii) the
breach of any covenant or agreement of Purchaser herein (other than any covered
by Article VI), and (iii) the Designated Liabilities. Anything in Section 8.01
to the contrary notwithstanding, no claim may be asserted nor may any action be
commenced against Purchaser pursuant to Section 8.02(a)(i) or 8.02(a)(ii) for
breach of any representation, warranty, covenant or agreement contained herein,
unless written notice of such claim or action is received by Purchaser
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action is
based ceases to survive as set forth in Section 8.01. Anything in this Agreement
to the contrary notwithstanding, any failure by Seller or any of its Affiliates
to notify Purchaser or any of its Affiliates of any claim, action or Loss in
connection with or relating to Purchaser's obligations pursuant to Section
8.02(a)(iii) shall in no way relieve or otherwise affect Purchaser's obligations
under such Sections.
(b) The indemnification obligations of Purchaser pursuant to
Section 8.02(a)(i) shall not be effective until the aggregate dollar amount of
all Losses which would otherwise be indemnifiable pursuant to Section 8.02(a)(i)
exceeds $250,000 (the "Purchaser's Threshold Amount"), and then only to the
extent such aggregate amount exceeds Purchaser's Threshold Amount and,
notwithstanding anything to the contrary, such indemnification obligations
pursuant to clause (i) of Section 8.02(a) of Purchaser shall be limited to
$15,000,000. All other indemnities of Purchaser in this Agreement shall be
effective without regard to the threshold or cap described in this Section
8.02(b). For the purposes of this Section 8.02 and any other indemnity by
Purchaser under this Agreement, and for the purposes of computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount net of any insurance proceeds and any indemnity,
contribution or other similar payments actually received by Seller, and Seller
shall reimburse Purchaser for the amount of any additional insurance proceeds
and any additional indemnity, contribution or other similar payment recovered by
Seller or any of its Affiliates from any third party, after deducting
out-of-pocket expenses incurred by Seller or its Affiliates to obtain such
recovery, with respect to any such claim for which Purchaser has been
indemnified by Seller. For any Loss indemnifiable by Purchaser under this
Agreement that is subject to insurance or other indemnity, contribution or other
similar payment from a third party, Purchaser will lend to the indemnified party
hereunder the amount covered by such insurance or other indemnity, contribution
or similar payment, and Seller will use reasonable efforts to collect such
amounts from the relevant third party, it being understood that such insurance,
indemnity, contribution or similar payment is primary and that
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Purchaser's indemnities under this Agreement are secondary. Any such
reimbursement in connection with any claim shall not exceed the amount received
by Purchaser from Seller in connection with Seller's indemnity for that claim.
(c) Seller, at its sole cost and expense, agrees to give
Purchaser written notice of any claim, assertion, event or proceeding by or in
respect of a third party as to which it may request indemnification under this
Agreement or as to which Purchaser's Threshold Amount may be applied as soon as
is practicable and in any event within 30 days of the time that Seller learns of
such claim, assertion, event or proceeding; PROVIDED, HOWEVER, that the failure
to so notify Purchaser shall not affect rights to indemnification hereunder
except to the extent that Purchaser demonstrates that it is actually prejudiced
by such failure. If Purchaser acknowledges in writing its obligations to
indemnify an indemnified person under Section 8.02(a) against any Loss that may
result from any such claim or proceeding, Purchaser shall be entitled to assume
and control, through counsel of its own choosing, the defense or settlement of
any such claim or proceeding at its own expense. If Purchaser elects to assume
the defense of any such claim or proceeding, Seller may participate in such
defense, but in such case the expenses of Seller and its counsel shall be paid
by Seller. Seller shall provide Purchaser with access to its records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with Purchaser in the
defense or settlement thereof, and Purchaser shall reimburse Seller for all its
reasonable out-of-pocket expenses in connection therewith. If Purchaser elects
to direct the defense of any claim or proceeding pursuant to this Section,
Seller shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability, unless Purchaser consents in writing to such payment or unless
Purchaser, subject to the last sentence of this Section 8.02(c), withdraws from
the defense of such asserted liability, or unless a final judgment from which no
appeal may be taken by or on behalf of Purchaser is entered against Seller for
such liability. If Purchaser shall fail to defend, or if, after commencing or
undertaking any such defense, Purchaser fails to prosecute or withdraws from
such defense, Seller shall have the right to undertake the defense or settlement
thereof, at Purchaser's expense. If Seller assumes the defense of any such claim
or proceeding pursuant to this Section 8.02(c) and proposes to settle such claim
or proceeding prior to a final judgment thereon or to forego appeal with respect
thereto, then Seller shall give Purchaser prompt written notice thereof and
Purchaser shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
(d) Except as set forth in this Agreement, Purchaser is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Notwithstanding anything to the contrary contained in
this Agreement, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of Seller, after the
consummation of the purchase and sale of the Shares contemplated by this
Agreement, to rescind this Agreement or any of the transactions contemplated
hereby.
(e) Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall have no liability under any provision of this
Agreement for and in no event shall Purchaser's Threshold Amount be applied to
any Losses to the extent that such Losses result from or arise out of actions
taken by Seller, the Seller Retained Subsidiaries or their respective Affiliates
after the Closing Date.
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(f) With respect to any claim for indemnity that may be
asserted under Section 8.02(a)(iii) or Sections 8.02(a)(i) or (ii), any such
claim may be asserted first under Section 8.02(a)(iii), and to the extent that
Section 8.02(a)(iii) does not apply to the whole of such claim, the remainder of
such claim may be asserted under Sections 8.02(a)(i) or (ii).
(g) In no event shall Purchaser be obligated to indemnify
Seller or any other Person with respect to any Excluded Liability. Nothing in
this Section 8.02(g) shall be construed to limit Purchaser's obligations to
indemnify Seller and its Affiliates for any Designated Liabilities in accordance
with the terms of this Agreement.
SECTION 8.03. INDEMNIFICATION BY SELLER. (a) Seller agrees,
subject to the other terms and conditions of this Agreement and the Assumption
Agreement, and without grossup for Taxes, to indemnify Purchaser, A. B. Dick,
the Purchaser Retained Subsidiaries and their respective Affiliates against and
hold them harmless from all Losses arising out of (i) the breach of any
representation or warranty of Seller herein (other than representations and
warranties contained in Section 3.14, Section 3.17 and Section 3.18 which shall
be governed by Article VI, Section 8.04 and Section 8.05, respectively, it being
understood that Article VI, Section 8.04 and Section 8.05 constitutes the sole
treatment of the matters addressed therein), (ii) the breach of any covenant or
agreement of Seller herein (other than Article VI, it being understood as
aforesaid), (iii) any action taken by any landlord under any of the leases
identified in Section 3.16 of the Disclosure Schedule as a result of or in
connection with the failure by Seller for any reason to obtain the consent of
any party to any of such leases required in connection with or as a result of
the execution of this Agreement by Seller or the consummation of the
transactions contemplated by this Agreement, but only to the extent that any
such action by any such landlord is not instigated by Purchaser or its
Affiliates, and (iv) the Excluded Liabilities. Anything in Section 8.01 to the
contrary notwithstanding, no claim may be asserted nor any action commenced
against Seller pursuant to Section 8.03(a)(i) or 8.03(a)(ii) for any
representation, warranty, covenant or agreement contained herein, unless written
notice of such claim or action is received by Seller describing in detail the
facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation, warranty, covenant
or agreement on which such claim or action is based ceases to survive as set
forth in Section 8.01, irrespective of whether the subject matter of such claim
or action shall have occurred before or after such date. Anything in this
Agreement to the contrary notwithstanding, any failure by Purchaser or any of
its Affiliates to notify Seller or any of its Affiliates of any claim, action or
Loss in connection with or relating to Seller's obligations pursuant to Section
8.03(a)(iii) or Section 8.03(a)(iv) shall in no way relieve or otherwise affect
Seller's obligations under such Sections.
(b) The indemnification obligations of Seller pursuant to
clause (i) of Section 8.03(a) shall not be effective until the aggregate dollar
amount of all Losses which would otherwise be indemnifiable pursuant to this
Section 8.03 exceeds $250,000 (the "Seller's Threshold Amount"), and then only
to the extent such aggregate amount exceeds Seller's Threshold Amount and,
notwithstanding anything to the contrary, such indemnification obligations
pursuant to clause (i) of Section 8.03(a) of Seller shall be limited to
$15,000,000 in the aggregate. All other indemnities of Seller in this Agreement
shall be effective without regard to the threshold or cap described in this
Section 8.03(b). For the purposes of this Section 8.03 and any other indemnity
by Seller under this Agreement, and for the purposes of computing such
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individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount net of any insurance proceeds and any indemnity,
contribution or other similar payments actually received by Purchaser, and
Purchaser shall reimburse Seller for the amount of any additional insurance
proceeds and any additional indemnity, contribution or other similar payments
recovered by Purchaser or any of its Affiliates from any third party, after
deducting out-of-pocket expenses incurred by Purchaser or its Affiliates to
obtain such recovery, with respect to any such claim for which Purchaser has
been indemnified by Seller. Any such reimbursement in connection with any claim
shall be limited to the amount received by Purchaser from Seller in connection
with Seller's indemnity for that claim. For any Loss indemnifiable by Seller
under this Agreement that is subject to insurance or other indemnity,
contribution or other similar payment from a third party, Seller will lend to
the indemnified party hereunder the amount covered by such insurance or other
indemnity, contribution or similar payment, and Purchaser will cause A. B. Dick
to use reasonable efforts to collect such amounts from the relevant third party,
it being understood that such insurance, indemnity, contribution or similar
payment is primary and that Seller's indemnities under this Agreement are
secondary.
(c) In no event shall Seller be obligated to indemnify
Purchaser or any other Person with respect to any Designated Liability. Nothing
in this Section 8.03(c) shall be construed to limit Seller's obligations to
indemnify Purchaser and its Affiliates for any Excluded Liabilities in
accordance with the terms of this Agreement.
(d) Seller shall promptly assume and control the defense of
any claim or proceeding by or in respect of a third party as to which Purchaser
is entitled indemnification under Section 8.03(a)(iv). Purchaser agrees to give
Seller written notice of any claim, assertion, event or proceeding by or in
respect of a third party as to which it may request indemnification under
Sections 8.03(a)(i), (ii) or (iii) or as to which Seller's Threshold Amount may
be applied as soon as is practicable and in any event within 30 days of the time
that Purchaser learns of such claim, assertion, event or proceeding; PROVIDED,
HOWEVER, that the failure to so notify Seller shall not affect rights to
indemnification hereunder except to the extent that Seller demonstrates that it
is actually prejudiced by such failure. Purchaser agrees to give Seller written
notice of any claim, assertion, event or proceeding by or in respect to a third
party as to which it may request indemnification under Section 8.03(a)(iv) as
soon as is practicable and in any event within 30 days of the time Purchaser
learns of such claim, assertion, event or proceeding; provided, however, that
the failure to so notify Seller shall not affect rights to indemnification
hereunder. If Seller acknowledges in writing its obligations to indemnify an
indemnified person under Sections 8.03(a)(i), (ii) or (iii) against any Loss
that may result from any such claim or proceeding, Seller shall be entitled to
assume and control, through counsel of its own choosing, the defense or
settlement of any such claim or proceeding at its own expense. Purchaser may
participate in any defense assumed by Seller, but in such case the expenses of
Purchaser shall be paid by Purchaser. Purchaser shall provide Seller with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with
Seller in the defense or settlement thereof, and Seller shall reimburse
Purchaser for all its reasonable out-of-pocket expenses in connection therewith.
If Seller elects to direct the defense of any such claim or proceeding,
Purchaser shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability unless Seller consents in writing to such payment or unless Seller,
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subject to the last sentence of this Section 8.03(d), withdraws from the defense
of such asserted liability or unless a final judgment from which no appeal may
be taken by or on behalf of Seller is entered against Purchaser for such
liability. If Seller shall fail to defend, or, if after commencing or
undertaking any such defense, fail to prosecute or withdraws from such defense,
Purchaser shall have the right to undertake the defense or settlement thereof,
at Seller's expense. If Purchaser assumes the defense of any such claim or
proceeding pursuant to this Section 8.03(d) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then Purchaser shall give Seller prompt written notice thereof
and Seller shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
(e) Except as set forth in this Agreement, Seller is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of Purchaser, after the consummation of
the purchase and sale of the Shares contemplated hereby, to rescind this
Agreement or any of the transactions contemplated hereby.
(f) Notwithstanding anything to the contrary contained in this
Agreement, Seller shall have no liability under Section 8.03(a)(i) and (ii) for
and in no event shall Seller's Threshold Amount be applied to any Losses to the
extent that such Losses result from or arise out of actions taken by A. B. Dick,
any Purchaser Retained Subsidiary, or their respective Affiliates after the
Closing Date or by Purchaser or its Affiliates.
(g) With respect to any claim for indemnity that may be
asserted under either Section 8.03(a)(iv) or Sections 8.03(a)(i), (ii) or (iii),
any such claim may be asserted first under Section 8.03(a)(iv), and to the
extent that Section 8.03(a)(iv) does not apply to the whole of such claim, the
remainder of such claim may be asserted under Sections 8.03(a)(i), (ii) or
(iii).
(h) In the event that Seller is required to indemnify
Purchaser or its Affiliates pursuant to clause (i) of Section 8.03(a) as it
relates to Section 3.07 on the basis that the Company's Financial Data
overstates the 3500 Inventory included therein, the Working Capital adjustments
made pursuant to clause (i) of Section 2.02(b) shall be retroactively
recalculated by deducting the amount of such overstatement from the Reference
Working Capital; provided, however, that the amount of such retroactive
adjustment shall not exceed the amount which Seller is required to pay to
Purchaser and its Affiliates for such indemnification. A payment in the amount
of such retroactive adjustment shall be made by Purchaser to Seller and such
payment shall be offset against the amount for which Seller is required to
indemnify Purchaser as described in the first sentence of this paragraph. For
purposes of this paragraph only, any such indemnity not payable by Seller due to
the Seller's Threshold Amount shall, to such extent, nonetheless be deemed to
have been paid to Purchaser.
SECTION 8.04. ENVIRONMENTAL INDEMNIFICATION. (a) Subject to
the limitations set forth below in Section 8.04(b), from and after the Closing
Date, Seller shall indemnify and hold harmless Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates from all Losses
and Consequential Damages arising out of: (i) any Hazardous Substance present
in, on, under or above any real property owned, leased, occupied or used by
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A. B. Dick or any Purchaser Retained Subsidiary at any time prior to the Closing
or any personal property located or used thereat, arising out of actions or
conditions occurring or existing prior to, at or after the Closing; (ii) any
claims by any governmental or regulatory authority or third party in connection
with any violation of or noncompliance with or other liability arising under any
Environmental Laws or Environmental Permits relating to A. B. Dick or any
Purchaser Retained Subsidiary prior to the Closing; (iii) the breach of any
representation or warranty of Seller in Section 3.17; (iv) the matters disclosed
in Section 3.17 of the Disclosure Schedule; and (v) all liabilities and
obligations in connection with any sites to which any Hazardous Substance was
transported or at which any Hazardous Substance migrated, was disposed or
arrangements were made for transportation to or disposal at such sites of any
Hazardous Substances from any location operated by A. B. Dick or any Purchaser
Retained Subsidiaries prior to the Closing, including any such sites previously
owned, leased, occupied or used by Seller in the conduct of the Business (any of
the matters addressed in clauses (i), (ii), (iii), (iv) or (v) of this Section
8.04(a) and clauses (i), (ii) or (iii) of Section 8.04(e) are collectively
"Environmental Losses"). Seller's obligations under this Section 8.04 shall be
without limitation as to time or amount.
(b) Notwithstanding anything to the contrary in this
Agreement, Seller's obligations under this Section 8.04 shall be subject to the
following provisions:
(i) With respect to the Real Property (other than the
Unoccupied Leased Properties), Seller's obligations under this Section
8.04 shall only apply to Environmental Losses arising out of actions or
conditions occurring or existing prior to Closing, but only to the
extent that Seller receives notice from an indemnified party within
three (3) years after the Closing Date of any such Environment Loss or
any such action, omission or condition that may result in an
Environmental Loss. It shall be presumed that (A) any Environmental
Loss of which Seller receives notice pursuant to the preceding sentence
arises out of actions or conditions occurring or existing prior to the
Closing Date absent a showing by Seller by a preponderance of the
evidence that such Environmental Loss relates solely to actions of
Purchaser, its Affiliates or any other third party after the Closing
Date and (B) any condition of which Seller receives notice pursuant to
the preceding sentence was in existence prior to the Closing Date
absent a showing by Seller by a preponderance of the evidence that such
condition relates solely to actions of Purchaser, its Affiliates or any
other third party after this Closing Date.
(ii) Subject to the requirement of notice and the presumption
described in clause (b)(i) above, with respect to any Hazardous
Substance present in, on, under or above the Real Property (other than
the Unoccupied Lease Properties), Seller's obligations under Section
8.04(a)(i) shall only apply to Environmental Losses arising out of the
investigation, sampling, monitoring, treatment, remediation, removal,
closure, corrective action, control (including by virtue of the
installation of pollution control equipment) or cleanup ("Remedial
Activities") of any Hazardous Substance present in, on, under or above
any Real Property (other than any Unoccupied Leased Property) or any
personal property located or used thereat, arising out of actions,
omissions or conditions occurring or existing prior to the Closing
Date, to the extent that those Remedial Activities are (A) required by
any governmental or regulatory authorities under any Environmental Law
or Environmental Permit, or (B) necessary and appropriate in
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connection with necessary excavation, maintenance, repair, replacement,
building expansion or reconstruction when done in the ordinary course
of business by A. B. Dick and the Purchaser Retained Subsidiaries after
the Closing. With respect to the Real Property (other than the
Unoccupied Leased Properties), Seller's obligations under Section
8.04(a)(i) shall not include the cost of Remedial Activities which are
required under any applicable Environmental Law because of a material
change by A. B. Dick or any Purchaser Retained Subsidiary on or after
the Closing in the nature of the use of the Real Property (other than
the Unoccupied Leased Properties) from the use thereof at the time of
the Closing.
(iii) With respect to the Niles Facility, Seller's obligations
under this Section 8.04 shall apply to all Environmental Losses arising
out of actions or conditions occurring or existing prior to, at or
after the Closing Date, except to the extent that (A) Seller proves by
a preponderance of the evidence that any such Environmental Loss
associated with the Niles Facility arose in connection with the use,
generation, storage, release, discharge or disposal of any Hazardous
Substance by A. B. Dick during the term of the Lease and (B) Purchaser
does not then prove by a preponderance of the evidence that any such
Environmental Loss associated with the Niles Facility was caused by a
Designated Use (defined below). "Designated Use" means any activity
which Purchaser, A. B. Dick and/or the Purchaser Retained Subsidiaries
conducts after the Closing in a manner, at a product rate and using
materials, processes and work practices that is substantially and
materially similar to those conducted by Seller, A. B. Dick and/or
their Affiliates prior to the Closing Date.
(iv) With respect to a breach of any representation or
warranty of Seller in Section 3.17, Seller's obligations under this
Section 8.04 shall only apply to any breach of which Seller receives
notice from an indemnified party within three (3) years after the
Closing Date.
(c) With respect to the Real Property after the Closing and
the Niles Facility during the term of the Lease, subject to Seller's option to
conduct Remedial Activities described in Section 8.04(d), Purchaser will not
unreasonably neglect Remedial Activities that are necessary and appropriate to
address conditions that could reasonably be expected to give rise to
Environmental Losses; PROVIDED, HOWEVER, that the failure by Purchaser to comply
with this Section 8.04(c) shall not affect rights to indemnification under this
Section 8.04 except to the extent that Seller is actually prejudiced by such
failure.
(d) Without limiting the effect of Section 8.04(a), Seller
shall have the option to conduct any indemnified Remedial Activities. The
indemnified party agrees to provide all necessary and reasonable cooperation to
the indemnifying party in performing such Remedial Activities and shall provide
the indemnifying party with all reasonable and necessary access to the Real
Property upon reasonable notice during normal business hours and without
unreasonable interference to the operation of the site. Subject to the
foregoing, Seller shall have the right to make such excavations, test pits,
boreholes, undertake investigations, install monitoring or treatment facilities,
in, on and under such Real Property to such extent and for so long as shall be
necessary to conduct such Remedial Activities. A party performing any such
Remedial Activities shall keep the other party informed regarding such Remedial
Activity and shall provide
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the other party with copies of all monitoring, sampling and other data regarding
conditions of the Real Property relating to the Remedial Activities. The party
performing any such Remedial Activities shall give the other party the
opportunity to review and comment in advance upon any material submissions to
governmental or regulatory authorities with respect to the Remedial Activities.
A party performing Remedial Activities hereunder shall conduct such Remedial
Activities providing such review and comment period does not interfere with any
obligations imposed under Environmental Law or, in the reasonable judgment of
the remediating party, jeopardize any privilege arising under a self audit law
or otherwise. A party performing Remedial Activities hereunder shall conduct
such remedial Activities as would a reasonable owner of the Real Property
conducting such Remedial Activities for its own account in similar circumstances
and for a similar industrial use, including making all reasonable efforts to
prevent the Remedial Activities from interfering with the conduct of business at
the Real Property.
(e) From and after the Closing Date, Seller shall indemnify
and hold harmless Purchaser, A.B. Dick, the Purchaser Retained Subsidiaries and
their respective Affiliates from all Losses arising out of or related to: (i)
any Hazardous Substance present in, on, under or above any real property owned,
leased, occupied or used by any Seller Retained Subsidiary at any time prior to,
at or after the Closing or any personal property located or used thereat,
arising out of actions or conditions occurring or existing prior to, at or after
the Closing; (ii) any claims by governmental or regulatory authority or third
party in connection with any violation of or noncompliance with or other
liability arising under any Environmental Laws or Environmental Permits relating
to any Seller Retained Subsidiary prior to, at or after the Closing; and (iii)
all liabilities and obligations in connection with any sites to which any
Hazardous Substance was transported or at which any Hazardous Substance
migrated, was disposed or arrangements were made for transportation to or
disposal at such sites of any Hazardous Substances from any location operated by
any Seller Retained Subsidiary prior to, at or after the Closing, including any
such sites owned, leased, occupied or used by any Seller Retained Subsidiary in
the conduct of its businesses.
(f) The obligations and liabilities of Seller with respect to
Environmental Losses arising from claims of any third party which are subject to
the indemnification provided for in Section 8.04(a) or Section 8.04(e) ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions:
(i) If an indemnified person shall receive notice of any
Third-Party Claim with respect to the Real Property, such indemnified
person shall give Seller notice of such Third-Party Claim within 30
days of the receipt by such indemnified person of such notice;
PROVIDED, HOWEVER, that the failure to so notify Seller shall not
affect rights to indemnification hereunder except to the extent that
Seller demonstrates that it is actually prejudiced by such failure. If
an indemnified person shall give Seller notice of any Third Party Claim
with respect to any property other than the Real Property, such
indemnified person shall give Seller notice of such Third Party Claim
within thirty (30) days of the receipt by such indemnified person of
such notice; PROVIDED, HOWEVER, that the failure to so notify Seller
shall not affect rights to indemnification hereunder.
(ii) Seller shall promptly assume and control the defense of
any Third Party Claim relating to any property other than the Niles
Facility or any Real Property that is
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not an Unoccupied Leased Property. With respect to the Niles Facility
or any Real Property that is not an Unoccupied Leased Property, if
Seller acknowledges in writing its obligations to indemnify an
indemnified person hereunder against any Environmental Losses that may
result from a Third Party Claim, then Seller shall be entitled to
assume and control the defense of such Third Party Claim at its expense
and through counsel of its choice if it gives notice of its intention
to do so to such indemnified person. If there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate
in the reasonable judgment of such indemnified person for the same
counsel to represent both such indemnified person and Seller, then such
indemnified person shall be entitled to retain its own counsel, in each
jurisdiction for which counsel is required, at the expense of Seller.
(iii) In the event Seller undertakes or exercises the right to
undertake any such defense against any Third Party Claim as provided
above, an indemnified person shall cooperate with Seller in such
defense and make available to Seller, at Seller's expense, all
witnesses, pertinent records, material and information in such
indemnified person's possession or under such indemnified person's
control relating thereto as is reasonably required by Seller.
Similarly, in the event an indemnified person is, directly or
indirectly, conducting the defense against any such Third-Party Claim,
the indemnifying person shall cooperate with such indemnified person in
such defense and make available to such indemnified person, at Seller's
expense, all such witnesses, records, materials and information in
Seller's possession or under Seller's control relating thereto as is
reasonably required by such indemnified person.
(iv) No such Third-Party Claim may be settled by Seller
without the written consent of the indemnified person, which consent
shall not be unreasonably withheld.
SECTION 8.05. INDEMNIFICATION BY SELLER FOR LIABILITIES
RELATING TO PENSION PLANS, OTHER BENEFIT PLANS, RETIREE MEDICAL BENEFITS AND
BREACH OF EMPLOYEE BENEFIT PLAN REPRESENTATIONS. (a) Seller shall indemnify
Purchaser, A. B. Dick, the Purchaser Retained Subsidiaries, and their respective
Affiliates, against, and to hold each of them harmless from, all Losses and
Consequential Damages arising out of or in any way related to (i) any A. B. Dick
Pension Plan or other A. B. Dick Benefit Plan not retained by A. B. Dick,
Purchaser, or an Affiliate of Purchaser after the Closing pursuant to Section
5.09A(c), (ii) any claim for retiree medical benefits under any A. B. Dick
Benefit Plan, as described in Section 5.09A(a) above, (iii) any A. B. Dick
Non-U.S. Pension Plan or other A. B. Dick Non-U.S. Benefit Plan not retained by
a Purchaser Retained Subsidiary, Purchaser, or an Affiliate of Purchaser after
the Closing pursuant to Sections 5.08B(c) and 5.09B(c) above, (iv) any claim for
retiree medical benefits under any A. B. Dick Non-U.S. Benefit Plan, as
described in Section 5.09B(a) above, (v) intentionally omitted, or (vi) any
breach of any of the representations and warranties of Seller under Section 3.18
above. Any representation or warranty of Seller under Section 3.18 relating to
any A. B. Dick Benefit Plan or A. B. Dick Non-U.S. Benefit Plan providing for
retiree medical benefits or any A. B. Dick Pension Plan or A. B. Dick Non-U.S.
Pension Plan shall survive the Closing and remain in full force and effect
indefinitely and all other representations and warranties of Seller under
Section 3.18 shall survive the Closing and remain in full force and effect until
March 31, 1998. Seller's obligations to indemnify Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates described in
Sections 5.08A,
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5.08B, 5.09A and 5.09B are hereby incorporated in this Section 8.05. The
indemnities described above and those indemnities incorporated in this Section
8.05 by reference shall survive the Closing and shall remain in full force and
effect for perpetuity, without any limit as to amount, except that any right to
indemnity for items (vi) above shall be for the period described in the second
sentence of this Section 8.05(a).
(b) Seller shall promptly assume and control the defense of
any claim or proceeding by or in respect to a third party as to which Purchaser
is entitled to indemnification under this Section 8.05. Purchaser may
participate in any defense assumed by Seller, but in such case the expenses of
Purchaser shall be paid by Purchaser. Purchaser shall provide Seller with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with
Seller in the defense or settlement thereof, and Seller shall reimburse
Purchaser for all its reasonable out-of-pocket expenses in connection therewith.
Upon the assumption by Seller of the defense of any such claim or proceeding,
Purchaser shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability unless Seller consents in writing to such payment or unless Seller,
subject to the last sentence of this Section 8.05, withdraws from the defense of
such asserted liability or unless a final judgment from which no appeal may be
taken by or on behalf of Seller is entered against Purchaser from such
liability. If Seller shall fail to defend, or, if after commencing or
undertaking any such defense, fails to prosecute or withdraws from such defense,
Purchaser shall have the right to undertake the defense or settlement thereof,
at Seller's expense. If Purchaser assumes the defense of any such claim or
proceeding pursuant to this Section 8.05(b) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then Purchaser shall give Seller prompt written notice thereof
and Seller shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
SECTION 8.06. EXCLUSIVE REMEDIES; WAIVER. The rights and
remedies provided in this Agreement, the Guaranty executed by Nesco, Inc. as of
the date hereof and the Guaranty executed by GEC plc as of the Closing Date
shall be the exclusive remedies with respect to this Agreement and the subject
matter hereof, and each party hereto hereby irrevocably waives and releases
discharges and acquits the other party from any causes of action known or
unknown whether based on statute, regulation or common law, and any claims,
demands, debt, controversies, damages, costs, losses and expenses except as
provided in this Agreement. Neither the acceptance nor the delivery of this
waiver and release shall be construed as an admission of liability.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser;
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(b) by Purchaser upon written notice to Seller if (i) any of
the representations or warranties of Seller contained herein is or
becomes inaccurate or untrue in any material respect (except for any
such breach that would not be reasonably expected to have a material
adverse effect individually or in the aggregate on the Business) and is
not cured in all material respects (including, but not limited to, by
the payment of money) within twenty (20) days of receipt of written
notice from Purchaser of such nonperformance; or (ii) any material
obligation, term or condition to be performed, kept or observed by
Seller hereunder has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement
and is not cured in all material respects (including, but not limited
to, by the payment of money) within twenty (20) days of receipt of
written notice from Purchaser of any such nonperformance (for purposes
of this Section 9.01(b), the covenants listed in Section 9.01(b) of the
Disclosure Schedule shall be deemed to be immaterial obligations and
all other obligations terms or conditions to be performed, kept or
observed by Seller hereunder shall be deemed to be material);
(c) by Seller upon written notice to Purchaser if (i) any of
the representations or warranties of Purchaser contained herein is or
becomes inaccurate or untrue in any material respect and is not cured
in all material respects (including, but not limited to, by the payment
of money) within twenty (20) days of receipt of written notice from
Seller of such nonperformance; or (ii) any obligation, term or
condition to be performed, kept or observed by Purchaser hereunder has
not been performed, kept or observed in any material respect at or
prior to the time specified in this Agreement and is not cured in all
material respects (including, but not limited to, by the payment of
money) within twenty (20) days of receipt of written notice from Seller
of any such nonperformance;
(d) by either Seller or Purchaser, if the Closing shall not
have occurred within 90 days of the date hereof; PROVIDED, HOWEVER,
that the right to terminate this Agreement under this Section 9.01(d)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur prior to such
date.
Time shall be of the essence in this Agreement.
SECTION 9.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto (a) except as set forth in Section 5.02 and Section 10.01 and (b) nothing
herein shall relieve either party from liability for any willful breach hereof.
Notwithstanding anything contained in this Agreement to the contrary, any party
terminating this Agreement for any reason shall not be liable to the other party
for Consequential Damages arising in connection with any such termination.
SECTION 9.03. WAIVER. At any time prior to the Closing, any
party may (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any of the agreements
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or conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. EXPENSES. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 10.02. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
(a) if to Seller:
GEC INCORPORATED
5700 West Touhy Avenue
Niles, Illinois 60714-4690
Attention: Vice President and Secretary
Telecopier: (847) 647-1276
Telephone for confirmation: (847) 647-9440
with a copy to:
The General Electric Company, plc
1 Stanhope Gate
London W1A 1EH
Attention: The Secretary
Telecopier: 011-44-171-493-1974
and with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Melvin L. Bedrick
Telecopier: (212) 474-3700
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(b) if to Purchaser:
Paragon Corporate Holdings, Inc
6140 Parkland Blvd.
Mayfield Heights, Ohio 44124
Attention: Chairman
Telecopier: (216) 449-3112
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Attention: Edward G. Ptaszek, Jr.
Telecopier: (216) 696-0740
SECTION 10.03. PUBLIC ANNOUNCEMENTS. No party to this
Agreement shall make any public announcements in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without prior notification to the other party, and the parties shall
cooperate as to the timing and contents of any such announcement.
SECTION 10.04. HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.05. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 10.06. ENTIRE AGREEMENT. This Agreement and the other
agreements and instruments contemplated hereby constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and undertakings, both written and oral, other than the
Confidentiality Agreement, between Seller and Nesco with respect to the subject
matter hereof and except as otherwise expressly provided herein.
SECTION 10.07. ASSIGNMENT; BINDING EFFECT. This Agreement and
the other agreements and instruments contemplated hereby shall not be assigned
by either party hereto and any such purported assignment shall be void and of no
effect; PROVIDED, HOWEVER, that (i) Purchaser may assign this Agreement to its
Affiliate and (ii) Purchaser may assign the Assumption Agreement to a purchaser
of the Business or to a financial institution in connection
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with a financing, in each case subject to any defense, estoppel, waiver, setoff
or claim which Seller may have with respect to Purchaser (arising before or
after such assignment). This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon Seller, its
successors and permitted assigns, and Purchaser, its successors and permitted
assigns. For purposes of this Agreement, all references to Purchaser, Seller, A.
B. Dick, the Seller Retained Subsidiaries and the Purchaser Retained
Subsidiaries include successors thereto.
SECTION 10.08. NO THIRD-PARTY BENEFICIARIES. Except as
provided in Article VI and VIII or in the Assumption Agreement, this Agreement
is for the sole benefit of the parties hereto and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 10.09. AMENDMENT. This Agreement may not be amended or
modified except by an instrument in writing signed by Seller and Purchaser.
SECTION 10.10. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State.
SECTION 10.11. ARBITRATION. If the parties hereto in good
faith cannot resolve any controversy or claim arising between the parties (but
not involving any third party) out of or related to this Agreement or in
connection with a breach of this Agreement within thirty (30) days after the
claiming party gives notice of such controversy or claim to the other party
hereto, any party hereto may demand and commence arbitration of the controversy
or claim. In the event of a demand for arbitration, Purchaser shall select one
arbitrator and Seller shall select one arbitrator within fifteen (15) days after
such demand shall have been given (the "Demand Date") and the two arbitrators,
within thirty (30) days after the Demand Date shall select a third arbitrator.
If the third arbitrator shall not be selected within thirty (30) days of the
Demand Date, either Purchaser or Seller may apply to the American Arbitration
Association (or any successor thereto) for the appointment of an arbitrator in
Chicago, Illinois or such other city as the parties may agree upon, and the
parties shall be bound by the appointments made by such Association. The
arbitration shall be held as promptly as practicable thereafter under the rules
of the American Arbitration Association in effect at the time such controversy,
claim or breach is submitted to arbitration. The determination made in
accordance with such rules shall be delivered in writing to the parties hereto
and shall be final, binding and conclusive upon them and, in the case of
arbitration pursuant to Article VIII hereof, the amount of the claim, if any, of
Purchaser or Seller determined to exist shall be a valid indemnifiable claim
under that Section. The parties hereto agree that a judgment may be entered by
any court of competent jurisdiction in accordance with any determination
properly made under this Section 10.11. Notwithstanding the foregoing, the
parties hereto agree that this Section 10.11 shall not apply to and shall have
no force or effect with respect to any claim by or controversy involving a third
party (a "Third Party Claim"). Each party hereto reserves the right to have any
Third Party Claim heard and determined in a court of competent jurisdiction.
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SECTION 10.12. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.13. WAIVER OF JURY TRIAL. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement, the Note, the Lease or the
Guaranty or any other agreement contemplated hereby. Each party hereto (a)
certifies that no representative, agent or attorney or any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it and the other party hereto have been induced to enter into this
Agreement and such other documents, as applicable, by, among other things, the
mutual waiver and certifications in this Section 10.13.
IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GEC INCORPORATED (Seller)
By /s/ A. Harris Walker
-----------------------------
Name: A. Harris Walker
Title: Vice President, Secretary
PARAGON CORPORATE HOLDINGS, INC.
(Purchaser)
By /s/ John H. Fountain
-----------------------------
Name: John H. Fountain
Title: Vice President
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EXHIBIT 10.3
------------
MANAGEMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st of April, 1998, by and among Nesco,
Inc., a Delaware corporation, hereinafter referred to as "Nesco", and Paragon
Corporate Holdings Inc., a Delaware corporation, hereinafter referred to as the
"Company", in order to set forth the express terms of their relationship.
WHEREAS, Nesco has provided general management oversight services to the
Company since the beginning of 1997, and Nesco officers and other personnel (the
"Executives") provide similar services to other affiliates of the Company that
are diversified in many businesses in the United Sates and throughout the world,
WHEREAS, the Company is in need of such services as provided by Nesco
and can benefit therefrom, and
WHEREAS, this Agreement will inure to the benefit of the Company due to
the additional advisory services that can be provided to the Company;
NOW, THEREFORE, in exchange for the mutual promises herein recited and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Nesco and the Company agree as follows:
1. Nesco, through its Executives, will provide general management oversight
services on a regular basis to the Company relating to business
activities involving financial results, legal issues, and long-term
planning involving current operations and acquisitions. Business
development planning include Nesco assistance to identify and acquire
acquisition candidates, including preliminary negotiations and
contractual preparations for such activities. Nesco has assisted and
will continue to assist the Company's efforts relating to banking
relationships of the Company for cash operation needs, acquisitions, and
other cash requirements, and will also monitor excess cash investments
for the Company through professional money management accounts.
2. In payment for these services, the Company will pay to Nesco a
management fee equal to 5% of the Company's EBITDA (as defined in the
offering memorandum for the Company's Senior Notes) calculated on an
annual basis. This fee shall be payable monthly.
3. It is understood and agreed that the Company will directly employ
independent auditors, legal counsel, and other consulting services, such
as advertising, both in the United States and its foreign operations.
Such services will be paid directly by the Company.
4. This Agreement and the fees to be paid hereunder shall be modified and
limited to the extent necessary from time to time to maintain the
Company's compliance with any specific restriction imposed by a lending
institution or indentures relating to outstanding indebtedness to the
Company, including the indenture governing the Company's Senior Notes
due 2008, entered into on April 1, 1998. In such event the Company shall
pay a management fee to Nesco in an amount that will not violate the
specific lending restriction.
<PAGE> 2
Any amount of management fee not timely paid due to the limitation
stated herein shall be accrued until such time as the restriction may be
removed and the accrued amount paid or as otherwise agreed by Nesco and
the Company.
5. This Agreement shall continue for an indefinite period, unless one party
notifies the other of its intent to terminate this Agreement upon not
less than 60 days written notice prior to the annual anniversary date of
the execution of this Agreement.
6. This Agreement constitutes the entire agreement between the parties
hereto concerning the subject matter hereof; all previous understandings
and negotiations concerning this subject matter are merged into this
Agreement and there are not understandings or agreements between the
parties hereto other than those set forth in this Agreement. In the
event the parties hereafter reach mutual agreement as to additional
terms, the performance of the parties shall be evidence of the terms of
such mutual agreement, however, the parties will maintain a written
record of the specific terms constituting amendments hereto.
7. The Company does hereby indemnify, defend, and hold Nesco, its directors
and officers, harmless from any claim of liability asserted by it or by
any third party, arising from the services rendered by Nesco hereunder,
except only in the case of gross negligence or willful misconduct
solely attributable to Nesco. Nesco's liability for damage shall be
limited to the total amount of management fees paid to Nesco during the
preceding 12 month period. In no event shall Nesco be liable to the
Company or any third party for incidental, consequential, exemplary,
punitive, or special damages of any kind whatsoever. The Company, at its
expense, will maintain Directors and Officers Liability insurance in
substantially its current form, with Nesco named as an "additional named
insured", for all periods during which this Agreement is in effect and
for 5 years after termination of this Agreement.
8. This Agreement has been executed and shall be construed in accordance
with and governed by the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereunto have affixed or caused to be
affixed their respective signatures on the date aforesaid.
NESCO, INC. PARAGON CORPORATE HOLDINGS INC.
By: /s/ Ralph L. Nehrig By: /s/ Gerald J. McConnell
------------------------------ ------------------------------------
Its: Vice President Its: President & CEO
------------------------------ -----------------------------------
2
<PAGE> 1
EXHIBIT 10.4
------------
TAX PAYMENT AGREEMENT
WHEREAS, NES Group, Inc. ("Shareholder") is the sole Shareholder of
Paragon Corporate Holdings Inc. ("Paragon"), Paragon is the sole Shareholder of
A. B. Dick Company ("A. B. Dick") and Curtis Industries, Inc. ("Curtis"), A. B.
Dick is the sole shareholder of ITEK Graphix Corp. ("ITEK"), and Curtis is the
sole shareholder of Curtis Sub, Inc. ("Curtis Sub"); Paragon, A. B. Dick,
Curtis, ITEK, and Curtis Sub are herein collectively called the "Subsidiaries"
and each individually called "Subsidiary"), and
WHEREAS, the Subsidiaries have elected to be treated as "S" Corporations
for U.S. Federal Income Tax purposes, and
WHEREAS, the taxable income of the Subsidiaries will be included in the
income of Shareholder for Federal Income Tax purposes, and the tax thereon is
payable by the shareholders of Shareholder, and similar consequences may result
for state or local tax purposes a well;
NOW, THEREFORE, in consideration of the mutual promises herein exchanged
and for other good and valuable consideration, the receipt and sufficiency of
which is mutually acknowledged, the parties agree that the Subsidiaries shall
each make estimated tax payments to Shareholder as set forth herein based on
their respective earnings:
1. Within fifteen (15) days after the end of each month, each Subsidiary
shall make distributions to Shareholder relating to the federal, state, local,
and foreign income taxes relating to such Subsidiary's operations in an amount
that is equal to the Stand-Alone Taxes for such month and the accrued and
unreimbursed Reimbursements, as described in Paragraph 3 below, provided that:
a) Subsidiary will be during the entire taxable period to which
the distribution relates an S Corporation for Federal Income Tax
purposes;
b) If the distributions made with respect to a calendar year
exceed the actual taxes for such calendar year (or as subsequently
adjusted by taxpayer and the taxing authority), the excess will be
returned to Subsidiary not later than 45 days after the taxpayer has
received the refund;
c) Distributions shall be made by each Subsidiary with respect
to state or local income taxes in a manner similar to Federal Income
Tax, but only if (i) there is state or local income tax rules providing
for pass-through treatment that is similar to the treatment under the
Subchapter S rules of the Internal Revenue Code of 1986, and (ii) the
Subsidiary is qualified for such treatment for the entire taxable
period.
<PAGE> 2
2. Distributions that comply with the requirements of 1. above shall be
made in one or more installments, including without limitation catch-up
installments at or after the end of a month or tax year, installments after
adjustments made by the Internal Revenue Service, and installments made for
Reimbursements.
3. Definitions:
a) "Reimbursements" means an amount equal to the sum of interest
and penalties imposed on the Subsidiary's Shareholder as a result of an
incorrect calculation by such Subsidiary of the amount distributed to
such Shareholder by the Subsidiary, adjustments made by the IRS relating
to the Subsidiary, and late tax distributions made by the Subsidiary to
such Shareholder. Notwithstanding the foregoing, Reimbursements shall
not include any amount described in the preceding sentence to the extent
such amount is as a result of, or directly attributable to, an action or
inaction taken by the Subsidiary's Shareholder.
b) "Stand-Alone Tax" means an amount (which shall never be less
than zero) computed as of the end of any month for the total U.S.
federal, state, local, and foreign (but only to the extent that foreign
taxes are imposed on the Subsidiary's income, but paid or payable by its
Shareholder, or by the direct or indirect individual shareholder(s) of
its Shareholder, to the foreign jurisdiction imposing such taxes on
behalf of the Subsidiary) income taxes (a) for which direct or indirect
individual shareholders of Subsidiary's Shareholder would be liable if
such Shareholder's income was only from the items of income, gain, loss,
deduction, or credit reportable by the Subsidiary for such tax purposes
for the period beginning on the first day of such month and ending on
the last day of such month, determined on an annualized basis, or (b)
one twelfth (1/12) of the tax liability expected to be reported for the
year, whichever is greater. The tax rates applied to such income are to
be based on the maximum individual U.S. federal, state, local, and
foreign income tax rates imposed by Section 1 of the Internal Revenue
Code of 1986, as amended and as it may be amended, and by the equivalent
provisions of the state, local, and foreign (but only to the extent that
foreign taxes are imposed on the Subsidiary's income, but paid or
payable by its Shareholder to the foreign jurisdiction imposing such
taxes on behalf of the Subsidiary) income taxes (based on the assumption
that all tax payments are subject to state or municipality). All of the
preceding shall be computed without regard to phase-in and phase-out
rules for minimum tax and alternative minimum tax, interest, and
penalties, but shall include any surtax, and shall reflect the benefits
of the deductibility of state and local income taxes and allowable tax
credits in effect for each of the respective taxable periods. These tax
payments will not recognize any future carry forward or carry back tax
benefits to Paragon, A. B. Dick, Curtis, ITEK, and Curtis Sub.
2
<PAGE> 3
c) For the purposes of this Agreement the term "subsidiary"
shall mean all present and future direct and indirect subsidiaries of
Paragon Corporate Holdings Inc.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed effective as of the 1st day of April, 1998.
PARAGON CORPORATE HOLDINGS INC. A. B. DICK COMPANY
By: /s/ Gerald J. McConnell By: /s/ Gerald J. McConnell
-------------------------------- --------------------------
Its: President & CEO Its: President & CEO
-------------------------------- -------------------------
CURTIS INDUSTRIES, INC. NES GROUP, INC.
By: /s/ A. Keith Drewett By: /s/ Robert J. Tomsich
-------------------------------- --------------------------
Its: Senior Vice President Its: President
-------------------------------- -------------------------
CURTIS SUB, INC. ITEK GRAPHIX CORP.
By: /s/ A. Keith Drewett By: /s/ Gerald J. McConnell
-------------------------------- --------------------------
Its: Senior Vice President Its: President
-------------------------------- --------------------------
3
<PAGE> 1
EXHIBIT 10.5
A.B.Dick Company
5700 West Touhy Avenue
Niles, IL 60714-4690
(312) 762-1900
November 10, 1995
Mr. Gerald J. McConnell
24347 Tanager Court
Barrington, IL 60010
Dear Mr. McConnell:
This letter agreement set forth the terms and conditions of your
employment with A. B. Dick Company ("the Company"). Please affix your signature
to the enclosed copy of this letter to document your agreement with these terms
and conditions and return the copy to me at your earliest convenience.
1. POSITION. During the term of your employment with the Company, you
will serve as President and Chief Executive Officer and shall serve as a member
of the Board of Directors of the Company. You agree to devote your full business
time and attention to the duties of such office and you will use your best
efforts to protect, encourage and promote the interests of the Company during
the term of your employment. You shall not during your employment be employed
by, or, without the consent of the Board of Directors, be a director of, any
other business and shall not take part in any activity detrimental to the
businesses of the Company or any of its subsidiaries or associated companies.
2. TERM. Your term of employment under this Agreement shall be for a
five-year period, commencing on December 4, 1995 and ending on December 3, 2000.
3. COMPENSATION. As compensation for the services which you will render
pursuant to this Agreement, you will receive the following payments and
benefits:
a. SALARY. You will receive an initial salary of $275,000 per
annum, to be paid not less frequently than monthly. Such salary shall
be subject to reviews by the Board of Directors of the Company on an
annual basis during the employment term in accordance with the usual
review procedures from time to time in effect for senior management of
the Company but shall not in any event be less than $275,000 per annum.
<PAGE> 2
Mr. Gerald J. McConnell
November 10, 1995
Page 2
b. BONUS. You will be paid an annual bonus of up to 25% of
your salary if the Company achieves annual financial performance goals
to be established by mutual agreement between you and the Company, the
goal for the first year to be established within 90 days after your
employment. Your bonus for the first year shall be not less than
$25,000.
c. SHADOW STOCK. In connection with your employment, you are
being granted a shadow stock award which will entitle you to a cash
payment equal to the appreciation, if any, in the value of a 5%
interest in the common stock of the Company from November 30, 1995
until November 30, 2000. The amount of appreciation will be paid to you
in a lump sum as soon as practicable after the conclusion of the
five-year shadow period. The value of the shadow stock at the
commencement of the employment period shall be equal to 5% of the
capital employed in the Company as determined on November 30, 1995. The
value of the shadow stock on November 30, 2000 shall be equal to the
greater of (i) 5% of the capital employed in the Company at November
30, 2000, or (ii) 5% times the net income of the Company before
interest and taxes for the 12-month period ending November 30, 2000,
multiplied by 8. The capital employed in the Company at November 30,
1995 and November 30, 2000 and the net income of the Company for the
12-month period ending November 30, 2000 shall be determined by the
Company's outside accountants based on the books and records of the
Company at such dates without audit but excluding Videojet Systems
International and MICAP Technology. The determination of the Company's
outside accountants shall be final and binding on the Company and you.
In the event of a sale or other disposition of the
stock of the Company, or substantially all of its assets, to a party
other than a subsidiary or associated company while you are employed
hereunder, the amount of appreciation shall be determined by
subtracting 5% of the capital employed in the Company on November 30,
1995 from an amount equal to 5% of the net proceeds of the transaction,
and you shall be paid the entire amount of such appreciation as soon as
possible after the consummation of the transaction.
In the event of your death, total permanent
disability or termination of employment by the Company without cause
during the five-year shadow period, you will be entitled to a cash
payment equal to the appreciation, if any, in the value of the vested
portion of the shares of Company stock on which this award is based,
from the date hereof until the last day of the calendar month in which
your death, disability or termination of employment occurs. In the case
of
<PAGE> 3
Mr. Gerald J. McConnell
November 10, 1995
Page 3
death or total permanent disability, 20% of the award shares shall
vest on November 30, 1996, and on each succeeding November 30 on which
you are employed by the Company hereunder. Your award will fully vest
in the case of a termination of your employment by the Company without
cause. The amount of appreciation shall be paid to you or a beneficiary
designated by you in a writing filed with the Company in a lump sum as
soon as practicable after the date of your death, disability or
termination. If you voluntarily terminate your employment or your
employment is terminated by the Company for cause during the five-year
shadow period, your shadow stock award shall be forfeited in its
entirety.
You will have no ownership interest of any kind in
any shares of common stock of the Company as a result of this award.
You will have no right to receive advances on any payments earned under
this award and you will not be able to alienate, dispose of or encumber
any interest arising out of this award. Nothing in this award shall be
interpreted or construed to require the Company in any manner to fund
its obligation to you pursuant to the award and all amounts payable
pursuant thereto shall be paid from the general assets of the Company.
In no event may the appreciation payment hereunder exceed $5,000,000.
Any payments with respect to the award shall be net of any required
withholding taxes.
d. BENEFITS. You will be entitled to participate in all
employee benefit plans and programs of the Company which are made
available from time to time to senior officers of the Company, relating
to medical care, dental care, annual physical examination, long-term
disability, pension and Section 401(k) participation. Some of these
programs require contribution or other payment by participants.
4. EXPENSES. The Company will pay or reimburse you for any expenses you
reasonably incur in furtherance of your duties hereunder upon submission of
vouchers or itemized reports prepared in compliance with Company policies and as
may be required in order to qualify such payments as proper deductions for tax
purposes. The Company shall also lease or purchase an automobile for your use in
the rendition of services hereunder and you shall be reimbursed for all expenses
incurred in the business use of the automobile.
5. VACATION. You shall be entitled to four weeks paid vacation during
each year of the term of your employment.
6. DISABILITY. Any physical or mental ailment which prevents you from
performing your duties hereunder for a period of more than 90 consecutive days
and which is expected to be of permanent duration shall constitute total
permanent disability hereunder. In the event of your
<PAGE> 4
Mr. Gerald J. McConnell
November 10, 1995
Page 4
permanent total disability, your employment will terminate and all rights,
duties and obligations of both parties under this Agreement (other than any
obligation of the Company to make a payment under paragraph 3c hereof or your
obligation of noncompetition and confidentiality under paragraph 9 hereof) shall
cease and you shall be entitled to all the benefits then being provided to
senior officers of the Company who become so disabled.
7. TERMINATION FOR CAUSE. The Company may terminate your employment at
any time for cause upon a determination of the Board of Directors that such
determination is appropriate after providing you notice of the proposed
termination and an opportunity to present relevant information to the Board. For
purposes hereof, the term "cause" shall mean only (i) an act of personal
dishonesty taken by you and intended to result in your substantial personal
enrichment at the expense of the Company; (ii) willful misconduct by you which
is materially injurious to the Company; (iii) your conviction of a felony
involving moral turpitude; or (iv) repeated willful failures by you to perform
your duties hereunder, which failures are not remedied in a reasonable period of
time after receipt of written notice thereof from the Board of Directors of the
Company. The failure of the Company to adequately perform shall not, in and of
itself, constitute cause for these purposes. All obligations of the Company
under this Agreement shall immediately cease upon termination of your employment
for cause except for obligations involving accrued but unpaid compensation under
this Agreement until such termination.
8. SEVERANCE. The Company reserves the right to terminate your
employment at any time without cause upon 30 days written notice. If your
employment is terminated by the Company other than for cause in accordance with
paragraph 7 hereof or as a result of your permanent total disability in
accordance with paragraph 6 hereof, the Company shall continue to pay you your
base salary for a 12-month period from the date of termination, continue your
medical and other insurance coverage for that period and make the payment
required under paragraph 3c hereof with respect to your shadow stock award. If
you secure other employment during the 12-month salary continuation period, you
may elect to receive a lump sum payment of the present value of the salary
payments otherwise required for the balance of the 12-month period and upon such
payment, your medical and other insurance coverage for that period will end.
Upon such termination, the Company shall also pay outplacement fees of not more
than $10,000 to aid in your securing new employment. Any payments under this
paragraph or paragraph 3c shall constitute liquidated damages and shall be your
sole right to compensation in the event of such termination of employment. The
amount of any payment provided for under this paragraph 8 shall not be reduced
by any compensation earned by you as a result of employment by another employer
after the date of termination.
<PAGE> 5
Mr. Gerald J. McConnell
November 10, 1995
Page 5
9. NONCOMPETITION; CONFIDENTIAL INFORMATION.
a. You agree that for a period of one year following your
termination of employment you will not participate in the management
of, or maintain any interest in, any organization which offers services
or products similar to those offered by the Company or its subsidiaries
without the prior written approval of the Board of Directors of the
Company. This subparagraph shall not apply if termination of your
employment is effected by the Company without cause pursuant to
paragraph 8 hereof.
b. Upon termination of your employment, you agree not to take
or retain any records, papers, files or other documents (including
copies thereof) and shall not disclose to any person or entity any
confidential information (as defined by the Illinois Trade Secrets Act)
of any kind relating to the business, financial or other affairs of the
Company or its affiliates without the prior written approval of the
Board of Directors of the Company.
10. ARBITRATION. Any controversy relating to this Agreement shall be
settled exclusively by arbitration in Chicago, Illinois, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on an arbitrator's award relating to this Agreement in any court having
jurisdiction.
11. NOTICES. All notices or other communications hereunder shall be in
writing and shall be effectively given when mailed by registered mail, return
receipt requested, and directed to the party at the address given herein, or to
such other address as either party may hereafter designate to the other in
writing.
If to Executive:
Mr. Gerald J. McConnell
24347 Tanager Court
Barrington, IL 60010
<PAGE> 6
Mr. Gerald J. McConnell
November 10, 1995
Page 5
If to the Company:
A. B. Dick Company
c/o Michael Lester
Vice-Chairman
The General Electric Company, p.l.c.
1 Stanhope Gate
London W1A 1EH ENGLAND
12. ENTIRE AGREEMENT. This letter Agreement constitutes the entire
agreement between you and the Company relating to your employment and supersedes
all previous agreements or understandings either oral or written with respect
thereto.
13. AMENDMENT. The terms and conditions of this Agreement may be
amended at any time by written agreement between you and the Company.
14. ENFORCEABILITY. The invalidity or unenforceability of any provision
of this letter Agreement shall not affect its other provisions and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision had not been included. Any waiver by the Company of a breach of any
provision of this Agreement by you shall not operate or be construed as a waiver
of any subsequent breach of the Agreement by you.
Very truly yours,
/s/ A. Harris Walker
------------------------------
I agree to the above terms and conditions.
November 10, 1995 /s/ Gerald J. McConnell
-----------------------------
Gerald J. McConnell
<PAGE> 1
Exhibit 10.6
SEVERANCE AND
NON-COMPETITION AGREEMENT
THIS SEVERANCE AND NON-COMPETITION AGREEMENT (this "Agreement") between
CURTIS INDUSTRIES, INC., a Delaware corporation (the "Company"), and A. KEITH
DREWETT (the "Executive") is dated the 28th day of February, 1996.
A. Executive is a key employee of the Company, who provides highly
valuable services to the Company and possesses, and has access to, confidential
and proprietary information concerning the Company .
B. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board believes it is imperative to diminish
any distraction of the Executive by virtue of the personal uncertainties and
risks created by a pending or threatened Change in Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change in Control
which will encourage the Executive to continue to provide services to the
Company (or its successor) after a Change in Control, thereby enhancing the
value of the Company in the event of a sale resulting in a Change in Control.
C. The Board and the Executive deem it to be in their respective best
interests to clarify and amend their existing severance arrangements and to
assure the Company of protection of its proprietary information and limited
protection against competition from the Executive on termination of the
Executive's employment.
Now, therefore, the parties, for the mutual consideration provided in
this Agreement, agree to be legally bound to the terms hereof.
1. CERTAIN DEFINITIONS.
a. "Affiliate" has the meaning ascribed in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
b. "Cause" means
<PAGE> 2
(1) the Executive's fraud, dishonesty,
willful misconduct or deliberate injury to the Company or any
Subsidiary (as defined below); or
(2) the Executive's intentional and repeated
refusal or failure to perform duties consistent with the
position of the Executive with the Company.
c. "Change in Control" means:
(1) The acquisition by any person (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of
securities representing a majority of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions will not constitute a Change in Control; (A) any
acquisition by the Company, (B) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any Person controlled by the
Company, (C) any acquisition by a Person who is an officer or
director of the Company on the date of this Agreement
("Current Officer or Director") or an Affiliate of any such
Person or (D) any acquisition by any Person pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subsection (3) of this Section 1(c); or
(2) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Approval by the stockholders of the
Company of a reorganization, merger or consolidation (a
"Business Combination") (other than a Business Combination
with a Person that is an affiliate of a Current Officer or
Director) in each case, unless, following such Business
Combination, (A) all or substantially all of the Persons who
were the beneficial owners, respectively, of the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election
of directors of the entity resulting from such Business
2
<PAGE> 3
Combination (including, without limitation, an entity
which, as a result of such transaction, owns the Company
through one or more subsidiaries) and (B) no Person (excluding
any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination and
any current Officer or Director or any affiliate of a Current
Officer or Director) beneficially owns, directly or
indirectly, 20% or more of combined voting power of the then
outstanding voting securities of such corporation without
counting any such ownership that existed prior to the Business
Combination; or
(4) Approval by the stockholders of the
Company of (A) a complete liquidation or dissolution of the
Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to
a Person who is an affiliate of a Current Officer or Director
or a Person, with respect to which following such sale or
other disposition, [a] more than 60% of the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Voting
Securities immediately prior to such sale or other
disposition, and [b] less than 20% of the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation and any current
Officer or Director or any affiliate of a Current Officer or
Director), without counting any such ownership that existed
prior to the sale or disposition.
d. "Compensation" means an amount equal to the higher
of the (A) then current annual rate of base salary or (B)
annual rate of base salary in effect immediately prior to such
then current rate; provided, that, if termination occurs after
a Change in Control, Compensation means the greatest of (i)
the higher of the two base salaries set forth above or (ii)
the annual rate of the base salary in effect immediately prior
to the Change in Control.
e. "Constructive Termination Without Cause" means a
termination of the Executive's employment by the Executive
following the occurrence, without his prior written consent,
of one or more of the following events (except in connection
with a termination of the Executive's employment for one of
the other reasons specified in Section 2, below):
(1) a reduction in the Executive's
Compensation, or a significant diminution in benefits
or perquisites following a Change in Control, unless,
in the case of termination or reduction of any such
benefit or perquisite, (A) there is substituted a
comparable benefit or perquisite that is economically
equivalent to
3
<PAGE> 4
such benefit or perquisite prior to its termination
or reduction, (B) the termination or reduction of the
benefit or perquisite affects members of the senior
management of the Company generally and occurs prior
to, and not in connection with or in anticipation of,
a Change in Control, or (C) the termination or
reduction of the benefit or perquisite occurs
pursuant to the Executive's direction or consent;
(2) a significant diminution in the
Executive's duties, responsibilities, titles or
position or the assignment to the Executive of duties
and responsibilities (A) inconsistent with the titles
or positions held by the Executive on the date of
this Agreement, as changed in connection with
promotions, if any, or (B) that are illegal, immoral
or unethical;
(3) the relocation of the Executive's
principal place of employment to a location that is
more than thirty (30) miles outside of Cuyahoga
County;
(4) the failure of the Company to obtain the
unconditional assumption, in writing or by operation
of law, of the Company's obligation to the Executive
under this Agreement by any successor prior to or at
the time of a reorganization, merger, consolidation,
disposition of all or substantially all of the assets
of the Company or similar transaction; or
(5) a termination for any reason during the
thirty (30) day period immediately following the
first anniversary of a Change in Control.
A Constructive Termination Without Cause will not
take effect unless: (i) the Executive has delivered written
notice to the Board within sixty (60) days after acquiring
knowledge of one of the events described in this subsection
1e, providing a basis for Constructive Termination Without
Cause, stating which one of these events has occurred; (ii)
within thirty (30) days after receipt of such notice the
Company has not remedied such event and provided the Executive
with written notice of such remedy; and (iii) if the Company
has not remedied such event within such period and provided
such notice, the Executive has notified the Company in writing
that he is terminating his employment; provided, however, that
a Constructive Termination Without Cause pursuant to clause
(5) of this subsection 1(e) will take effect at the expiration
of such thirty (30) day period if the Executive has delivered
and not withdrawn written notice thereof within such period.
The failure of the Executive to effect a Constructive
Termination Without Cause as to any one event described in
this subsection 1(e) above will not affect the Executive's
entitlement to effect a Constructive Termination Without Cause
as to any other such event.
f. "Disability" means the illness or other mental or
physical incapacity of the Executive, resulting in the
inability, as determined in good faith by the Board, to
perform substantially his duties for a period of one hundred
eighty (180) days in any twelve
4
<PAGE> 5
(12) month period.
g. "Subsidiary" means any entity in an unbroken chain
of entities beginning with the Company, if each of the
entities other than the last entity in the unbroken chain owns
equity possessing fifty percent (50%) or more of the total
combined voting power in one of the other entities in such
chain.
2. TERMINATION OF EMPLOYMENT.
a. TERMINATION BY DEATH. In the event that the
Executive's employment is terminated by death, his estate or
designated beneficiary, as the case may be, will be entitled
to:
(1) Compensation through the date of death;
(2) annual bonuses earned or awarded for
prior periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of death;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of death; and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with the applicable plans and programs of
the Company.
b. TERMINATION DUE TO DISABILITY. In the event that
the Executive's employment is terminated due to Disability,
the Executive will be entitled to:
(1) Compensation through the date of
termination of employment;
5
<PAGE> 6
(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of termination;
(3) continuation of the medical benefits to
which the Executive and his dependents were entitled
at the time of termination, for a period of twelve
(12) months following termination of employment;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the date of termination of
employment in accordance with the applicable plans
and programs of the Company.
c. TERMINATION BY THE COMPANY FOR CAUSE. In the event
that the Executive's employment is terminated for Cause, the
Executive will be entitled to:
(1) Compensation through the date of
termination for Cause;
(2) any annual bonuses awarded but not yet
paid;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with applicable plans and programs of the
Company.
d. TERMINATION WITHOUT CAUSE. In the event that the
Company terminates Executive's employment for reasons other
than death, Disability or Cause, or the Executive terminates
employment in connection with a Constructive Termination
Without Cause, the Executive will be entitled to:
(1) Compensation for a period of twelve (12)
months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portions of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of
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termination of employment;
(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twelve (12) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twelve (12)
months after termination of employment in accordance
with applicable plans and programs of the Company.
e. TERMINATIONS WITHOUT CAUSE FOLLOWING A CHANGE IN
CONTROL. Anything to the contrary in this Agreement
notwithstanding, in the event of a Termination Without Cause,
a Constructive Termination Without Cause or a termination due
to Death or Disability within two (2) years following a Change
in Control, the Executive (or his estate or designated
beneficiary) will
be entitled to:
(1) Compensation for a period of twenty-four
(24) months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned for prior periods but
not yet paid including the pro rata portion of any
bonus earned under any applicable bonus plan for the
portion of the year elapsed to the date of
termination of employment;
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(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twenty-four (24) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twenty-four (24)
months after termination of employment in accordance
with applicable plans and programs of the Company.
Termination of employment after the two (2) year period referred to in the first
paragraph of this subsection 2e will be subject to subsections a through d of
this Section 2.
3. LIMITATION OF PAYMENTS. If any compensation payments under
this Agreement would result in an "excess parachute payment" within the meaning
of Section 280G(b), then compensation payments under this Agreement will be
limited to the highest amount permitted without resulting in an "excess
parachute payment".
4. COVENANT NOT TO COMPETE.
a. During the term of the Executive's employment with
the Company or its successors and for a period of twelve (12)
months following termination of employment, the Executive will
not:
(1) directly or indirectly, as an employee,
agent, lender, investor or otherwise in any manner,
engage in business competition with the Company or
its Subsidiaries or have any interest in any person,
firm or corporation that directly or indirectly
engages in competition with the Company or its
Subsidiaries, other than ownership of up to one
percent (1%) of the stock of a publicly-held entity;
(2) employ, assist in employing, or
otherwise associate in business with, any then (at
the time of termination) employee, officer or agent
of the Company or its Subsidiaries; provided,
however, that Executive may employ, assist in
employing or associate with any employee, officer or
agent of the Company whose employment or other
engagement has been terminated by the Company, or who
has resigned under circumstances which would
constitute a Constructive Termination Without Cause
as
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defined in this Agreement; or
(3) induce any person who is an employee,
officer or agent of the Company or any of its
Subsidiaries to terminate said relationship.
b. For the purposes of this Agreement, the phrase
"engage in business competition" with the Company or its
Subsidiaries means, engaging in (1) the distribution of
industrial maintenance products, fasteners, automotive
replacement parts and security products (including, without
limitation, key blanks, key duplicating machines and key code
cutters), to the extent such distribution would target the
same types of customers or product sales opportunities that
the Company or its Subsidiaries have targeted, or actively
considered, studied or investigated targeting, during the
Executive's employment with the Company or (2) engaging in
direct competition with any other business of the Company or
its Subsidiaries as conducted at the time of termination of
employment.
c. All records of the accounts of customers and any
other records and books relating in any way whatsoever to the
customers or suppliers of the Company or its Subsidiaries, and
all records, pricing information, price lists, drawings,
product specifications, computer printouts, marketing plans or
information, data, samples, models, engineering data or other
trade secrets (or copies or extracts thereof) or
investigations, research, or business touching the operations
of the Company or its Subsidiaries, whether prepared by the
Executive or otherwise coming into the Executive's possession,
constitute proprietary and confidential information of the
Company (the "Confidential Information"), are and will remain
at all times hereafter the exclusive property of the Company,
and the Executive will not, at any time during or after
employment with the Company, disclose, divulge, copy or
otherwise use in any manner whatsoever any of the Confidential
Information. On termination of employment, the Executive will
return all such written Confidential Information, together
with all copies thereof, to the Company.
d. The remedy at law for any breach of this Section 4
will be inadequate and the damages flowing from such breach
are not readily susceptible to being measured in monetary
terms. Therefore, it is acknowledged that on proof of a
violation of any legally enforceable provision of this Section
4, the Company and its Subsidiaries will be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or future breach, in addition to
any other available legal or equitable remedies. In the event
of any breach of this Section 4, the Company will be relieved
of any obligation to pay any amounts then due and owing to the
Executive.
e. THE RESTRICTIONS IMPOSED BY THIS SECTION 4 ARE
REASONABLE, DESIGNED TO LIMIT UNFAIR COMPETITION, DO NOT
STIFLE THE EXECUTIVE'S SKILL AND
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EXPERIENCE AND WILL NOT OPERATE AS A BAR TO THE EXECUTIVE'S
MEANS OF SUPPORT. IN THE EVENT THAT THE EXECUTIVE VIOLATES ANY
LEGALLY ENFORCEABLE PROVISIONS OF THIS SECTION 4 AS TO WHICH
THERE IS A SPECIFIC TIME PERIOD DURING WHICH THE EXECUTIVE IS
PROHIBITED FROM TAKING CERTAIN ACTIONS OR FROM ENGAGING IN
CERTAIN ACTIVITIES, AS SET FORTH IN SUCH PROVISION, THEN, IN
SUCH EVENT, SUCH VIOLATION WILL TOLL THE RUNNING OF SUCH TIME
PERIOD FROM THE DATE OF SUCH VIOLATION UNTIL SUCH VIOLATION
WILL CEASE.
f. This Section 4 is of the essence of this Agreement
and will be construed independently from all other provisions
of this Agreement. Any claim Executive may have against the
Company, whether based on a breach of this Agreement or
otherwise, will not constitute a defense to the enforcement of
this Section 4.
5. PAYMENTS AND WITHHOLDING TAXES. All payments to the
Executive or the Executive's estate or beneficiaries, as the case may be, will
be made in accordance with the Company's regular payroll and reimbursement
practices in effect from time to time and will be subject to withholding on
account of federal, state and local taxes as required by law. If any payment
hereunder is insufficient to provide the amount of such taxes required to be
withheld, the Company may withhold such taxes from any other payment due to the
Executive or such estate or beneficiaries.
6. NO MITIGATION. The Executive will have no obligation to
mitigate damages, or seek other employment or compensation in the event of
termination of employment governed by this Agreement, and, except as otherwise
expressly provided, payments due to the Executive under this Agreement will not
be offset by compensation from other sources.
7. ASSIGNABILITY; BINDING NATURE. This Agreement will be
binding on and inure to the benefit of the Company and the Executive and their
respective successors, heirs (in the case of the Executive) and assigns.
8. ENTIRE AGREEMENT. Except to the extent otherwise provided
herein, this Agreement contains the entire understanding and agreement between
the parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the parties concerning the subject
matter hereof, including, but not limited, to the letter agreement dated June 5,
1992 between the Company and the Executive.
9. AMENDMENT OR WAIVER. No provision in this Agreement may be
amended unless such amendment is agreed to in writing and signed by both the
Executive and an authorized officer of the Company. No waiver by either party of
any breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized
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officer of the Company, as the case may be. The failure by either party to
enforce any provision or provisions of this Agreement will not in any way be
construed by a waiver of any such provision or provisions or as to any future
violations thereof, nor prevent that party thereafter from enforcing each and
every other provision of this Agreement. The rights granted the parties in this
Agreement are cumulative and the waiver of any single remedy will not constitute
a waiver of such party's rights to assert all other legal remedies available.
10. SEVERABILITY. If any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
11. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder will survive any termination of the Executive's employment
with the Company to the extent necessary to the intended preservation of such
rights and obligations as described in this Agreement.
12. BENEFICIARIES/REFERENCES. The Executive will be entitled
to select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death by giving the Company written notice
thereof. In the event of the Executive's death or of a judicial determination of
incompetence, reference in this Agreement to the Executive will be deemed, as
appropriate, to refer to his beneficiary, estate or other legal representative.
13. NOTICE. All notices under this Agreement must be given in
writing, personally delivered, or by facsimile transmission with an appropriate
answer back received, or by mail. If by mail, notice must be mailed by
registered or certified mail, post prepaid, return receipt requested, and will
be deemed to have been given on the date following the date it is posted. Notice
to the Corporation is to be addressed to its then principal office. Notice to
the Executive is to be addressed to the Executive's address as it appears on the
records of the Company, or to such other address for either party as may be
designated pursuant to this Section 13.
14. GOVERNING LAW/JURISDICTION. This Agreement will be
governed by and construed and interpreted in accordance with the laws of Ohio,
without reference to principles of conflict of laws.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
CURTIS INDUSTRIES, INC.
BY: /s/ Livio Borghese
-----------------------------
ITS:
-----------------------------
EXECUTIVE
/s/ A. Keith Drewett
----------------------------------------
A. Keith Drewett
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<PAGE> 1
Exhibit 10.7
SEVERANCE AND
NON-COMPETITION AGREEMENT
THIS SEVERANCE AND NON-COMPETITION AGREEMENT (this "Agreement") between
CURTIS INDUSTRIES, INC., a Delaware corporation (the "Company"), and MAURICE P.
ANDRIEN, JR. (the "Executive") is dated the 28th day of February, 1996.
A. Executive is a key employee of the Company, who provides highly
valuable services to the Company and possesses, and has access to, confidential
and proprietary information concerning the Company .
B. The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control (as
defined below) of the Company. The Board believes it is imperative to diminish
any distraction of the Executive by virtue of the personal uncertainties and
risks created by a pending or threatened Change in Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change in Control
which will encourage the Executive to continue to provide services to the
Company (or its successor) after a Change in Control, thereby enhancing the
value of the Company in the event of a sale resulting in a Change in Control.
C. The Board and the Executive deem it to be in their respective best
interests to clarify and amend their existing severance arrangements and to
assure the Company of protection of its proprietary information and limited
protection against competition from the Executive on termination of the
Executive's employment.
Now, therefore, the parties, for the mutual consideration provided in
this Agreement, agree to be legally bound to the terms hereof.
1. CERTAIN DEFINITIONS.
a. "Affiliate" has the meaning ascribed in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
b. "Cause" means
<PAGE> 2
(1) the Executive's fraud, dishonesty,
willful misconduct or deliberate injury to the
Company or any Subsidiary (as defined below); or
(2) the Executive's intentional and repeated
refusal or failure to perform duties consistent with
the position of the Executive with the Company.
c. "Change in Control" means:
(1) The acquisition by any person (within
the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of securities representing a
majority of the then outstanding voting securities of
the Company entitled to vote generally in the
election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the
following acquisitions will not constitute a Change
in Control; (A) any acquisition by the Company, (B)
any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company
or any Person controlled by the Company, (C) any
acquisition by a Person who is an officer or director
of the Company on the date of this Agreement
("Current Officer or Director") or an Affiliate of
any such Person or (D) any acquisition by any Person
pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (3) of this Section
1(c); or
(2) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of
the Board; provided, however, that any individual
becoming a director subsequent to the date hereof
whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(3) Approval by the stockholders of the
Company of a reorganization, merger or consolidation
(a "Business Combination") (other than a Business
Combination with a Person that is an affiliate of a
Current Officer or Director) in each case, unless,
following such Business Combination, (A) all or
substantially all of the Persons who were the
beneficial owners, respectively, of the Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 60% of the combined voting
power of the then outstanding voting securities
entitled to vote generally in the election of
directors of the entity resulting from such Business
2
<PAGE> 3
Combination (including, without limitation, an entity
which, as a result of such transaction, owns the
Company through one or more subsidiaries) and (B) no
Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination and any
current Officer or Director or any affiliate of a
Current Officer or Director) beneficially owns,
directly or indirectly, 20% or more of combined
voting power of the then outstanding voting
securities of such corporation without counting any
such ownership that existed prior to the Business
Combination; or
(4) Approval by the stockholders of the
Company of (A) a complete liquidation or dissolution
of the Company or (B) the sale or other disposition
of all or substantially all of the assets of the
Company, other than to a Person who is an affiliate
of a Current Officer or Director or a Person, with
respect to which following such sale or other
disposition, [a] more than 60% of the combined voting
power of the then outstanding voting securities of
such corporation entitled to vote generally in the
election of directors is beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial
owners of the Outstanding Company Voting Securities
immediately prior to such sale or other disposition,
and [b] less than 20% of the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the
election of directors is then beneficially owned,
directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the
Company or such corporation and any current Officer
or Director or any affiliate of a Current Officer or
Director), without counting any such ownership that
existed prior to the sale or disposition.
d. "Compensation" means an amount equal to the higher
of the (A) then current annual rate of base salary or (B)
annual rate of base salary in effect immediately prior to such
then current rate; provided, that, if termination occurs after
a Change in Control, Compensation means the greatest of (i)
the higher of the two base salaries set forth above or (ii)
the annual rate of the base salary in effect immediately prior
to the Change in Control.
e. "Constructive Termination Without Cause" means a
termination of the Executive's employment by the Executive
following the occurrence, without his prior written consent,
of one or more of the following events (except in connection
with a termination of the Executive's employment for one of
the other reasons specified in Section 2, below):
(1) a reduction in the Executive's
Compensation, or a significant diminution in benefits
or perquisites following a Change in Control, unless,
in the case of termination or reduction of any such
benefit or perquisite, (A) there is substituted a
comparable benefit or perquisite that is economically
equivalent to
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<PAGE> 4
such benefit or perquisite prior to its termination
or reduction, (B) the termination or reduction of the
benefit or perquisite affects members of the senior
management of the Company generally and occurs prior
to, and not in connection with or in anticipation of,
a Change in Control, or (C) the termination or
reduction of the benefit or perquisite occurs
pursuant to the Executive's direction or consent;
(2) a significant diminution in the
Executive's duties, responsibilities, titles or
position or the assignment to the Executive of duties
and responsibilities (A) inconsistent with the titles
or positions held by the Executive on the date of
this Agreement, as changed in connection with
promotions, if any, or (B) that are illegal, immoral
or unethical;
(3) the relocation of the Executive's
principal place of employment to a location that is
more than thirty (30) miles outside of Cuyahoga
County;
(4) the failure of the Company to obtain the
unconditional assumption, in writing or by operation
of law, of the Company's obligation to the Executive
under this Agreement by any successor prior to or at
the time of a reorganization, merger, consolidation,
disposition of all or substantially all of the assets
of the Company or similar transaction; or
(5) a termination for any reason during the
thirty (30) day period immediately following the
first anniversary of a Change in Control.
A Constructive Termination Without Cause will not
take effect unless: (i) the Executive has delivered written
notice to the Board within sixty (60) days after acquiring
knowledge of one of the events described in this subsection
1e, providing a basis for Constructive Termination Without
Cause, stating which one of these events has occurred; (ii)
within thirty (30) days after receipt of such notice the
Company has not remedied such event and provided the Executive
with written notice of such remedy; and (iii) if the Company
has not remedied such event within such period and provided
such notice, the Executive has notified the Company in writing
that he is terminating his employment; provided, however, that
a Constructive Termination Without Cause pursuant to clause
(5) of this subsection 1(e) will take effect at the expiration
of such thirty (30) day period if the Executive has delivered
and not withdrawn written notice thereof within such period.
The failure of the Executive to effect a Constructive
Termination Without Cause as to any one event described in
this subsection 1(e) above will not affect the Executive's
entitlement to effect a Constructive Termination Without Cause
as to any other such event.
f. "Disability" means the illness or other mental or
physical incapacity of the Executive, resulting in the
inability, as determined in good faith by the Board, to
perform substantially his duties for a period of one hundred
eighty (180) days in any twelve
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(12) month period.
g. "Subsidiary" means any entity in an unbroken chain
of entities beginning with the Company, if each of the
entities other than the last entity in the unbroken chain owns
equity possessing fifty percent (50%) or more of the total
combined voting power in one of the other entities in such
chain.
2. TERMINATION OF EMPLOYMENT.
a. TERMINATION BY DEATH. In the event that the
Executive's employment is terminated by death, his estate or
designated beneficiary, as the case may be, will be entitled
to:
(1) Compensation through the date of death;
(2) annual bonuses earned or awarded for
prior periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of death;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of death; and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with the applicable plans and programs of
the Company.
b. TERMINATION DUE TO DISABILITY. In the event that
the Executive's employment is terminated due to Disability,
the Executive will be entitled to:
(1) Compensation through the date of
termination of employment;
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<PAGE> 6
(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portion of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of termination;
(3) continuation of the medical benefits to
which the Executive and his dependents were entitled
at the time of termination, for a period of twelve
(12) months following termination of employment;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the date of termination of
employment in accordance with the applicable plans
and programs of the Company.
c. TERMINATION BY THE COMPANY FOR CAUSE. In the event
that the Executive's employment is terminated for Cause, the
Executive will be entitled to:
(1) Compensation through the date of
termination for Cause;
(2) any annual bonuses awarded but not yet
paid;
(3) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(4) other benefits accrued and earned by the
Executive through the date of termination in
accordance with applicable plans and programs of the
Company.
d. TERMINATION WITHOUT CAUSE. In the event that the
Company terminates Executive's employment for reasons other
than death, Disability or Cause, or the Executive terminates
employment in connection with a Constructive Termination
Without Cause, the Executive will be entitled to:
(1) Compensation for a period of twelve (12)
months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned or awarded for prior
periods but not yet paid including the pro rata
portions of any bonus earned under any applicable
bonus plan for the portion of the year elapsed to the
date of
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<PAGE> 7
termination of employment;
(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twelve (12) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twelve (12)
months after termination of employment in accordance
with applicable plans and programs of the Company.
e. TERMINATIONS WITHOUT CAUSE FOLLOWING A CHANGE IN
CONTROL. Anything to the contrary in this Agreement
notwithstanding, in the event of a Termination Without Cause,
a Constructive Termination Without Cause or a termination due
to Death or Disability within two (2) years following a Change
in Control, the Executive (or his estate or designated
beneficiary) will
be entitled to:
(1) Compensation for a period of twenty-four
(24) months, payable in accordance with the Company's
regular payroll practices for senior management, as
in effect from time to time;
(2) any bonuses earned for prior periods but
not yet paid including the pro rata portion of any
bonus earned under any applicable bonus plan for the
portion of the year elapsed to the date of
termination of employment;
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<PAGE> 8
(3) continued participation in all employee
benefit plans or programs in which the Executive was
participating on the date of termination of
employment, until the earlier of: (i) the expiration
of twenty-four (24) months after termination of
employment, and (ii) the date the Executive receives
equivalent coverage and benefits under other plans
and programs of a subsequent employer;
(4) reimbursement, in accordance with
Company policy as in effect from time to time, of any
business expenses incurred by the Executive but not
yet paid on the date of termination of employment;
and
(5) other benefits accrued and earned by the
Executive through the period ending twenty-four (24)
months after termination of employment in accordance
with applicable plans and programs of the Company.
Termination of employment after the two (2) year period referred to in the first
paragraph of this subsection 2e will be subject to subsections a through d of
this Section 2.
3. LIMITATION OF PAYMENTS. If any compensation payments under
this Agreement would result in an "excess parachute payment" within the meaning
of Section 280G(b), then compensation payments under this Agreement will be
limited to the highest amount permitted without resulting in an "excess
parachute payment".
4. COVENANT NOT TO COMPETE.
a. During the term of the Executive's employment with
the Company or its successors and for a period of twelve (12)
months following termination of employment, the Executive will
not:
(1) directly or indirectly, as an employee,
agent, lender, investor or otherwise in any manner,
engage in business competition with the Company or
its Subsidiaries or have any interest in any person,
firm or corporation that directly or indirectly
engages in competition with the Company or its
Subsidiaries, other than ownership of up to one
percent (1%) of the stock of a publicly-held entity;
(2) employ, assist in employing, or
otherwise associate in business with, any then (at
the time of termination) employee, officer or agent
of the Company or its Subsidiaries; provided,
however, that Executive may employ, assist in
employing or associate with any employee, officer or
agent of the Company whose employment or other
engagement has been terminated by the Company, or who
has resigned under circumstances which would
constitute a Constructive Termination Without Cause
as
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<PAGE> 9
defined in this Agreement; or
(3) induce any person who is an employee,
officer or agent of the Company or any of its
Subsidiaries to terminate said relationship.
b. For the purposes of this Agreement, the phrase
"engage in business competition" with the Company or its
Subsidiaries means, engaging in (1) the distribution of
industrial maintenance products, fasteners, automotive
replacement parts and security products (including, without
limitation, key blanks, key duplicating machines and key code
cutters), to the extent such distribution would target the
same types of customers or product sales opportunities that
the Company or its Subsidiaries have targeted, or actively
considered, studied or investigated targeting, during the
Executive's employment with the Company or (2) engaging in
direct competition with any other business of the Company or
its Subsidiaries as conducted at the time of termination of
employment.
c. All records of the accounts of customers and any
other records and books relating in any way whatsoever to the
customers or suppliers of the Company or its Subsidiaries, and
all records, pricing information, price lists, drawings,
product specifications, computer printouts, marketing plans or
information, data, samples, models, engineering data or other
trade secrets (or copies or extracts thereof) or
investigations, research, or business touching the operations
of the Company or its Subsidiaries, whether prepared by the
Executive or otherwise coming into the Executive's possession,
constitute proprietary and confidential information of the
Company (the "Confidential Information"), are and will remain
at all times hereafter the exclusive property of the Company,
and the Executive will not, at any time during or after
employment with the Company, disclose, divulge, copy or
otherwise use in any manner whatsoever any of the Confidential
Information. On termination of employment, the Executive will
return all such written Confidential Information, together
with all copies thereof, to the Company.
d. The remedy at law for any breach of this Section 4
will be inadequate and the damages flowing from such breach
are not readily susceptible to being measured in monetary
terms. Therefore, it is acknowledged that on proof of a
violation of any legally enforceable provision of this Section
4, the Company and its Subsidiaries will be entitled to
immediate injunctive relief and may obtain a temporary order
restraining any threatened or future breach, in addition to
any other available legal or equitable remedies. In the event
of any breach of this Section 4, the Company will be relieved
of any obligation to pay any amounts then due and owing to the
Executive.
e. THE RESTRICTIONS IMPOSED BY THIS SECTION 4 ARE
REASONABLE, DESIGNED TO LIMIT UNFAIR COMPETITION, DO NOT
STIFLE THE EXECUTIVE'S SKILL AND
9
<PAGE> 10
EXPERIENCE AND WILL NOT OPERATE AS A BAR TO THE EXECUTIVE'S
MEANS OF SUPPORT. IN THE EVENT THAT THE EXECUTIVE VIOLATES ANY
LEGALLY ENFORCEABLE PROVISIONS OF THIS SECTION 4 AS TO WHICH
THERE IS A SPECIFIC TIME PERIOD DURING WHICH THE EXECUTIVE IS
PROHIBITED FROM TAKING CERTAIN ACTIONS OR FROM ENGAGING IN
CERTAIN ACTIVITIES, AS SET FORTH IN SUCH PROVISION, THEN, IN
SUCH EVENT, SUCH VIOLATION WILL TOLL THE RUNNING OF SUCH TIME
PERIOD FROM THE DATE OF SUCH VIOLATION UNTIL SUCH VIOLATION
WILL CEASE.
f. This Section 4 is of the essence of this Agreement
and will be construed independently from all other provisions
of this Agreement. Any claim Executive may have against the
Company, whether based on a breach of this Agreement or
otherwise, will not constitute a defense to the enforcement of
this Section 4.
5. PAYMENTS AND WITHHOLDING TAXES. All payments to the
Executive or the Executive's estate or beneficiaries, as the case may be, will
be made in accordance with the Company's regular payroll and reimbursement
practices in effect from time to time and will be subject to withholding on
account of federal, state and local taxes as required by law. If any payment
hereunder is insufficient to provide the amount of such taxes required to be
withheld, the Company may withhold such taxes from any other payment due to the
Executive or such estate or beneficiaries.
6. NO MITIGATION. The Executive will have no obligation to
mitigate damages, or seek other employment or compensation in the event of
termination of employment governed by this Agreement, and, except as otherwise
expressly provided, payments due to the Executive under this Agreement will not
be offset by compensation from other sources.
7. ASSIGNABILITY; BINDING NATURE. This Agreement will be
binding on and inure to the benefit of the Company and the Executive and their
respective successors, heirs (in the case of the Executive) and assigns.
8. ENTIRE AGREEMENT. Except to the extent otherwise provided
herein, this Agreement contains the entire understanding and agreement between
the parties concerning the subject matter hereof and supersedes any prior
agreements, whether written or oral, between the parties concerning the subject
matter hereof, including, but not limited, to the letter agreement dated August
17, 1992 between the Company and the Executive.
9. AMENDMENT OR WAIVER. No provision in this Agreement may be
amended unless such amendment is agreed to in writing and signed by both the
Executive and an authorized officer of the Company. No waiver by either party of
any breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party will be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or an
authorized
10
<PAGE> 11
officer of the Company, as the case may be. The failure by either party to
enforce any provision or provisions of this Agreement will not in any way be
construed by a waiver of any such provision or provisions or as to any future
violations thereof, nor prevent that party thereafter from enforcing each and
every other provision of this Agreement. The rights granted the parties in this
Agreement are cumulative and the waiver of any single remedy will not constitute
a waiver of such party's rights to assert all other legal remedies available.
10. SEVERABILITY. If any provision or portion of this
Agreement is determined to be invalid or unenforceable for any reason, in whole
or in part, the remaining provisions of this Agreement will be unaffected
thereby and will remain in full force and effect to the fullest extent permitted
by law.
11. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder will survive any termination of the Executive's employment
with the Company to the extent necessary to the intended preservation of such
rights and obligations as described in this Agreement.
12. BENEFICIARIES/REFERENCES. The Executive will be entitled
to select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death by giving the Company written notice
thereof. In the event of the Executive's death or of a judicial determination of
incompetence, reference in this Agreement to the Executive will be deemed, as
appropriate, to refer to his beneficiary, estate or other legal representative.
13. NOTICE. All notices under this Agreement must be given in
writing, personally delivered, or by facsimile transmission with an appropriate
answer back received, or by mail. If by mail, notice must be mailed by
registered or certified mail, post prepaid, return receipt requested, and will
be deemed to have been given on the date following the date it is posted. Notice
to the Corporation is to be addressed to its then principal office. Notice to
the Executive is to be addressed to the Executive's address as it appears on the
records of the Company, or to such other address for either party as may be
designated pursuant to this Section 13.
14. GOVERNING LAW/JURISDICTION. This Agreement will be
governed by and construed and interpreted in accordance with the laws of Ohio,
without reference to principles of conflict of laws.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
CURTIS INDUSTRIES, INC.
BY: /s/ Livio Borghese
-----------------------------
ITS:
-----------------------------
EXECUTIVE
/s/ Maurice P. Andrien, Jr.
--------------------------------
Maurice P. Andrien, Jr.
12
<PAGE> 13
[CURTIS LOGO] Curtis Industries, Inc.
- ----------------------------------------------6140 Parkland Boulevard
Mayfield Heights, Ohio 44124-4103
April 21, 1998
Mr. Robert J. Tomsich
Chairman of the Board
Curtis Industries, Inc.
6140 Parkland Boulevard
Mayfield Heights, Ohio 44124
Re: SEVERANCE AND NON-COMPETITION AGREEMENT DATED THE 28th DAY OF
FEBRUARY, 1996 ("AGREEMENT")
Dear Bob:
This will confirm that I will terminate my employment with the Company at the
close of business May 31, 1998, or such earlier date at the Company shall
choose, provided that such termination will trigger the right to benefits under
Section 2.e. of the Agreement for "Constructive Termination Without Cause"
following a "Change in Control".
In consideration of the foregoing:
- I waive the provisions of Section 1.e.(2) of the Agreement solely to
allow Curtis Industries, Inc. ("Company") to give another individual
the title and position of President and/or Chief Executive Officer of
the Company, without triggering any compensation rights under the
Agreement.
- I waive any right to a pro rata bonus that may be payable under the
Agreement.
- I will surrender the possession of my Company automobile at the
Company's headquarters no later than the close of business May 31,
1998.
- I agree that I will make no announcement of the termination, either
orally or in writing, without your approval and further agree to keep
the contents of this letter confidential.
- I agree that I will make myself available during the month of June,
1998, to provide consulting services to the Company for no more than
four business days, upon request of the Company, at a mutually
convenient time; provided, however, that the Company shall reimburse
me, in accordance with Company policy as in effect from time to time,
for any business expenses incurred in connection with such consulting
services.
Except as provided herein, the Agreement shall otherwise remain in full force
and effect. If the foregoing is acceptable to the Company, please indicate such
acceptance in the place provided for below.
Sincerely,
/s/ Maurice P. Andrien, Jr.
---------------------------
Maurice P. Andrien, Jr.
AGREED TO AND
ACCEPTED THIS 22 DAY OF APRIL, 1998.
----
CURTIS INDUSTRIES, INC.
Robert J. Tomsich
- ---------------------------
Robert J. Tomsich, Chairman
<PAGE> 1
<TABLE>
Exhibit 12
Paragon Corporate Holdings Inc.
Computation of Ratio of Earnings to Fixed Charges
(In thousands, except for ratios)
<CAPTION>
THE
A.B. DICK (THE PREDECESSOR COMPANY) COMPANY
----------------------------------- -------
4/1/96 1/17/97
FISCAL YEARS ENDED MARCH 31, THROUGH THROUGH
1994 1995 1996 1/16/97 12/31/97
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Computation of Earnings:
Income (loss) before income taxes 2,132 2,677 (5,463) (455) 9,329
Add:
Interest expense(1) 0 134 162 205 2,598
Portion of rent expense representative
of an interest factor 1,778 1,103 728 765 742
-----------------------------------------------------------------
Earnings (deficiency) 3,910 3,914 (4,573) 515 12,669
=================================================================
Computation of Fixed Charges:
Interest expense(1) 0 134 162 205 2,598
Portion of rent expense representative
of an interest factor 1,778 1,103 728 765 742
-----------------------------------------------------------------
Fixed Charges 1,778 1,237 890 970 3,340
=================================================================
Ratio of Earnings to Fixed Charges(2) 2.20 3.16 -- -- 3.79
=================================================================
<FN>
(1) Amortization of deferred financing cost is included in interest expense.
(2) Earnings were inadequate to cover fixed charges in the fiscal year ended
March 31, 1996 and in the period from April 1, 1996 through January 16,
1997 by $5,463 and $455, respectively.
</TABLE>
<PAGE> 1
EXHIBIT 21
----------
Subsidiaries of the Company
---------------------------
Subsidiary State or Jurisdiction of Incorporation
- ---------- --------------------------------------
A.B. Dick B.V. The Netherlands
A.B. Dick Company Delaware
A.B. Dick Company of Canada, Ltd. Canada
A.B. Dick-Itek Limited United Kingdom
A.B. Dick Netherland B.V. The Netherlands
A.B. Dick, S.A. Belgium
Curtis Industries, Inc. Delaware
Curtis Industries of Canada, Ltd. Canada
Curtis Italy Italy
Curtis Sub, Inc. Delaware
Curtis U.K. Ltd. United Kingdom
Itek Graphix Corp. Delaware
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of Paragon Corporate
Holdings Inc. and A.B. Dick Company (The Predecessor Company) dated February 27,
1998, except for Note J as to which the date is April 1, 1998, in the
Registration Statement (Form S-4 No. 333-XXXXX) and related Prospectus of
Paragon Corporate Holdings Inc. for the registration of $115,000,000 in Senior
Notes due 2008.
/s/ Ernst & Young LLP
Cleveland, Ohio
May 1, 1998
<PAGE> 2
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of Curtis Industries,
Inc. and Subsidiaries dated February 27, 1998, in the Registration Statement
(Form S-4 No. 333-XXXXX) and related Prospectus of Paragon Corporate Holdings
Inc. for the registration of $115,000,000 in Senior Notes due 2008.
/s/ Ernst & Young LLP
Cleveland, Ohio
May 1, 1998
<PAGE> 1
Exhibit 25
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
- ---- SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
PARAGON CORPORATE HOLDINGS INC.
(Exact name of obligor as specified in its charter)
DELAWARE 34-1845312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5700 WEST TOUHY AVENUE
NILES, ILLINOIS 60714
(Address of principal executive offices) (Zip code)
-----------------------------
9 5/8% SERIES B SENIOR NOTES DUE 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued
June 28, 1872, by the Comptroller of the
Currency to The Northwestern National Bank
of Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-47427.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 21st day of April 1998.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
---------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE> 5
EXHIBIT 6
April 21, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
------------------------------------
Curtis D. Schwegman
Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS ON PAGES F-3 AND F-4 OF THIS FORM S-4 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001060513
<NAME> PARAGON CORPORATE HOLDINGS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,283
<SECURITIES> 4,176
<RECEIVABLES> 37,821
<ALLOWANCES> 1,545
<INVENTORY> 48,068
<CURRENT-ASSETS> 94,883
<PP&E> 10,308
<DEPRECIATION> 310
<TOTAL-ASSETS> 138,075
<CURRENT-LIABILITIES> 57,263
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 7,130
<TOTAL-LIABILITY-AND-EQUITY> 138,075
<SALES> 193,216
<TOTAL-REVENUES> 193,216
<CGS> 129,651
<TOTAL-COSTS> 129,651
<OTHER-EXPENSES> 52,566
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,598
<INCOME-PRETAX> 9,329
<INCOME-TAX> 775
<INCOME-CONTINUING> 8,554
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,554
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
LETTER OF TRANSMITTAL
TO
TENDER FOR EXCHANGE
9 5/8% SERIES A SENIOR NOTES DUE 2008
OF
PARAGON CORPORATE HOLDINGS INC.
PURSUANT TO
PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 9 5/8% SERIES
A SENIOR NOTES DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES
DESCRIBED IN THE PROSPECTUS AND HEREIN.
The Exchange Agent for the Exchange Offer is:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
P. O. Box 1517
Minneapolis, Minnesota 55480-1517
By Overnight Courier:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
By Hand:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
By Facsimile:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
(612) 667-4927
Confirm by telephone:
(612) 667-9764
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SERIES A NOTES TENDERED
SERIES A NOTES) (ATTACH ADDITIONAL SCHEDULE, IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------
(1) (2) (3)
CERTIFICATE NUMBER(S) TOTAL PRINCIPAL AMOUNT
(IF ENCLOSING OF SERIES A NOTES
CERTIFICATES) TENDERED
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED ,
1998 (THE "PROSPECTUS"), OF PARAGON CORPORATE HOLDINGS INC., A DELAWARE
CORPORATION (THE "COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE
COMPANY, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE
PROSPECTUS AND HEREIN AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL
AMOUNT OF ITS 9 5/8% SERIES B SENIOR NOTES DUE 2008 (THE "SERIES B NOTES") FOR
EACH $1,000 PRINCIPAL AMOUNT OF ITS OUTSTANDING 9 5/8% SERIES A SENIOR NOTES DUE
2008 (THE "SERIES A NOTES"), OF WHICH $115 MILLION AGGREGATE PRINCIPAL AMOUNT IS
OUTSTANDING. THE MINIMUM PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT OF SERIES A
NOTES, AND ALL OTHER TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998 (the "Expiration Date"), unless extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE SERIES B NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR SERIES A NOTES TO THE EXCHANGE AGENT BY
5:00 P.M. ON THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Series A
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Series A Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Series A Notes
is to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company ("DTC" or the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer--Procedures for Tendering." Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
Holders whose Series A Notes are not available or who cannot deliver their
Series A Notes and all other documents required hereby to the Exchange Agent by
5:00 p.m. on the Expiration Date nevertheless may tender their Series A Notes in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF SERIES A
NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION
IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR SERIES A NOTES MUST COMPLETE COLUMNS (1)
THROUGH (3) IN THE BOX ENTITLED "DESCRIPTION OF SERIES A NOTES TENDERED" ON THE
PRIOR PAGE, COMPLETE THE APPROPRIATE BOX BELOW UNDER "METHOD OF DELIVERY" AND
SIGN WHERE INDICATED BELOW.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF SERIES A
NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE SERIES A NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.
<PAGE> 3
METHOD OF DELIVERY
<TABLE>
<S> <C>
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED SERIES A NOTES ARE
ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------------------
DTC Account Number:
------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT
TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (SEE
INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s):
------------------------------------------------------------
Window Ticket Number (if any):
------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------------------------------------------
Name of Eligible Institution which Guaranteed Delivery:
---------------------------------------------------------
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE
THE FOLLOWING INFORMATION:
DTC Account Number:
------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
TEN ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
------------------------------------------------------------
Address:
------------------------------------------------------------
</TABLE>
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Series A Notes
indicated in the box entitled "Description of Series A Notes Tendered." Subject
to, and effective upon, the acceptance for exchange of the Series A Notes
tendered hereby, the undersigned hereby irrevocably sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to such
Series A Notes, and hereby irrevocably constitutes and appoints the Exchange
Agent the true and lawful agent and attorney-in-fact of the undersigned (with
full knowledge that said Exchange Agent also acts as the agent of the Company
and as Trustee under the indenture governing the Series A Notes and the Series B
Notes) with respect to such Series A Notes, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver certificates representing such Series A Notes, and to
deliver all accompanying evidences of transfer and authenticity to or upon the
order of the Company upon receipt by the Exchange Agent, as the undersigned's
agent, of the Series B Notes to which the undersigned is entitled upon the
acceptance by the Company of such Series A Notes for exchange pursuant to the
Exchange Offer, (b) receive all benefits and otherwise to exercise all rights of
beneficial ownership of such Series A Notes, all in accordance with the terms of
the Exchange Offer, and (c) present such Series A Notes for transfer on the
register for such Series A Notes.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Series A Notes or the Series B Notes. If a market
for the Series B Notes should develop, the Series B Notes could trade at a
discount from their principal amount. The undersigned is aware that the Company
does not intend to list the Series B Notes on a national securities exchange and
that there can be no assurance that an active market for the Series B Notes will
develop.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of Series
B Notes. If the undersigned is a broker-dealer that will receive Series B Notes,
it represents that the Series A Notes to be exchanged for Series B Notes were
acquired as a result of market-making activities or other trading activities and
it acknowledges that it will deliver a prospectus in connection with any resale
of such Series B Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE SERIES A NOTES IN ANY JURISDICTION IN WHICH THE
MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, (b) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Series B Notes, and (c) it
is acquiring the Series B Notes in the ordinary course of business.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, to purchase or make offers for any Series A Notes
that remain outstanding subsequent to the Expiration Date or to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Series A
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers will differ from the terms of the Exchange
Offer.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Series A Notes
tendered hereby, (c) the tender of such Series A Notes complies with Rule 14e-4
(to the extent that Rule 14e-4 is applicable to such exchange), (d) the
undersigned has full power and authority to tender, exchange, assign and
transfer the Series A Notes tendered hereby, and (e) when the same are accepted
for exchange by the Company, the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim or right. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Series A Notes tendered hereby.
<PAGE> 5
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Series A Notes tendered hereby cannot be
withdrawn.
The undersigned understands that tenders of the Series A Notes pursuant to
any one of the procedures described in the Prospectus under the caption "The
Exchange Offer--Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Series A Notes pursuant to
one of the procedures described in the Prospectus and the instructions thereto,
the tendering holder will be deemed to have waived the right to receive any
payment in respect of interest on the Series A Notes accrued up to the date of
issuance of the Series B Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Series A Notes tendered. Series A Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Series B Notes, and Series A Notes not validly tendered or
accepted for exchange, will be issued in the name of the undersigned. Similarly,
unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Series B Notes, and Series A Notes not validly tendered or
accepted for exchange, will be delivered to the undersigned at the address shown
in such box below the signature of the undersigned. The undersigned recognizes
that the Company has no obligation pursuant to the "Special Issuance
Instructions" to transfer any Series A Notes from the name of the registered
holder thereof if the Company does not accept for exchange any of the principal
amount of such Series A Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Series A Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Series A
Notes not properly tendered or any Series A Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to particular Series A Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Series A Notes must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Series A Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Series A Notes will not be deemed to have been made until such
irregularities have been cured or waived. Any Series A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Series A Notes,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
<PAGE> 6
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X _____________________________________________________________________________
X _____________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of Series A Notes exactly as
their name(s) appear(s) on certificate(s) for the Series A Notes or by person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
agent or other person acting in a fiduciary or representative capacity, please
provide the following information. See Instruction 3.
Name(s): ______________________________________________________________________
_______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title):
Address: ______________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone No.: __________________________________________________
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3)
_______________________________________________________________________________
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURE(S))
_______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NO., INCLUDING AREA CODE, OF FIRM)
_______________________________________________________________________________
(AUTHORIZED SIGNATURE)
_______________________________________________________________________________
(PRINTED NAME)
_______________________________________________________________________________
(TITLE)
Date: ________________________________, 1998
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3, 4 and 6)
To be completed ONLY if certificates for Series A Notes in a
principal amount not exchanged and/or certificates for Series B Notes are
to be issued in the name of someone other than the undersigned, or if
Series A Notes are to be returned by credit to an account maintained by
the Book-Entry Transfer Facility.
Issue (check appropriate box)
[ ] Series B Notes to:
[ ] Series A Notes to:
Name: ______________________________________________________________________
(Please Print)
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
Credit unaccepted Series A Notes tendered by book-entry transfer to:
[ ] The Depository Trust Company
account set forth below
____________________________________________________________________________
(DTC ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4 and 6)
To be completed ONLY if certificates for Series A Notes in a
principal amount not exchanged and/or certificates for Series B Notes are
to be sent to someone other than the undersigned at an address other than
that shown above.
Deliver (check appropriate box)
[ ] Series B Notes to:
[ ] Series A Notes to:
Name: ______________________________________________________________________
(Please Print)
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
____________________________________________________________________________
Taxpayer Identification Number
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Series A Notes, together with a properly completed Letter of Transmittal (or
facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal. If the beneficial owner of any Series A Notes is not the
registered holder, then such person may validly tender his or her Series A Notes
only by obtaining and submitting to the Exchange Agent a properly completed
Letter of Transmittal from the registered holder. SERIES A NOTES SHOULD BE
DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR TO ANY OTHER
PERSON.
THE METHOD OF DELIVERY OF SERIES A NOTES AND ALL OTHER REQUIRED DOCUMENTS
TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Series A Notes and such holder's Series A
Notes are not immediately available or time will not permit such holder's Letter
of Transmittal, Series A Notes or other required documents to reach the Exchange
Agent on or before the Expiration Date, such holder's tender may be effected if:
(a) the tender is made through an Eligible Institution (as defined);
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Series A Notes, the
certificate number or numbers of such Series A Notes and the principal
amount of Series A Notes tendered, stating that the tender is being made
thereby, and guaranteeing that, within three business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Series A Notes to be tendered in
proper form for transfer or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within three business days after the Expiration Date.
2. WITHDRAWAL OF TENDERS. Tendered Series A Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Series A Notes, (c) contain the
description of the Series A Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Series A Notes and the aggregate
principal amount represented by such Series A Notes and (d) be signed by the
holder of such Series A Notes in the same manner as the original signature
appears on this Letter of Transmittal (including any required signature
guarantees) or be accompanied by evidence sufficient to have the Trustee with
respect to the Series A Notes register the transfer of such Series A Notes into
the name of the holder withdrawing the tender. The signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution unless such Series A
Notes have been tendered (a) by a registered holder of Series A Notes who has
not completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
for the account of an Eligible Institution. All questions as to the validity,
form and eligibility (including time of receipt) of such withdrawal notices
shall be determined by the Company, whose determination shall be final and
binding on all parties. If the Series A Notes to be withdrawn have been
delivered or otherwise identified to the Exchange Agent, a signed notice of
withdrawal is effective immediately upon receipt by the Exchange Agent of a
written or facsimile transmission notice of withdrawal even if physical release
is not yet effected. In addition, such notice must specify, in the case of
Series A Notes tendered by delivery of certificates for such Series A Notes, the
name of the registered holder (if different from that of the tendering holder)
to be credited with the withdrawn Series A Notes.
<PAGE> 9
Withdrawals may not be rescinded, and any Series A Notes withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer.
However, properly withdrawn Series A Notes may be retendered by following one of
the procedures described under "The Exchange Offer--Procedures for Tendering" in
the Prospectus at any time on or prior to the applicable Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Series A Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.
If any Series A Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any Series A Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Series B Notes are to be issued, or
certificates for any untendered principal amount of Series A Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein such certificates(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Series A Notes tendered
pursuant hereto are tendered (a) by a registered holder of Series A Notes who
has not completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(b) for the account of an Eligible Institution. In the event that signatures on
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States ("Eligible
Institutions").
Endorsements on certificates for Series A Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate in the applicable box the name and address to which certificates
for Series B Notes and/or substitute certificates evidencing Series A Notes for
the principal amounts not exchanged are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. If no such
instructions are given, any Series A Notes not exchanged will be returned to the
name and address of the person signing this Letter of Transmittal.
5. TAX IDENTIFICATION NUMBER WITHHOLDING. Federal income tax law of
the United States requires that a holder of Series A Notes whose Series A Notes
are accepted for exchange provide the Company with the holder's correct taxpayer
identification number, which, in the case of a holder who is an individual, is
his or her social security number, or otherwise establish an exemption from
backup withholding. If the Company is not provided with the correct taxpayer
identification number, the exchanging holder of Series A Notes may be subject to
a $50 penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
interest on the Series B Notes acquired pursuant to the Exchange Offer may be
subject to backup withholding in an amount equal to 31% of any interest payment.
If withholding occurs and results in an overpayment of taxes, a refund may be
obtained.
To prevent backup withholding, each exchanging holder of Series A Notes
subject to backup withholding must provide his correct taxpayer identification
number by completing the Substitute Form W-9 provided in this Letter of
Transmittal, certifying that the taxpayer identification number provided is
correct (or that the exchanging holder of
<PAGE> 10
Series A Notes is awaiting a taxpayer identification number) and that either (a)
the exchanging holder has not yet been notified by the IRS that such holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (b) the IRS has notified the exchanging holder that such holder is
no longer subject to backup withholding.
Certain exchanging holders of Series A Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding requirements. A foreign individual and other exempt holders (i.e.,
corporations) should certify, in accordance with the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9," to such
exempt status on the Substitute Form W-9 provided in this Letter of Transmittal.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer
will not be obligated to pay brokerage commissions or fees or to pay transfer
taxes with respect to their exchange under the Exchange Offer unless the box
entitled "Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Series B Notes are to be issued to any person other
than the holder of the Series A Notes tendered for exchange. The Company will
pay all other charges or expenses in connection with the Exchange Offer. If
holders tender Series A Notes for exchange and the Exchange Offer is not
consummated, certificates representing the Series A Notes will be returned to
the holders at the Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Series A Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.
8. PARTIAL TENDERS. Tenders of Series A Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Series A Notes, fill in the principal
amount of Series A Notes which are tendered in column (3) of the box on the
first page of this Letter of Transmittal entitled "Description of Series A Notes
Tendered." In the case of partial tenders, new certificates representing the
Series A Notes in fully registered form for the remainder of the principal
amount of the Series A Notes will be sent to the person(s) signing this Letter
of Transmittal, unless otherwise indicated in the appropriate place on this
Letter of Transmittal, as promptly as practicable after the expiration or
termination of the Exchange Offer.
9. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. Any holder
whose Series A Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or additional copies of the Prospectus or this Letter of Transmittal
may be obtained from the Exchange Agent at its telephone number set forth on the
first page of this Letter of Transmittal.
<PAGE> 11
<TABLE>
<CAPTION>
_____________________________________________________________________________________________
PAYER'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
<S> <C> <C>
____________________________________________________________________________________________
PART I__PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW
__________________________________________
Social Security Number
__________________________________________________________
OR Employer Identification Number
__________________________________________________________
SUBSTITUTE CERTIFICATION__UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
Form W-9 (1) The number shown on this form is my correct Taxpayer
Department of the Treasury Identification Number (or I am waiting for a number to be
Internal Revenue Service issued to me) and
Payer's Request for Taxpayer (2) I am not subject to backup withholding either because:
Identification Number (TIN) (a) I am exempt from backup withholding; or (b) I have not
been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
_________________________________________________________
PART II--AWAITING TIN [ ] PART III--EXEMPT [ ]
_________________________________________________________
CERTIFICATION INSTRUCTIONS__You must cross out item (2)
above if you have been notified by the IRS that you are
subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2). If you are exempt
from backup withholding, check the box in Part III.
Signature _____________________________ Date ___________
________________________________________________________________________________
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
Please fill out your name and address below:
________________________________________________________________________________
Name
________________________________________________________________________________
Address (Number and street)
________________________________________________________________________________
City, State and Zip Code
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE
SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART II OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payer by the time of
payment, 31% of all reportable payments made to me will be withheld until I
provide a number and that, if I do not provide my taxpayer identification number
within 60 days, such retained amounts shall be remitted to the IRS as backup
withholding.
_________________________________________________________ ________________________________________________________
Signature Date
</TABLE>
<PAGE> 12
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
CORPORATE TRUST ADMINISTRATION
NORWEST CENTER
SIXTH AND MARQUETTE
MINNEAPOLIS, MINNESOTA 55479-0069
PARAGON CORPORATE HOLDINGS INC.
OFFER TO EXCHANGE
9 5/8% SERIES B SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 5/8% SERIES A SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF
9 5/8% SERIES A SENIOR NOTES DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
To Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees:
We have been appointed by Paragon Corporate Holdings Inc., a Delaware
corporation (the "Company"), to act as the Exchange Agent in connection with the
offer (the "Exchange Offer") of the Company to exchange $1,000 principal amount
of its 9 5/8% Series B Senior Notes due 2008 for each $1,000 principal amount of
its outstanding 9 5/8% Series A Senior Notes due 2008 (the "Series A Notes"),
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1998 (the "Prospectus") and in the related Letter of Transmittal and
the instructions thereto (the "Letter of Transmittal").
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9
providing information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Series A Notes and all other required documents cannot be
delivered to the Exchange Agent on or prior to the Expiration Date (as
defined); and
4. A form of letter which may be sent to your clients for whose
account you hold the Series A Notes in your name or in the name of a
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1998 (THE "EXPIRATION DATE"),
UNLESS EXTENDED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fees or commission to any broker or dealer or
other person (other than to the Exchange Agent) for soliciting tenders of the
Series A Notes pursuant to the Exchange Offer. You will be reimbursed for
customary mailing and handling expenses incurred by you in forwarding the
enclosed materials to your clients.
<PAGE> 13
Additional copies of the enclosed materials may be obtained by contacting
the Exchange Agent as provided in the enclosed Letter of Transmittal.
Very truly yours,
Norwest Bank Minnesota, National
Association
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE
YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT CONTAINED IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
<PAGE> 14
PARAGON CORPORATE HOLDINGS INC.
OFFER TO EXCHANGE
9 5/8% SERIES B SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 5/8% SERIES A SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF
9 5/8% SERIES A SENIOR NOTES DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
, 1998
To Our Clients:
Enclosed for your consideration is the Prospectus dated , 1998 (the
"Prospectus") and the related Letter of Transmittal and instructions thereto
(the "Letter of Transmittal") in connection with the offer (the "Exchange
Offer") of Paragon Corporate Holdings Inc., a Delaware corporation ("the
Company"), to exchange $1,000 principal amount of its 9 5/8% Series B Senior
Notes due 2008 (the "Series B Notes") for each $1,000 principal amount of its
outstanding 9 5/8% Series A Senior Notes due 2008 (the "Series A Notes").
Consummation of the Exchange Offer is subject to certain conditions
described in the Prospectus. Capitalized terms used herein but not defined shall
have the meanings ascribed to them in the Prospectus.
WE ARE THE REGISTERED HOLDER OF SERIES A NOTES HELD BY US FOR YOUR ACCOUNT.
A TENDER OF ANY SUCH SERIES A NOTES CAN BE MADE ONLY BY US AS THE REGISTERED
HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SERIES A
NOTES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Series A Notes held by us for your account pursuant to the terms
and conditions set forth in the Prospectus and the Letter of Transmittal. We
urge you to read carefully the Prospectus and the Letter of Transmittal before
instructing us to tender your Series A Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Series A Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME ON , 1998 (THE
"EXPIRATION DATE"), UNLESS EXTENDED. Series A Notes tendered pursuant to the
Exchange Offer may only be withdrawn under the circumstances described in the
Prospectus and the Letter of Transmittal.
Your attention is directed to the following:
1. The Exchange Offer is for the entire aggregate principal amount of
outstanding Series A Notes.
2. Consummation of the Exchange Offer is conditioned upon the
conditions set forth in the Prospectus under the caption "The Exchange
Offer--Conditions."
3. Tendering holders may withdraw their tender at any time until the
Expiration Date.
4. Any transfer taxes incident to the transfer of Series A Notes from
the tendering holder to the Company will be paid by the Company, except as
provided in the Prospectus and the instructions to the Letter of
Transmittal.
<PAGE> 15
5. The Exchange Offer is not being made to (nor will the surrender of
Series A Notes for exchange be accepted from or on behalf of) holders of
Series A Notes in any jurisdiction in which the making or acceptance of the
Exchange Offer would not be in compliance with the laws of such
jurisdiction.
6. The acceptance for exchange of Series A Notes validly tendered and
not validly withdrawn and the issuance of Series B Notes will be made as
promptly as practicable after the Expiration Date. Subject to rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company, however, expressly reserves the right to
delay acceptance of any of the Series A Notes or to terminate the Exchange
Offer and not accept for purchase any Series A Notes not theretofore
accepted if any of the conditions set forth in the Prospectus under the
caption "The Exchange Offer-Conditions" shall not have been satisfied or
waived by the Company.
7. The Company expressly reserves the right, in its sole discretion,
(i) to delay accepting any Series A Notes, (ii) to extend the Exchange
Offer, (iii) to amend the terms of the Exchange Offer or (iv) to terminate
the Exchange Offer. Any delay, extension, amendment or termination will be
followed as promptly as practicable by oral or written notice to the
Exchange Agent and a public announcement thereof. In the case of an
extension, such public announcement shall include disclosure of the
approximate number of Series A Notes deposited to date and shall be made
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Without limiting the manner in which
the Company may choose to make a public announcement of any extension,
amendment or termination of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service. Except as otherwise provided in the Prospectus, withdrawal rights
with respect to Series A Notes tendered pursuant to the Exchange Offer will
not be extended or reinstated as a result of an extension or amendment of
the Exchange Offer.
8. Consummation of the Exchange Offer may have adverse consequences to
non-tendering Series A Note holders, including that the reduced amount of
outstanding Series A Notes as a result of the Exchange Offer may adversely
affect the trading market, liquidity and market price of the Series A
Notes.
If you wish to have us tender any or all of the Series A Notes held by us
for your account, please so instruct us by completing, executing and returning
to us the instruction form that follows.
<PAGE> 16
PARAGON CORPORATE HOLDINGS INC.
INSTRUCTIONS REGARDING THE EXCHANGE OFFER
WITH RESPECT TO THE
9 5/8% SERIES A SENIOR NOTES DUE 2008
THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED
DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE COMPANY.
THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF SERIES A
NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED PURSUANT TO
THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF
TRANSMITTAL.
Box 1 [ ] Please tender the Series A Notes held by you for my account, as
indicated below.
Box 2 [ ] Please do not tender any Series A Notes held by you for my account.
Date: ____________________ , 1998
Principal Amount of Series A Notes to be Tendered:
$___________________________________________________________________________*
(must be in the principal amount of $1,000 or an integral multiple thereof)
____________________________________________________________________________
____________________________________________________________________________
Signature(s)
____________________________________________________________________________
____________________________________________________________________________
Please print name(s) here
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
Please type or print address
____________________________________________________________________________
Area Code and Telephone Number
____________________________________________________________________________
Taxpayer Identification or Social Security Number
____________________________________________________________________________
My Account Number with You
_____________
*UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL
CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL SERIES A NOTES OF SUCH
BENEFICIAL OWNER(S).
<PAGE> 17
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
9 5/8% SERIES A SENIOR NOTES DUE 2008
OF
PARAGON CORPORATE HOLDINGS INC.
PURSUANT TO
PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery or a form substantially equivalent
hereto must be used to accept the offer (the "Exchange Offer") of Paragon
Corporate Holdings Inc., a Delaware corporation (the "Company"), to exchange
$1,000 principal amount of its 9 5/8% Series B Senior Notes due 2008 for each
$1,000 principal amount of its outstanding 9 5/8% Series A Senior Notes due 2008
(the "Series A Notes") if (a) certificates representing the Series A Notes are
not immediately available or (b) time will not permit the Series A Notes and all
other required documents to reach the Exchange Agent on or prior to the
Expiration Date. This form may be delivered by an Eligible Institution (as
defined) by mail or hand delivery or transmitted, via facsimile, telegram or
telex to the Exchange Agent as set forth below. All capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
Prospectus dated , 1998 (the "Prospectus").
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF SERIES A
NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SERIES A NOTES IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, , 1997, UNLESS EXTENDED. TENDERS OF 9 5/8%
SERIES A SENIOR NOTES DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
The Exchange Agent for the Exchange Offer:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
P. O. Box 1517
Minneapolis, Minnesota 55480-1517
By Hand:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, Minnesota 55479-0113
By Overnight Courier:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
By Facsimile:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
(612) 667-4927
Confirm by telephone:
(612) 667-9764
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 18
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the principal amount of Series A Notes set forth below, pursuant
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures."
Subject to and effective upon acceptance for exchange of the Series A Notes
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of the Company all right, title and interest in and to, and any
and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Series A Notes tendered hereby. In the
event of a termination of the Exchange Offer, the Series A Notes tendered
pursuant thereto will be returned to the tendering Series A Note holder
promptly.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Series A Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the sale, assignment and transfer of
the Series A Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
_______________________________________________________________________________
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s) or Authorized Signatory:
_______________________________________________________________________________
_______________________________________________________________________________
Name(s) of Registered Holder(s):
_______________________________________________________________________________
_______________________________________________________________________________
Principal Amount of Series A Notes Tendered:
_______________________________________________________________________________
Certificate No(s). of Series A Notes (if available):
_______________________________________________________________________________
_______________________________________________________________________________
Address(es): __________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Area Code and Telephone No.:
_______________________________________________________________________________
If Series A Notes will be delivered by a book-entry transfer, provide the
following information:
Transaction Code No.: _________________________________________________________
Depository Account No.: _______________________________________________________
<PAGE> 19
_______________________________________________________________________________
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Series A Notes exactly as their name(s) appear(s) on the Series A
Notes or by person(s) authorized to become registered holder(s) by endorsements
and documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name: _____________________________________________________
_____________________________________________________
Capacity: _____________________________________________________
_____________________________________________________
Address(es): _____________________________________________________
_______________________________________________________________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution") hereby guarantees that, within three business
days from the date of this Notice of Guaranteed Delivery, a properly completed
and validly executed Letter of Transmittal (or a facsimile thereof), together
with Series A Notes tendered hereby in proper form for transfer (or confirmation
of the book-entry transfer of such Series A Notes into the Exchange Agent's
account at a Book-Entry Transfer Facility) and all other required documents will
be deposited by the undersigned with the Exchange Agent at one of its addresses
set forth above.
Name of Firm: _________________________________________________________________
Address: ______________________________________________________________________
Area Code and Telephone No.: __________________________________________________
_______________________________________________________________________________
Authorized Signature
Name: _________________________________________________________________________
Title: ________________________________________________________________________
Date: _________________________________________________________________________
DO NOT SEND SERIES A NOTES WITH THIS FORM. ACTUAL SURRENDER OF SERIES A NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
