<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996.
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file no. 1-7088
------
AMERICAN BUSINESS PRODUCTS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1030529
(State of Incorporation) (I.R.S. Employer Identification No.)
2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328
(Address of principal executive offices, including zip code)
(770) 953-8300
(Registrant's telephone number, including area code)
_____________________
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
- ---------------------------- -----------------------
<S> <C>
Common Stock, $2 par value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
_________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The aggregate market value of the registrant's outstanding Common Stock, $2.00
par value per share, held by non-affiliates of the registrant on March 4, 1997
was $265,540,663.
There were 16,408,617 shares of Common Stock outstanding on March 4, 1997.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
Portions of the registrant's 1996 Annual Report for the fiscal year ended
December 31, 1996, are incorporated by reference in Parts I and II hereof.
Portions of the registrant's Proxy Statement for the 1997 Annual Meeting of
Shareholders to be held on April 23, 1997, are incorporated by reference in
Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
<PAGE> 2
PART I
ITEM 1 - BUSINESS
General
American Business Products, Inc. ("American Business Products") was
incorporated under the laws of Delaware in December 1967 to acquire the stock
of Curtis 1000 Inc., a producer of envelopes and forms which has operated since
1882. Hereinafter, American Business Products and its subsidiaries are
collectively referred to as the "Company." In April 1986, American Business
Products was reincorporated under the laws of Georgia. The Company is in the
business of manufacturing and distributing specialty custom printed information
products and services. The Company is one of the nation's leading suppliers of
printed business supplies, principally envelope products, custom labels and
custom business forms. Additionally, the Company manufactures and distributes
books for the publishing industry and also engages in specialty extrusion
coating and laminating of papers, films, and nonwoven fabrics for packaging and
other products.
Sale of Subsidiary Assets
Effective on December 31, 1996, Vanier Graphics Corporation ("Vanier"), a
wholly owned subsidiary of American Business Products, sold substantially all
its assets to The Reynolds and Reynolds Company (the "Vanier Sale"). Vanier was
a manufacturer of business forms and a provider of forms management and
work-flow analysis.
Restructuring Program
During 1996 the Company reconfigured much of its business supplies
production by closing 13 generally smaller plants in various locations and
transferring their production to a smaller number of larger, more efficient
facilities. This action is expected to reduce operating costs and result in
higher equipment utilization, improved employee productivity and other scale
economies.
Business Segments
The Company's product line is composed of three business segments:
business supplies printing, book manufacturing, and specialty extrusion coating
and laminating.
Business supplies printing consists principally of the manufacture of a
wide variety of specialty mailers, envelopes, labels and lightweight packaging,
and other related products and services including digital imaging or on-demand
printing of various documents and materials for businesses. The manufacture
and distribution of customized specialty labels is a rapidly growing part of
this segment. The Company produces a complete line of standard and specialized
types and sizes of envelopes. Prior to the Vanier Sale the Company also
manufactured business forms. Business supplies printing accounted for 74.1% of
the Company's sales in 1996, 75.2% in 1995 and 76.2% in 1994.
Book manufacturing consists of the printing and binding of both hard cover
and soft cover books for the publishing industry. In addition, the Company
provides storage and order fulfillment services by shipping orders to
publishers' customers from two large distribution centers. This business
segment accounted for 8.6% of the Company's sales in 1996 9.2% in 1995 and 8.8%
in 1994.
Specialty extrusion coating and laminating consist of applying plastic
coatings in varying degrees of thickness to rolls of paper, film or fabric.
The Company also prints and metalizes certain of these products for customers.
The materials produced by this segment are used primarily for packaging
consumer products such as individual servings of sugar, salt and pepper, sugar
substitutes, and candy and ice cream bars, as well as medical and
pharmaceutical products. These materials also are used for composite can
liners and release liner papers for pressure sensitive products such as labels
and postage stamps. This business segment accounted for 17.3% of the Company's
sales in 1996, 15.6% in 1995, and 15.0% in 1994.
Financial information regarding the Company's three business segments is
presented in the Notes to Consolidated Financial Statements under the heading
"Business Segment Information" of the Company's 1996 Annual Report, which
information is incorporated herein by reference. Portions of the 1996 Annual
Report are filed as Exhibit 13 to this Annual Report on Form 10-K.
2
<PAGE> 3
Production
Substantially all of the Company's products are manufactured by wholly
owned subsidiaries of the Company in 13 manufacturing facilities located
throughout the United States. (See "Item 2 - Properties.") The principal raw
materials used by the Company in the manufacture of its products are paper,
carbon, ink and poly-resins. All purchases of such materials are made at
competitive prices negotiated with suppliers. The Company believes that there
are sufficient alternative sources of supply to provide its raw material
requirements if for any reason its present suppliers are unable to do so.
Trademarks
The Company holds trademarks which management believes are sufficient for
the operation of its business without any substantial restrictions and adequate
for the operation of each business segment.
Backlog
As of January 31, 1997, the Company had backlogs believed to be firm of
approximately $30.4 million for business supplies printing, approximately $5.2
million for book manufacturing and approximately $16.4 million for extrusion
coating and laminating. Comparable backlogs as of January 31, 1996 were
approximately $49.0 million for business supplies printing, approximately $5.2
million for book manufacturing and approximately $9.6 million for extrusion
coating and laminating. All present backlogs are expected to be filled during
1997.
Distribution and Customers
The Company's products are sold throughout the United States, and less
than 1% of the Company's sales in any year have been outside of the United
States. The Company's products are sold principally through approximately 493
sales representatives. No customer or related group of customers in 1996
accounted for 10% or more of the sales of the Company. Demand for the
Company's business supplies printing, book manufacturing and extrusion coating
and laminating generally is not seasonal.
Competition
Business supplies printing, book manufacturing, and specialty extrusion
coating are highly competitive industries. Principal methods of competition
are pricing and service. The business supplies industry generally falls within
the commercial printing industry, which had estimated 1996 sales of $88 billion
with a projected growth of 6% in 1997, according to an industry trade
association. Printed business supplies are produced by thousands of commercial
printing enterprises, estimated at 40,000 establishments, ranging from small
family operations to large multinational corporations. To improve its
competitive position, the Company's business supplies operations reconfigured
production facilities for greater efficiency and began implementing a plan of
business process reengineering and redesigned, advanced technology
order-processing and information systems. In marketing many of its products,
the Company competes with some larger nationwide firms which have more
resources than the Company as well as numerous local and regional businesses,
most of which are smaller than the Company. The Company has generally
maintained or increased its market share against competitors by: (1) using to
advantage its sales force, unusually large for its industries; (2) utilizing
its ability to process numerous small orders efficiently; (3) creating new
products and modifying existing products to meet market needs; and (4)
providing faster and/or more dependable processing and delivery of customer
orders. Based on annual revenues attributable to the production of business
supplies, the Company is a leading U.S. producer of printed business supplies.
No competitor is known to offer a greater range of products than that offered
by the Company.
In the envelope industry, which had United States sales of approximately
$2.9 billion in 1996, according to the Department of Commerce, the Company's
largest subsidiary, Curtis 1000 Inc., is believed to be the leading
direct-to-user marketer of business envelopes in the United States based on
annual revenues, yet still has only a small share of the total market. Within
the industry, the Company also holds a strong competitive position in the sale
of specialty envelopes, including those manufactured from paper and a
synthetic, olefin, which offers superior quality, lighter weight and postage
savings to customers in comparison with kraft paper envelopes of the same size.
Specialty envelopes comprise the strongest sector of this industry and
continue to offer the most favorable growth outlook compared to other envelope
products.
In the business forms industry, strong pricing competition in recent years
has created essentially a commodity market for these products, while
competition from electronic communications has contributed to a decline or
flattening of total industry sales, estimated at less than $7 billion in 1996
based on Department of Commerce projections. Although the
3
<PAGE> 4
Company sold its business forms business, Vanier Graphics, in 1996, the
Company's major business supplies subsidiary, Curtis 1000 Inc., continues to
provide customized forms for its customers and this is a substantial portion of
Curtis 1000 sales. However, these products are marketed as value-added
products usually as part of a total "business solutions" plan, including other
products such as envelopes and on-demand printing, and are not positioned as a
low-priced commodity, thus affording the Company competitive advantages through
its large direct sales force and relationship selling.
Book printing, which had industry sales exceeding $5 billion in 1996, is
also highly competitive, and the Company competes with numerous other book
manufacturers, many of which are larger and have substantially more resources
than the Company and therefore possible advantages in production and marketing
economies of scale and efficiencies. However, the Company has achieved growth
by providing complete order fulfillment services for customers or publishers
and targeting certain segments of the industry as more attractive sectors,
including university presses and publishers of religious books, while
specializing in short to medium runs of book printing and acquiring and
utilizing advanced technology to provide high quality service and broaden the
product line.
Major competitors for the extrusion coating and laminating business
segment, which nationally had 1996 sales of approximately $3 billion, are
relatively few. They include Thilmany (division of International Paper),
several divisions of James River Corporation and Twin Pack (Canada). Management
believes none of these competitors is superior to the Company's subsidiary,
Jen-Coat, in terms of quality and service, which together with price form the
basis of competition in this business segment. An advantage is considered to be
the entry barriers to the industry, including a significant capital investment,
which may deter smaller companies, and highly individual market niches with
relatively low sales volume, which generally deters larger companies from
entering this industry.
Within the combined markets of the Company, the Company's total share of
sales is relatively small, providing the opportunity to increase market share
through innovative and creative products and effective marketing, which are
major elements of the Company's strategy for growth.
Environmental Matters
The Company knows of no significant environmental liabilities involving
its operations.
Employees
At December 31, 1996, the Company had approximately 3,520 full-time
employees. No significant number of employees is covered by any collective
bargaining agreement.
International Operations
The Company has a European joint venture, Curtis 1000 Europe GmbH ("Curtis
1000 Europe"), which is 50% owned by the Company and has plants in four
countries: Germany, England, Luxembourg and Poland (See Part I - Item 2).
Curtis 1000 Europe manufactures and sells envelopes of all kinds. The
Company's share of net income of Curtis 1000 Europe, which is not significant,
is translated at average exchange rates prevailing during the year, and is
included in the Consolidated Financial Statements of the Company and Notes to
Consolidated Financial Statements which are incorporated herein by reference.
(See Part II, Item 8 - Financial Statements and Supplementary Data.")
ITEM 2 - PROPERTIES
The Company's executive offices are located in approximately 15,200 square
feet of space at 2100 RiverEdge Parkway, Suite 1200, Atlanta, Georgia 30328.
The offices are leased from an unaffiliated party under a lease expiring on
January 26, 2003.
In addition to the executive offices, the Company operates 13 production
facilities in the United States encompassing approximately 1,066,800 square
feet. Twelve of these facilities are owned and one is leased.
The Company's business supplies printing business leases four
administrative/sales offices and three warehouses. The Company's book
manufacturing business leases four administrative/sales offices and four
warehouses. All of the leased facilities are located in the United States.
The Company and a European joint venture partner operate five production
facilities. Two of the facilities in Germany and one in Poland are owned and
one each in England and Luxembourg are leased.
4
<PAGE> 5
Certain properties owned by the Company are held subject to mortgages.
See the information set forth under the heading "Long Term Debt" in the Notes
to Consolidated Financial Statements in the Company's 1996 Annual Report, which
information is incorporated herein by reference.
As of March 1, 1997 the Company owned ten properties which had been
rendered redundant to operating needs due to the Vanier Sale, the 1996 plant
consolidation program and otherwise. The Company intends to sell all of these
properties. All operating properties and equipment are believed to be in good
condition, adequately utilized and suitable for the purposes for which they are
being used.
ITEM 3 - LEGAL PROCEEDINGS
As of March 14, 1997, there were no material pending legal proceedings,
other than routine litigation incidental to the business, to which the Company
was a party or of which any of its properties were the subject, and none are
expected by management to materially affect the Company's financial position
and results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the shareholders of the Company
during the fourth quarter of 1996.
ITEM 4 (A) - EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information as of March 14, 1997 regarding the
executive officers of the Company:
HENRY CURTIS VII, 48, has been Vice President of Administration of the Company
since April, 1995. He previously served as Vice President of Administration
and Sales Support of Curtis 1000 Inc., a subsidiary of the Company from 1992 to
March, 1995. He previously served as Director of Administration and Sales
Support of Curtis 1000 Inc. from 1990 to 1992. He served as Director of
Employee Benefits of the Company from 1983 to 1990 and held various positions
with the Company and its wholly-owned subsidiaries, Curtis 1000 Inc. and Vanier
Graphics Corporation since 1971. He has been a director of the Company since
1989 and has served with the Company or its subsidiaries for over 26 years.
MICHAEL C. DENIKEN, 49, has served as Treasurer and Chief Accounting Officer of
the Company from October, 1995. He has served with the Company for over 18
years.
DAWN M. GRAY, 52, has served as Secretary of the Company since July, 1989. She
served as Assistant Secretary from October, 1976 to June, 1989. She has served
with the Company or Curtis 1000 Inc., a wholly-owned subsidiary of the Company,
for over 30 years.
ROBERT W. GUNDECK, 53, has served as the Chief Executive Officer of the Company
since January, 1996 and President of the Company since April, 1994. He
previously served as Chief Operating Officer of the Company from January, 1993
until December, 1995. He served as Executive Vice President of the Company
from 1993 until April, 1994 and as Vice President - Corporate Development of
the Company from 1990 until 1993. From 1988 until 1990 Mr. Gundeck was
Director of Acquisitions and Corporate Development of the Company. He has been
a director of the Company since 1993, and he has served with the Company for
over 9 years.
RICHARD A. LEFEBER, 61, has served as Vice President - Communications and
Investor Relations from April, 1995. He previously served as Vice
President-Administration of the Company from January, 1980 to April, 1995. He
served as Secretary of the Company from August, 1982 to June, 1989. He has
served with the Company or Curtis 1000 Inc., a wholly-owned subsidiary of the
Company, for over 39 years.
RICHARD G. SMITH, 48, has served as Vice President - Finance and Chief
Financial Officer of the Company since January, 1996. He joined the Company as
Vice President - Corporate Development in September, 1995. From August, 1994
to August, 1995, Mr. Smith was Senior Vice President of Brambles USA, Inc., the
major U. S. subsidiary of Brambles Industries Limited, an Australian based
specialized industrial services provider with annual revenues of approximately
$2 billion. From September, 1992 to July, 1994, he was Vice President and
Chief Financial Officer of Brambles Acquisition, Inc., the largest subsidiary
of Brambles USA, Inc. He was Vice President and Chief Financial Officer of
Environmental Systems Company, a New York Stock Exchange-listed hazardous waste
company from June, 1991 to August, 1992. Environmental Systems Company was
acquired by Brambles in March, 1992. Prior to 1991 he served as Vice President
of Corporate Development for Laidlaw, Inc.
5
<PAGE> 6
The Board of Directors elects officers annually in April for one year
terms or until their successors are elected and qualified. Officers are
subject to removal by the Board of Directors at any time.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information relating to the market for, holders of and dividends paid on
the Company's Common Stock is set forth under the captions "Unaudited Quarterly
Financial Data," "Stock Exchange Listing," and "Shareholders of Record," in the
Company's 1996 Annual Report, which information is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
Selected consolidated financial data for the Company for each year of the
five year period ended December 31, 1996 is set forth under the caption "Five
Year Financial Review" in the Company's 1996 Annual Report, which information
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A discussion of the Company's financial condition and results of
operations at and for the dates and periods covered by the consolidated
financial statements set forth in the Company's 1996 Annual Report is set forth
under the caption "Management's Discussion and Analysis" in the Company's 1996
Annual Report. Such discussion is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and its
subsidiaries, together with the Independent Auditors' Report, which are set
forth in the Company's 1996 Annual Report, are incorporated herein by
reference:
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1996
Consolidated Balance Sheets as of December 31, 1996 and
1995
Consolidated Statements of Stockholders Equity for each
of the three years in the
period ended December 31, 1996
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1996
Notes to Consolidated Financial Statements
The supplementary consolidated financial information regarding the Company
which is required by Item 302 of Regulation S-K is set forth under the caption
"Unaudited Quarterly Financial Data" in the Company's 1996 Annual Report. Such
information is incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change of or disagreements with independent accountants
by the Company in the past two fiscal years or subsequently.
6
<PAGE> 7
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is set forth in
"Proposal 1 - Election of Directors" under the captions "Nominees,"
"Information Regarding Nominees and Directors" and "Meetings and Committees of
the Board of Directors" in the Company's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders to be held on April 23, 1997 (the "Proxy
Statement"). Such information is incorporated herein by reference. Pursuant
to Instruction 3 of Item 401(b) of Regulation S-K and General Instruction G(3)
of Form 10-K, information relating to the executive officers of the Company is
set forth in Part I, Item 4(A) of this Report under the caption "Executive
Officers of the Registrant." Information regarding compliance by directors and
executive officers of the Company and owners of more than ten percent of the
Company's Common Stock with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, is set forth in the Proxy
Statement under the caption "Section 16(a) of the Securities Exchange Act of
1934 Beneficial Ownership Reporting." Such information is incorporated herein
by reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information relating to compensation of the executive officers and
directors of the Company is set forth in "Proposal 1 - Election of Directors"
under the caption "Director Compensation" and in "Executive Compensation" in
the Proxy Statement. Such information is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding ownership of the Company's $2.00 par value Common
Stock by certain persons is set forth in "Voting" under the caption "Principal
Shareholders" and in "Proposal 1 - Election of Directors" under the caption
"Information Regarding Nominees and Directors" and under the caption "Executive
Compensation" in the Proxy Statement. Such information is incorporated herein
by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding relationships or transactions between the Company and
affiliates of the Company is set forth under the caption "Executive Compensation
- - Certain Relationships and Related Transactions" in the Proxy Statement
referred to in Item 10 above. Such information is incorporated herein by
reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
The Consolidated Financial Statements and the Independent Auditors'
Report thereon which are required to be filed as part of this Report are
included in the Company's 1996 Annual Report and are set forth in and
incorporated by reference in Part II, Item 8 hereof. These Consolidated
Financial Statements are as follows:
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1996
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Stockholder's Equity for each of the three
years in the period ended December 31, 1996
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1996
7
<PAGE> 8
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The financial statement schedule filed as part of this Report
pursuant to Article 12 of Regulation S-X and the Independent
Auditors' Report in connection therewith are contained in the Index
of Financial Statement Schedule on page S-1 of this Report. All
other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have
been omitted because such schedules are not required under the
related instructions or are inapplicable or because the information
required is included in the Consolidated Financial Statements or
notes thereto.
3. Exhibits
The exhibits required to be filed as part of this Report are set forth
in the Index of Exhibits on page E-1 of this Report.
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed by the Registrant during the
last quarter of the period covered by this report.
(c) The exhibits required to be filed as part of this Report are set forth in
the Index of Exhibits on page E-1 of this report
(d) The financial statement schedule required to be filed as part of this
Report is set forth in the Index of Financial Statement Schedule on page
S-1 of this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN BUSINESS PRODUCTS, INC. (Registrant)
Date: March 14, 1997 BY:/S/ Robert W. Gundeck
----------------------------------
Robert W. Gundeck
Chief Executive Officer,
President and Director
Date: March 14, 1997 /S/ Richard G. Smith
----------------------------------
Richard G. Smith
Vice President-Finance
and Chief Financial Officer
Date: March 14, 1997 /S/ Michael C. Deniken
----------------------------------
Michael C. Deniken
Treasurer and
Chief Accounting Officer
8
<PAGE> 9
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Date: March 14, 1997 */S/ F. Duane Ackerman
-----------------------------
F. Duane Ackerman, Director
Date: March 14, 1997 */S/ W. J. Biggers
------------------------------
W. J. Biggers, Director
Date: March 14, 1997 */S/ Thomas R. Carmody
-----------------------------
Thomas R. Carmody, Director
& Chairman of the Board
Date: March 14, 1997 */S/ Henry Curtis VII
-----------------------------
Henry Curtis VII, Director
Date: March 14, 1997 */S/ Hollis L. Harris
-----------------------------
Hollis L. Harris, Director
Date: March 14, 1997 */S/ W. Stell Huie
-----------------------------
W. Stell Huie, Director
Date: March 14, 1997 */S/ Thomas F. Keller,
-------------------------------
Thomas F. Keller, Director
Date: March 14, 1997 */S/ Rex A. McClelland
-------------------------------
Rex A. McClelland, Director
Date: March 14, 1997 */S/ Daniel W. McGlaughlin
-------------------------------
Daniel W. McGlaughlin, Director
Date: March 14, 1997 */S/ C. Douglas Miller
-------------------------------
C. Douglas Miller, Director
Date: March 14, 1997 */S/ G. Harold Northrop
-------------------------------
G. Harold Northrop, Director
* By:/S/ Dawn M. Gray
-----------------
Dawn M. Gray,
Attorney-in-Fact
9
<PAGE> 10
AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF EXHIBITS
Where an exhibit is filed by incorporation by reference to a previously
filed registration statement or report, such registration statement or report
is identified in parentheses.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Articles of Incorporation (Exhibit 3(a), Annual Report on Form
10-K for the fiscal year ended December 31, 1989).
3.2 Restated Bylaws, as amended and restated on December 11, 1996,
filed herewith.
4.1 Note Agreement dated as of October 1, 1990 among the Company and
the institutional investors listed on Schedule I thereto, together
with the form of 9.92% Senior Note to be used in connection
therewith (Exhibit 4, Annual Report on Form 10-K for the fiscal
year ended December 31, 1990).
4.2 Note Agreement dated as of December 1, 1993 among the Company and
the institutional investors listed on Schedule I thereto, together
with the form of 5.77% Senior Note to be used in connection
therewith. (Exhibit 4.2 Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
4.3 Form of Rights Agreement dated as of October 25, 1989 between the
Company and Citizens and Southern Trust Company (Georgia), N.A.
(Exhibit 4, Current Report on Form 8-K dated October 25, 1989).
4.4 First Amendment to Rights Agreement dated as of August 10, 1992
between the Company and Wachovia Bank of North Carolina, N.A., as
successor Rights Agent (Exhibit 4(c), Annual Report on Form 10-K
for the fiscal year ended December 31, 1992).
10.1 Executive Compensation Plans and Arrangements:
(a) Supplemental Retirement Income Plan (Exhibit 10(a), Annual
Report on Form 10-K for the fiscal year ended December 31,
1989).
(b) Deferred Compensation Investment Plan (Directors) (Exhibit
10(b), Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(c) Deferred Compensation Investment Plan (Executives) (Exhibit
10(c), Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(d) 1981 Stock Option Plan (Exhibit 10(d), Annual Report on
Form 10-K for the fiscal year ended December 31, 1989).
(e) Deferred Compensation Plan for Directors (Exhibit 10(e),
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
(f) American Business Products, Inc. Executive Retirement Plan
dated September 14, 1992 (Exhibit 10(h), Annual Report on
Form 10-K for the fiscal year ended December 31, 1992).
(g) 1991 Stock Option Plan, and First Amendment thereto.
(Exhibit 10(g), Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
</TABLE>
E-1
<PAGE> 11
<TABLE>
<S> <C> <C>
(h) 1993 Directors Stock Incentive Plan (Exhibit 10(h), Annual
Report on Form 10-K for the fiscal year ended December 31,
1993.
(i) Special Nonqualified Deferred Compensation Plan and related
Trust Agreement (Exhibit 10.1(a) Quarterly Report on Form
10-Q for the quarter ended September 30, 1995).
(j) Second Amendment to the 1991 Stock Option Plan (Exhibit
10.1(a), Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995).
(k) First Amendment to the Deferred Compensation Plan for
Directors (Exhibit 10.1(a) Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996).
(l) First Amendment to the 1993 Directors Stock Incentive Plan,
filed herewith.
10.2 Agreement for the Purchase of Stock dated as of September 21, 1990
by and among the Company, Edward C. Leavy, Edward C. Leavy,
Executor under the will of Jean L. Leavy, and James B. Kauffman
relating to the purchase of Jen-Coat, Inc. (Exhibit 2, Current
Report on Form 8-K, dated October 1, 1990).
10.3 (a) Stock Purchase Agreement dated September 1, 1993 among the
Company, Home Safety Equipment Co., Inc., and William
Frederick Conway, Sr., Betty Conway, Allen C. Conway,
Winifred Conway Arledge, William Frederick Conway, Jr.,
Winifred B. Arledge, QSST Trust #1, Winifred B. Arledge,
QSST Trust #2, Allen C. Conway, QSST Trust #1, Allen C.
Conway, QSST Trust #2, Allen C. Conway, QSST Trust #3, and
William Frederick Conway, Jr., QSST Trust #1, William
Frederick Conway, Jr., QSST Trust #2 (Exhibit 2, Current
Report on Form 8-K dated September 13, 1993).
(b) Non-Competition Agreement dated as of August 10, 1993 by
and among William Frederick Conway, Sr., Betty Conway,
Allen C. Conway, Winifred Conway Arledge, Sol A. Arledge,
and William Frederick Conway, Jr. and the Company (Exhibit
99.1, Current Report on Form 8-K, dated September 13,
1993).
10.4 Revolving Credit Agreement dated as of April 22, 1996 by and
between American Business Products, Inc., and SunTrust Bank,
Atlanta, filed herewith.
13 Pages 1 and 9 through 28 of the Company's 1996 Annual Report which
are incorporated herein by reference.
21 Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
24 Power of Attorney.
27 Financial Data Schedules (for SEC use only)
</TABLE>
E-2
<PAGE> 12
AMERICAN BUSINESS PRODUCTS, INC.
INDEX OF FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report S-2
Schedule of the Company and Subsidiaries
II - Valuation Reserves S-3
</TABLE>
S-1
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Business Products, Inc.:
We have audited the consolidated financial statements of American Business
Products, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
and have issued our report thereon dated February 14, 1997; such financial
statements and report are included in your 1996 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of American Business Products, Inc.
and subsidiaries listed in Item 14 and on page S-1. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 14, 1997
S-2
<PAGE> 14
SCHEDULE II
AMERICAN BUSINESS PRODUCTS, INC. AND SUBSIDIARIES
VALUATION RESERVES
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO OTHER CHANGES
BEGINNING COSTS AND ADD (DEDUCT) ENDING
DESCRIPTION BALANCE EXPENSES DESCRIBE (1) DEDUCTIONS (2) BALANCE
- ---------------------------------------- ---------- ----------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1994:
Allowance for doubtful accounts $2,218 $1,162 $1,001 $2,379
For the Year Ended December 31, 1995:
Allowance for doubtful accounts $2,379 $1,211 $ 753 $2,837
For the Year Ended December 31, 1996:
Allowance for doubtful accounts $2,837 $1,740 $(788) $1,904 $1,885
</TABLE>
(1) Sale of Vanier Graphics Corporation Assets on December 31, 1996.
(2) Deductions represent uncollectible accounts charged off, less recoveries.
S-3
<PAGE> 1
EXHIBIT 3.2
EXHIBIT 3.2
RESTATED BYLAWS, AS AMENDED AND RESTATED ON DECEMBER 11, 1996
<PAGE> 2
BYLAWS OF
AMERICAN BUSINESS PRODUCTS, INC.
(As amended on January 28, 1970; April 28, 1971;
November 10, 1972; July 25, 1973; December 3, 1980;
July 30, 1985; February 12, 1986; April 29, 1987;
December 7, 1988; July 25, 1990; restated July 25, 1990;
amended and restated April 24, 1996; and
amended and restated December 11, 1996)
ARTICLE I
CAPITAL STOCK
Section 1. Stock Certificates. The capital stock of the company shall be
evidenced by certificates bearing the signatures or facsimiles thereof of the
Chief Executive Officer and the Secretary and countersigned by the Registrar
and Transfer Agent, if any. The stock shall be transferable only on the books
of the company by assignment properly signed by the stockholder of record. The
company may refuse any requested transfer until furnished evidence satisfactory
to it that such requested transfer is proper. The company may deem and treat
the registered holder of any stock as the absolute owner thereof for all
purposes and shall not be required to take any notice of any right or claim of
right of any other person.
Section 2. Record Date. The Board of Directors may fix a date (the "record
date") not exceeding seventy (70) days prior to the date appointed for any
meeting of the stockholders, or prior to the date fixed for the payment of any
dividend, or for the delivery of any evidences of rights, or other distribution
allowed by law, as the record date for the determination of the stockholders
entitled to participate in the aforesaid. Only stockholders of record on the
record date shall be entitled to notice of or to participate in the aforesaid.
Section 3. Inspection of Records. The record of stockholders, accounting
records and written proceedings of the stockholders, the Board of Directors and
committees of the Board of Directors shall be open for inspection and copying
during regular business hours at the company's principal office by a
stockholder owning not less than two percent (2%) of the outstanding shares of
the company upon at least five (5) days written notice of his demand to inspect
and copy. The right of inspection by a stockholder may be granted only if his
demand is made in good faith and for a proper purpose that is reasonably
relevant to his legitimate interest as a stockholder, he describes with
reasonable particularity his purpose and the records he desires to inspect, the
records are directly connected with his purpose and are to be used only for the
stated purpose.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting of Stockholders. The annual meeting of the
stockholders shall be
<PAGE> 3
held on the last Wednesday in April in each year at 2:00 P.M. at the company's
executive offices in Atlanta, Georgia, unless a different time and place shall
be designated by the Board of Directors, for the purpose of electing Directors
and for the transaction of only such other business as is properly brought
before the meeting in accordance with these bylaws. Notice of such meeting
stating the time and place thereof shall be given by the Secretary not less
than ten days nor more than fifty days before the time for such meeting by
depositing such notice in the post office with postage prepaid and directed to
each stockholder at his last known residence or at such other address as any
stockholder may have designated in writing.
To be properly brought before the meeting, business must be either (a)
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (c)
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before
an annual meeting by a stockholder, the stockholder must have satisfied all of
the conditions set forth in Securities and Exchange Commission Rule 14a-8,
including particularly the requirement that the stockholder give timely written
notice of his proposal to the company. To be timely, a stockholder's notice
must be delivered to or mailed and received by the Secretary of the company at
the executive offices of the company within the time period specified in Rule
14a-8(a)(3)(i), and such notice to the Secretary shall set forth, as to each
matter the stockholder proposes to bring before the annual meeting, the
information required by said Rule 14a-8. Notwithstanding anything in the
bylaws to the contrary, no business shall be conducted at the annual meeting
except in accordance with the procedures and conditions set forth in this
Article II, Section 1 and said Rule 14a-8; provided, however, that nothing in
this Article II, Section 1 or said Rule 14a-8 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
annual meeting. The chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article II,
Section 1, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section 2. Special Meetings of Stockholders. Special meetings of the
stockholders may be called at any time by the Board of Directors, the Chief
Executive Officer, or the holders of not less than 50% of the shares then
outstanding and entitled to vote. Meetings may be held either within or
without the State of Georgia as designated by the Board of Directors. Notice
of special meetings of the stockholders, setting out the time, place and
purpose of the meeting, shall be mailed to each stockholder at his address
shown on the books of the company, not less than ten days nor more than sixty
days before such meeting, unless such stockholder waives notice of the meeting.
No business may be transacted at any special meeting of stockholders except
such business as is set forth in the notice of the special meeting.
Section 3. Quorum. The presence, in person or by proxy, of a majority of the
shares entitled to vote at a meeting shall constitute a quorum for the
transaction of business. Except as otherwise required by law or the articles
of incorporation of the company or these bylaws, the acts of a majority of the
stockholders present at a meeting at which a quorum is present shall be the
acts of the stockholders.
2
<PAGE> 4
Section 4. Waiver of Notice. Any stockholder present at a meeting in person,
or by proxy, shall be deemed to have waived notice thereof.
Section 5. Proxies. Any stockholder may vote his shares in person or by proxy
by executing a writing which authorizes another person or persons to vote or
otherwise act on the stockholder's behalf. Execution may be accomplished by
means of facsimile telecommunication, either personally or by an
attorney-in-fact of an individual stockholder or by an authorized officer,
director, employee or agent in the case of any other stockholder. A
stockholder may authorize another person or persons to act for him as proxy by
transmitting or authorizing the transmission of a telegram, cablegram or other
means of electronic or telecommunication transmission acceptable to the company
to the person who will be the holder of the proxy.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business of the company shall be managed by a
Board of Directors consisting of not less than three nor more than fifteen
persons. Hereafter, within the limits above specified, the number of Directors
shall be determined only by the Board of Directors.
Section 2. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of
the company at the annual meeting may be made at a meeting of stockholders, by
or at the direction of the Board of Directors, by any nominating committee or
person appointed by the Board of Directors, or by any stockholder of the
company entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Article III, Section 2.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the company. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the executive offices of the company within the time
period specified in Securities and Exchange Commission Rule 14a-8(a)(3)(i).
Such stockholder's notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a Director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the company which are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of Directors pursuant to Securities and Exchange Commission Regulation
14A; and (b) as to the stockholder giving the notice, (i) the name and address
of the stockholder and (ii) the class and number of shares of capital stock of
the company which are beneficially owned by the stockholder. The company may
require any proposed nominee to furnish such other information as may
reasonably be required by the company to determine the eligibility of such
proposed nominee to serve as Director of the company. No person shall be
eligible for election as a Director of the company unless nominated in
accordance with the procedures set forth herein. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded,
3
<PAGE> 5
Section 3. Qualification of Directors. Directors shall be natural persons
who have attained the age of 18 years but need not be residents of the State of
Georgia or stockholders of the company.
Section 4. Regular Meetings. Regular meetings of the Board of Directors shall
be held at such places within or without the State of Georgia and at such times
as the Board of Directors by vote may from time to time determine and if so
determined, no notice thereof need be given.
Section 5. Special Meetings. Special meetings of the Board of Directors may
be called by a Director or officer of the company. Said meetings shall be held
at the place designated in the notice of such meeting. Notice of such special
meeting shall be given to each Director at least two (2) days before such
meeting. Such notice may be given personally or by telephone, mail, telegram,
telex, facsimile transmission or any other means. Notice given by mail shall
be addressed to a Director at his last known principal place of business or
residence, 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 given by telegram, telex or facsimile transmission shall be
deemed to be delivered when the telegram is delivered to the telegraph company,
or when the telex or facsimile transmission is transmitted to the Director.
Written notice delivered by any other means shall be deemed delivered when
received at or delivered to the Director's last known principal place of
business or residence.
Section 6. Quorum and Voting. At all meetings of the Board of Directors or a
committee thereof, one-half of the number of Directors shall be necessary to
constitute a quorum to transact business. The affirmative vote of a majority
of the Directors present at any meeting at which there is a quorum at the time
of such act shall be the act of the Board or of the committee, except as might
be otherwise specifically provided by statute or by the articles of
incorporation or bylaws.
Section 7. Waiver of Notice. Whenever any notice is required to be given
under provisions of the articles of incorporation or these bylaws or by law, a
waiver thereof, signed by the Director entitled to notice and delivered to the
company for inclusion in the minutes or filing with the corporate records,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting and of all objections to the place or time of the
meeting or the manner in which it has been called or convened, except when the
Director attends a meeting for the express purpose of stating, at the beginning
of the meeting, any such objection and does not thereafter vote for or assent
to action taken at the meeting. Neither the business to be transacted at nor
the purpose of any regular or special meeting of the Directors need be
specified in any written waiver of notice.
Section 8. Committees. The Board of Directors may, by resolution, designate
from among its members one or more committees, each committee to consist of one
or more directors, except that committees appointed to take action with respect
to indemnification of directors, directors' conflicting interest transactions
or derivative proceedings shall consist of two or more directors qualified to
serve pursuant to the Georgia Business Corporation Code (the "Code"). Any such
committee, to the extent specified by the board of directors, articles of
incorporation or bylaws, shall have and may exercise all of the authority of the
Board of Directors in the management of
4
<PAGE> 6
the business and affairs of the company, except that it may not (1) approve or
propose to stockholders action that the Code requires to be approved by
stockholders, (2) fill vacancies on the Board of Directors or any of its
committees, (3) amend the articles of incorporation, (4) adopt, amend, or repeal
bylaws or (5) approve a plan of merger not requiring stockholder approval.
Section 9. Action Without Meeting. Unless the articles of incorporation or
bylaws provide otherwise, any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if the action is taken by all members of the Board or committee, as
the case may be. The action must be evidenced by one or more written consents
describing the action taken, signed by each director, and filed with the
minutes of the proceedings of the Board or committee or filed with the
corporate records.
Section 10. Remote Participation in a Meeting. Unless otherwise restricted by
the articles of incorporation or the bylaws, any meeting of the Board of
Directors may be conducted by the use of any means of communication by which
all directors participating may simultaneously hear each other during the
meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
Section 11. Compensation of Directors. The Board of Directors may fix the
compensation of the directors for their services as directors. No provision of
these bylaws shall be construed to preclude any director from serving the
company in any other capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
Section 1. Appointment of Officers. The officers of the company may include a
Chairman of the Board, Chief Executive Officer, Chief Operating Officer,
President, a Secretary, a Chief Financial Officer (whose title shall be
designated by the Board) and such other officers and assistant officers as may
be elected or appointed by the Board of Directors or the Chief Executive
Officer. The same individual simultaneously may hold more than one office.
Section 2. Powers and Duties. Each officer has the authority and shall
perform the duties set forth below or, to the extent consistent with these
bylaws, the duties prescribed by the Board of Directors or by direction of the
Chief Executive Officer authorized to prescribe the duties of other officers.
(a) Chairman of the Board. The Chairman of the Board shall be chosen
from among the directors of the company and shall preside at all meetings of
the stockholders and the Board of Directors. The Chairman of the Board shall
have the usual powers and duties incident to the position of Chairman of the
Board of Directors of a company and such other powers and duties as from time
to time may be assigned by the Board of Directors.
(b) Chief Executive Officer. The Chief Executive Officer of the company
shall be
5
<PAGE> 7
responsible for the administration of the company, including general
supervision of the policies of the company and general and active management of
the financial affairs of the company. The Chief Executive Officer shall have
the power to make and execute contracts on behalf of the company and to
delegate such power to others. The Chief Executive Officer also shall have
such powers and perform such duties as are specifically imposed on him by law
and as may be assigned to him by the Board of Directors.
(c) President. The President shall perform such duties as a President
customarily performs and shall perform such other duties and shall exercise
such other powers as the Chief Executive Officer or the Board of Directors may
from time to time designate. The President, in the absence or disability or at
the direction of the Chief Executive Officer, shall perform the duties and
exercise the powers of the Chief Executive Officer.
(d) Chief Operating Officer. The Chief Operating Officer shall perform
such duties as a Chief Operating Officer customarily performs and shall perform
such other duties and shall exercise such other powers as the Chief Executive
Officer or the Board of Directors may from time to time designate. The Chief
Operating Officer, in the absence or disability or at the direction of the
President, shall perform the duties and exercise the powers of the President.
(e) Vice Presidents. The Vice Presidents, if any, shall perform such
duties as Vice Presidents customarily perform and shall perform such other
duties and shall exercise such other powers as the Chief Executive Officer or
the Board of Directors may from time to time designate. The Vice President, in
the absence or disability or at the direction of the President, shall perform
the duties and exercise the powers of the President. If the company has more
than one Vice President, the one designated by the Board of Directors shall act
in lieu of the President, or, in the absence of any such designation, then the
Vice President first elected shall act in lieu of the President. In the
absence of a Secretary or an Assistant Secretary, the Vice President shall
perform the Secretary's duties.
(f) Secretary. The Secretary shall attend all meetings of the
stockholders and all meetings of the Board of Directors, as requested, and
shall record all votes and minutes of all proceedings in books to be kept for
that purpose, and shall perform like duties for the standing committees when
required. The Secretary shall have custody of the corporate seal of the
company, shall have the authority to affix the same to any instrument the
execution of which on behalf of the company under its seal is duly authorized
and shall attest to the same by his signature whenever required. The Board of
Directors may give general authority to any other officer to affix the seal of
the company and to attest to the same by his signature. The Secretary shall
give, or cause to be given, any notice required to be given of any meetings of
the stockholders, the Board of Directors and of the standing committees when
required. The Secretary shall cause to be kept such books and records as the
Board of Directors, the Chairman of the Board, the Chief Executive Officer or
the President may require and shall cause to be prepared, recorded,
transferred, issued, sealed and canceled certificates of stock as required by
the transactions of the company and its stockholders. The Secretary shall
attend to such correspondence and shall perform such other duties as may be
incident to the office of a Secretary of a company or as may be assigned to him
by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer or the President.
6
<PAGE> 8
(g) Treasurer. The Treasurer shall be charged with the management of
financial affairs of the company. The Treasurer shall perform such duties as
Treasurers usually perform and shall perform such other duties and shall
exercise such other powers as the Board of Directors, the Chairman of the
Board, the Chief Executive Officer or the President may from time to time
designate and shall render to the Chairman of the Board, the Chief Executive
Officer, the President and to the Board of Directors, whenever requested, an
account of the financial condition of the company.
(h) Assistant Vice President, Assistant Secretary and Assistant
Treasurer. The Assistant Vice President, Assistant Secretary and Assistant
Treasurer, if any, in the absence or disability of any Vice President, the
Secretary or the Treasurer, respectively, shall perform the duties and exercise
the powers of those offices, and, in general, they shall perform such other
duties as shall be assigned to them by the Board of Directors or by the person
appointing them. Specifically the Assistant Secretary may affix the corporate
seal to all necessary documents and attest the signature of any officer of the
company.
Section 3. Other Duties. Each officer, employee and agent shall have such
other duties and authorities as may be conferred upon him by the Board of
Directors.
Section 4. Resignation and Removal of Officers. Any officer may resign at any
time by delivering notice to the company and such resignation is effective when
the notice is delivered unless the notice specifies a later effective date.
The Board of Directors may remove any officer at any time with or without
cause. A contract of employment for a definite term shall not prevent the
removal of any officer, but this provision shall not prevent the making of a
contract of employment with any officer, and any officer removed in breach of
his contract of employment shall have cause of action therefor.
Section 5. Execution of Documents. All deeds, contracts and other instruments
shall be executed by such person or persons as the Board of Directors may from
time to time designate.
ARTICLE V
DEPOSITORIES
Section 1. Bank Accounts. All funds of the company shall be deposited in the
name of the company in such bank, banks, trust companies, or other depositories
as the Board of Directors may from time to time designate and shall be drawn
out on checks, drafts or other orders signed on behalf of the company by such
person or persons as the Board of Directors may from time to time designate.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 1. Authority to Indemnify; Third Party Actions. Every person now or
hereafter serving as a director or officer of the company and any and all
former directors and officers shall be
7
<PAGE> 9
indemnified and held harmless by the company from and against any and all loss,
cost, liability, and expense that may be imposed upon or incurred by him in
connection with or resulting from any threatened, pending, or completed claim,
action, suit, or proceeding (other than an action by or in the right of the
company), whether civil, criminal, administrative, or investigative, in which he
may become involved, as a party or otherwise, by reason of his being or having
been a director or officer of the company, or arising from his status as such,
or that he is or was serving at the request of the company as a director,
officer, employee, or agent of another company, limited liability company,
partnership, limited partnership, limited liability partnership, limited
liability limited partnership, joint venture, trust, or other enterprise,
regardless of whether such person is acting in such capacity at the time such
loss, cost, liability or expense shall have been imposed or incurred. As used
herein, the term "loss, cost, liability and expense" shall include, but shall
not be limited to, any and all costs, expenses (including attorneys' fees and
disbursements), judgments, penalties, fines, and amounts paid in settlement
incurred in connection with any such claim, action, suit, or proceeding if such
person acted in good faith and, while acting in an official capacity as a
director, acted in a manner he reasonably believed to be in the best interest of
the company, and, in all other cases, acted in a manner he reasonably believed
was not opposed to the best interests of the company and, with respect to any
criminal action or proceeding, if such person had no reasonable cause to believe
his conduct was unlawful. The termination of any claim, 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 a manner which meets the standard described in the
immediately preceding sentence. If any such claim, action, suit, or proceeding
is settled (whether by agreement, plea of nolo contendere, entry of judgment or
consent, or otherwise), the determination in good faith by the Board of
Directors of the company that such person acted in a manner that met the
standard set forth in this paragraph shall be necessary and sufficient to
justify indemnification.
Section 2. Authority to Indemnify; Derivative Actions. The company shall
indemnify and hold harmless 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 company to procure a judgment in its favor by reason of
the fact he is or was a director or officer of the company, or is or was
serving at the request of the company as a director, officer, employee, or
agent of another company, limited liability company, partnership, limited
partnership, limited liability partnership, limited liability limited
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees and disbursements) and any other amounts, now or
hereafter permitted by applicable law, actually and reasonably incurred by him
or in connection with the defense or settlement of such action or suit, if he
acted in a manner that met the standard set forth in Section 1 of this Article;
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
company, unless and only to the extent that the court in which such action or
suit was brought or another court of competent jurisdiction shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 3. Advancement of Expenses. Expenses incurred in any claim, action,
suit, or proceeding may be paid by the company in advance of the final
disposition of such claim, action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt from the
8
<PAGE> 10
director or officer of a written affirmation of his good faith belief that he
has met the relevant standard of conduct set forth under Section 14-2-851 of the
Code and furnishes to the company an undertaking to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
company.
Section 4. Determination of Indemnification Rights. Except as ordered by a
court, the company may not indemnify a director, officer, employee or agent
under this Article unless authorized hereunder and a determination has been
made in the specific case that indemnification of the director, officer or
employee is permissible under the circumstances because he or she has met the
relevant standard of conduct set forth in either Section 1 or Section 2. The
determination shall be made (i) if there are two or more disinterested
directors, by the board of directors by a majority vote of all the
disinterested directors (a majority of whom shall for such purpose constitute a
quorum), or by a majority of the members of a committee of two or more
disinterested directors appointed by such a vote; (ii) by special legal counsel
(a) selected in the manner prescribed in clause (i) of this sentence or (b) if
there are fewer than two disinterested directors, selected by the board of
directors (in which selection directors who do not qualify as disinterested
directors may participate); or (iii) by the shareholders, but shares owned by
or voted under the control of a director who at the time does not qualify as a
disinterested director may not be voted on the determination.
Section 5. Non-Exclusive Right of Indemnification. The foregoing rights of
indemnification and advancement of expenses shall not be deemed exclusive of
any other right to which those indemnified may be entitled, and the company may
provide additional indemnity and rights to its directors, officers, employees
or agents.
Section 6. Insurance. The company may purchase and maintain insurance, at its
expense, on behalf of an individual who is or was a director, officer, employee
or agent of the company or who, while a director, officer, employee or agent of
the company, is or was serving at the request of the company as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by him in any such
capacity or arising from his status as a director, officer, employee or agent,
whether or not the company would have power to indemnify him against the same
liability under this Article.
Section 7. Miscellaneous. The provisions of this Article VI shall cover
claims, actions, suits and proceedings, civil or criminal, whether now pending
or hereafter commenced and shall be retroactive to cover acts or omissions or
alleged acts or omissions which heretofore have taken place. In the event of
death of any person having a right of indemnification or advancement of
expenses under the provisions of this Article VI, such right shall inure to the
benefit of his heirs, executors, administrators and personal representatives.
If any part of this Article VI should be found to be invalid or ineffective in
any proceeding, the validity and effect of the remaining provisions shall not
be affected.
ARTICLE VII
APPROVAL OF BUSINESS COMBINATIONS
9
<PAGE> 11
Section 1. Business Combinations. All of the requirements of Sections
14-2-1131 to 1133 of the Code, inclusive, and as from time to time amended,
shall be applicable to the company.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Seal. The company may have a seal, which shall be in such form as
the Board of Directors may from time to time determine. In the event that the
use of the seal is at any time inconvenient, the signature of an officer of the
company, followed by the word "Seal" enclosed in parenthesis, shall be deemed
the seal of the company.
Section 2. Voting Shares in Subsidiaries. In the absence of other
arrangements by the Board of Directors, shares of stock issued by another
corporation and owned or controlled by the company, whether in a fiduciary
capacity or otherwise, may be voted by the Chairman of the Board, Chief
Executive Officer, President or any Vice President, in the same order as they
preside, or, in the absence of action by the foregoing officers, by any other
officer of the company, and such person may execute the aforementioned powers
by executing proxies and written waivers and consents on behalf of the company.
Section 3. Amendment of Bylaws. These bylaws may be amended or repealed and
new bylaws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors unless the articles of incorporation or the
Code reserve this power exclusively to the stockholders in whole or in part or
the stockholders, in amending or repealing the particular bylaw, provide
expressly that the Board of Directors may not amend or repeal that bylaw.
10
<PAGE> 1
EXHIBIT 10.1(l)
EXHIBIT 10.1(l)
FIRST AMENDMENT TO THE 1993 DIRECTORS STOCK INCENTIVE PLAN
<PAGE> 2
FIRST AMENDMENT TO THE AMERICAN BUSINESS PRODUCTS, INC.
1993 DIRECTORS STOCK INCENTIVE PLAN
This First Amendment to the American Business Products, Inc. 1993
Directors Stock Incentive Plan (the "Plan") is made and entered into this
11th day of December , 1996, by American Business Products, Inc. (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan for the benefit of its directors
who are not otherwise employees of the Company or its subsidiaries; and
WHEREAS, the Company believes it is in the best interest of the Company
and its directors to amend the Plan to (i) effective as of January 1, 1996,
permit directors whose service on the Board of Directors ceases as a result of
their voluntary termination or due to attainment of age 70 to exercise their
vested Options for a period of up to one year following the end of their
service, (ii) effective as of January 1, 1997, increase the formula for awards
of Restricted Stock to eligible directors, and (iii) decrease the vesting
period for Restricted Stock awards made after January 1, 1997; and
WHEREAS, Section 10(b) of the Plan permits the Company to amend the Plan
at any time; and
WHEREAS, the Board has adopted a resolution authorizing the amendment of
the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as
follows:
1.
Effective as of January 1, 1996, subsection 5(j)(ii) of the Plan shall be
deleted in its entirety and the following substituted in lieu thereof:
"(ii) In the event an Optionee ceases to be a director
of the Company at the request of the Company or due to
his failure to be reelected by the shareholders, any
Option or unexercised portion thereof granted to him
which is otherwise exercisable shall terminate on and
shall not be exercisable after the earlier of
(a) the expiration date of the Option, or (b) 3 months
after the date the director ceases to be a director of
the Company. Prior to the earlier of the dates
specified in the first sentence of this subsection
5(j)(ii), the Option shall be exercisable only in
accordance with its terms."
2.
Effective as of January 1, 1996, Section 5(j) of the Plan shall be amended
by adding the following as subsection (iv) thereof:
<PAGE> 3
"(iv) In the event an Optionee voluntarily ceases to be a
director of the Company at any time or ceases to be a
director upon attaining age 70, any Option or unexercised
portion thereof granted to him which is otherwise
exercisable shall terminate on and shall not be exercisable
after the earlier of (a) the expiration date of the Option,
or (b) 1 year after the date the director ceases to be a
director of the Company. Prior to the earlier of the dates
specified in the first sentence of this subsection 5(j)(iv),
the Option shall be exercisable only in accordance with its
terms."
3.
Effective as of January 1, 1997, subsection 6(a)(iv) of the Plan shall be
deleted in its entirety and the following new subsections (iv) and (v)
substituted in lieu thereof:
"(iv) As of the date of the annual shareholders
meeting at the beginning of each year for which an
eligible director is reelected or continues to serve
as a director of the Company, he shall receive 100
shares of Restricted Stock.
(v) Notwithstanding any other provision of this Plan,
no director shall receive a total of more than 2,000
shares of Restricted Stock under this Plan."
4.
Effective as of January 1, 1997, Section 6(b) of the Plan shall be
amended by adding the following sentence at the end thereof:
"For purposes of any award of Restricted Stock made
after January 1, 1997 under the Plan, the restrictions
described above shall apply for only one year after
the date of award, instead of three years after such
date. Further, the one-year period shall be waived
and the Recipient deemed fully vested upon any one of
the events described in subsections (i) through (iv)
of this Section 6(b) above that occurs during the
one-year period from the date of award."
5.
Except as specifically set forth herein, the terms of the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed by its duly authorized officer as of the date first written above.
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ R. W. Gundeck
------------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
<PAGE> 1
EXHIBIT 10.4
EXECUTION COPY
REVOLVING CREDIT AGREEMENT
Dated as of April 22, 1996
By and Between
AMERICAN BUSINESS PRODUCTS, INC.
AND
SUNTRUST BANK, ATLANTA
$35,000,000 Three-Year Revolving Credit Facility
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS
1.1. Definitions .................................................................1
1.2. Use of Defined Terms; Accounting Terms; Interpretation .....................10
ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT
2.1. Advances and Revolving Credit Note .........................................10
2.2. Interest on Revolving Credit Note ..........................................11
2.3. Method of Borrowing Under the Commitment ...................................11
2.4. Selection of Successive Interest Rates and Interest Periods ................11
2.5. Interest Payment Dates .....................................................12
2.6 Repayment and Prepayment of Advances Under the Commitment ..................12
2.7 Optional Reduction or Termination of Commitment ............................12
2.8 Extension of Termination Date ..............................................12
2.9 Use of Proceeds ............................................................13
2.10 Commitment Fee ............................................................13
2.11 Basis for Determining Interest Rate Inadequate or Unfair ..................13
2.12 Illegality ................................................................13
2.13 Increased Costs ...........................................................14
2.14 Indemnity .................................................................14
2.15 Capital Adequacy ..........................................................14
2.16 Survival ..................................................................15
2.17 Making of Payments ........................................................15
2.18 Default Rate of Interest ..................................................15
2.19. Calculation of Interest ...................................................15
2.20. Letters of Credit .........................................................15
ARTICLE III CONDITIONS PRECEDENT
3.1. Conditions Precedent .......................................................18
3.2. Condition Precedent to Initial Advance .....................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1. Corporate Organization and Authority .......................................19
4.2. Qualification to Do Business ...............................................19
4.3. Corporate Authorization; Enforceability ....................................19
4.4. Subsidiaries ...............................................................19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.5. Financial Statements .......................................................20
4.6. No Contingent Liabilities or Adverse Changes ...............................20
4.7. No Pending Litigation or Proceedings .......................................20
4.8. Compliance with Law ........................................................20
4.9. Pension Reform Act of 1974 .................................................21
4.10. Title of Properties .......................................................22
4.11. Leases ....................................................................22
4.12. Franchises, Patents, Trademarks and Other Rights ..........................22
4.13. No Defaults ...............................................................22
4.14. Governmental Consent ......................................................23
4.15. Taxes .....................................................................23
4.16. Status under Certain Statutes .............................................23
4.17. Effect of Other Instruments ...............................................23
4.18. Use of Proceeds ...........................................................23
4.19. Condition of Property .....................................................24
4.20. Books and Records .........................................................24
4.21. Full Disclosure ...........................................................24
4.22. Indebtedness ..............................................................24
4.23. Solvency ..................................................................24
ARTICLE V AFFIRMATIVE COVENANTS
5.1. Corporate Existence ........................................................25
5.2. Insurance ..................................................................25
5.3. Taxes, Claims for Labor and Materials, and Compliance with Laws ............25
5.4. Maintenance of Properties ..................................................26
5.5. Maintenance of Records .....................................................26
5.6. Nature of Business .........................................................26
5.7. Net Worth ..................................................................26
5.8. Funded Debt ................................................................26
5.9. Subsidiary Funded Debt .....................................................26
5.10. Limitations on Liens ......................................................27
5.11. Merger or Consolidation ...................................................28
5.12. Sale of Assets ............................................................30
5.13. Transactions with Affiliates ..............................................30
5.14. ERISA .....................................................................30
5.15. Financial Reports and Rights of Inspection ................................31
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES
6.1. Events of Default ..........................................................34
6.2. Remedies on Default ........................................................36
6.3. Notice of Default ..........................................................37
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VII MISCELLANEOUS
7.1. No Waiver ..................................................................37
7.2. Notices ....................................................................38
7.3. Survival of Representations and Warranties .................................38
7.4. Descriptive Headings .......................................................38
7.5. Severability ...............................................................38
7.6. Time is of the Essence .....................................................39
7.7. Counterparts ...............................................................39
7.8. Payment of Costs ...........................................................39
7.9. Successors and Assigns .....................................................39
7.10. Amendments; Consents ......................................................39
7.11. Set-Off ...................................................................40
7.12. Indemnity .................................................................40
7.13. Usury .....................................................................40
7.14. Governing Law, Submission to Jurisdiction and Waiver of Jury Trial ........40
7.15. Construction ..............................................................41
7.16. Entire Agreement ..........................................................41
</TABLE>
<PAGE> 5
Schedule 4.4 List of Subsidiaries
Schedule 4.10 Description of Liens
Schedule 4.13 Waivers
Schedule 4.22 Description of Indebtedness
Exhibit A Revolving Credit Note
Exhibit B Form of Funds Transfer Agreement
Exhibit C Consolidating Income Statement
<PAGE> 6
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT dated as of April 22, 1996, by and
between AMERICAN BUSINESS PRODUCTS, INC., a corporation organized and existing
under the laws of the State of Georgia (the "Borrower"), and SUNTRUST BANK,
ATLANTA, a Georgia banking corporation, and its successors and assigns (the
"Bank").
WITNESSETH
WHEREAS, the Borrower has requested the Bank to establish a $35,000,000
three-year revolving credit facility to finance working capital and other
general corporate purposes (including the financing of acquisitions) of the
Borrower, including a $5,000,000 commitment to issue letters of credit
thereunder; and
WHEREAS, the Bank is willing to establish the three-year revolving
credit facility in the aforesaid amount, subject to the terms and conditions as
hereinafter set forth;
NOW THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by the Bank to the Borrower, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. In addition to the other terms defined
herein, the following terms shall have the meanings herein specified:
"Advance" shall mean any advance of funds by the Bank to the Borrower
under this Agreement, which shall be either a Base Rate Advance or a LIBOR
Advance.
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Borrower, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Borrower or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower or a Subsidiary. The term "affiliate"
shall mean, as to any Person other than the Borrower, any Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such 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.
<PAGE> 7
"Agreement" shall mean this Revolving Credit Agreement, either as
originally executed or as it may be from time to time supplemented, amended,
renewed or extended.
"Agreement Date" shall mean the date of this Agreement.
"Authorized Officer" of the Borrower shall mean the Person duly
authorized as the Chief Executive Officer, the Chief Financial Officer or the
Chief Accounting Officer.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978, as amended,
11 U.S.C. 101 et seq.
"Base Rate" shall mean the higher of (i) the Prime Rate and (ii) the
Federal Funds Rate plus 0.50% per annum.
"Base Rate Advance" shall mean any Advance hereunder that bears
interest at the Base Rate.
"Bond Guaranty" shall mean the Guaranty of the Borrower of the Bond
Obligations.
"Bond Letter of Credit Agreement" shall mean the agreement to be
entered into between the Bank and Curtis with respect to the issuance of a
standby letter of credit in connection with the Bonds.
"Bond Obligations" shall mean all payment and performance obligations
of Curtis under a standby letter of credit to be issued by the Bank pursuant to
the Bond Letter of Credit Agreement.
"Bonds" shall mean the tax exempt bonds to be issued by the Development
Authority of Gwinnett County for the benefit of Curtis.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks are required or authorized to close for business
in Atlanta, Georgia, except that, in the case of LIBOR Advances, such day is
also a day on which the Bank transacts business in the London interbank and
foreign exchange markets.
"Capitalized Lease" shall mean any lease of property, real or personal,
the obligation for Rentals with respect to which is required to be capitalized
in accordance with GAAP.
"Capitalized Rentals" shall mean as of the date of any determination
the amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Borrower or any Subsidiary is a lessee would
be reflected as a liability of a consolidated balance sheet of the Borrower and
its Subsidiaries.
"Change in Control" shall mean the acquisition, through purchase or
otherwise (including the agreement to act in concert without more), by any
Person or group of Persons acting in concert,
2
<PAGE> 8
directly or indirectly, in one or more transactions, of beneficial ownership of
securities representing more than 30% of the combined voting power of the
Borrower's Voting Stock, determined on the date prior to the date of such
acquisition. For purposes of this definition, "beneficial ownership" shall have
the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended.
"Code" shall have the meaning set forth in Section 4.9 hereof.
"Commitment" shall have the meaning set forth in Section 2.1(a)
hereof, as such amount may be reduced or terminated pursuant to Section 2.7
hereof.
"Commitment Fee" shall have the meaning set forth in Section 2.9
hereof.
"Consolidated Funded Debt" shall mean as of any date of determination
thereof Funded Debt of the Borrower and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Capitilization" shall mean, on a consolidated basis
for the Borrower and its Restricted Subsidiaries, total assets (excluding
minority interests) less investments (including minority interests) in and
loans to Unrestricted Subsidiaries, less all items that would appear on the
liability side of a balance sheet except capital stock, surplus and Funded
Debt, all determined in accordance with GAAP.
"Consolidated Net Income" or "Consolidated Net Loss" for any period
shall mean the gross revenues of the Borrower and its Restricted Subsidiaries
for such period, less all expenses and other proper charges (including taxes on
income), determined on a consolidated basis in accordance with GAAP consistently
applied and after eliminating earnings or losses attributable to outstanding
minority interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition
(other than in the ordinary course of business) of investments or fixed or
capital assets, and any taxes an such excluded gains and any tax deductions or
credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy on the life of
any officer, director or employee of the Borrower or any of its Restricted
Subsidiaries;
(c) net income and losses of any Restricted Subsidiary accrued
prior to the date it became a Restricted Subsidiary;
(d) net income and losses of any corporation (other than a
Restricted Subsidiary), substantially all of the assets of which have been
acquired by the Borrower or any Restricted Subsidiary in any manner, realized by
such other corporation prior to the date of such acquisition;
3
<PAGE> 9
(e) net income and losses of any corporation (other than a
Restricted Subsidiary) with which the Borrower or a Restricted Subsidiary shall
have consolidated or which shall have merged into or with the Borrower or a
Restricted Subsidiary prior to the date of such consolidation or merger;
(f) net income of any business entity (other than a Restricted
Subsidiary) in which the Borrower or any Restricted Subsidiary has an ownership
interest unless such net income shall have actually been received by the
Borrower or such Restricted Subsidiary in the form of cash distributions;
(g) any portion of the net income of any Restricted Subsidiary
which for any reason is unavailable for payment of dividends to the Borrower or
any other Restricted Subsidiary;
(h) earnings resulting from any reappraisal, reevaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Restricted Subsidiary at the date of acquisition thereof over
the amount invested in such Restricted Subsidiary;
(j) any gain arising from the acquisition of any securities
of the Borrower or any Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provisions for such contingency reserve shall have been made from
income arising during such period; and
(1) any other extraordinary gain.
"Consolidated Net Worth" shall mean for any period Consolidated Net
Capitalization less Consolidated Funded Debt, all determined in accordance with
GAAP.
"Consolidated Tangible Net Worth" shall mean Consolidated Net Worth
less all goodwill, trade names, trademarks, patents, organization expense,
unamortized debt discount and expense and other similar intangibles properly
classified as such in accordance with GAAP; provided, that in computing
Consolidated Tangible Net Worth, the Borrower shall include intangible assets in
an amount equal to $16,000,000.
"Current Debt" shall mean all Indebtedness for borrowed money or which
has been incurred in connection with the acquisition of property or assets, the
final maturity of which Indebtedness is one year or less from the date of
determination.
"Curtis" shall mean Curtis 1000 Inc., a Georgia corporation and a
wholly-owned Subsidiary of the Borrower.
4
<PAGE> 10
"Default" shall mean any event that, with notice or lapse of time or
both, would constitute an Event of Default.
"Default Rate shall have the meaning set forth in Section 2.18 hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Due Date" shall have the meaning set forth in Section 2.20(c) hereof.
"ERISA" shall have the meaning set forth in Section 4.9 hereof.
"Event of Default" shall have the meaning set forth in Section 6.1
hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100 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 New York on the Business Day next
succeeding such day, provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the Bank
on such day on such transactions.
"Funded Debt" shall mean, with respect to any Person, (i) all
Indebtedness for borrowed money or which has been incurred in connection with
the acquisition of property or assets in each case having a final maturity of
more than one year from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more than one
year from the date of origin), excluding current maturities which are included
as current liabilities on the balance sheet of such Person prepared in
accordance with GAAP, (ii) all Capitalized Rentals, (iii) all Guaranties of
Funded Debt of others and (iv) the amount by which Current Debt outstanding (if
any) at the last day of a thirty day period within the previous twelve months
representing the lowest levels of Current Debt for a thirty day period during
such previous twelve months exceeds zero; provided, that Funded Debt shall not
include any policy loans against the cash value of life insurance policies which
are reflected on a net asset basis in accordance with GAAP.
"Funds Transfer Agreement" shall mean the Funds Transfer Agreement
dated as of the date hereof between the Borrower and the Bank substantially in
the form of Exhibit B attached. hereto.
"GAAP" shall mean generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with the
prior financial practice of the Borrower and any predecessors as reflected in
the financial statements previously furnished to the Bank pursuant to Section
4.5 hereof and the financial statements to be provided to the Bank pursuant to
Section 5.15 hereof, provided that if the Borrower notifies the Bank that the
Borrower wishes to
5
<PAGE> 11
amend any of the covenants set forth in Section 5.7, 5.8, or 5.9 hereof to
eliminate the effect on the operation of such covenant(s) of any change in GAAP
that is (i) mandated by the Financial Accounting Standards Board or similar
accounting authority of comparable standing or (ii) recommended by the
Borrower's independent public accountants, then the Borrower's compliance with
such covenant(s) shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until such covenant(s) are
amended in a manner satisfactory to the Borrower and the Bank.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, or (y)
to maintain fixed charge coverage or working capital or other balance sheet
condition or otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligations, or (iii) to lease property or to
purchase securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal amount
of such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty in respect of any other obligation or liability or any dividend shall
be deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Indebtedness" shall mean, with respect to any Person as of any date of
determination and without duplication, all obligations of such Person which in
accordance with GAAP shall be classified on a balance sheet of such Person as
liabilities of such Person and in any event shall include all (i) obligations of
such Person for borrowed money or which has been incurred in the acquisition of
property or assets, (ii) obligations secured by any Lien on property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such obligations, (iii) obligations created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Guaranties, (v) Capitalized
Rentals under any Capitalized Lease and (vi) any recourse obligations arising
upon a sale of assets. For the purpose of computing "Indebtedness" of any
Person, there shall be excluded any particular Indebtedness to the extent that,
upon or prior to the maturity thereof there shall have been irrevocably
deposited with the proper depositary in trust the necessary funds (or evidences
of Indebtedness or other securities, if permitted by the instrument creating
such Indebtedness) for the payment, redemption or satisfaction of such
6
<PAGE> 12
Indebtedness; and thereafter such funds and evidences of Indebtedness so
deposited shall not be included in any computation of the assets of such Person.
"Interest Period" shall mean, with respect to any LIBOR Advance, a
period of 1, 2, 3 or 6 months, as the Borrower may elect as provided in this
Agreement; provided, that (i) the first day of an Interest Period must be a
Business Day, (ii) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day, unless
such Business Day falls in the next calendar month, in which case the Interest
Period shall end on the next preceding Business Day, (iii) any Interest Period
which begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of an
Interest Period) shall end on the last Business Day of a calendar month and (iv)
no Interest Period with respect to any LIBOR Advance shall extend beyond the
Termination Date.
"LC Application" shall mean any application for a Letter of Credit on
the Bank's standard form executed and delivered by the Borrower to the Bank.
"Letters of Credit" shall mean any standby letters of credit issued by
the Bank for the account of the Borrower under the Letter of Credit Commitment
pursuant to Section 2.20 hereof, and any extension, renewal or amendment
thereof.
"Letter of Credit Commitment" shall mean the commitment of the Bank to
issue Letters of Credit up to the maximum principal amount of $5,000,000.
"Letter of Credit Obligations" shall mean, at any time, the sum of (i)
the maximum amount which is available to be drawn under Letters of Credit then
outstanding plus (iii) the aggregate amount of all drawings under Letters of
Credit honored by the Bank and not theretofore reimbursed.
"LIBOR" shall mean with respect to any Interest Period for any LIBOR
Advance the rate per annum equal to the quotient of (i) the offered rate for
deposits in Dollars of amounts equal or comparable to the principal amount of
such LIBOR Advance offered for a term comparable to such Interest Period, which
rate appears on the Telerate Page 3750 as of 11:00 A.M. (London, England) time,
two (2) Business Days prior to the first day of such Interest Period; provided,
that if no such offered rates appear on such page, the rate used for such
Interest Period will be the arithmetic average (rounded upward, if necessary, to
the next higher 1/16th of 1%) of rates offered to the Bank by not less than two
major banks in London, England at approximately 10:00 A.M. (Atlanta, Georgia
time), two (2) Business Days prior to the first day of such Interest Period for
deposits in Dollars in the London interbank market for a period comparable to
such Interest Period in an amount comparable to the principal amount of such
LIBOR Advance, divided by a number equal to 1.00 minus the Reserve Percentage.
The rate so determined in accordance herewith shall be rounded upwards to the
nearest multiple of 1/100th of 1%. "Telerate Page 3750" shall mean the display
designated as "Page 3750" on the Telerate Service (or such other page as may
replace Page 3750 on that service or another service as may be nominated by the
British Bankers' Association as the
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information vendor for the purpose of displaying British Bankers' Association
Interest Settlement Rate for Dollars).
"LIBOR Advance" shall mean any Advance hereunder which bears interest
based on LIBOR.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof (including Capitalized Leases), and the filing of or
agreement to file any financing statement under the Uniform Commercial Code of
any jurisdiction in connection with any of the foregoing.
"Loan Documents" shall mean and include, as the context requires, this
Agreement, the Revolving Credit Note, the Letters of Credit, the LC
Applications, the Bond Guaranty, the Funds Transfer Agreement and any and all
other instruments, agreements, documents and writings contemplated hereby or
executed in connection herewith.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, prospects and profits, operations or condition, financial
or otherwise, of the Borrower and its Subsidiaries taken as a whole.
"Notice of Borrowing" shall have the meaning set forth in Section 2.3
hereof.
"PBGC" shall have the meaning set forth in Section 4.9 hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated association, joint venture or other
entity, or a government or political subdivision or agency thereof.
"Plan" shall have the meaning set forth in Section 4.9 hereof.
"Prime Rate" shall mean the per annum rate of interest designated from
time to time by the Bank to be its prime rate, with any change in the rate of
interest resulting from a change in the Prime Rate to be effective as of the
opening of business of the Bank on the day of such change. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Bank may make commercial loans and any
other loans at rates of interest at, above or below the Prime Rate.
"Rentals" shall mean and include all rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by the Borrower or a Subsidiary,
as lessee or sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by the Borrower or a Subsidiary
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes, and similar charges.
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"Reserve Percentage" shall mean, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained with respect
to liabilities or assets consisting of or including "eurocurrency liabilities",
as prescribed by Regulation D of the Board of Governors of the Federal Reserve
System (or by any other governmental body having jurisdiction with respect
thereto), including without limitation any basic, marginal, emergency,
supplemental, special, transitional or other reserves, the rate so determined to
be rounded upward to the nearest whole multiple of 1/100 of 1%.
"Restricted Subsidiary" shall mean any Subsidiary in which the Borrower
or its Restricted Subsidiaries owns 80% or more of the Voting Stock and which is
not an Unrestricted Subsidiary.
"Revolving Credit Note" shall mean a promissory note of the Borrower
payable to the order of the Bank, in substantially the form of Exhibit A
attached hereto, evidencing the original principal amount of the Commitment,
either as originally executed or as it may be from time to time supplemented,
modified, amended, renewed or extended.
"Solvent" shall have the meaning set forth in Section 4.23 hereof.
"Subsidiary" shall mean a subsidiary of the Borrower, "subsidiary"
shall mean, as to any particular parent corporation, any corporation of which
more than 50% (by number of votes) of the Voting Stock shall be owned or
controlled by such parent corporation and/or one or more corporations which are
themselves subsidiaries of such parent corporation.
"Termination Date" shall mean the earlier of (i) April 22, 1999, as
such date may be extended pursuant to Section 2.8 hereof, or (ii) the date on
which the Commitment may be terminated pursuant to Section 6.2(a) or (b) hereof.
"Unrestricted Subsidiary" shall mean any Subsidiary that has been
designated by the Borrower's Board of Directors as an Unrestricted Subsidiary,
provided that the Subsidiary has not been previously designated as a Restricted
Subsidiary and at the time of such designation (i) the Subsidiary so designated
neither owns, directly or indirectly, any Funded Debt or capital stock of any
Restricted Subsidiary and (ii) immediately thereafter the Borrower could incur
an additional $1 of Funded Debt pursuant to Section 5.8 hereof.
"Voting Stock" shall mean the capital stock of any class or classes of
a corporation, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of the members of the board of
directors of such corporation, or Persons performing similar functions
(irrespective of whether or not at the time stock of any class shall have or
might have special voting power or rights by reason of the happening of any
contingency). Reference to a percentage of Voting Stock shall mean a percentage
of the votes represented by such Voting Stock and not to the number of shares if
there are classes of Voting Stock possessing different voting rights.
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"Wholly-Owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Borrower and/or one or more of its
Wholly-Owned Subsidiaries.
SECTION 1.2. Use of Defined Accounting Terms: Interpretation. All terms
defined in this Agreement shall have the same defined meanings when used in any
other Loan Documents, unless the context shall require otherwise. All accounting
terms not specifically defined herein shall be construed as having the
respective meanings customary under GAAP. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all genders; the singular shall include the plural, and the plural shall
include the singular; "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to this Agreement and not to any particular
Article, Section or other provision hereof; "or" is not exclusive; and relative
to any determination of any period of time, "from" means "from and including",
"to" means "to but not including" and "through" means "through and including".
All Exhibits and Schedules attached hereto are by reference made a part hereof.
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
SECTION 2.1. Advances and Revolving Credit Note.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, the Bank agrees to make available to the Borrower from time to time
from the Agreement Date to the Termination Date Advances in aggregate principal
amount at any one time outstanding equal to $35,000,000 (the "Commitment"),
provided that the Bank shall not be obligated to make available any Advance to
the extent that immediately after making any such Advance the sum of (i) the
outstanding principal balance of all Advances, (ii) the outstanding Bond
Obligations and (iii) the outstanding Letter of Credit Obligations would exceed
the Commitment. Within the limits of the Commitment, the Borrower may borrow,
repay and reborrow under the terms of this Agreement; provided, that the
Borrower may neither borrow nor reborrow if a Default or an Event of Default
exists or would result from the making of such Advance or from the application
of the proceeds therefrom.
(b) The Borrower's obligations to pay the principal of, and interest
on, the Advances shall be evidenced by the records of the Bank and by the
Revolving Credit Note completed in conformity with this Agreement. The aggregate
principal amount of each LIBOR Advance shall be $500,000 or a greater integral
multiple of $100,000, and each Base Rate Advance shall be $50,000 or a greater
integral multiple of $10,000. In addition, no more than ten (10) LIBOR Advances
shall be outstanding at any time.
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SECTION 2.2. Interest on Revolving-Credit Note. Interest shall accrue
on the unpaid principal amount of each Advance under the Commitment at the
following per annum rates, which may be selected by the Borrower subject to and
in accordance with the terms of this Agreement:
(i) the Base Rate; or
(ii) LIBOR for the Interest Period selected by the
Borrower, plus .20% per annum.
SECTION 2.3. Method of Borrowing Under the Commitment; Disbursements.
The Borrower shall give the Bank written (including by telecopy) or telephonic
notice (promptly confirmed in writing) of any requested Advance under the
Commitment (a "Notice of Borrowing") specifying (a) the principal amount of such
Advance, (b) the date such Advance is to be made (which shall be a Business
Day), (c) whether such Advance shall be a Base Rate Advance or a LIBOR Advance
and (d) in the case of a LIBOR Advance, the duration of the initial Interest
Period applicable thereto. Each Notice of Borrowing shall be given to the Bank
(i) with respect to any LIBOR Advance, not later than 1:00 P.M. (Atlanta,
Georgia time) on the second Business Day preceding the date of such requested
Advance, and (ii) with respect to any Base Rate Advance, not later than 11:00
A.M. (Atlanta, Georgia time) on the day of such requested Advance. Each Notice
of Borrowing shall be executed by an Authorized Officer, and the Bank shall be
entitled to rely on any telephonic Notice of Borrowing which it believes in good
faith to have been given by an Authorized Officer. The proceeds of each Advance
shall be credited to the Borrower's account with the Bank, account number
#8801668354 (and only to such account), prior to 1:00 P.M. (Atlanta, Georgia
time) on the day of such requested Advance, and when so credited, shall be an
Advance for all purposes hereunder. These instructions to credit such proceeds
to the above-referenced account may be changed only upon receipt by the Bank in
writing (but not a telecopy or similar teletransmission or writing) of a letter
duly executed by any two Authorized Officers, whose signatures are set forth in
the Secretary's Certificate delivered pursuant to Section 3.1 hereof
Disbursements of the proceeds of all Advances shall be made solely in accordance
with the Funds Transfer Agreement.
SECTION 2.4. Selection of Successive Interest Rates and Interest
Periods. The Borrower may, on the last day of the Interest Period relating
thereto, convert any LIBOR Advance into a Base Rate Advance or continue a LIBOR
Advance in the same aggregate principal amount. The Borrower may at any time
convert a Base Rate Advance into a LIBOR Advance (unless a Default or Event of
Default shall then exist). The Borrower shall give the Bank telephonic notice
(promptly confirmed in writing) at least two (2) Business Days prior to a
conversion or continuation of any such Advance (other than the continuation of a
Base Rate Advance), such notice to specify whether such Advance is to be
continued as a LIBOR Advance or converted to a LIBOR Advance or a Base Rate
Advance, as the case may be, and, if applicable, the Interest Period selected by
the Borrower for such Advance. If the Bank does not receive timely notice with
respect to any LIBOR Advance of any succeeding interest rate and/or Interest
Period selected by the Borrower as provided for herein or if the Borrower
selects an interest rate for an Interest Period which is not available under
Section 2.2, or if a Default
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or Event of Default shall exist at the end of an Interest Period applicable
thereto, any such outstanding LIBOR Advance shall automatically be converted to
a Base Rate Advance.
SECTION 2.5. Interest Payment Dates. Interest on the Revolving Credit
Note shall be payable (a) on the last day of the relevant Interest Period for
LIBOR Advances (except if any Interest Period is longer than three (3) months,
interest will be payable every three (3) months); (b) on the last day of each
calendar quarter, in arrears, for each Base Rate Advance; and (c) on the
Termination Date.
SECTION 2.6. Repayment and Prepayment of Advances Under the Commitment.
(a) Unless earlier required pursuant to this Agreement or any other
Loan Document, the Borrower will repay the principal amount of, and all accrued
but unpaid interest on, all outstanding Advances on the Termination Date.
(b) The Borrower shall have the right to prepay LIBOR Advances and Base
Rate Advances under the Commitment, in whole at any time or in part from time to
time, without premium or penalty but with accrued interest on the principal
amount prepaid to the date of such prepayment; provided, that (i) with respect
to a LIBOR Advance, the Borrower gives the Bank at least two Business Days'
prior written notice of such prepayment, specifying the date such prepayment
will occur and the Advance to be prepaid, (ii) each partial prepayment of a
LIBOR Advance shall be in an amount of $500,000 or a greater integral multiple
of $100,000 and each partial prepayment of a Base Rate Advance shall be $50,000
or a greater integral multiple of $10,000, and (iii) a LIBOR Advance may only be
prepaid on the last day of the then current Interest Period with respect
thereto.
SECTION 2.7. Optional Reduction or Termination of Commitment. The
Borrower shall have the right to terminate in whole or reduce in part the amount
of the unused Commitment from time to time, without premium or penalty;
provided, that (i) the Borrower gives the Bank at least five (5) Business Days'
prior written notice of such reduction, specifying the date that such reduction
will be effective, (ii) each reduction shall be in an amount of $500,000 or a
greater integral multiple of $100,000 and (iii) any such termination or
reduction shall be permanent and the Borrower shall have no right thereafter to
reinstate or increase, as the case may be, the Commitment.
SECTION 2.8 Extension of Termination Date. The Borrower may request the
Bank to extend the then current Termination Date for an additional one-year
period on each anniversary of the Agreement Date by delivering a written request
for such extension not earlier than forty-five (45) days and not later than
thirty (30) days prior to the end of such anniversary date. The Bank will notify
the Borrower whether it agrees to such an extension within fifteen (15) days
after receipt of such written request; provided, that any failure of the Bank to
so notify the Borrower shall be deemed to be a denial of such request and the
Termination Date will not be so extended; and provided further, that if the Bank
agrees to such an extension, the Borrower will deliver to the Bank an officer's
certificate dated as of such anniversary date certifying that the
representations and warranties contained in Article IV hereof are true and
correct on and as of such anniversary date as
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though made on and as of such date, other than those representations and
warranties that, by their terms, related expressly to an earlier date. If the
Bank at any time refuses to extend the Termination Date, the Borrower will not
have any right on subsequent anniversaries of the Agreement Date to request any
further extensions, and the Termination Date will be either the original
Termination Date or such date to which it was extended prior to such refusal.
The Borrower understands and acknowledges by executing this Agreement that the
Bank has not promised (either explicitly or implicitly), nor shall the Bank have
any obligation or commitment whatsoever, to extend the Termination Date at any
time.
SECTION 2.9. Use of Proceeds. The proceeds of each Advance under the
Commitment will be used by the Borrower solely to finance working capital and
other general corporate purposes (including the financing of acquisitions).
SECTION 2.10. Commitment Fee. From and after the date hereof up to and
including the Termination Date, the Borrower shall pay to the Bank a commitment
fee equal to 0.10% per annum on the average daily amount of the unused
Commitment (the "Commitment Fee"). The Commitment Fee shall be payable by the
Borrower quarterly in arrears, commencing on last day of the first calendar
quarter ending after the Agreement Date and on the Termination Date.
SECTION 2.11. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period:
(a) the Bank determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant
market for such Interest Period, or
(b) the Bank determines in good faith that LIBOR will not
adequately and fairly reflect the cost to the Bank for funding
the relevant LIBOR Advance for such Interest Period,
the Bank shall promptly give notice to the Borrower, whereupon until the Bank
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligation of the Bank to make any LIBOR Advance specified in
such notice shall be suspended. Unless the Borrower notifies the Bank at least
one Business Day prior to the date of any Advance that it elects not to borrow
on such date, such Advance will instead be made as a Base Rate Advance.
SECTION 2.12. Illegality. Notwithstanding any other provisions of this
Agreement, if the introduction of, or any change in or in the interpretation or
application of, any applicable law, regulation or directive shall make it
unlawful or impossible for the Bank to make, maintain or fund any LIBOR Advance,
the obligation of the Bank hereunder to make, maintain or fund LIBOR Advances
shall forthwith be suspended, until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, and the Borrower
shall, at its option, prepay all outstanding LIBOR Advances or convert such
LIBOR Advances to Base Rate Advances.
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SECTION 2.13. Increased Costs. In the event that the introduction of,
or any change in or in the interpretation of or application of, any applicable
law, treaty or governmental regulation, or the compliance by the Bank with any
guideline, request or directive (whether or not having the force of law) from
any central bank or other U.S. or foreign financial, monetary or other
governmental authority, shall: (a) subject the Bank to any tax of any kind
whatsoever with respect to this Agreement or any Advance or change the basis of
taxation of payments to the Bank of principal, interest, fees or any other
amount payable hereunder (except for changes in the rate of tax in the overall
net income of the Bank); (b) impose, modify, or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by or committed to be extended by any office of the Bank (other than
any change by way of imposition or increase of reserve requirements under
Regulation D of the Board of Governors of the Federal Reserve System, in the
case of LIBOR Advances, included in the Reserve Percentage); or (c) impose on
the Bank or on the London interbank market any other condition with respect to
this Agreement, the Revolving Credit Note or any LIBOR Advance thereunder; and
the result of any of the foregoing is to increase the cost to the Bank of making
or committing to make, renewing or maintaining any LIBOR Advance or to reduce
the amount of any payment (whether of principal, interest or otherwise) in
respect of any LIBOR Advance, THEN, IN ANY SUCH CASE, the Borrower shall
promptly pay from time to time, upon demand of the Bank, such additional amounts
as will compensate the Bank for such additional cost or such reduction, as the
case may be. The Bank shall certify the amount of such additional cost or
reduced amount to the Borrower, including a description of the calculation
thereof in reasonable detail, which certification shall be conclusive provided
that it was made in good faith and on a reasonable basis.
SECTION 2.14. Indemnity. The Borrower hereby agrees to indemnify the
Bank and hold the Bank harmless from any loss, cost or expense it may sustain or
incur as a consequence of (a) the failure by the Borrower to complete any LIBOR
Advance or the failure of the Borrower to convert any outstanding Base Rate
Advance into a LIBOR Advance pursuant to Section 2.4 hereof after notice thereof
has been given to the Bank or (b) the payment or conversion of a LIBOR Advance
on a day other than the last day of the Interest Period applicable thereto,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired or deemed
acquired by the Bank to fund such LIBOR Advance when such LIBOR Advance, as
result of such failure, is not made on such date. The Bank shall certify the
amount of its loss or expense to the Borrower, and such certification shall be
conclusive provided that it was made in good faith and on a reasonable basis.
SECTION 2.15. Capital Adequacy. If, after the date of this Agreement,
the Bank shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Banks capital (whether on
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this Commitment or otherwise) as a consequence of its obligations hereunder to a
level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount deemed by the Bank to be material, then from
time to time, promptly upon demand by the Bank, the Borrower shall pay the Bank
such additional amount or amounts as will compensate the Bank for such
reduction. A certificate of the Bank setting forth the additional amount or
amounts to be paid to it hereunder, providing a description of the calculation
thereof in reasonable detail, shall be conclusive provided that it was made in
good faith and on a reasonable basis. In determining any such amount, the Bank
may use any reasonable averaging and attribution methods.
SECTION 2.16. Survival. The obligations of the Borrower under Sections
2.13, 2.14 and 2.15 and shall survive the termination of this Agreement and the
payment of the Revolving Credit Note.
SECTION 2.17. Making of Payments. All payments of principal of, or
interest on, the Revolving Credit Note, all payments under Letters of Credit and
the Commitment Fee shall be made in immediately available funds to the Bank at
its principal office in Atlanta, Georgia. All such payments shall be made not
later than 12:00 Noon (Atlanta, Georgia time) and funds received after that hour
shall be deemed to have been received by the Bank on the next following Business
Day.
SECTION 2.18. Default Rate of Interest. If the Borrower shall fail to
pay on the due date therefor, whether by acceleration or otherwise, any
principal owing under the Revolving Credit Note, then interest shall accrue on
such unpaid principal, and to the extent allowed by law, other amounts due, at
the option of the Bank, from the due date until and including the date on which
such principal or other amount is paid in full at (i) the then applicable
interest rate with respect to LIBOR Advances until the end of the Interest
Period applicable thereto plus an additional two per cent (2%) per annum and
(ii) thereafter, and with respect to Base Rate Advances at any time, a rate of
interest equal to the Base Rate plus two percent (2.0%) per annum. (the "Default
Rate").
SECTION 2.19. Calculation of Interest. Interest payable on the
Revolving Credit Note and the Commitment Fee shall be calculated on the basis of
a year of 360 days (or 365 days in the case of Base Rate Advances) and paid for
the actual number of days elapsed.
SECTION 2.20 Letters of Credit.
(a) Issuance. Subject to the terms and conditions hereof, the Bank
shall issue from time to time Letters of Credit for the account of the Borrower
in an aggregate face amount at any time outstanding up to the Letter of Credit
Commitment; provided, that the Bank shall not be obligated to issue any Letter
of Credit (i) to the extent that immediately after the issuance of such Letter
of Credit, the sum of (X) the outstanding principal balance of all Advances, (Y)
the outstanding Bond Obligations and (Z) the outstanding Letter of Credit
Obligations would exceed the Commitment or (ii) a Default or Event of Default
exists or would result from the issuance of such Letter of Credit. The Bank
shall issue Letters of Credit upon receipt at least two (2) Business Days prior
to the
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requested date of issuance of (i) a properly completed and duly executed LC
Application and (ii) such other documents and materials as may be required
thereunder.
(b) Terms. Each Letter of Credit shall (i) have an expiry date not
later than 360 days after the date of issuance thereof and in any case not later
than the Termination Date, (ii) be issued solely for a general business purpose
of the Borrower and (iii) shall have such additional terms and provisions as the
Bank shall deem appropriate in connection with the particular circumstances
under which such Letter of Credit is being issued. Notwithstanding and in
addition to the foregoing, all of the terms and conditions set forth in the
related LC Application shall apply to each Letter of Credit, which are
incorporated herein by reference; provided, that in case of any conflict between
the terms of such LC Application and this Agreement, the terms of this Agreement
shall govern. Letters of Credit will not be issued to provide credit support or
liquidity support for any security or borrowing.
(c) Reimbursement of Drawings under Letters of Credit. The Borrower
shall pay to the Bank at the place and in the manner specified in Section 2.17
hereof the amount to be paid in respect of each drawing under, or prefunding of,
a Letter of Credit on the date of such drawing or prefunding (each a "Due
Date"). Each unpaid drawing under a Letter of Credit shall bear interest at the
Base Rate from and including the Due Date thereof to and including the second
Business Day following such Due Date (counting the Due Date as the first day),
and thereafter shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the rate specified in Section 2.18 hereof;
provided, that the Borrower may direct that any drawing be paid in whole or in
part from the proceeds of an Advance.
(d) Borrower's Obligations Absolute. The obligation of the Borrower to
reimburse the Bank for each drawing under a Letter of Credit shall be
irrevocable, shall not be subject to any qualification or exception whatsoever
and shall be binding in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any Letter of Credit;
(ii) the existence of any claim set-off, defense or right
which the Borrower may have at any time against a beneficiary of any
Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), the Bank or any
other Person, whether in connection with this Agreement or any Letter
of Credit, the transactions contemplated herein or any unrelated
transactions;
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement;
(v) any failure of the Bank to provide notice to the Borrower
of any drawing under any Letter of Credit; or
(vi) the occurrence and continuation of any Default or any
Event of Default.
(e) Limitation of Liability. As between the Borrower and the Bank, the
Borrower assumes all risks of the acts and omissions of, or misuse of, the
Letter of Credit by the beneficiary of such Letter of Credit. Without limiting
the foregoing, the Bank shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any draft, demand, application or other documents submitted by any
party in connection with any Letter of Credit or any LC Application, even if
such document should in fact prove to be in any and all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(ii) the validity, genuineness or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits hereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason;
(iii) failure of the beneficiary of a Letter of Credit to comply fully
with any agreement or other transaction with the Borrower;
(iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages by mail, cable, telegraph, telex or otherwise, whether
or not they may be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any document
required to make a drawing under any Letter of Credit or with respect to the
proceeds thereof;
(vii) the misapplication by the beneficiary of a Letter of Credit or of
the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of the
Bank, including, without limitation, any act or omission, rightfully or
wrongfully, of any present or future governmental authority.
None of the above circumstances shall affect, impair or prevent the vesting of
any of the Bank's rights or powers hereunder.
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ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. Conditions Precedent. The obligation of the Bank to make
Advances hereunder and under the Revolving Credit Note and to issue Letters of
Credit is subject to the Bank having received the following documents, each
dated as of the Agreement Date, in form and substance satisfactory to the Bank:
(a) A duly executed Agreement.
(b) A duly executed Revolving Credit Note.
(c) A duly executed Funds Transfer Agreement.
(d) Copies of the articles of incorporation of the Borrower,
certified as true and correct by the Georgia Secretary of State, and a
certificate from the Georgia Secretary of State certifying the Borrower's
existence as a corporation in such State.
(e) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the by-laws of the Borrower attached thereto, the
resolutions of the Board of Directors of the Borrower in form and content
satisfactory to the Bank attached thereto and the names and true signatures of
the officers of the Borrower authorized to execute this Agreement, the Revolving
Credit Note and the other Loan Documents.
(f) A favorable written opinion of Long Aldridge & Norman,
counsel to the Borrower, in form and content reasonably satisfactory to the Bank
and addressed to the Bank.
(g) All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all Loan Documents
and other documents incident thereto, or delivered in connection therewith,
shall be satisfactory in form and substance to the Bank.
SECTION 3.2. Condition Precedent to Initial Advance, At the time of the
making by the Bank of the initial Advance hereunder, the following statements
shall be true (and the giving by the Borrower of the Notice of Borrowing in
accordance with Section 2.3 hereof with respect to such Advance and the
acceptance by the Borrower of the proceeds of such Advance shall constitute a
representation and warranty by the Borrower that on the date of the initial
Advance, before and after giving effect thereto and to the application of the
proceeds therefrom, such statements are true):
(i) The representations and warranties contained in Article IV
hereof are true and correct on and as of the date of such Advance as though made
on and as of such date, other than those representations and warranties that, by
their terms, relate expressly to an earlier date, and
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(ii) No Default or Event of Default exists or would result
from such Advance or from the application of the proceeds therefrom.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
SECTION 4.1. Corporate Organization and Authority. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia and has full corporate power and authority to own and
operate its property, to carry on its business as now conducted and to enter
into this Agreement and the other Loan Documents.
SECTION 4.2. Qualification to Do Business. The Borrower is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in each jurisdiction where the nature of its business or the
character of its properties makes such qualification or licensing necessary,
except for such jurisdictions where the failure to be so qualified or licensed
will not have a Material Adverse Effect on the Borrower. A list of those
jurisdictions wherein the Borrower is qualified to do business is set forth in
the attached Schedule 4.4.
SECTION 4.3. Corporate Authorization: Enforceability. The Agreement and
the other Loan Documents have been duly authorized on the part of the Borrower
and constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their terms, except as enforceability of any of
them may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or secured parties or by general
principles of equity. The execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents (i) are within the corporate powers
of the Borrower, (ii) have been duly authorized by proper corporate action and
(iii) are legal and will not result in any breach of any of the provisions of,
or constitute a default under, conflict with or result in the creation of any
Lien or encumbrance upon any property of the Borrower or any Subsidiary under
the provisions of any charter instrument, by law, loan agreement, indenture or
other agreement or instrument to which the Borrower or any Subsidiary is a party
or by which any of them or their property may be bound.
SECTION 4.4. Subsidiaries. The Borrower has no Subsidiaries except
those listed in the attached Schedule 4.4 which correctly sets forth the
percentage of the outstanding capital stock or equivalent interest of each
Subsidiary which is owned, of record or beneficially, by the Borrower and/or one
or more Subsidiaries and whether such Subsidiary is a Restricted Subsidiary.
Each Subsidiary has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization and
is duly licensed or qualified in each other jurisdiction where the nature of its
business or the character of its properties makes such qualification or
licensing necessary, except for such jurisdictions where the failure to be so
qualified or licensed
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will not have a Material Adverse Effect on such Subsidiary. A list of those
jurisdictions wherein each Subsidiary is qualified to do business is set forth
in the attached Schedule 4.4. Each Subsidiary has full corporate power and
authority and all necessary licenses and permits to own its properties and to
carry on its business as now conducted, except for such licenses and permits the
failure of which to obtain will not have a Material Adverse Effect on such
Subsidiary. The Borrower and/or one or more Subsidiaries have good and
marketable title to all of the shares it purports to own of the capital stock of
each Subsidiary, free and clear in each case of any Lien, and all such shares
have been duly issued and are fully paid and nonassessable.
SECTION 4.5. Financial Statements. The consolidated balance sheets of
the Borrower and its Subsidiaries as of December 31, 1994 and December 31, 1995,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the two years ended December 31, 1994 and December 31,
1995, certified by the Borrower's independent public accountants copies of which
have heretofore been delivered to you, were prepared in accordance with GAAP
consistently applied throughout the periods involved (except as otherwise noted
therein) and present fairly in all material respects the financial condition and
results of operations and cash flows of the Borrower and its Subsidiaries for
and as of the end of each of such years.
SECTION 4.6 No Contingent Liabilities or Adverse Changes. Neither the
Borrower nor any of its Subsidiaries has any contingent liabilities which are
material to the Borrower or any of its Subsidiaries other than as described in
the financial statements referred to in Section 4.5 hereof Since December 31,
1995, there have been no material adverse changes in the condition, financial or
other, of the Borrower or any of its Subsidiaries.
SECTION 4.7. No Pending Litigation or Proceedings. There are no
actions, suits or proceedings pending or, to the best knowledge of the Borrower
and its Subsidiaries, affecting or threatened against the Borrower or any of its
Subsidiaries, at law or in equity or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality or arbitration board or tribunal, domestic or foreign, which
might result, either individually or collectively, in any Material Adverse
Effect on the Borrower or any of its Subsidiaries or which could have a material
adverse effect on the consummation of the transactions contemplated hereby.
SECTION 4.8. Compliance with Law. (a) Neither the Borrower nor any of
its Subsidiaries is: (i) in default with respect to any order, writ, injunction
or decree of any court, governmental authority or arbitration board or tribunal
to which it is a named party; or (ii) in violation of any law, rule, regulation,
ordinance or order relating to its or their respective businesses, except for
any such violations which would not individually or in the aggregate have a
Material Adverse Effect on the Borrower or any of its Subsidiaries or which
would not individually or in the aggregate have a Material Adverse Effect on the
consummation of the transactions contemplated hereby.
(b) Neither the Borrower nor any Subsidiary is in violation of
any applicable Federal, state, or local laws, statutes, rules, regulations or
ordinances relating to public health, safety
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or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls, asbestos or urea formaldehyde, to the treatment,
storage, disposal or management of hazardous substances (including, without
limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances which violation could have
a Material Adverse Effect on the Borrower and its Subsidiaries. The Borrower
does not know of any liability of the Borrower or any Subsidiary under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.) which might
result, individually or in the aggregate, in a Material Adverse Effect.
(c) Neither the Borrower, any Subsidiary nor any Affiliate of the
Borrower is an entity defined as a "designated national" within the meaning
of the Foreign Assets Control Regulations, 31 C. F. R. Chapter V, or for any
other reason, subject to any restriction or prohibition under, or is in
violation of, any Federal statute or Presidential Executive Order, or any rules
or regulations of any department, agency or administrative body promulgated
under any such statute or Order, concerning trade or other relations with any
foreign country or any citizen or national thereof or the ownership or operation
of any property.
SECTION 4.9. Pension Reform Act of 1974. Neither the execution and
delivery of this Agreement and the other Loan Documents nor the consummation of
any of the transactions contemplated thereunder is or will constitute a
"prohibited transaction" within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Internal
Revenue Service has issued a determination that each "employee pension benefit
plan," as defined in Section 3 of ERISA (a "Plan"), established, maintained or
contributed to by the Borrower or any Subsidiary (except for any Plan which is
unfunded and maintained primarily for the purpose of providing deferred
compensation and supplemental retirement benefits for a select group of
management or highly compensated employees) is qualified under Section 401(a)
and related provisions of the Code and that each related bug or custodial
account is exempt from taxation under Section 501(a) of the Code. All Plans of
the Borrower or any Subsidiary comply in all material respects with ERISA and
other applicable laws. There exist with respect to the Borrower or any
Subsidiary no "multiemployer plans," as defined in Section 4001(a)(3) of ERISA,
for which a material withdrawal or termination liability may be incurred. There
exist with respect to all Plans or trusts established or maintained by the
Borrower or any Subsidiary: (i) no material accumulated funding deficiency
within the meaning of ERISA; (ii) no termination of any Plan or trust which
would result in any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") or any "reportable event," as that term is defined in
ERISA, which is likely to constitute grounds for termination of any Plan or
trust by the PBGC; and (iii) no "prohibited transaction," as that term is
defined in ERISA, which is likely to subject any Plan, trust or party dealing
with any such Plan or trust to any material tax or penalty on prohibited
transactions imposed by Section 4975 of the Code. As of the last valuation
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date, the present value of all benefits vested under all Plans did not exceed
the value of the assets of the Plans allocable to such vested benefits by an
amount greater than $500,000 in the aggregate.
SECTION 4.10. Title to Properties. The Borrower and each of its
Subsidiaries have (a) good and marketable title in fee simple under applicable
law to all the real property owned by each of them and (b) good title to all of
the other property it purports to own, including that reflected in the
consolidated balance sheet delivered pursuant to Section 4.5 hereof or
subsequently acquired by the Borrower or any Subsidiary (except as sold or
otherwise disposed of in the ordinary course of business), in each case free
from all Liens of any kind, except (i) those securing Indebtedness for borrowed
money of the Borrower or a Subsidiary which are listed in the attached Schedule
4.10 and (ii) other Liens permitted pursuant to Section 5.10(a), (c), or (d)
hereof; provided, that any such Liens described in clauses (a) and (b) above do
not, individually or in the aggregate, materially impair the use or value of the
property in the operation of the business of the Borrower and its Subsidiaries,
taken as a whole.
SECTION 4.11. Leases. The Borrower and each Subsidiary enjoy peaceful
and undisturbed possession under all leases under which the Borrower or such
Subsidiary is a lessee or is operating. None of such leases contains any
provision which might materially and adversely affect the operation or use of
the property so leased. All of such leases are valid and subsisting and none of
them is in default.
SECTION 4.12. Franchises, Patents, Trademarks and Other Rights. The
Borrower and each Subsidiary have all franchises, permits, licenses and other
authority as are necessary to enable them to carry on their respective
businesses as now being conducted and as proposed to be conducted, and none of
them is in default under any of such franchises, permits, licenses or other
authority. The Borrower and each Subsidiary own or possess all patents,
trademarks, service marks, trade names, copyrights, licenses and rights with
respect to the foregoing necessary for the present conduct of their businesses,
without any known conflict with the rights of others.
SECTION 4.13. No Defaults. No event has occurred and no condition
exists which upon the execution and delivery of this Agreement and the other
Loan Documents would constitute a Default or an Event of Default under this
Agreement. Neither the Borrower nor any Subsidiary is in default, and no event
has occurred which with notice or passage of time or both would constitute a
default, under any charter instrument, by law, loan agreement, indenture or
other material agreement or instrument to which it is a party or by which it or
its property may be bound nor has the Borrower or any Subsidiary obtained any
waivers with respect to any such defaults under any loan agreements or other
material agreements or instruments, except such waivers copies of which are
attached as Schedule 4.13 hereto.
SECTION 4.14. Governmental Consent. Neither the nature of the Borrower
or any of its Subsidiaries, nor their respective businesses or properties, nor
any relationship between the Borrower or any of its Subsidiaries and any other
Person, nor any circumstances in connection with the execution and delivery of
this Agreement and the other Loan Documents is such as to require a
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consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority in connection with the execution and delivery
of this Agreement and the other Loan Documents or compliance with the terms
hereof or thereof.
SECTION 4.15. Taxes. (a) All tax returns required to be filed by the
Borrower or any Subsidiary in any jurisdiction have in fact been filed, and all
taxes' assessments, fees and other governmental charges upon the Borrower or any
Subsidiary, or upon any of their respective properties, income or franchises,
which are due and payable, have been paid timely or within appropriate extension
periods. The Borrower does not know of any proposed additional tax assessment
against it or of any basis for one which would have a Material Adverse Effect on
the Borrower and its Subsidiaries taken as a whole.
(b) The respective Federal income tax liabilities of the
Borrower and its Subsidiaries have been finally determined by the Internal
Revenue Service and satisfied for all taxable years to and including the taxable
year ended December 31, 1992, and no material controversy in respect of
additional income taxes due since said date is pending or to the knowledge of
the Borrower threatened. The consolidated provisions for taxes on the books of
the Borrower and each Subsidiary are adequate for all open years and for the
current fiscal period.
SECTION 4.16. Status under Certain Statutes. Neither the Borrower nor
any Subsidiary is: (a) a "public utility company" or a "holding company," or an
"affiliate" or a "subsidiary company" of a "holding company," or an "affiliate"
of such a "subsidiary company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (b) a "public utility" as defined in
the Federal Power Act, as amended, or (c) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
SECTION 4.17. Effect of Other Instruments. Neither the Borrower nor any
Subsidiary is bound by any agreement or instrument or subject to any charter or
other corporate restriction which has or might have (i) a Material Adverse
Effect on the Borrower or any Subsidiary or (ii) a material adverse effect on
the Borrower's ability to perform its obligations under this Agreement and the
other Loan Documents.
SECTION 4.18. Use of Proceeds. The Borrower will apply the proceeds of
the Advances for working capital and for general corporate purposes. None of the
transactions contemplated in this Agreement (including, without limitation
thereof, the use of the proceeds of the Advances) will violate or result in a
violation of Section 7 of the Exchange Act or any regulations issued pursuant
thereto, including, without limitation, Regulations G,T,U and X of the Board of
Governors of the Federal Reserve System (12 C.F.R., Chapter II). Neither the
Borrower nor any Subsidiary owns or intends to carry or purchase any "margin
stock" within the meaning of Regulation U, and none of the proceeds from any
Advance will be used to purchase or carry or refinance any borrowing the
proceeds of which were used to purchase or carry any "margin stock" or "margin
security" in violation of Regulation G,T,U or X.
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SECTION 4.19. Condition of Property. All of the facilities of the
Borrower and each of its Subsidiaries are in sound operating condition and
repair, except for facilities being repaired in the ordinary course of business.
SECTION 4.20. Books and Records. The Borrower and each of its
Subsidiaries maintain books, records and accounts which, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of their
respective assets, and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in accordance with GAAP and (ii) to maintain accountability for
assets; (c) access to assets is permitted only in accordance with management's
general or specific authorization; and (d) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
SECTION 4.21. Full Disclosure. Neither the financial statements
referred to in Section 4.05 hereof nor this Agreement, nor any other statement
or document furnished by the Borrower to the Bank in connection with the
transactions contemplated by this, Agreement, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact known, or which,
with reasonable diligence would be known, by the Borrower which the Borrower has
not disclosed to the Bank in writing which has or, so far as the Borrower can
now foresee, might have (i) a Material Adverse Effect on the Borrower or any of
its Subsidiaries or (ii) a material adverse effect on the ability of the
Borrower to perform its undertakings under and in respect of this Agreement and
the other Loan Documents.
SECTION 4.22. Indebtedness. The Borrower and the Restricted
Subsidiaries have no Indebtedness outstanding as of the Agreement Date other
than as set forth on the attached Schedule 4.22.
SECTION 4.23. Solvency. The Borrower and its Subsidiaries,
individually, and the Borrower and its Subsidiaries, taken as a whole on a
consolidated basis, are Solvent. For purposes hereof, "Solvent" shall mean, with
respect to any Person on any date of determination, that on such date: (a) to
the best of such Person's knowledge, the sum of such Person's assets, at a fair
valuation, exceeds its debts; (b) such Person has not incurred, has not intended
to incur and does not believe that it will incur debts beyond its ability to pay
such debts as such debts mature; and (c) such Person's assets do not constitute
unreasonably small capital with which to conduct its business. For purposes
hereof debt means any liability on a "claim" and "claim" means: (i) right to
payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured; or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
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ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Revolving Credit Note remains unpaid or the Commitment
remains outstanding hereunder or any Letter of Credit remains outstanding, the
Borrower will, unless the Bank otherwise consents in writing:
SECTION 5. 1. Corporate Existence. The Borrower will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and all licenses and permits necessary
to the proper conduct of its business and will use, and will cause each
Subsidiary to use, its best efforts to maintain and preserve all of its rights,
powers, privileges and franchises which in the good faith opinion of the Board
of Directors of the Borrower continue to be advantageous to the Borrower and its
Subsidiaries; provided, that the foregoing shall not prevent any transaction
permitted by Section 5.11 hereof.
SECTION 5.2. Insurance. The Borrower will maintain, and will cause each
Subsidiary to maintain, insurance coverage in such forms and amounts and against
such risks, including without limitation insurance with respect to its property,
the operation thereof and its business against casualties, contingencies and
risks and insurance against loss or damage from such hazard and risks to the
person or property of others, as are customary for corporations similarly
situated and engaged in the same or a similar business and owning and operating
similar properties. All such insurance shall be carried with financially sound
and reputable insurers.
SECTION 5.3. Taxes, Claims for Labor and Materials, and Compliance with
Laws. The Borrower will promptly pay and discharge when due, and will cause each
Subsidiary promptly to pay and discharge when due, all taxes, assessments and
governmental charges or levies imposed upon the Borrower or such Subsidiary,
respectively, or upon or in respect of all or any part of the property or
business of the Borrower or such Subsidiary or upon properties leased by it (but
only to the extent required to do so by the applicable lease), all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien or
charge upon any property of the Borrower or such Subsidiary; provided, that the
Borrower or such Subsidiary shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if (a) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Borrower or such Subsidiary and any material interference with the use
thereof by the Borrower or such Subsidiary and (b) the Borrower or such
Subsidiary shall set aside on its books reserves deemed by it to be adequate
with respect thereto. The Borrower will comply and will cause each Subsidiary to
comply with all laws, ordinances and governmental rules and regulations to which
it is subject and the failure with which to comply could result in a Material
Adverse Effect, including without limitation, the Occupational Safety and Health
Act of 1970, ERISA and all laws,
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ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions.
SECTION 5.4. Maintenance Of Properties. The Borrower will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties which are used or useful in the conduct of its business
(whether owned in fee or a leasehold interest) in good repair and working order
and from time to time will make all necessary repairs, replacements, renewals
and additions so that at all times the efficiency thereof shall be maintained.
SECTION 5.5. Maintenance of Records. The Borrower will keep, and will
cause each Subsidiary to keep, at all times proper books of record and account
in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Borrower or
such Subsidiary, in accordance with GAAP consistently applied throughout the
period involved (except for such changes as are disclosed in such financial
statements or in the notes thereto and concurred in by the independent certified
public accountants), and the Borrower will, and will cause each Subsidiary to,
provide reasonable protection against loss or damage to such books of record and
account.
SECTION 5.6. Nature of Business. Neither the Borrower nor any of its
Subsidiaries will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Borrower and its Subsidiaries
on the date of this Agreement.
SECTION 5.7. Net Worth. The Borrower will maintain Consolidated Net
Worth as of the end of each fiscal quarter at an amount not less than the sum of
(a) $95,000,000, plus (b) 25% of Consolidated Net Income, calculated on a
cumulative basis, for each of the fiscal years and each interim fiscal quarter
of the Borrower commencing after September 30, 1993; provided, that for purposes
of this Section 5.7, Consolidated Net Losses in any such fiscal year or interim
fiscal quarter shall not be applied to reduce such accumulated Consolidated Net
Income.
SECTION 5.8. Funded Debt. The Borrower will not, at any time, permit
Consolidated Funded Debt to exceed 50% of Consolidated Net Capitalization.
SECTION 5.9. Subsidiary Funded Debt. The Borrower will not permit any
Restricted Subsidiary to create, assume, incur, guarantee or permit to exist any
Funded Debt other than: (a) Funded Debt of any Restricted Subsidiary owing to
the Borrower or to other Restricted Subsidiaries; (b) existing Funded Debt
described in Schedule 4.22 attached hereto; and (c) Funded Debt which, after
giving effect thereto and to the application of the proceeds thereof, would not
result in (i) the aggregate outstanding principal amount of Funded Debt issued
by Restricted Subsidiaries (excluding Funded Debt incurred or existing pursuant
to clauses (a) and (b) of this Section 5.9) plus (ii) Indebtedness secured by
Liens incurred pursuant to Section 5.10(i), to exceed 15% of Consolidated
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Tangible Net Worth; provided, that the Borrower shall at all times remain in
compliance with Section 5.8.
SECTION 5.10. Limitations on Liens. The Borrower will not, and will not
permit any Restricted Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien of any kind on its or their property or assets, whether
now owned or hereafter acquired, or upon any income or profits therefrom, or
transfer any property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its or their general creditors, or
acquire or agree to acquire any property or assets upon conditional sales
agreements or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental
charges or levies; provided, that payment thereof is not at the time
required by Section 5.3;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Borrower or a Restricted Subsidiary
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured;
(c) any mechanic's, materialmen's, warehousemen's, supplier's
or vendor's lien or right in respect thereof, and deposits, pledges or
liens to secure statutory obligations or surety bonds or other Liens of
like general nature incurred in the ordinary course of business and not
in connection with the borrowing of money; provided that in each case
the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings that will
prevent a forfeiture or sale of any property and an adequate book
reserve shall have been set aside with respect thereto;
(d) exceptions in the nature of easements, rights of others
for rights-of-way, utilities and other similar purposes, or zoning or
other restrictions as to the use of real properties which customarily
exist on properties of such kind and which do not materially impair
their use and/or value in the operation of the business of the Borrower
and its Restricted Subsidiaries;
(e) Liens existing as of the date hereof securing Indebtedness
of the Borrower or any Restricted Subsidiary outstanding on such date,
which are listed in the attached Schedule 4.22;
(f) Liens incurred after the date hereof given to secure the
payment of the purchase price incurred in connection with the
acquisition of tangible personal property or real property, including
Liens existing on such property at the time of the acquisition thereof
by the Borrower or a Restricted Subsidiary; provided, that (i) the Lien
shall attach solely to the property acquired or purchased, (ii) at the
time of acquisition of such property, the aggregate amount remaining
unpaid on all Indebtedness secured by Liens on such property
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whether or not assumed by the Borrower or a Restricted Subsidiary shall
not exceed an amount equal to 100% of the lesser of the total purchase
price or fair market value at the time of acquisition of such property
(as determined in good faith by the Board of Directors of the
Borrower), or in the case of any such Lien created or incurred in
connection with any issue of industrial development bonds or pollution
control financing 100% of the lesser of the total purchase price or
fair market value at the time of such issuance of the projects or
facilities being financed or, in the case of any Capitalized Lease,
100% of the total purchase price or fair market value at the time of
entering into the Capitalized Lease of the property subject to such
Capitalized Lease, (iii) such Lien is incurred with respect to such
fixed assets at the time of, or within 90 days after, such acquisition;
and (iv) the aggregate amount of Indebtedness secured by Liens pursuant
to this paragraph (f) does not exceed 20% of Consolidated Tangible Net
Worth;
(g) Liens resulting from extensions, renewals, refinancings
and refundings of Indebtedness secured by Liens permitted by paragraphs
(e) and (f) above; provided, that there is no increase in the
outstanding principal amount of Indebtedness secured thereby and any
new Liens attached only to the same property theretofore subsequent to
such earlier Lien;
(h) Liens securing Indebtedness owed by a Restricted
Subsidiary to the Borrower or to another Restricted Subsidiary; and
(i) Liens which are not permitted by the foregoing paragraphs
(a) through (h) above, and which are incurred to secure Indebtedness;
provided, that (y) the aggregate principal amount of Indebtedness so
secured and incurred pursuant to this paragraph (i) plus (z) Subsidiary
Funded Debt incurred pursuant to Section 5.9(c) shall not, in the
aggregate, exceed 15% of Consolidated Tangible Net Worth.
SECTION 5.11. Merger or Consolidation. The Borrower will not, and will
not permit any Restricted Subsidiary to, merge or consolidate with any other
Person, except that
(a) The Borrower may consolidate with or merge into any Person or
permit any other Person to merge into it, provided that immediately after giving
effect thereto,
(i) The Borrower is the successor corporation or, if the
Borrower is not the successor corporation, the successor corporation is a
corporation organized under the laws of a state of the United States of America
or the District of Columbia and shall expressly assume in writing the Borrower's
obligations under this Agreement and the other Loan Documents;
(ii) There shall exist no Default or Event of Default; and
(iii) The Borrower or such successor corporation could incur
at least $1.00 of additional Funded Debt pursuant to Section 5.8 hereof.
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(b) Any Restricted Subsidiary may (i) merge into the Borrower or
another Wholly Owned Restricted Subsidiary or (ii) sell, transfer or lease all
or any part of its assets to the Borrower or to another Wholly-Owned Restricted
Subsidiary or (iii) merge into any Person which, as a result of such merger,
concurrently becomes a Restricted Subsidiary; provided, that in each such
instance there shall exist no Default or Event of Default.
(c) The Borrower will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class (including as "stock" for the purposes of
this Section 5.11, any warrants, rights or options to purchase or otherwise
acquire stock or other securities exchangeable for or convertible into stock) of
such Restricted Subsidiary to any Person other than the Borrower or a
Wholly-Owned Restricted Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous issuance of
stock to the Borrower and/or a Restricted Subsidiary whereby the Borrower and/or
such Restricted Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary.
(d) The Borrower will not sell, transfer or otherwise dispose of any
shares of stock in any Restricted Subsidiary (except to qualify directors) or
any Indebtedness of any Restricted Subsidiary, and will not permit any
Subsidiary to sell, transfer or otherwise dispose of (except to the Borrower or
a Wholly-Owned Restricted Subsidiary) any shares of stock or any Indebtedness of
any other Restricted Subsidiary, unless:
(i) simultaneously with such sale, transfer, or disposition,
all shares of stock and all Indebtedness of such Restricted Subsidiary at the
time owned by the Borrower and by every other Restricted Subsidiary shall be
sold, transferred or disposed of as an entirety;
(ii) the Board of Directors of the Borrower shall have
determined, as evidenced by a resolution thereof, that the retention of such
stock and Indebtedness is no longer in the best interests of the Borrower;
(iii) such stock and Indebtedness is sold, transferred or
otherwise disposed of to a Person, for cash consideration and on terms
reasonably deemed by the Board of Directors to be adequate and satisfactory;
(iv) the Subsidiary being disposed of shall not have any
continuing investment in the Borrower or any other Restricted Subsidiary not
being simultaneously disposed of; and
(v) such sale or other disposition of the assets of the
Borrower and its Subsidiaries is permitted by Section 5.12 hereof.
SECTION 5.12. Sale of Assets. During any fiscal year, the Borrower will
not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or
otherwise dispose of any assets, in one or a series of transactions, other than
in the ordinary course of business, to any Person, other than the Borrower or a
Wholly-Owned Restricted Subsidiary (collectively a "Disposition"), if after
giving
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effect to such Disposition, (i) the aggregate book value of all Dispositions
made during such fiscal year would exceed twenty percent (20%) of Consolidated
Tangible Net Worth as of the end of the immediately preceding fiscal year or
(ii) the Consolidated Net Income derived from all such assets sold, leased,
transferred or otherwise disposed of contributed in excess of 20% of
Consolidated Net Income determined as of the end of the Borrower's preceding
fiscal year. Notwithstanding the foregoing, the Borrower may make a Disposition
in excess of the aforesaid percentages if the Borrower shall, within 180 days
after such Disposition, use the net proceeds from the sale of such assets to
invest in other tangible property and of at least equivalent value for use in
the business of the Borrower and its Restricted Subsidiaries. For purposes of
this Section 5.12, sales of or realization on accounts receivable which have
been delinquent for no less than 90 days shall not constitute Dispositions;
provided, that such sales or realization shall not exceed, in the aggregate, 10%
of Consolidated Net Income as of the end of the immediately preceding fiscal
year.
SECTION 5.13. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, enter into or be a party to, any transaction
or arrangement with any Affiliate (including without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except in the ordinary course of and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person other
than an Affiliate.
SECTION 5.14. ERISA. (a) The Borrower agrees that all assumptions and
methods used to determine the actuarial valuation of employee benefits, both
vested and unvested, under any Plan of the Borrower or any Subsidiary, and each
such Plan, whether now or hereafter existing, will comply in all material
respects with ERISA and other applicable laws.
(b) The Borrower will not at any time permit any Plan established,
maintained or contributed to by it or any Subsidiary or "affiliate" (as defined
in Section 407(d)(7) of ERISA) to:
(i) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term
is defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to
result in the imposition of a Lien on the property of the Borrower or any
Subsidiary pursuant to Section 4068 of ERISA, if and to the extent such
termination is within the control of the Borrower;
if the event or condition described in (i), (ii) or (iii) above is likely to
subject the Borrower or any Subsidiary or "affiliate" (as defined in Section
407(d)(7) of ERISA) to a liability which, in the aggregate, is material in
relation to the business, operations, property or condition, financial or other,
of the Borrower or any of its Subsidiaries.
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(c) Upon the request of the Bank, the Borrower will furnish a copy of
the annual report of each Plan (Form 5500) required to be filed with the
Internal Revenue Service. Copies of annual reports shall be delivered no later
than 30 days after the later of the date such report has been filed with the
Internal Revenue Service or the date the copy is requested.
SECTION 5.15. Financial Reports and Rights of Inspection. The Borrower
will furnish by overnight courier to the Bank (in duplicate if so requested):
(a) Quarterly Statements. As soon as available and in any event within
45 days after the end of each of the first three quarterly fiscal periods of
each fiscal year, copies of.
(i) consolidated balance sheets of the Borrower and its
Restricted Subsidiaries as of the close of such quarter setting forth in
comparative form the figures for the corresponding period of the preceding
fiscal year;
(ii) consolidated statements of income and cash flows of the
Borrower and its Restricted Subsidiaries for such quarterly period and for the
portion of the fiscal year ending with such quarter, setting forth in
comparative form the figures for the corresponding periods of the preceding
fiscal year; and
(iii) consolidated statements of changes in stockholder's
equity of the Borrower and its Restricted Subsidiaries for the portion of the
fiscal year ending with such quarter, setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail prepared in accordance with GAAP consistently applied (except
for such changes as are disclosed in such financial statements or in the notes
thereto and concurred in by the Borrower's independent certified public
accountants) subject to normal year-end adjustments and certified as complete
and correct and as fairly presenting in all material respects the financial
condition and results from operations of the Borrower and its Restricted
Subsidiaries by an authorized financial officer of the Borrower;
(b) Annual Statements. As soon as available and in any event within 120
days after the last day of each fiscal year of the Borrower, copies of:
(i) consolidated balance sheets of the Borrower and its
Restricted Subsidiaries as of the end of such fiscal year; and
(ii) consolidated statements of income, cash flows and changes
in stockholder's equity of the Borrower and its Restricted Subsidiaries for such
fiscal year, in each case setting forth in comparative form the consolidated and
consolidating figures for the preceding fiscal year, all in reasonable detail
and accompanied by an opinion thereon (which shall not be qualified by reasons
of any limitation as to scope) of Deloitte & Touche, or any other firm of
independent public accountants of recognized national standing selected by the
Borrower, to the effect that the consolidated financial statements have been
prepared in accordance with GAAP consistently applied
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(except for noted changes in application in which such accountants concur) and
present fairly in all material respects the financial condition of the Borrower
and its Restricted Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(c) Summary Consolidating Information. On the dates that the Borrower
provides the quarterly and annual statements to the Bank required by paragraphs
(a) and (b) above, the Borrower shall also provide to the Bank summary
consolidating financial information for the Borrower and each Restricted
Subsidiary (whether now or hereafter designated) in the form attached hereto as
Exhibit C;
(d) Audit Reports. Promptly, upon receipt thereof, delivered by
overnight courier, one copy of each interim or special audit made by independent
accountants of the books of the Borrower or any Restricted Subsidiary, and the
Borrower's or such Subsidiary's written response, if any, thereto;
(e) SEC and Other Reports. Promptly upon their becoming available,
delivered by overnight courier, one copy of each report, and any registration
statement or prospectus filed by the Borrower or any Restricted Subsidiary with
any securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which the
Borrower or any of its Subsidiaries is a party, issued by any governmental
agency, Federal or state, having jurisdiction over the Borrower or any of its
Restricted Subsidiaries;
(f) Materials Sent to Stockholders. Promptly upon their becoming
available, delivered by overnight courier, one copy of each financial statement,
report, notice or proxy statement sent by the Borrower or any Restricted
Subsidiary to stockholders generally;
(g) Officers' Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of an authorized financial officer of the
Borrower, delivered by overnight courier, stating that he has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish whether the
Borrower was in compliance with the requirements of Section 5.7 through Section
5.12, inclusive, at the end of the period covered by the financial statements
then being finished, and (ii) whether there existed as of the date of such
financial statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the period
covered by such financial statements any Default or Event of Default and, if any
such condition or event existed during such period or exists on the date of the
certificate, specifying the nature and period of existence thereof and the
action the Borrower has taken, is taking or proposes to take with respect
thereto;
(h) Accountant's Certificate. Within the period provided in paragraph
(b) above, a certificate of the accountants who render an opinion with respect
to such financial statements,
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delivered by overnight courier, stating that they have reviewed this Agreement
and stating further, whether in making their audit, such accountants have become
aware of any Default or Event of Default under any of the terms or provisions of
this Agreement insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof,
(i) Litigation. Within 15 days after the Borrower obtains knowledge
thereof, notice. delivered by overnight courier, of any pending or threatened
litigation not fully covered by insurance or as to which an insurance company
has not accepted liability or governmental proceeding against the Borrower or
any Restricted Subsidiary in which the damages sought exceed $5,000,000,
individually or in the aggregate, or which might otherwise materially adversely
affect the business, operations or condition, financial or other, of the
Borrower or any of its Restricted Subsidiaries: and
(j) Requested Information; Inspections; Confidentiality. (i) With
reasonable promptness, such other data and information as the Bank may
reasonably request.
(ii) Without limiting the foregoing, the Borrower will permit
the Bank (or such Persons as the Bank may designate), to visit and inspect any
of the properties of the Borrower or any Subsidiary, to examine all their books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Borrower authorizes said accountants to discuss with the Bank
the finances and affairs of the Borrower and its Subsidiaries), all at such
reasonable times and as often as may be reasonably requested. The Borrower shall
not be required to pay or reimburse the Bank or its agents for expenses which
the Bank or its agents may incur in connection with any such visitation or
inspection so long as no Default or Event of Default shall have occurred and be
continuing.
(iii) The Bank agrees to treat any information obtained by it
pursuant to this Section 5.15 which is marked and otherwise treated as
confidential by the Borrower as confidential; provided, that nothing herein
contained shall limit or impair the right or obligation of the Bank to disclose
such information: (i) to its directors, auditors, attorneys, employees or agents
who would have access to such information in the normal course of the
performance of such Person's duties, (ii) when required by any law, ordinance or
governmental order, regulation, rule, policy, investigation or any regulatory
authority request, (iii) as may be required in any report, statement or
testimony submitted to any municipal, state, provincial or federal regulatory
body having or claiming to have jurisdiction over the Bank, (iv) in connection
with the enforcement of the terms and conditions of this Agreement and the other
Loan Documents, (v) which is publicly available or readily ascertainable from
public sources, or which is received by the Bank from a third Person who or
which is not bound to keep the same confidential, (vi) in connection with any
proceeding, case or matter pending (or on its face purported to be pending)
before any court, tribunal, arbitration board or any governmental agency,
commission, authority, board or similar entity or (vii) to the extent necessary
in connection with any assignment of or participation in the Bank's Commitment
and its Revolving Credit Note to which the Borrower has consented in accordance
with Section 7.9 hereof.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
(a) The Borrower shall fail to pay when due (i) any principal on the
Revolving Credit Note or any drawing under any Letter of Credit or (ii) any
interest due on the Revolving Credit Note or any other amount payable hereunder
or under any of the other Loan Documents and such failure continues for more
than five (5) Business Days; or
(b) Default shall be made in the payment of the principal of or
interest or premium on Indebtedness of the Borrower or any Restricted Subsidiary
aggregating in excess of $2,000,000, as and when the same shall become due and
payable by the lapse of time, by declaration, by call for redemption or
otherwise, and such default shall continue beyond the period of grace, if any,
allowed with respect thereto: or
(c) Default or the happening of any event shall occur under any
indentures, agreements, or other instruments under which any Indebtedness of the
Borrower or any Restricted Subsidiary aggregating in excess of $2,000,000 may be
issued and such default or event shall continue for a period of time sufficient
to permit the acceleration of the maturity of Indebtedness of the Borrower or
any Restricted Subsidiary outstanding thereunder; or the sums due thereunder
shall have been accelerated and such acceleration shall not have been annulled
or rescinded; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.1 and Sections 5.7 through 5.12,
inclusive; or
(e) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 calendar days after
such default shall have become known to any officer of the Borrower; or
(f) Any representation or warranty made by the Borrower herein, or made
by the Borrower in any statement or certificate furnished by the Borrower in
connection with the execution and delivery of this Agreement or furnished by the
Borrower pursuant hereto, is untrue as of the date of such execution and
delivery or making thereof, or
(g) Any judgment, writ or warrant of attachment or any similar process
in an aggregate amount in excess of $2,000,000 shall be entered or filed against
the Borrower or any Restricted Subsidiary or against any property or assets of
either and remain unpaid, unvacated, unbonded or unstayed (through appeal or
otherwise) for a period of 30 days after the Borrower receives notice thereof,
or
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(h) The Borrower or any Subsidiary shall incur a "Distress Termination"
(as defined in Title IV of ERISA) of any Plan or any trust created thereunder
which results in material liability to the PBGC, the PBGC shall institute
proceedings to terminate any Plan or any trust created thereunder, or a trustee
shall be appointed by a United States District Court pursuant to Section 4042(b)
of ERISA to administer any Plan or any trust created thereunder; or
(i) The Borrower or any Restricted Subsidiary shall
(i) generally not pay its debts as they become due or admit in
writing its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or
for the adoption of an arrangement under the Federal Bankruptcy Code or any
similar applicable bankruptcy or insolvency law, as now or in the future amended
(herein collectively called "Bankruptcy Laws"), or an answer or other pleading
admitting or failing to deny the material allegations of such a petition or
seeking, consenting to or acquiescing in relief provided for under the
Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property;
(v) be subject to the entry of a court order, which shall not
be vacated, set aside or stayed within 45 days from the date of entry,
appointing a receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(vi) be subject to the institution against it of bankruptcy,
reorganization, arrangement or insolvency proceedings, or other proceedings
pursuant to the Bankruptcy Laws or any other proceedings for judicial
modification or alteration of the rights of creditors, which proceedings are not
dismissed within 60 days after such institution or which otherwise result in the
Borrower or such Restricted Subsidiary being finally adjudicated a bankrupt or
insolvent; or
(vii) be subject to the assumption of custody or sequestration
by a court of competent jurisdiction of all or a substantial part of its
property, which custody or sequestration shall not be suspended or terminated
within 60 days from its inception; or
(j) The occurrence of a Change of Control of the Borrower; or
(k) The Borrower shall deny that it has any liability or obligation
under the Bond Guaranty or shall fail to perform its obligations under the Bond
Guaranty or the Bond Guaranty Shall for any reason cease to be in full force and
effect or shall be declared null and void or the validity or enforceability
thereof shall be contested by the Borrower, or
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(l) The occurrence and continuance of an "event of default" under the
Bond Letter of Credit Agreement.
SECTION 6.2. Remedies on Default.
(a) Upon the occurrence and during the continuance of an Event of
Default (other than an Event of Default described in Section 6.1(i), the Bank
may (i) terminate its obligations to the Borrower, including, without
limitation, all obligations to make Advances under the Commitment and to issue
Letters of Credit under the Letter of Credit Commitment, and (ii) declare the
Revolving Credit Note, including, without limitation, principal, accrued
interest and costs of collection (including, without limitation, reasonable
attorney's fees actually incurred if collected by or through an attorney-at-law
or in bankruptcy, receivership or other judicial proceedings) and all
outstanding Letters of Credit immediately due and payable, without presentment,
demand, protest or an other notice of any kind, all of which are expressly
waived.
(b) Upon the occurrence of an Event of Default under Section 6.1(i),
(i) all obligations of the Bank to the Borrower, including, without limitation,
all obligations to make Advances under the Commitment and to issue Letters of
Credit under the Letter of Credit Commitment, shall terminate automatically and
(ii) the Revolving Credit Note, including, without limitation, principal,
accrued interest and costs of collection (including, without limitation,
reasonable attorney's fees actually incurred if collected by or through an
attorney-at-law or in bankruptcy, receivership or other judicial proceedings)and
all outstanding Letters of Credit shall be immediately due and payable, without
presentment, demand, protest, or any other notice of any kind, all of which are
expressly waived.
(c) Upon the occurrence of an Event of Default and acceleration of the
Revolving Credit Note and all outstanding Letters of Credit as provided in
clause (a) or (b) above, the Bank may pursue any remedy available under this
Agreement, the Revolving Credit Note, or any other Loan Document, or available
at law or in equity, all of which shall be cumulative. The order and manner in
which the rights and remedies of the Bank under the Loan Documents and otherwise
may be exercised shall be determined by the Bank.
(d) In addition to the foregoing, upon the occurrence of an Event of
Default and acceleration of all outstanding Letters of Credit as provided in
clause (a) or (b) above, the Borrower will establish a deposit account (the
"Collateral Account") to be maintained by the Bank, and the Borrower will
promptly pay the Bank for deposit into the Collateral Account an amount equal to
the outstanding Letter of Credit Obligations. As security for the payment of the
Letter of Credit Obligations, the Borrower hereby grants, pledges and creates in
the Bank's favor a lien on all monies, instruments and securities at any time
held or acquired in the Collateral Account. The Collateral Account will at all
times be under the sole dominion and control of the Bank. The Bank will (i)
apply any funds in the Collateral Account on account of the outstanding Letter
of Credit Obligations when the same become due and payable if and to the extent
the Borrower shall fail directly to pay the same when due and (ii) after the
Termination Date and the date on which all Letters of Credit
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shall have expired and all of the Borrower's obligations to the Bank in respect
thereof shall have been paid in full, apply any proceeds remaining in the
Collateral Account first to pay any amounts due under the Revolving Credit Note
and then to refund any remaining amount to Borrower.
SECTION 6.3. Notice of Default. With respect to Events of Default or
claimed defaults the Borrower will give the following notices:
(a) The Borrower promptly, but in any event within three Business Days,
will furnish to the Bank written notice of the occurrence of a Default or an
Event of Default. Such notice shall specify the nature of such Default or Event
of Default, the period of existence thereof and what action the Borrower has
taken or is taking or proposes to take with respect thereto.
(b) If the holder of or of any other evidence of Indebtedness of the
Borrower or any Subsidiary gives any notice or takes any other action with
respect to a claimed default, the Borrower will forthwith give written notice
thereof to the Bank, describing the notice or action and the nature of the
claimed default.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. No Waiver. No delay or failure on the part of the Bank or
any holder of the Revolving Credit Note in the exercise of any right, power or
privilege granted under this Agreement or any other Loan Document, or available
at law or in equity, shall impair any such right, power or privilege or be
construed as a waiver of any Event of Default or any acquiescence therein. No
single or partial exercise of any such right, power or privilege shall preclude
the further exercise of such right, power or privilege. No waiver shall be valid
against the Bank unless made in writing and signed by the Bank, and then only to
the extent expressly specified therein.
SECTION 7.2. Notices. Unless otherwise provided herein, all notices,
requests and other communications provided for hereunder shall be in writing
(including telecopy or similar teletransmission or writing) and shall be given
at the following addresses:
(1) If to the Bank: SunTrust Bank, Atlanta
25 Park Place/Center Code 127
Atlanta, Georgia 30303
Attention: Ms. Jenna Hale
Banking Officer
Telephone: (404) 230-5427
Telecopy: (404) 588-8833
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(2) If to Borrower: American Business Products, Inc.
2100 River Edge Parkway, Suite 1200
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Telephone: (770) 953-8300
Telecopy: (770) 952-2343
Any such notice, request or other communication shall be effective (a) if given
by mail, upon the earlier of receipt or the third Business Day after such
communication is deposited in the United States mails, registered or certified,
with first class postage prepaid, addressed as aforesaid, (b) if given by
telecopy, upon receipt during regular business hours on a Business Day or if
received at any other time, on the next succeeding Business Day, or (c) if given
by any other means (including, without limitation, by air courier), when
delivered at the address specified herein during regular business hours on a
Business Day. The Borrower and the Bank may change its address for notice
purposes by notice to the other parties in the manner provided herein.
SECTION 7.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made by or furnished on
behalf of the Borrower in connection herewith shall survive the execution and
delivery of this Agreement and all other Loan Documents.
SECTION 7.4. Descriptive Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
SECTION 7.5. Severability. If any part of any provision contained in
this Agreement or in any other Loan Document shall be invalid or unenforceable
under applicable law, said part shall be ineffective to the extent of such
invalidity only, without in any way affecting the remaining parts of said
provision or the remaining provisions.
SECTION 7.6. Time is of the Essence. Time is of the essence in
interpreting and performing this Agreement and all other Loan Documents.
SECTION 7.7. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which, taken together, shall constitute one and the same instrument.
SECTION 7.8. Payment of Costs. The Borrower shall pay all costs,
expenses, taxes and fees (i) incurred by the Bank in connection with the
preparation, execution and delivery of this Agreement and all other Loan
Documents including, without limitation, the reasonable costs and expenses of
counsel (including in-house counsel) to the Bank, and any and all stamp,
intangible or other taxes that may be payable or determined in the future to be
payable in connection therewith; (ii) incurred by the Bank in connection with
administration of the Advances and the Loan
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Documents in accordance with the provisions thereof which would not be
considered in the ordinary course of business and the preparation, execution and
delivery of any waiver, amendment or consent by the Bank relating to the Loan
Documents, including, without limitation, the reasonable costs and expenses of
counsel (including in-house counsel) for the Bank; and (iii) incurred by the
Bank in enforcing the Loan Documents, including, without limitation, reasonable
costs and expenses of counsel (including in-house counsel) for the Bank.
SECTION 7.9. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the Borrower and the Bank, and their respective
successors and assigns; provided, that the Borrower shall have no right to
assign its rights or obligations hereunder to any Person. The Bank shall not
assign its rights and obligations under this Agreement, the other Loan
Documents, the Commitment or any Advances under the Revolving Credit Note or
sell participations in the Commitment or any Advances under the Revolving Credit
Note without the prior consent of the Borrower, which may be withheld for any
reason or for no reason, except that the Bank may make such assignments and
participations to (i) SunTrust Bank, Central Florida, N.A. and SunTrust Bank,
Nashville, N.A., without the consent of the Borrower and (ii) any other
"affiliate" of the Bank with the prior consent of the Borrower (which consent
will not be unreasonably withheld).
SECTION 7.10. Amendments: Consents. No amendment, modification,
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Borrower therefrom,
may in any event be effective unless in writing signed by the Bank, and then
only in the specific instance and for the specific purpose given.
SECTION 7.11 Set-Off. Upon the occurrence and during the continuation
of an Event of Default, the Borrower authorizes the Bank or any other holder of
the Revolving Credit Note, without notice or demand, to apply all deposits of
the Borrower (general or special, time or demand, provisional or final) held by
the Bank or such holder and any other Indebtedness due or to become due to the
Borrower from the Bank or such holder in satisfaction of any of the liabilities
or obligations of the Borrower under this Agreement or under any other Loan
Document. The Bank or such holder shall promptly notify the Borrower of any set
off hereunder.
SECTION 7.12. Indemnity. The Borrower agrees to protect, indemnify and
save harmless the Bank and its affiliates, shareholders, directors, officers,
employees and agents, from and against any and all (i) claims, demands and
causes of action of any nature whatsoever brought by any Person not a party to
this Agreement and arising from or related or incident to (A) this Agreement or
any other Loan Document or (B) the issuance of any Letter of Credit (including
the failure of the Bank to honor any drawing under a Letter of Credit as a
result of any act or omission of any governmental authority or any action or
nonaction taken at the Borrower's request with respect to a Letter of Credit),
(ii) costs and expenses incident to the defense of such claims, demands and
causes of action, including, without limitation, reasonable attorneys' fees, and
(iii) liabilities, judgments, settlements, penalties and assessments arising
from such claims, demands and causes of action, except in each case such claims,
costs and liabilities caused by the Bank's gross negligence or willful
misconduct. The indemnity contained in this Section shall survive the
termination of this Agreement.
39
<PAGE> 45
SECTION 7.13. Usury. It is the intent of the parties hereto not to
violate any Federal or state law, rule or regulation pertaining either to usury
or to the contracting for or charging or collecting of interest, and the
Borrower and the Bank agree that, should any provision of this Agreement or the
Revolving Credit Note, or any act performed hereunder or thereunder, violate any
such law, rule or regulation, then the excess of interest contracted for or
charged or collected over the maximum lawful rate of interest shall be applied
to the outstanding principal Indebtedness due to the Bank by the Borrower under
this Agreement and the Revolving Credit Note.
SECTION 7.14. Governing Law, Submission to Jurisdiction and Waiver of
Jury Trial.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND UNDER THE REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT
TO THE CONFLICT OF LAW PRINCIPLES THEREOF) AND THE LAWS OF THE UNITED STATES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE
REVOLVING CREDIT NOTE OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE SUPERIOR
COURT OF FULTON COUNTY, GEORGIA, OR ANY OTHER COURT OF COMPETENT JURISDICTION IN
THE STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF GEORGIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
(c) THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY TO THE
EXTENT PERMITTED BY APPLICABLE LAW.
(d) Nothing herein shall affect the right of the Bank or any holder of
the Revolving Credit Note to commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.
SECTION 7.15. Construction. Should any provision of this Agreement
require judicial interpretation, the parties hereto agree that the court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against one party by reason of the rule
of construction that a document is to be more strictly construed against the
party that itself or through its agents prepared the same, it being agreed that
the Borrower and the Bank and their respective agents have participated equally
in the preparation hereof.
40
<PAGE> 46
SECTION 7.16. Entire Agreement. This Agreement and the other Loan
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether in writing or oral, with
respect thereto including, without limitation, any loan commitment from the Bank
to the Borrower, are expressly superseded hereby. The execution of this
Agreement and the other Loan Documents by the Borrower was not based upon any
facts or materials provided by the Bank, nor was the Borrower induced to execute
this Agreement or any other Loan Document by any representation, statement or
analysis made by the Bank.
[SIGNATURE PAGE FOLLOWS ON NEXT PAGE]
41
<PAGE> 47
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
AMERICAN BUSINESS PRODUCTS, INC.
By /s/ Richard G. Smith
--------------------------------------
Name: Richard G. Smith
Title: Chief Financial Officer
Attest /s/ Dawn M. Gray
----------------------------------
Name: Dawn M. Gray
Title: Secretary
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA
By /s/ Jenna M. Hale
--------------------------------------
Name: Jenna M. Hale
Title: Banking Officer
By /s/ Willem-Jan O. Hattink
--------------------------------------
Name: Willem-Jan O. Hattink
Title: Group Vice President
42
<PAGE> 48
SCHEDULE 4.4
RESTRICTED SUBSIDIARIES
Percentage State of Foreign
Name Ownership Incorporation Qualifications
- ---- --------- ------------- --------------
American Business
Products, Inc. N/A Georgia
International Envelope Company
(formerly American Fiber-Velope
Mfg. Co.) 100% Delaware California
Illinois
*New Jersey
Pennsylvania
Bookcrafters USA, Inc. 100% Michigan California
Illinois
Massachusetts
New Jersey
Ohio
Texas
Virginia
Curtis 1000 Inc. 100% Georgia Alabama
Arkansas
California
Colorado
Connecticut
Florida
Illinois
Iowa
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Minnesota
<PAGE> 49
Percentage State of Foreign
Name Ownership Incorporation Qualifications
- ---- --------- ------------- --------------
Mississippi
Missouri
Montana
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Washington
West Virginia
Wisconsin
Discount Labels, Inc.
(formerly Home Safety Equipment
Co., Inc.) 100% Indiana
Jen-Coat, Inc. 100% Massachusetts
Vanier Graphics
Corporation 100% California Arizona
Colorado
Georgia
Hawaii
Louisiana
Nevada
New Jersey
New York
<PAGE> 50
Percentage State of Foreign
Name Ownership Incorporation Qualifications
- ---- --------- ------------- --------------
North Carolina
Pennsylvania
Texas
Utah
Washington
Wisconsin
British Columbia
Curtis 1000 Speedi- Curtis 1000 Speedi-Print, Inc. merged
Print, Inc. into Curtis 1000 Inc. on September 15,
1992. Curtis 1000 Inc. was the
survivor of the merger, and Curtis 1000
Speedi-Print, Inc. has since withdrawn
from all the jurisdictions in which it
was qualified as a foreign corporation.
Cascade Business
Forms, Inc. (Inactive) 100% Washington
American Business
Forms and Systems,
Inc. (Inactive) 100% Delaware
*withdrawal in process
<PAGE> 51
SCHEDULE 4.10
DESCRIPTION OF LIENS
Secured Party Description of Collateral
- ------------- -------------------------
Wachovia Bank and Trust Furniture, fixtures, machinery
at Chelsea, Michigan and equipment
Massachusetts Industrial Finance Agency Land, building, improvements,
goods, equipment, machinery,
tools, furniture and other
tangible personal property at
Westfield, Massachusetts
NationsBank Land and building at Livermore,
California
<PAGE> 52
SCHEDULE 4.13
-------------
WAIVERS
-------
None.
<PAGE> 53
SCHEDULE 4.22
DESCRIPTION OF INDEBTEDNESS
<TABLE>
<CAPTION>
Principal Amount
Debtor Creditor of Indebtedness
------ -------- ---------------
<S> <C> <C>
AMERICAN BUSINESS PRODUCTS, INC. ALLSTATE LIFE INSURANCE COMPANY 20,000,000.00
AMERICAN BUSINESS PRODUCTS, INC. AID ASSOCIATION FOR LUTHERANS 15,000,000.00
AMERICAN BUSINESS PRODUCTS, INC. NATIONWIDE LIFE INSURANCE COMPANY 10,000,000.00
AMERICAN BUSINESS PRODUCTS, INC. EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU 3,000,000.00
AMERICAN BUSINESS PRODUCTS, INC. BHF BANK (GUARANTY IN CONNECTION WITH DM 3,000,000.00
CURTIS 1000 EUROPE GMBH LOAN)
AMERICAN BUSINESS PRODUCTS, INC. BHF BANK (COMFORT LETTER PROVIDED IN CONNECTION DM 1,500,000.00
WITH CURTIS 1000 EUROPE GMBH OVERDRAFT FACILITY)
AMERICAN BUSINESS PRODUCTS, INC. FIRST UNION NATIONAL BANK, ATLANTA, GA 933,333.30
AMERICAN BUSINESS PRODUCTS, INC. MINNESOTA MUTUAL LIFE INSURANCE COMPANY, ST. PAUL, MN 13,928,570.00
BOOKCRAFTERS USA, INC. WACHOVIA BANK AND TRUST, WINSTON-SALEM, INC. 658,300.00
(CERTAIN OBLIGATIONS ALSO GUARANTEED BY THE COMPANY)
JEN-COAT INC. MASSACHUSETTS INDUSTRIAL FINANCE AGENCY 2,000,000.00
(CERTAIN OBLIGATIONS ALSO GUARANTEED BY THE COMPANY)
VANIER GRAPHICS CORPORATION FIRST NATIONAL BANK OF ATLANTA, ATLANTA, GA 1,510,610.00
(CERTAIN OBLIGATIONS ALSO GUARANTEED BY THE COMPANY)
VANIER GRAPHICS CORPORATION NATIONSBANK, ATLANTA, GA 2,600,000.00
</TABLE>
<PAGE> 1
FIVE YEAR FINANCIAL REVIEW
The following table presents a summary of selected financial data for each of
the five years in the period ended December 31:
(In thousands, except per share and employee data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales $631,638 $633,955 $563,133 $486,139 $463,470
Net Income 21,054 25,505 19,528(B) 16,683 19,582(C)
Net Income Per Common Share(A) 1.28 1.57 1.22(B) 1.04 1.22(C)
Dividends Paid Per Common Share(A) 0.58 0.56 0.53 0.50 0.47
Working Capital 116,692 93,601 89,293 86,438 77,429
Property, Plant and Equipment 81,929 91,310 92,240 94,448 77,926
Total Assets 340,491 336,431 312,101 302,192 237,238
Long-Term Debt 54,958 61,761 75,144 85,580 40,005
Stockholders' Equity 172,991 160,873 137,481 127,093 118,819
Employees at End of Year 3,520 4,452 4,152 4,320 3,727
</TABLE>
(A) Per share figures have been adjusted to reflect a 3-for-2 stock split
in 1995.
(B) Before change in accounting principles of $605 or $0.04 per share.
(C) Before change in accounting principles of $12,449 or $0.78 per share.
1996 results included a restructuring charge of $4.8 million after tax, or $0.29
per share, as a result of the Company's plant consolidation program, gains of
$1.8 million after tax, or $0.11 per share, from related sales of redundant
realty, and a loss of $1.6 million after tax, or $0.10 per share, on the sale of
the assets of the Company's business forms manufacturing subsidiary, Vanier
Graphics Corporation. Without the restructuring charge, the related realty gains
and the Vanier sale loss, the Company would have shown net income of $25.6
million or $1.56 per share, for the year 1996. Proceeds of the Vanier sale
amounted to $47.2 million in cash.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
DISPOSITION OF ASSETS
Effective on December 31, 1996 (the "Effective Time"), Vanier Graphics
Corporation ("Vanier"), a wholly-owned subsidiary of the Company, sold
substantially all its assets (the "Vanier Sale") to The Reynolds and Reynolds
Company ("Reynolds"), for a purchase price of approximately $47.2 million in
cash (the "Purchase Price"), and the assumption by Reynolds of certain
liabilities of Vanier. As described in more detail below, the Purchase Price is
subject to adjustment. The Company has recorded a loss of $1.6 million (net of
taxes) on the Vanier Sale.
Vanier was a manufacturer of business forms and a provider of forms management
and work-flow analysis (collectively, the "Business"). The assets sold by Vanier
to Reynolds consisted of substantially all of the assets of Vanier relating to
the Business, consisting principally of certain plants, facilities and real
property; leasehold interests; furniture and fixtures; machines and equipment;
inventory; accounts receivable; customer contracts; software used in the
Business; intellectual property relating to the Business; and other tangible and
intangible property of Vanier relating to the Business. The assets sold to
Reynolds did not include certain facilities and real property owned by Vanier.
It currently is anticipated that Vanier will sell these facilities and the real
property at a later date.
In connection with the Vanier Sale, Curtis 1000 Inc. ("Curtis 1000"), a
wholly-owned subsidiary of the Company, entered into a supply agreement with
Reynolds which is discussed in Note 9 of the Notes to Consolidated Financial
Statements.
The Purchase Price was derived from the September 30, 1996 Balance Sheet of
Vanier, as adjusted to eliminate the assets and liabilities that were excluded
from the Vanier Sale (the "Adjusted 9/30/96 Balance Sheet"). Within ninety (90)
days following the Effective Time, Vanier will prepare and deliver to Reynolds a
"Closing Balance Sheet" as of the Effective Time. The Purchase Price will be
reduced or increased, as the case may be, by the amount the acquired net book
value on the Closing Balance Sheet is less than, or greater than, as the case
may be, the acquired net book value on the Adjusted 9/30/96 Balance Sheet.
In connection with the Vanier Sale, Vanier agreed to indemnify Reynolds against
certain potential liabilities and losses which is discussed in Note 9 of the
Notes to Consolidated Financial Statements.
PLANT CONSOLIDATIONS
To reduce operating costs, the Company in 1996 closed 13 plants and reconfigured
much of its business supplies production to a smaller number of larger, more
efficient facilities. A 14th plant closing and completion of the production
relocation are expected in the first quarter of 1997. The Company's
restructuring plan is discussed in Note 3 of the Notes to Consolidated Financial
Statements. The reconfiguration of production is expected to result in higher
equipment utilization, improved employee productivity and other scale economies.
As a result of the restructuring, the Company recorded a restructuring charge of
approximately $8.3 million (before taxes) in 1996. Also in 1996 the Company
recorded gains of approximately $3.1 million (before taxes) upon disposal of
real estate rendered redundant by the plant consolidation program. Further
expected gains on disposals of the remaining redundant real estate will be
recognized as the related facilities are sold.
RESULTS OF OPERATIONS
The Company's 1996 revenues of $631.6 million were little changed versus its
1995 revenues of $634.0 million. Management expects the Company's 1997 revenues
will be lower than its 1996 revenues due to the sale of the Company's business
forms business which accounted for $130.3 million in revenues in 1996.
Management expects the Company should improve profits and profit margins in 1997
versus 1996 due to the following factors: (1) reduction of expenses relating to
restructuring in 1997 versus 1996; (2) realization of benefits from
restructuring activities undertaken in 1996; (3) the Vanier Sale, which
eliminated a business whose profit margins were lower than those of the
Company's continuing businesses; and (4) higher than previous levels of capital
investment in 1996 and 1997 for the purpose of enlarging capacity, reducing unit
costs and improving customer service levels for the Company's continuing
operations.
Business supplies segment sales decreased 1.8% for the year despite continued
rapid growth in custom label sales. This decrease is due to the pass-through to
customers of lower raw materials costs, processing bottlenecks occasioned by the
restructuring program, and distractions caused by the Vanier Sale. This segment
is expected to show lower future revenues and higher profit margins than
otherwise, as a result of the Vanier Sale. Certain benefits of the Company's
restructuring program are expected to be realized during 1997, primarily in
the second half of the year and, more fully, in 1998.
9
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
cont'd
The book manufacturing segment sales decreased 6.1% with accompanying lower
profits and profit margins, due primarily to lower demand from the businesses'
customers. The Company believes the book manufacturing industry as a whole
experienced lower levels of demand in 1996 than in 1995. The Company has
instituted programs aimed at increasing revenues, reducing costs and improving
customer service levels at its book manufacturing operations.
The extrusion coating segment increased sales 10.1% with significantly improved
profits and profit margins due to the introduction of new products, penetration
of new markets and generally high customer demand for this businesses' products.
This business segment is expected to continue increasing sales in the future
due, in part, to the planned installation of new equipment which is expected to
expand its production capacity significantly. This installation, though, may
adversely affect profit margins in the first half of 1997 as a result of
disruptions and costs associated with the installation and start-up of such new
equipment.
The Company's 1995 revenues were a record $634.0 million, an increase of 12.6%
over 1994. This increase in revenues resulted from a combination of growth of
units sold and higher selling prices obtained by passing through unusually high
raw materials costs. Business supplies segment sales increased 11.0% for 1995,
with the pass-through of inflation in raw material costs accounting for more
than 50% of the increase and unit sales growth accounting for the balance. The
book manufacturing segment increased sales 17.7% also due to a combination of
higher prices and unit growth with accompanying higher profits and profit
margins. The operation again added to capacity, broadened its product line and
expanded customer order fulfillment capabilities. The extrusion coating segment
increased sales 17.6% with strong unit growth and improved profits and profit
margins, benefiting from the ability to pass through higher raw material costs,
the moderation of competitive pricing pressures, the introduction of new
products and penetration of new markets.
In 1994 ABP sales were a record $563.1 million, up 15.8% over 1993, with the
major portion of the sales increase resulting from acquisitions made in 1993
which expanded the business supplies segment. This segment achieved 20.0% sales
growth, passing through higher raw material costs and also increasing unit sales
moderately. Book manufacturing gained 12.4% in sales with a substantial increase
in unit sales, although the combination of higher raw material costs, price
competition and start-up costs of a new production line resulted in essentially
flat net profits. In 1994, extrusion coating sales advanced 0.2% with moderate
unit growth, and profit margins constrained by higher raw material costs
combined with price competition and change in product mix.
In 1996 the Company derived 74.1% of revenues from envelope products, business
forms, labels, and related business supplies printing operations; 8.6% from book
manufacturing and order fulfillment operations; and 17.3% from extrusion coating
and laminating operations. Sales by business segments in 1995 were: 75.2% from
business supplies products; 9.2% from book manufacturing and order fulfillment
operations; and 15.6% from extrusion coating and laminating operations. In 1994
the same segments had sales, respectively of 76.2%, 8.8% and 15.0%.
The Company's gross profit margin (the difference between net sales and cost of
goods sold, expressed as a percentage of net sales) was 29.8% in 1996 compared
to 29.4% in 1995 and 29.9% in 1994.
Selling and administrative expenses (as a percentage of net sales) were 22.5% in
1996 compared to 22.0% in 1995 and 22.7% in 1994. The lower level in 1995
resulted primarily from higher selling prices in that year.
As discussed above, the Company recorded restructuring and other expenses of
$8.3 million in 1996.
Other expenses decreased to $3.4 million in 1996 compared to $5.5 million in
1995 and $7.5 million in 1994. The decreases were due both to lower interest
expense and increased miscellaneous income. The increased miscellaneous income
is due primarily to profits recognized upon disposal of real property rendered
redundant by the Company's plant consolidation program.
The Company's income tax rate decreased to 38.1% in 1996 compared to 38.5% in
1995 and 40.8% in 1994. The decrease in 1996 and 1995 to more normal levels
versus the unusually high rate in 1994 was due to several factors including a
non-taxable loss from the Company's European joint venture in 1994.
The effect of inflation on sales and operating income in 1996, as previously
indicated, was decreased raw material costs and the need to pass through these
lower prices to customers with resultant pressure on profit margins. This effect
is most evident in the Company's business forms manufacturing business as this
business' prices are most affected by swings in the cost of paper raw materials.
By comparison, in 1995, inflation
10
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
cont'd
of raw material costs positively affected profit margins for much of the year.
In 1994 inflation of raw materials costs negatively affected profit margins for
much of the year. As a result of the Vanier Sale, the Company expects
fluctuations in raw material costs will have less effect on its future revenues
and profits.
LIQUIDITY AND CAPITAL RESOURCES
Stockholders' equity increased $12.1 million during 1996 and totaled $173.0
million at December 31, 1996.
Cash and cash equivalents increased $53.5 million during 1996 and totaled $82.5
million at December 31, 1996. Operating activities provided $39.3 million in
cash during 1996. The other significant source of cash was $47.2 million of
proceeds from the Vanier Sale discussed in Note 2 of the Notes to Consolidated
Financial Statements. Significant uses of cash in 1996 were $20.8 million for
investing activities exclusive of cash provided by the Vanier Sale, and $12.2
million for financing activities, which included $9.5 million for reduction in
long term debt partially offset by $6.5 million from additional long term debt
issued during 1996. During 1996 the Company obtained a $35.0 million committed
revolving credit facility from a bank, an approximately $6.6 million letter of
credit under the facility and approximately $6.5 million in industrial revenue
bond financing supported by the letter of credit, all of which is discussed in
Note 5 of the Notes to Consolidated Financial Statements.
Cash and cash equivalents increased $3.0 million during 1995 and totaled $29.0
million at December 31, 1995. Operating activities provided $40.9 million in
cash during 1995. Significant uses of cash in 1995 were $18.1 million for
investing activities and $19.8 million for financing activities which included
$11.4 million for reduction of long term debt.
Cash and cash equivalents decreased $4.2 million during 1994 and totaled $26.0
million at December 31, 1994. Operating activities provided $29.3 million.
Significant uses of cash in 1994 were $13.9 million for investing activities and
$19.5 million for financing activities which included $10.5 million for
reduction of long term debt.
The principal investing activity in 1996 was capital expenditures of $28.4
million which was significantly higher than in prior years, due primarily to
capital expenditures related to the Company's plant consolidation and process
reengineering programs along with ongoing upgrading and improving of the
Company's plants and equipment. As part of its 1996 capital expenditure program,
the Company expended $2.9 million of a planned $6.9 million capital investment
in new equipment intended to substantially increase the capacity and lower the
unit operating costs of its extrusion coating business with the remaining
expenditure expected to be made in the first half of 1997. The Company expects
to continue to make significant capital investments in 1997 with the intent to
expand capacity, lower unit operating costs and improve customer service in its
continuing businesses. As well, the Company is seeking opportunities to enter,
principally by acquisition, additional specialty custom printed information
businesses that serve high growth niche markets. No assurances can be given that
the Company will be successful in this regard.
In 1995 the Company's principal investing activity was capital expenditures for
upgrading and improving plants and equipment and the acquisition of Electronic
Form Systems.
In 1994 the principal investment activity was capital expenditures for upgrading
and improving equipment and plants.
The Company's ratio of long term debt to total capitalization was 24.1% at
December 31, 1996, compared with 27.7% at December 31, 1995, and 35.2% at
December 31, 1994. The Company believes it has or should generate sufficient
cash from operations to finance its capital expenditure program and meet its
other financial commitments.
Under the Company's plan to repurchase up to 1,687,500 shares of its Common
Stock in varying amounts over an indefinite period, there was no activity in
1996 or 1995. In 1994, the Company acquired 45,150 shares at prevailing market
prices at a total cost of $0.6 million.
11
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
cont'd
UNAUDITED QUARTERLY FINANCIAL DATA
(In thousands, except per share amounts)
1996 QUARTERLY DATA
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C>
Net Sales $ $157,007 $ 157,394 $ $157,993 $ 159,244
Gross Margin 45,640 46,585 48,137 47,655
Net Income 3,899 5,895 6,379 4,881
Earnings Per Share 0.24 0.36 0.39 0.29
Dividends Per Share 0.145 0.145 0.145 0.145
Price Range of Common Stock
(High-Low) 27.50-21.63 23.00-19.25 23.00-19.13 25.88-21.88
1995 QUARTERLY DATA
1ST 2ND 3RD 4TH
Net Sales $ 157,384 $ 156,425 $ 157,169 $ 162,977
Gross Margin 47,016 45,961 46,268 47,335
Net Income 5,949 5,937 6,019 7,600
Earnings Per Share 0.37 0.37 0.37 0.46
Dividends Per Share 0.14 0.14 0.14 0.14
Price Range of Common Stock
(High-Low) 17.63-13.56 20.50-16.83 21.00-18.25 28.50-20.63
</TABLE>
Per share figures have been adjusted to reflect a 3-for-2 stock split in 1995.
12
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
cont'd
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed consolidated financial statements
give effect to the Vanier Sale as if the transaction occurred on December 31,
1995, and before giving effect to the Company's restructuring charge and gains
upon sale of related realty. The pro forma condensed consolidated financial
statements of the Company are presented for informational purposes only and
their inclusion in this report is not intended to intimate that the pro forma
information is a more meaningful indicator of the results of operations than the
Company's reported financial results. Further, the pro forma information may not
reflect the Company's future results of operations or what the results of
operations of the Company would have been had the Vanier Sale occurred at the
date indicated, the restructuring charge not been incurred and the related
realty gains not realized.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL PRO FORMA ADJUSTMENT FOR PRO FORMA
DECEMBER 31, ADJUSTMENT FOR RESTRUCTURING DECEMBER 31,
1996 DISPOSITION AND REALTY 1996
<S> <C> <C> <C> <C>
Net Sales $ 631,638 $(130,293) $ 501,345
Cost and Expenses
Cost of goods sold 443,621 (93,818) 349,803
Selling and administrative 142,229 (31,136) 111,093
Restructuring expenses 8,334 (1,426) (6,908)
----------- --------- ------- -----------
594,184 (126,380) $(6,908) 460,896
----------- --------- ------- -----------
Operating Income 37,454 (3,913) 6,908 40,449
Other Income (expense)
Interest expense (7,525) 276 (7,249)
Miscellaneous - net 4,110 4,220(1) (3,129) 5,201
----------- --------- ------- -----------
Income Before Income Taxes 34,039 583 3,779 38,401
Provision for Income Taxes 12,985 321 1,607 14,913
----------- --------- ------- -----------
Net Income $ 21,054 $ 262 $ 2,172 $ 23,488
=========== ========= ======== ===========
Earnings Per Share $ 1.28 $ 0.02 $ 0.13 $ 1.43
Weighted Average Number
of Common Shares Outstanding 16,395,851 16,395,851
</TABLE>
(1) Includes the loss on the Vanier Sale of $2.8 million and assumes net
proceeds of the Vanier Sale had been invested in money market instruments.
13
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
cont'd
OTHER MATTERS
Pursuant to amendments to the Internal Revenue Code of 1986 which were
enacted in 1996, the deductibility for income tax purposes of interest expense
on certain loans from life insurance companies that are secured by the cash
values of underlying life insurance policies will be phased out, becoming 90%
deductible in 1997, 80% deductible in 1998 and non-deductible thereafter. In
1996 the deductibility of $3.3 million of interest expense of the Company would
have been affected had the provisions of the amendments been applicable in 1996.
Except for historical information contained herein, the matters set forth in
this report including statements regarding the Company's expectations,
hopes, intentions or strategies regarding the future, are forward looking
statements that involve certain risks and uncertainties that could cause actual
results to differ materially from those in the forward looking statements. The
Company assumes no obligation to update any such forward looking statements.
The Company's expectations respecting future sales and profits assume,
among other things, reasonable continued growth in the general economy which
affects demand for the Company's products, and reasonable stability in raw
materials pricing, changes in which affect customer purchasing decisions as
well as the Company's prices and margins. The costs and benefits of the
Company's plant consolidation plan and the related redesign of order
processing may vary from the Company's expectations due to various factors such
as: the extent of management's ability to control and ultimately eliminate
duplication of costs, inefficiencies, overheads, and operating bottlenecks
associated with transferring production from closing to continuing plants; the
speed with which requisite numbers of new employees can be hired, trained and
deployed productively at the Company's new and enlarged continuing
manufacturing plants; sale prices realized upon future disposal of redundant
assets, particularly real property which is subject to future supply and
demand conditions in various local real estate markets; the Company's ability
to implement its order processing automation project within expected time and
cost constraints; and the difficulties inherent in forecasting the operating
results of an operating mode different from that which exists at the time the
forecast is made.
14
<PAGE> 8
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET SALES $631,638 $633,955 $563,133
COST AND EXPENSES
Cost of goods sold 443,621 447,375 394,839
Selling and administrative expenses 142,229 139,536 127,802
Restructuring and other charges 8,334
-------- -------- --------
594,184 586,911 522,641
-------- -------- --------
OPERATING INCOME 37,454 47,044 40,492
OTHER INCOME (EXPENSE)
Interest expense (7,525) (8,243) (8,711)
Miscellaneous - net 4,110 2,701 1,226
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 34,039 41,502 33,007
PROVISION FOR INCOME TAXES
Current
Federal 10,958 14,347 11,902
State 2,966 3,202 3,700
Deferred (939) (1,552) (2,123)
-------- -------- --------
12,985 15,997 13,479
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 21,054 25,505 19,528
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (605)
-------- -------- --------
NET INCOME $ 21,054 $ 25,505 $ 18,923
======== ======== ========
PER COMMON SHARE
Income before cumulative
effect of change
in accounting principle $ 1.28 $ 1.57 $ 1.22
Net income $ 1.28 $ 1.57 $ 1.18
</TABLE>
See Notes to Consolidated Financial Statements
15
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
(In thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 82,516 $ 29,023
Accounts receivable, less allowances
of $1,885 and $2,837 60,082 85,978
Inventories 38,911 52,715
Other 12,046 1,103
-------- --------
Total Current Assets 193,555 168,819
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 3,114 5,558
Buildings and improvements 37,476 53,566
Machinery, equipment and software 97,796 133,157
Construction in progress 10,952 4,023
-------- --------
149,338 196,304
Less accumulated depreciation 67,409 104,994
-------- --------
81,929 91,310
INTANGIBLE ASSETS FROM ACQUISITIONS
Goodwill, less amortization of $4,077 and $4,657 28,125 36,936
Other, less amortization of $4,586 and $4,671 1,362 1,755
-------- --------
29,487 38,691
DEFERRED INCOME TAXES 12,987 12,048
OTHER ASSETS 22,533 25,563
-------- --------
TOTAL ASSETS $340,491 $336,431
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
16
<PAGE> 10
CONSOLIDATED BALANCE SHEETS
cont'd
DECEMBER 31
(In thousands, except share amounts)
<TABLE>
<CAPTION>
1996 1995
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 49,142 $ 45,686
Salaries and wages 11,957 12,839
Profit sharing contributions 3,717 5,924
Income taxes 2,518
Current maturities of long-term debt 12,047 8,251
-------- --------
Total Current Liabilities 76,863 75,218
LONG-TERM DEBT 54,958 61,761
SUPPLEMENTAL RETIREMENT BENEFITS 18,492 16,465
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS 17,187 22,114
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Common stock - $2 par value; authorized 50,000,000
shares, issued 16,620,848 and 16,582,209 shares 33,242 33,164
Additional paid-in capital 6,118 5,701
Retained earnings 136,003 124,459
Foreign currency translation adjustment 651 365
-------- --------
176,014 163,689
Less 213,256 and 204,232 shares
of common stock in treasury - at cost 3,023 2,816
-------- --------
172,991 160,873
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $340,491 $336,431
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE> 11
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1993 10,774,484 $21,549 $107,728 $(433) (92,391) $(1,751)
Net income 18,923
Dividends paid, $0.533 per share (8,550)
Exercise of stock options 7,995 16 $ 82 (6) 1,013 14
Repurchase of common stock (30,100) (628)
Restricted stock awards 1,800 4 36
Foreign currency translation 497
---------- ------- ------ -------- ----- -------- -------
BALANCE DECEMBER 31, 1994 10,784,279 21,569 118 118,095 64 (121,478) (2,365)
Net income 25,505
Dividends paid, $0.56 per share (9,085)
Exercise of stock options 48,579 96 514 (19,577) (451)
Shares issued in acquisition 323,304 647 5,353
Three-for-Two stock split 5,406,897 10,814 (758) (10,056) (63,177)
Restricted stock awards 400 1 10
Performance award 18,750 37 464
Foreign currency translation 301
---------- ------- ------ -------- ----- -------- -------
BALANCE DECEMBER 31, 1995 16,582,209 33,164 5,701 124,459 365 (204,232) (2,816)
Net income 21,054
Dividends paid, $0.58 per share (9,510)
Exercise of stock options 38,039 77 405 (9,024) (207)
Restricted stock awards 600 1 12
Foreign currency translation 286
---------- ------- ------ -------- ----- -------- -------
BALANCE DECEMBER 31, 1996 16,620,848 $33,242 $6,118 $136,003 $ 651 (213,256) $(3,023)
========== ======= ====== ======== ===== ======== =======
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $21,054 $25,505 $18,923
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,213 17,556 17,391
(Gain) loss on disposition of plant and equipment (3,383) 627 (129)
Loss on disposition of Vanier assets 2,786
Change in assets and liabilities, excluding
effects of acquisitions and disposition
(Increase) decrease in accounts receivable 9,121 (13,443) (7,536)
(Increase) decrease in inventories 3,581 (734) (6,242)
(Increase) decrease in other current assets (5,996) 1,147 (1,320)
(Increase) decrease in intangible and other assets 449 (384) (279)
Increase in accounts payable 64 3,897 5,434
Increase (decrease) in other current liabilities (4,726) 5,772 2,672
Increase in supplemental retirement,
postemployment and postretirement benefits 103 2,536 2,891
(Increase) in deferred income taxes (939) (1,552) (2,532)
------- ------- -------
Total adjustments 18,273 15,422 10,350
------- ------- -------
Net cash provided by operating activities 39,327 40,927 29,273
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired (3,419)
Disposition of Vanier assets 47,211
(Increase) decrease in cash value of life insurance 422 (826) (19)
Additions to property, plant and equipment (28,407) (16,933) (14,208)
Proceeds from disposition of plant and equipment 7,162 3,059 285
------- ------- -------
Net cash provided (used) by investing activities 26,388 (18,119) (13,942)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt 6,460
Reductions of long-term debt (9,460) (11,368) (10,453)
Repurchase of common stock (628)
Sales and exchanges of common stock 288 671 146
Dividends paid (9,510) (9,085) (8,550)
------- ------- -------
Net cash (used) by financing activities (12,222) (19,782) (19,485)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 53,493 3,026 (4,154)
Cash and cash equivalents at beginning of year 29,023 25,997 30,151
------- ------- -------
Cash and cash equivalents at end of year $82,516 $29,023 $25,997
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) $ 7,770 $ 7,768 $ 9,039
Income taxes 21,983 15,405 12,988
Liabilities assumed in acquisitions 115 849
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION, ETC: The consolidated financial statements
include the accounts of American Business Products, Inc. and its subsidiaries
(the "Company"). The Company's investment in a 50 percent owned affiliated
company is accounted for under the equity method. Intercompany balances and
transactions have been eliminated. These financial statements have been prepared
in accordance with generally accepted accounting principles which in certain
instances requires the use of management's estimates. Actual results could
differ from those estimates.
NATURE OF OPERATIONS: The Company manufactures and markets envelope products,
business forms, labels and other supplies for business and industry;
manufactures and distributes hardcover and softcover books for the publishing
industry; and manufacturers and markets extrusion coating and laminating of
papers, films, and nonwoven fabrics for use in medical, industrial and consumer
packaging. The markets for these products are located principally throughout
the continental United States.
CASH AND CASH EQUIVALENTS: The Company invests cash in excess of daily
operating requirements in income producing investments. Such amounts, stated at
cost which approximates market, at December 31, 1996 and 1995 were $68,136,000
and $16,820,000 respectively. All such investments have an original maturity of
90 days or less and for purposes of the Statement of Cash Flows are considered
to be cash equivalents.
Amounts due banks upon the clearance of certain checks under the Company's cash
management program have been included in accounts payable. At December 31, 1996
and 1995 such amounts were $8,441,000 and $9,381,000 respectively.
INVENTORIES: Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
INTANGIBLE ASSETS: The excess of cost over amounts assigned to tangible assets
of purchased subsidiaries (goodwill) is being amortized on the straight-line
basis over periods of 10 to 40 years. The Company evaluates the net carrying
value of such assets based on expectations of nondiscounted cash flows of each
subsidiary for which such assets are recorded. The Company believes no material
impairment of such assets exists. Other acquired intangibles are principally
non-compete agreements and are being amortized on a straight-line basis over
their estimated useful lives of 3 to 8 years.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost.
Depreciation is computed using the straight-line method for financial reporting
purposes and was $15,226,000, $15,420,000 and $15,536,000 for 1996, 1995 and
1994, respectively. Accelerated depreciation methods are used for income tax
purposes.
ENVIRONMENTAL COSTS: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Remediation costs of
existing conditions caused by past operations are accrued when it is probable
that a liability has been incurred and the cost can be reasonably estimated.
REVENUE RECOGNITION: Sales and related costs are generally recorded by the
Company upon shipment of products to its customers. Under contractual agreement
with some customers, sales of certain custom products are recognized upon
completion of the order and invoiced under normal credit terms.
STOCK BASED COMPENSATION: As permitted under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," the Company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
NET INCOME PER COMMON SHARE: Net income per common share is based upon the
weighted average number of shares outstanding, 16,395,851 in 1996, 16,197,044
in 1995, and 16,025,695 in 1994 which have been restated to reflect a
three-for-two stock split in June 1995. The dilutive effect of outstanding
stock options is not significant.
FOREIGN CURRENCY TRANSLATION: The Company's investment in a 50 percent owned
foreign joint venture is translated at the rate in effect at the balance sheet
date. The Company's share of net income of the joint venture is translated at
average exchange rates prevailing during the year. Resulting translation
adjustments are reported separately as a component of stockholders' equity.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: In 1994 the Company
adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
resulting in a cumulative net adjustment of $605,000.
RECLASSIFICATIONS: Certain 1995 and 1994 amounts have been reclassified to
conform with the 1996 presentation.
20
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
2. VANIER GRAPHICS CORPORATION
On December 31, 1996 the Company sold substantially all of the assets of its
subsidiary Vanier Graphics Corporation ("Vanier") for $47,211,000 in cash (the
"Vanier Sale"). Vanier was a leading business forms manufacturer and provider
of forms management and work flow analysis. The loss on the sale was
approximately $1,588,000 net of tax. The proceeds from this divestiture are
subject to adjustment based upon the closing balance sheet of Vanier. Any
change in proceeds is not expected to have a material effect on the loss on the
sale. Vanier recorded sales of approximately $130,000,000, $138,000,000 and
$115,000,000 in 1996, 1995 and 1994 respectively.
On June 1, 1995 the Company acquired certain assets of Electronic Form Systems,
Inc. ("EFS") for $9,650,000. The excess of the purchase price over the fair
value of the assets acquired was approximately $6,765,000. The acquisition was
recorded under the purchase method of accounting and the results of operations
have been included in the Company's consolidated financial statements since
acquisition. The assets of EFS were sold as part of the Vanier Sale.
3. RESTRUCTURING AND OTHER CHARGES
In February 1996, the Company announced a restructuring plan (the "Plan") to
reduce operating costs. The Company planned to close 14 plants and transfer
production to other larger facilities. As of December 31, 1996 the Company had
closed 13 of these plants. The 14th plant will be closed in the first quarter
of 1997. As a result of the Plan the Company recorded restructuring and other
charges to operations in 1996 of $8,334,000, consisting of severance and other
employee related costs of $6,320,000, fixed-asset write-downs of $427,000 and
lease termination and other miscellaneous costs of $1,587,000. Cash
expenditures of $7,498,000 were made against the restructuring accrual in 1996
with approximately $836,000 remaining in the accrual at December 31, 1996.
Severance costs relate to approximately 509 employees, primarily production and
administrative personnel located at the closing plants. Of these, 478
employees' employment terminated in 1996.
As a result of the Plan and the Vanier Sale (Note 2), the Company sold certain
real estate assets resulting in gains of $3,129,000 which are included within
miscellaneous-net on the accompanying Consolidated Statement of Income. The
Company also has approximately $5.1 million in real estate assets held for sale
at December 31, 1996 which are classified as other current assets. The Company
plans to sell these assets in 1997.
4. INVENTORIES
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Products finished or in process $15,825 $27,557
Raw materials 22,413 24,438
Supplies 673 720
------- -------
$38,911 $52,715
======= =======
</TABLE>
5. LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Senior notes, 9.92%, due 1996 to 2000 $ 9,643 $13,929
Senior notes, 5.77%, due 1997 to 2003 48,000 48,000
Note payable to bank, variable at LIBOR
plus 1.15%, principal due to 2000 781 990
Mortgage note, variable at 56% of bank's base rate plus .25%
not to exceed 15%, principal due to 1999 1,500 2,000
Mortgage note, variable at 75.8% of prime rate not
to exceed 11%, principal due to 2001 1,590
Mortgage note, variable at 79.4% of prime rate
not to exceed 11.75%, principal due to 1999 527 702
Note payable to bank, 9.375%, due 1996 2,700
Industrial revenue bonds due 2031, variable rate 6,460
Other 94 101
------- -------
67,005 70,012
------- -------
Less current maturities 12,047 8,251
------- -------
$54,958 $61,761
======= =======
</TABLE>
21
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
The Company has an unsecured committed revolving credit agreement (the "Credit
Agreement") with a bank, under which the Company may borrow up to $35.0 million
through April 22, 1999. The Credit Agreement provides for borrowing at rates
related to prime and Eurocurrency rates, and for payment of commitment fees of
1/10% per annum on the unused portion of the credit facility. Currently, the
Company has no outstanding borrowings under the Credit Agreement. Curtis 1000
Inc. ("Curtis 1000"), a wholly-owned subsidiary of the Company, has borrowed
approximately $6.5 million through a variable interest rate industrial revenue
bond (the "Bond") due May 1, 2031. The interest rate on the Bond was 4.25% at
December 31, 1996. The Bond is supported by a letter of credit issued pursuant
to the Credit Agreement, which commensurately reduces the balance available to
the Company under the Credit Agreement. The Credit Agreement provides for
payment of fees of 2/10% per annum on the amount of the letter of credit
outstanding, which was $6.6 million at December 31, 1996.
The net carrying amount of plant, equipment and other assets assigned as
collateral to the Company's long-term debt obligations was approximately
$19,305,000 and $19,522,000 at December 31, 1996 and 1995 respectively. The
Company has agreed to certain restrictive covenants during the terms of some of
these agreements. Under the most restrictive of the covenants, the Company must
maintain tangible net worth not less than approximately $95,000,000 plus 25% of
net income earned after 1992, and must limit the amount of Senior Funded Debt
to not more than 40% of total capitalization. The aggregate amounts of
long-term debt maturing during the next five years are approximately:
1997-$12,047,000; 1998 - $12,141,000; 1999 - $8,833,000; 2000 - $6,952,000;
2001 - $6,857,000; thereafter -$20,175,000. Loans from life insurance companies
aggregating approximately $44,500,000 and $42,700,000 are secured by the cash
values of the underlying life insurance policies of $49,000,000 and $47,400,000
at December 31, 1996 and 1995, respectively. Such loans have been netted
against the cash values. Interest is payable annually at rates ranging from
11.5% to 13%.
The fair value of the Company's long-term debt is based on management's
estimate of current market prices for the same issues. Fair value is estimated
to be $65,340,000 at December 31, 1996 and $70,042,000 at December 31, 1995.
6. INCOME TAXES
Deferred income taxes have been established for the effects of differences in
the bases of assets and liabilities for financial reporting and income tax
purposes.
The provision for income taxes is reconciled with the Federal statutory rate as
follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Income tax at
Federal statutory rate $11,914 $14,526 $11,552
State income taxes net of
Federal income tax benefit 1,926 2,010 2,093
Non-taxable life insurance proceeds
and increase in cash value (1,078) (1,285) (957)
Other 223 746 791
------- ------- -------
$12,985 $15,997 $13,479
======= ======= =======
</TABLE>
Components of the net deferred income tax asset at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
DEFERRED INCOME TAX ASSETS:
Postretirement and postemployment benefits $14,607 $16,117
State net operating loss carryforward,
net of Federal benefit 1,243 1,063
Other 3,726 3,516
------- -------
Gross deferred tax asset 19,576 20,696
Valuation allowance (461) (1,580)
------- -------
19,115 19,116
DEFERRED INCOME TAX LIABILITIES:
Property plant and equipment 6,128 7,068
------- -------
NET DEFERRED INCOME TAX ASSET $12,987 $12,048
======= =======
</TABLE>
22
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
During 1996, the Company reduced its deferred tax asset valuation allowance by
$1,119,000 due to the availability of tax planning strategies to utilize state
net operating loss carryforwards and state deferred tax assets for
postretirement and postemployment benefits. Management believes it is more
likely than not that future taxable income will be sufficient to realize fully
the net deferred tax asset.
7. EMPLOYEE RETIREMENT PLANS
The Company has profit sharing and other retirement plans covering its
employees. The Company's contributions, which are principally discretionary,
were approximately $4,520,000 in 1996, $5,460,000 in 1995, and $4,530,000 in
1994.
The Company has entered into agreements with directors of the Company and
key officers of the Company and its subsidiaries which provide for nonfunded
supplemental retirement benefits. The Company has made current provisions for
future payments due under these agreements. The amounts charged to operations in
1996, 1995, and 1994 were approximately $2,143,000, $3,939,000 and $3,457,000,
respectively. In January 1997 the Company entered into a springing note payable
whereby upon a change in control of the Company, amounts sufficient to discharge
the Company's obligations under these plans becomes due.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits for
eligible retired employees. Substantially all of the Company's employees may
become eligible for benefits if, after ten or more years of service, they reach
normal retirement age while working for the Company. The health care plan is
contributory and is adjusted periodically based on actual experience while the
life insurance plan is noncontributory. Neither plan is funded. The Company
accounts for these arrangements in accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions."
As of January 1, 1993 the Company made modifications to the above plans which
reduced its obligations for prior service costs by approximately $13,900,000.
The Company made an additional modification during 1996 which becomes effective
January 1, 1997 that increased its obligations for prior service costs by
approximately $472,000. Such amounts are being amortized over the remaining
active service periods of its employees.
The following table presents a reconciliation of the plan's funded status at
December 31:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
<S> <C> <C> <C>
Retired employees $ 4,772 $ 4,572 $ 5,447
Fully eligible active employees 343 458 608
Other active employees 3,503 3,776 4,604
------- ------- -------
8,618 8,806 10,659
------- ------- -------
Unrecognized prior service
cost reduction 7,665 11,394 12,231
Unrecognized net gain (loss) 566 503 (1,671)
------- ------- -------
Postretirement benefits $16,849 $20,703 $21,219
======= ======= =======
NET PERIODIC BENEFIT COST:
Service cost $ 320 $ 194 $ 332
Interest cost 647 647 800
Net amortization (822) (859) (744)
------- ------- -------
$ 145 $ (18) $ 388
======= ======= =======
</TABLE>
In addition to the net postretirement benefit expense, the Company recognized a
net curtailment gain in 1996 of $3,359,000 related to employee terminations due
to the Vanier Sale, which is included in the net loss on the sale.
The assumed health care cost trend rate for 1997 is 9.5% decreasing annually by
1% to a rate of 5.5% in 2001 and beyond. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7.25% at
December 31, 1996 and 1995 and 8.5% at December 31, 1994.
If the health care cost trend rate were increased by one percent for all future
years, the impact on the accumulated postretirement benefit obligation as of
December 31, 1996 and the aggregate of service and interest costs for 1996
would have been insignificant.
23
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
9. COMMITMENTS AND CONTINGENCIES
Rental expense under operating leases was approximately $5,359,000 in 1996,
$5,053,000 in 1995 and $4,889,000 in 1994. Minimum rental commitments under
noncancelable leases other than capital leases are approximately: 1997 -
$4,026,000; 1998-$3,600,000; 1999-$3,059,000; 2000-$2,712,000; 2001-$2,111,000
and $2,132,000 thereafter.
Prior to the Vanier Sale, Vanier provided to Curtis 1000 certain products and
services relative to the business of Curtis 1000. In connection with the Vanier
Sale, Curtis 1000 entered into an agreement with the purchaser pursuant to
which the purchaser agreed to provide to Curtis 1000 and Curtis 1000 agreed to
buy from the purchaser substantially the same products and services in
substantially similar quantities until September 30, 1999. In connection with
the Vanier Sale, Vanier agreed to indemnify the purchaser against certain
potential liabilities and losses, including environmental, and reimburse the
purchaser for any expenses incurred to repair damages, if any, existing at the
effective time of the Vanier Sale, to the physical structure of two facilities
that Vanier sold to the purchaser. The Company has agreed to guarantee Vanier's
indemnification obligations and certain other obligations entered into in
connection with the Vanier Sale. Based on information currently available,
management does not expect the resolution of the contingencies related to the
Vanier Sale to have a material effect on the financial statements.
In the opinion of management, no litigation or claims are pending against the
Company which will have an adverse material effect on its financial statements.
10. STOCK COMPENSATION PLANS
The Company currently has two stock compensation plans: the Stock Option Plan,
which was adopted in 1991 ("1991 Plan"), and the Director's Stock Incentive
Plan, which was adopted in 1994 ("Director's Plan").
The 1991 Plan is a nonqualified plan which replaced the expiring 1981 Stock
Option Plan ("1981 Plan"). Under both the 1991 and 1981 Plans, options could be
granted at fair market value to key employees. The weighted average fair value
at date of grant for options granted under the 1991 Plan during 1996 and 1995
was $4.47 and $3.53, respectively. Twenty-five percent of each grant becomes
exercisable in each succeeding year and the maximum term of the options is ten
years. The weighted average fair value at date of grant for reload options
granted under the 1981 Plan during 1996 and 1995 was $3.37 and $2.22,
respectively. Reload grants carry the same vesting schedule and maximum term as
the original grant. The board of directors may grant options which include a
stock appreciation feature under which employees may elect to receive cash in
lieu of Common Stock for up to 25% of the option exercised. The Company has
reserved 1,379,516 and 1,413,959 shares of Common Stock for issuance under the
1991 and 1981 Plans at December 31, 1996 and 1995, respectively.
The Director's Plan is a nonqualified plan which awards stock options and
restricted stock to directors who elect to forego all or a portion of the
director's retainer fee for the following year in exchange for an option to
purchase Common Stock. The number of options to be issued is determined by
dividing the foregone director's fee by one-half of the fair market value of
the Common Stock on the date of grant. The exercise price is equal to one-half
of the fair market value of the Common Stock on the date of grant and these
options are fully vested at the date of grant. The weighted average fair value
at date of grant for options granted under the Director's Plan during 1996 and
1995 was $11.15 and $8.78, respectively. The Company has reserved 217,509 and
221,700 shares of Common Stock for issuance under the Director's Plan at
December 31, 1996 and 1995, respectively.
The Director's Plan also provides for restricted stock awards. In general, each
director was issued 300 shares of Common Stock upon adoption of the plan and
new directors will be issued 200 shares upon election. Additional awards of 100
shares will be made to each director annually, but no director will receive
more than 2,000 shares of restricted stock. The Company issued 600 shares of
restricted stock in 1996 and 1995. The weighted average fair market value per
share at the date of grant of shares issued in 1996 and 1995 was $21.54 and
$17.83, respectively. The Company had issued 3,900 and 3,300 shares of
restricted stock at December 31, 1996 and 1995, respectively.
24
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
The following table summarizes activity adjusted for stock splits in the
Company's stock option plans for each of the last three years:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- --------------------- -----------------------
WTD-AVG WTD-AVG WTD-AVG
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 394,881 $15.93 278,300 $13.52 228,988 $13.45
Issued at fair value 159,532 20.86 165,018 18.86 60,660 13.17
Issued at less than fair value 6,740 11.13 10,092 8.92 12,215 7.91
Exercised (38,039) 12.67 (54,329) 11.24 (15,008) 8.66
Canceled (17,467) 17.63 (4,200) 15.38 (8,495) 10.33
------- ------- -------
Outstanding at December 31 505,647 17.61 394,881 15.93 278,300 13.52
======= ======= =======
Exercisable at December 31 208,302 15.63 161,045 14.29 132,646 12.56
</TABLE>
The following table summarizes information about stock options at December 31,
1996
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$ 6.17 - $18.33 271,101 7.16 $15.01 142,446 $13.46
$18.50 - $19.50 48,862 5.64 19.37 46,367 19.41
$20.75 - $27.50 185,684 9.16 20.94 19,489 22.54
------- -------
$ 6.17 - $27.50 505,647 7.75 17.61 208,302 15.63
======= =======
</TABLE>
Stock-based compensation costs recorded in income for 1996 and 1995 were
immaterial. Had compensation costs for the Company's stock option plans been
determined based on the fair value at the grant date for awards in 1996 and 1995
consistent with the provisions of FAS 123, the effect on the Company's net
earnings and earnings per share would have been immaterial. The effect on 1996
and 1995 net earnings is not representative of the effect on net earnings in
future years because it does not take into consideration compensation expense
related to grants made prior to 1995.
The fair value of options at date of grant was estimated using the
Black-Scholes Model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Expected life (years) 5 5
Interest rate 6.40% 5.63%
Volatility 28.0% 26.0%
Dividend yield 3.25% 3.34%
</TABLE>
25
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
cont'd
11. STOCKHOLDERS' EQUITY
The Company has authorized 500,000 shares of Preferred Stock without par
value. No shares have been issued.
On October 25, 1989 the Board of Directors adopted a Share Rights Plan and
declared a dividend of one Right for each outstanding share of Common Stock on
November 6, 1989. Such Rights become exercisable, or transferable apart from
the Common Stock, twenty days after a person or group (Acquiring Person) has
acquired beneficial ownership of 20% of the Common Stock or after a person or
group has acquired beneficial ownership of 10% of the Common Stock and, after
reasonable inquiry and investigation, has been declared by the Board of
Directors to be an "Adverse Person". Each Right then may be exercised to
acquire a number of shares of Common Stock equal to one share of Common Stock
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock outstanding on the date that an Acquiring Person or an Adverse
Person was first determined to be such (Stock Acquisition Date) and the
denominator of which is the number of Rights outstanding on the Stock
Acquisition Date that are not owned by the Acquiring Person or Adverse Person.
The price to be paid for each share of Common Stock acquired by exercise of
Rights is 20% of market value on the Stock Acquisition Date. In general, the
Rights may be redeemed by the Company at a price of $.01 at any time until
twenty days following the Stock Acquisition Date. The Rights will expire on
November 6, 1999.
12. BUSINESS SEGEMENT INFORMATION
<TABLE>
<CAPTION>
(In thousands) DEPRECIATION & CAPITAL IDENTIFIABLE OPERATING
SALES AMORTIZATION EXPENDITURES ASSETS PROFIT
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Business supplies printing $467,865 $11,789 $19,400 $157,583 $26,492
Book manufacturing 54,642 2,370 4,206 27,003 4,591
Extrusion coating and laminating 109,131 2,703 4,584 55,084 15,519
Corporate 351 217 100,821 (9,148)
-------- ------- ------- -------- -------
$631,638 $17,213 $28,407 $340,491 $37,454
======== ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1995
Business supplies printing $476,604 $12,327 $10,834 $214,196 $37,432
Book manufacturing 58,207 2,113 4,041 26,715 6,781
Extrusion coating and laminating 99,144 2,814 1,910 47,828 11,639
Corporate 302 148 47,692 (8,808)
-------- ------- ------- -------- -------
$633,955 $17,556 $16,933 $336,431 $47,044
======== ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1994
Business supplies printing $429,342 $11,204 $ 7,635 $191,635 $32,290
Book manufacturing 49,464 1,860 2,318 25,539 5,653
Extrusion coating and laminating 84,327 2,760 1,376 46,609 8,778
Corporate 1,567 2,879 48,318 (6,229)
-------- ------- ------- -------- -------
$563,133 $17,391 $14,208 $312,101 $40,492
======== ======= ======= ======== =======
</TABLE>
The Company's three operating business segments are as follows: the printing of
business supplies, consisting principally of business forms and envelope
products; the manufacture of books; and the extrusion of polyethylene onto
lightweight papers and non-wovens.
Operating profit for each segment is sales less operating expenses. In
computing operating profit for each segment, the following items have not been
added or deducted: general corporate expenses, interest expense, income from
investments and income taxes.
Identifiable assets are those assets used in each segment's operation.
Corporate assets consist of cash and cash equivalents and other noncurrent
assets not used in the operation of a segment.
26
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Business Products, Inc.
We have audited the accompanying consolidated balance sheets of American
Business Products, Inc. and subsidiaries as of December 31, 1996 and 1995 and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of American Business Products, Inc.
and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, in 1994 the
Company changed its method of accounting for postemployment benefits.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 14, 1997
27
<PAGE> 21
CORPORATE INFORMATION
STOCK EXCHANGE LISTING
American Business Products, Inc.'s
Common Stock is listed on the New York
Stock Exchange. Ticker Symbol: ABP.
ANNUAL MEETING
The Annual Meeting of Shareholders will be held April 23, 1997 at 11:00 a.m. at
the Cobb Galleria Centre, Two Galleria Parkway, Atlanta, Georgia 30339
FORM 10-K ANNUAL REPORT
The Form 10-K filed with the Securities and Exchange Commission is available to
shareholders and may be obtained without charge upon written request to the
Secretary of the Company.
SHAREHOLDERS OF RECORD
On March 1, 1997, there were approximately 5,100 shareholders of record
including dividend reinvestment participants.
AUDITORS
Deloitte & Touche LLP, Atlanta
GENERAL COUNSEL
Long, Aldridge & Norman, Atlanta
TRANSFER AGENT AND REGISTRAR
Wachovia Bank of North Carolina, N. A.
Winston-Salem
1-800-633-4236 Shareholder Services
EQUAL OPPORTUNITY EMPLOYER
American Business Products, Inc., and its subsidiaries are equal opportunity
employers.
DIVIDEND REINVESTMENT/STOCK PURCHASE PLAN
Registered shareholders may participate in the Company's Dividend
Reinvestment/Stock Purchase Plan to acquire additional shares. The Company pays
commission charges on purchases made by the Plan. A booklet describing the Plan
and enrollment procedures is available upon request from Wachovia Bank of North
Carolina, N. A., P. O. Box 3001, Winston-Salem, NC 27102-3001
DIVIDENDS
Cash dividends on ABP Common Stock have been paid without interruption for 39
years and have been increased for the last 39 years through 1996. Since ABP's
initial public offering in 1969, dividends per share have been increased by more
than 50 times. Dividends are generally declared on a quarterly basis, with
holders of record date entitled to receive the cash dividend on the payable
date. Anticipated record and payable dates for the year 1997 are listed below:
Record Date Payable Date
February 28, 1997 March 14, 1997
June 2, 1997 June 16, 1997
September 2, 1997 September 15, 1997
December 1, 1997 December 15, 1997
This annual report is printed on recycled paper.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<PAGE> 2
EXHIBIT 21
SUBSIDIARIES OF AMERICAN BUSINESS PRODUCTS, INC.
The subsidiaries of the Company as of March 14, 1997, all of which are
wholly-owned, are set forth below:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
BookCrafters USA, Inc. Michigan
Curtis 1000 Inc. Georgia
Discount Labels, Inc. Indiana
International Envelope Company Delaware
Jen-Coat, Inc. Massachusetts
Vanier Graphics Corporation California
</TABLE>
The results of operations of all subsidiaries described above are included
in the Consolidated Financial Statements
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
<PAGE> 2
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our reports dated February 14,
1997, appearing in and incorporated by reference in this Annual Report on Form
10-K of American Business Products, Inc. for the year ended December 31, 1996
in the following Registration Statements of American Business Products, Inc.:
<TABLE>
<CAPTION>
FORM FILE NO.
<S> <C>
S-3 33-60567
S-8 33-53627
S-8 33-59271
S-8 33-61359
</TABLE>
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 14, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints RICHARD G. SMITH, MICHAEL C. DENIKEN AND DAWN M.
GRAY, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution, for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of American Business
Products, Inc., for the fiscal year ended December 31, 1996, and any and all
amendments to such Annual report on Form 10-K and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission and the New York Stock Exchange, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, lawfully may
do or cause to be done by virtue thereof.
This 14th day of March, 1997.
/s/ F. Duane Ackerman /s/ W. Stell Huie
---------------------------- ---------------------------------
F. Duane Ackerman W. Stell Huie
/s/ W. Joseph Biggers /s/ Thomas F. Keller
---------------------------- ---------------------------------
W. Joseph Biggers Thomas F. Keller
/s/ Thomas R. Carmody /s/ Rex A. McClelland
---------------------------- ---------------------------------
Thomas R. Carmody Rex A. McClelland
/s/ Henry Curtis VII /s/ Daniel W. McGlaughlin
---------------------------- ---------------------------------
Henry Curtis VII Daniel W. McGlaughlin
/s/ Robert W. Gundeck /s/ C. Douglas Miller
---------------------------- ---------------------------------
Robert W. Gundeck C. Douglas Miller
/s/ Hollis L. Harris /s/ G. Harold Northrop
---------------------------- ---------------------------------
Hollis L. Harris G. Harold Northrop
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN BUSINESS PRODUCTS, INC. FOR THE YEAR ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 82,516
<SECURITIES> 0
<RECEIVABLES> 61,967
<ALLOWANCES> 1,885
<INVENTORY> 38,911
<CURRENT-ASSETS> 193,555
<PP&E> 149,338
<DEPRECIATION> 67,409
<TOTAL-ASSETS> 340,491
<CURRENT-LIABILITIES> 76,863
<BONDS> 0
0
0
<COMMON> 33,242
<OTHER-SE> 139,749
<TOTAL-LIABILITY-AND-EQUITY> 340,491
<SALES> 631,638
<TOTAL-REVENUES> 631,638
<CGS> 443,621
<TOTAL-COSTS> 594,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,525
<INCOME-PRETAX> 34,039
<INCOME-TAX> 12,985
<INCOME-CONTINUING> 21,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,054
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
