Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
..X.. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
.... TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period from _________to _________
Commission File Number 1-3410
AMERICAN BANKNOTE CORPORATION
(Exact name of Registrant as specified in its charter)
A Delaware I.R.S. Employer
Corporation No. 13-0460520
51 West 52nd Street, New York, New York 10019
Telephone - Area Code 212-582-9200
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 for the past 90 days. Yes X No
At November 6, 1995 - 19,110,763 shares of common stock were outstanding.
<PAGE>
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AMERICAN BANKNOTE CORPORATION
(formerly named United States Banknote Corporation)
FORM 10-Q
I N D E X
PAGE
NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Condensed Consolidated Balance Sheets
September 30, 1995 and December 31, 1994 . . . . . . . . 3
Condensed Consolidated Statements of Operations
For the nine months and third quarters ended
September 30, 1995 and 1994. . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994 5
Condensed Consolidated Statement of Stockholders' Equity
For the nine months ended September 30, 1995 . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 18
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share data)
<TABLE>
<CAPTION>
September December
30, 1995 31, 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents. . . . . . . . $ 19,052 $ 31,658
Accounts receivable, net of allowance for
doubtful accounts of $916 and $471. . . . . . 36,322 43,783
Other receivables. . . . . . . . . . . . . . . 6,499 4,767
Inventories. . . . . . . . . . . . . . . . . . 23,867 20,497
Deferred income tax benefits . . . . . . . . . 3,210 5,685
Prepaid expenses . . . . . . . . . . . . . . . 6,268 2,971
Total current assets . . . . . . . . . 95,218 109,361
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $54,753 and $44,517. . . . . 228,989 215,859
Other assets . . . . . . . . . . . . . . . . 25,027 23,985
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $2,790 and $1,851. . . . . . 35,363 33,745
$384,597 $382,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portions of long-term debt . . . $ 67 $ 359
Accounts payable and accrued expenses. . . . . 40,597 43,115
Total current liabilities. . . . . . . . 40,664 43,474
Long-term debt, net of unamortized discount
of $1,147 and $1,221 . . . . . . . . . . . . . 191,267 191,192
Other liabilities. . . . . . . . . . . . . . . . 13,311 16,188
Deferred income taxes . . . . . . . . . . . . . 69,371 69,319
Minority interest. . . . . . . . . . . . . . . . 17,350 -
331,963 320,173
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding . . . . . . . - -
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
19,391,763 shares and 19,289,888 shares . . . 194 193
Capital surplus. . . . . . . . . . . . . . . . 67,091 66,883
Retained-earnings (deficit). . . . . . . . . . (13,398) (3,046)
Treasury stock, at cost (281,000 shares) . . . (1,253) (1,253)
Total stockholders' equity . . . . . . . 52,634 62,777
$384,597 $382,950
</TABLE>
See notes to condensed consolidated financial statements.
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Third
Months Ended Quarter Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . $153,442 $149,193 $ 56,783 $ 52,890
Costs and expenses
Cost of goods sold. . . . . . 109,512 90,658 39,414 33,517
Selling and administrative . . 29,767 29,077 9,258 10,272
Depreciation and amortization . 10,741 9,640 4,187 3,206
150,020 129,375 52,859 46,995
3,422 19,818 3,924 5,895
Other (expense) income
Interest expense. . . . . . . . (17,293) (15,249) (5,832) (5,696)
Foreign exchange gain
(loss), net . . . . . . . . . (206) (7,487) (264) 412
Other, net. . . . . . . . . . . 2,920 1,261 1,850 437
(14,579) (21,475) (4,246) (4,847)
Income (loss) before
income taxes. . . . . . . . . (11,157) (1,657) (322) 1,048
Income tax charge (benefit). . . (1,217) (784) (787) 487
Income (loss) before
minority interest . . . . . . (9,940) (873) 465 561
Minority interest. . . . . . . . (412) - (412) -
Income (loss) before
extraordinary item. . . . . . (10,352) (873) 53 561
Extraordinary item . . . . . . . - (114) - -
NET INCOME (LOSS) . . . . . . . $(10,352) $ (987) $ 53 $ 561
Weighted average number of
common and common equivalent
shares outstanding. . . . . . 19,087 19,040 19,300 19,230
Net income (loss) per share:
Operations. . . . . . . . . . . $ (.54) $ (.04) $ (.00) $ .03
Extraordinary item. . . . . . . - (.01) - -
Net income (loss) per share . $ (.54) $ (.05) $ (.00) $ .03
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1995 1994
<S> <C> <C>
Operating Activities
Net cash from operations, after adjustments
to reconcile net loss to net cash (used in)
or provided by operating activities . . . . . .$ (2,649) $16,947
Accounts and other receivables. . . . . . . . . 3,978 (7,907)
Inventories . . . . . . . . . . . . . . . . . . 1,759 (2,550)
Prepaid and other assets. . . . . . . . . . . . 1,253) (641)
Accounts payable and accrued expenses . . . . . 4,733) 7,592
Deferred debt costs . . . . . . . . . . . . . . - (3,744)
Other . . . . . . . . . . . . . . . . . . . . . 2,673) (2,079)
Net cash used in Operating Activities. . . . . . . 5,571) 7,618
Investing Activities
Capital expenditures, net . . . . . . . . . . . (5,442) (7,781)
Other long-term investments. . . . . . . . . . . (1,195) -
Net cash used in Investing Activities. . . . . . (6,637) (7,781)
Financing Activities
Proceeds from 11 5/8% Senior Notes . . . . . . . . - 63,718
Proceeds from issuance of Common Stock . . . . . . 19 122
Repayment of bank borrowings . . . . . . . . . . . - (40,000)
Acquisition of treasury stock. . . . . . . . . . . - (378)
Payment of other long-term
obligations and other . . . . . . . . . . . . . (292) (423)
Net cash (used in) provided by
Financing Activities. . . . . . . . . . . . . . (273) 23,039
Effect of foreign currency exchange rate
changes on cash and cash equivalents . . . . . . . (125) (1,379)
Increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . . . (12,606) 21,497
Cash and cash equivalents - beginning of period. . . 31,658 15,437
Cash and cash equivalents - end of period . . . . . $19,052 $36,934
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Amounts in thousands)
<TABLE>
<CAPTION>
Retained
Common Stock Capital Earnings Treasury Total
Shares Amount Surplus (Deficit) Stock Equity
<S> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1995 19,290 $193 $66,883 $(3,046) $(1,253) $62,777
Issuance of common
shares and other 102 1 208 209
Net loss (10,352) (10,352)
Balance -
September 30, 1995 19,392 $194 $67,091 $(13,398) $(1,253) $52,634
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A - Basis of Presentation
As of July 1, 1995, the name of the corporation was changed to
American Banknote Corporation from United States Banknote Corporation.
The accompanying unaudited condensed consolidated financial
statements do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the Company's Annual
Report on Form 10-K and Form 10-K/A for the year ended December 31,
1994. The accompanying unaudited condensed consolidated financial
statements reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of the results of the interim periods presented and are
not necessarily indicative of the results which may be expected for a
full fiscal year.
In May 1994, the Company wrote off as a net extraordinary charge to
income $0.1 million of deferred debt expenses, net of tax benefits
(approximately $0.1 million), related to the early extinguishment of the
Company's bank indebtedness. (See Note C).
Primary and fully-diluted income (loss) per share are the same.
Cash tax payments for the nine months ended September 30, 1995 and
1994, amounted to approximately $2.3 million in both periods. Cash
interest payments for the nine months ended September 30, 1995 and 1994
amounted to approximately $14.9 million and $9.6 million, respectively.
In addition, under interest rate swap agreements, a cash interest
payment of $0.6 million was made in the nine months ended September 30,
1995 versus the receipt of cash interest of $0.9 million in the nine
months ended September 30, 1994.
The fair value of the Company's swap and cap agreements represented a
net payable position of approximately $0.6 million as of September 30,
1995.
<PAGE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note B - Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September December
30, 1995 31, 1994
<S> <C> <C>
Work in process. . . . . . . . . . . . $ 11,864 $ 12,963
Raw materials and supplies . . . . . . 12,003 7,534
Total inventories . . . . . . . . . $ 23,867 $ 20,497
</TABLE>
Note C - Senior Debt
Senior debt consists of the following (in thousands):
<TABLE>
<CAPTION>
September December
30, 1995 31, 1994
<S> <C> <C>
10-3/8% Senior Notes,
due June 1, 2002 . . . . . . . . . $ 126,500 $ 126,500
11-5/8% Senior Notes,
due August 1, 2002,
net of unamortized discount
of $1,147 and $1,221 (a). . . . . . 63,853 63,779
Other long-term obligations. . . . . . 981 1,272
Less current portion . . . . . . . . . (67) (359)
Total senior debt . . . . . . . . . $ 191,267 $ 191,192
</TABLE>
(a) On May 4, 1994, the Company completed a sale of $65 million
principal amount of the 11-5/8% Senior Notes. The proceeds were
used, in part, to prepay $40 million outstanding indebtedness under
bank borrowings.
<PAGE>
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AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
September December
30, 1995 31, 1994
<S> <C> <C>
Accounts payable . . . . . . . . . . . $ 8,074 $ 10,633
Accrued expenses . . . . . . . . . . . 7,955 9,924
Customers' advances. . . . . . . . . . 4,665 6,656
Salaries and wages . . . . . . . . . . 5,787 5,645
Restructuring and merger -
related accruals. . . . . . . . . . 6,317 4,202
Interest payable . . . . . . . . . . . 4,882 3,550
Other . . .. . . . . . . . . . . . . . 2,917 2,505
Total accounts payable
and accrued expenses. . . . . . $ 40,597 $ 43,115
</TABLE>
Note E - Acquisition of Subsidiary
As of July 1, 1995, the Company's Brazilian subsidiary, American
Bank Note Company Grafica e Servicos Ltda. ("ABN-Brazil"), acquired the
printing business and operations of Grafica Bradesco Ltda. ("Grafica
Bradesco") from Banco Bradesco S.A. (Brazil) ("Banco Bradesco"). Under
the terms of the acquisition agreement Banco Bradesco became a holder of
22.5% of ABN-Brazil in exchange for the business and certain operating
assets of Grafica Bradesco valued at approximately $17 million. Grafica
Bradesco's business includes check printing, check personalization,
continuous forms, deposit slips, financial cards and insurance policies.
Prior to the acquisition, Graficia Bradesco printed exclusively for
Banco Bradesco and its affiliates and ABN-Brazil expects to continue to
be the principal print supplier for Banco Bradesco. ABN-Brazil will
continue to operate in the Sao Paulo Banco Bradesco facility, which was
previously used by Grafica Bradesco through July 1996. The acquisition
was accounted for as a purchase and recorded approximately $2.6 million
as the cost in excess of the fair market value of the underlying net
assets acquired, which cost is being amortized over 20 years.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note E - Acquisition of Subsidiary (cont'd.)
The following unaudited pro forma combined results of operations for
the nine months ended September 30, 1995 and 1994 has been prepared as
if the acquisition had occurred on January 1 of each year. The
acquisition has been accounted for as a purchase transaction in
accordance with APB No. 16 "Business Combinations."
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined
Nine Months Ended
September 30
1995 1994
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $ 171,940 $ 174,969
Income (loss) before
extraordinary item . . . . . . . . . . $ (8,383) $ 5,218
Net income (loss). . . . . . . . . . . . $ (8,383) $ 5,104
Income (loss) per share
Before extraordinary item. . . . . . . $ (.44) $ .28
Net income (loss). . . . . . . . . . . $ (.44) $ .27
</TABLE>
The above pro forma statements are not intended to be indicative of
the results of operations which actually would have occurred had the
acquisition been made at such dates.
Note F - Commitments and Contingencies
The Company is involved in various litigations (reference is made to
"Part II - Other Information, Item 1. Legal Proceedings" herein), the
adverse determination of which would have a material adverse effect on
the financial condition or results of operations of the Company. The
Company believes, however, that it has good and meritorious defenses to
the litigations and intends to vigorously defend against such actions.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
As noted elsewhere, the Company acquired the printing business and
operations of Grafica Bradesco in exchange for 22.5% of ABN-Brazil. The
acquisition was accounted for as a purchase transaction and its
operations have been recorded since the July 1, 1995 acquisition date.
The acquisition had a significant impact on the operations of the
Company beginning in the third quarter of 1995.
COMPARISON OF RESULTS OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Sales in 1995 increased by $4.2 million (2.8%) from 1994. Government
sales decreased $7.5 million. Corporate and Commercial and Holographic
sales increased $5.7 million and $6.0 million, respectively. The
decrease in Government is primarily due to a decrease in food coupons
($10.8 million) and U.S. Postal ($1.1 million) sales, partially offset
by increases in currency ($2.0 million) and automobile vouchers, driver
licenses and other product sales ($2.4 million). The reduction in food
coupon sales reflects a trend that can be expected to continue. See
"Liquidity and Capital Resources." The increase in Corporate and
Commercial sales is primarily due to increases in sales as a result of
the Grafica Bradesco acquisition ($11.4 million) and increases in
prepaid telephone cards ($11.2 million) offset by decreases in sales of
stocks and bonds ($12.9 million), personalized checks ($3.8 million) and
other products ($0.2 million). The increase in holographic sales is
attributable to holograms for credit cards. The change in various
components of sales may be affected by the timing of contract awards and
delivery requirements of customers.
Cost of goods sold increased $18.9 million (20.8%) from 1994 and as
a percentage of sales was 71.4% in 1995 as compared to 60.8% in 1994.
Cost of goods sold increased as a result of the Grafica Bradesco
acquisition in the third quarter of 1995, a change in product mix and, in
the second quarter of 1995, the write-off of inventory related to work
for an overseas customer that went out of business and manufacturing
losses on certain other orders ($6.2 million). The Company does not
expect to incur additional charges from these inventory and
manufacturing losses in the future. The cost of sales percentage also
was impacted by reduced margins in Brazil since margins in the prior
year were higher as sales included inflationary price adjustments which
have now been eliminated as part of the current economic stabilization
program. While margins were lower due to this stabilization program,
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
earnings were favorably impacted by the virtual elimination of
translation losses. The Company expects ABN-Brazil's margins to
continue to be affected by these factors. The new prepaid telephone card
production lines in Brazil increased fixed manufacturing cost which was
offset, in part, by lower domestic fixed manufacturing cost. The product
mix in any given period is not indicative of the expected product mix
which can be expected in future periods.
Selling and administrative expenses increased by $0.7 million from
1994 (2.4%) primarily as a result of the settlement of an executive
severance agreement and increased commission expense in Brazil offset in
part by reduced domestic selling and administrative expenses. As a
percentage of sales, selling and administrative expenses decreased to
19.4% from 19.5%.
Depreciation expense increased $1.1 million in 1995 primarily as a
result of the Grafica Bradesco acquisition.
Interest expense increased $2.0 million in 1995 primarily due to the
issuance of $65 million 11-5/8% Senior Notes during May 1994 at a higher
rate of interest than the $40 million of bank debt it replaced. In
addition under its interest rate swap agreements, the Company incurred
net interest expense ($0.3 million) in 1995 versus income ($0.3 million)
in 1994.
Other income increased $1.7 million due in part to an unrealized
gain in a long-term marketable investment ($0.9 million).
Foreign exchange gain (loss), net, is a result of the Company's
translation of Brazilian local currency financial statements into
dollars in accordance with Statement of Financial Accounting Standards
("SFAS") No. 52 "Foreign Currency Translation." As a result, the
translation adjustment is recorded as a period item. Improving economic
conditions in Brazil stemming from the country's July 1994 economic
stabilization program resulted in a $7.3 million reduction in foreign
exchange loss.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Income taxes (benefits) are based on book income (loss) using an
estimated annual effective tax rate that assumes various assumptions
such as state and local taxes, utilization of foreign tax credits and
timing of certain deductions. The Company recorded a nominal tax
benefit primarily due to the tax benefit from domestic losses being
offset by U.S. and Brazilian taxes on profits earned in Brazil.
The minority interest represents Banco Bradesco's 22.5% interest in
ABN-Brazil's operations since the July 1, 1995 acquisition of Grafica
Bradesco by ABN-Brazil.
The extraordinary item in 1994 represents the writeoff of deferred
debt expenses, net of tax benefits related to the early extinguishment
of the Company's $40 million bank indebtedness.
COMPARISON OF RESULTS OF THE THIRD QUARTER ENDED SEPTEMBER 30, 1995
WITH THE THIRD QUARTER ENDED SEPTEMBER 30, 1994
Sales in 1995 increased by $3.9 million (7.4%) from 1994. Government
sales decreased $6.1 million. Corporate and Commercial and Holographic
sales increased $8.0 million and $2.0 million, respectively. The
decrease in Government is primarily due to a decrease in food coupon
sales ($6.8 million), partially offset by increases in currency, postal
and other ($0.7 million). The reduction in food coupon sales reflects a
trend that can be expected to continue. See "Liquidity and Capital
Resources." The increase in Corporate and Commercial sales is primarily
due to increases in sales as a result of the Grafica Bradesco
acquisition ($11.4 million), increases in prepaid telephone cards ($5.4
million) offset by decreases in sales of stocks and bonds ($5.8
million), personalized checks ($1.0 million) and commercial and other
products ($2.0 million). The increase in Holographic sales is
attributable to holograms for credit cards. The change in various
components of sales may be affected by the timing of contract awards and
delivery requirements of customers.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - Continued
Cost of goods sold increased $5.9 million (17.6%) from 1994 and as a
percentage of sales was 69.4% in 1995 as compared to 63.4% in 1994.
Cost of goods sold increased mainly due to a change of product mix and
the Grafica Bradesco acquistion. The cost of sales percentage also was
impacted due to the reduced margins as a result of product mix and the
acquistion. The new prepaid telephone card production lines in Brazil
increased fixed manufacturing cost which was offset in part by lower
domestic fixed manufacturing cost. The product mix in any given period
is not indicative of the expected product mix which can be expected in
future periods.
Selling and administrative expenses decreased by $1.0 million from
1994 primarily due to reduced commissions as a result of lower domestic
sales volumes and reduced administrative expenses. As a result, selling
and administrative expenses as a percentage of sales, decreased to
16.3% from 19.4%.
Depreciation expense increased $1.0 million in 1995 primarily as a
result of the Grafica Bradesco acquistition.
Interest expense increased $0.1 million in 1995 primarily a result
of the Company's interest rate swap agreements.
Other income increased $1.4 million primarily due to an unrealized
gain in a long-term marketable investment ($1.2 million).
Foreign exchange translation loss, net, is a result of the Company's
translation of Brazilian local currency financial statements into
dollars in accordance with SFAS No. 52. As a result, the translation
adjustment is recorded as a period item. See "Impact of Inflation."
Income taxes (benefits) are based on book income (loss) using an
estimated annual effective tax rate that assumes various assumptions
such as state and local taxes, utilization of foreign tax credits and
timing of certain deductions. The tax benefit recorded in the quarter
is as a result of cumulative change in the tax benefit recorded.
The minority interest represents Banco Bradesco's 22.5% interest in
ABN-Brazil's operations since the July 1, 1995 acquisition of Grafica
Bradesco by ABN-Brazil.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1995, the Company's net cash
used in operations was approximately $2.6 million. The net loss of $10.4
million was adjusted by $7.8 million to reconcile the net loss to net
cash used in or provided by operating activities before changes in
operating assets and liabilities. The non-cash adjustments principally
consisted of depreciation and amortization of $10.7 million offset
partially by deferred tax benefits of approximately $5.1 million.
Significant increases in certain balance sheet amounts at September
30, 1995 compared to December 31, 1994 were due principally to the
acquisition of the business and certain operating assets of Grafica
Bradesco by ABN-Brazil in exchange for a 22.5% minority interest in
ABN-Brazil during 1995. As a result of the acquistion, the following balance
sheet accounts increased: inventories $5.1 million, prepaid expenses and
other current assets $2.0 million, property plant and equipment $17.6
million, net excess cost of investment in subsidiaries over net assets
acquired $2.6 million, accounts payable and accrued expenses $2.4
million, deferred income tax liability $8.0 million and minority
interest $16.9 million. In addition to the changes discussed above, the
net decrease in accounts and other receivables of $4.0 million and
inventory of $1.8 million provided cash during the period. Cash was used
to reduce accounts payable and accrued expenses by $4.7 million, other
liabilities by $2.7 million and increase prepaid and other assets by
$1.2 million.
Net cash used in investing activities was $6.6 million as a result
of capital expenditures for new equipment of $5.4 million and a long-term
investment in marketable securities of $1.2 million.
Net cash used for financing activities amounted to $0.3 million
resulting primarily from payments of long-term debt.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - continued
At September 30, 1995, the Company had approximately $19.1 million
in cash and cash equivalents, $126.5 million of 10-3/8% Senior Notes
outstanding, $63.9 million of 11-5/8% Senior Notes outstanding, and had
approximately $5.6 million of availability under the Credit Agreement,
as extended, after giving effect to $4.4 million of outstanding letters
of credit.
The Company is currently negotiating a $20 million credit facility to
replace the Credit Agreement which expired (other than the letter of
credit facility) on October 31, 1995. On September 20, 1995, the
Company signed a commitment letter for a new credit facility and is
negotiating an extension of the commitment which expired November 2,
1995.
Certain states are continuing the evaluation of the feasibility of
utilizing electronic benefit transfer ("EBT") programs which replace the
traditional methods of distribution of public assistance benefits to
recipients, including replacing food coupons with debit-type cards. Food
coupon production constitutes a significant component of the Company's
sales and earnings. While sales of food coupons have increased in recent
years, recent reforms proposed by Congress as well as EBT programs and
the USDA's high level of food coupon inventory will reduce the Company's
volume of food coupon production for 1995 and in future years. The USDA
is currently soliciting bids for the future printing of food coupons at
substantially lower volumes than in prior years. Reference is made to
the Company's Annual Report on Form 10-K and Form 10-K/A for the year
ended December 31, 1994.
Management of the Company believes that cash flows from operations
of the Company, together with its cash balances and borrowings, will be
sufficient to service its working capital and debt service requirements
and fund capital expenditures for the foreseeable future.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - continued
NEW ACCOUNTING STANDARD
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," was issued
and contains changes to current accounting practices and must be adopted
for fiscal years beginning after December 15, 1995. Management
estimates that the adoption of this Standard will not have a material
effect on the Company's financial statements and will be adopted in
1996.
IMPACT OF INFLATION
The Company's domestic operations are not significantly affected by
inflation. ABN-Brazil sales for 1995 contributed a significant portion
of consolidated sales of the Company (43.1%). Reference is made to the
Company's Form 10-K and Form 10-K/A for the year ended December 31, 1994
"Impact of Inflation."
On July 1, 1994 the Brazilian government introduced a new currency,
the "Real" as part of the government's economic stabilization program
designed to reduce the country's hyperinflation. Prior to the
introduction of the Real, the Brazilian government created a new
monetary unit (the "URV") as a transition mechanism. During this period
prices were re-negotiated in URV's. From April 1 to June 30, 1994
inflation increased over pre-URV levels, resulting in higher than
anticipated translation losses. However, the annual inflation rate has
decreased substantially (to approximately 1.4% per month in September
1995 and 1.2% per month in September 1994) and in 1995 the Company
realized a nominal translation loss. The Company cannot predict what
impact, if any, such initiatives will have on the Brazilian economy or
on ABN-Brazil's consolidated results of operations<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K and
Form 10-K/A for the year ended December 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
4.1 New Credit Agreement and Temporary Commitment, dated as of
August 31, 1995, among American Banknote Corporation,
American Bank Note Company and American Bank Note
Holographics, Inc. and Citibank, N.A., as Agent
4.2 Security Agreement dated as of August 31, 1995, between
American Bank Note Company and Citibank, N.A.
4.3 One month extension of New Credit Agreement and Temporary
Commitment dated as of September 30, 1995 among American
Banknote Corporation, American Bank Note Company and American
Bank Note Holographics, Inc. and Citibank, N.A., as Agent
4.4 Chemical Bank commitment letter dated September 20, 1995
pertaining to Credit Facility for American Bank Note Company
and American Bank Note Holographics, Inc.
10.1 Offer of employment, dated August 18, 1995, between Robert
Wilcox and American Banknote Corporation
10.2 Agreement for Services, effective October 1, 1995, between
Kelly, Anderson, Pethick & Associates, Inc. and American
Banknote Corporation
27 Article 5 Financial Data Schedule
(b) Reports on Form 8-K
a) Form 8-K dated July 10, 1995 (filed July 19, 1995)
Item 2 Acquisition or Disposition of Assets
Item 7 Exhibits
a) Form 8-K/A dated July 10, 1995 (filed September 21, 1995)
Item 7 Financial Statements of Business Acquired, Pro
Forma Financial Information and Exhibits
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMERICAN BANKNOTE CORPORATION
(formerly named United States Banknote Corporation)
By: s/ John T. Gorman
John T. Gorman
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Date: November 13, 1995
<PAGE>
<PAGE>
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K: Exhibit
Page #
4.1 New Credit Agreement and Temporary Commitment, dated as of
August 31, 1995, among American Banknote Corporation,
American Bank Note Company and American Bank Note
Holographics, Inc. and Citibank, N.A., as Agent
4.2 Security Agreement dated as of August 31, 1995, between
American Bank Note Company and Citibank, N.A.
4.3 One month extension of New Credit Agreement and Temporary
Commitment dated as of September 30, 1995 among American
Banknote Corporation, American Bank Note Company and American
Bank Note Holographics, Inc. and Citibank, N.A., as Agent
4.4 Chemical Bank commitment letter dated September 20, 1995
pertaining to Credit Facility for American Bank Note Company
and American Bank Note Holographics, Inc.
10.1 Offer of employment, dated August 18, 1995, between Robert
Wilcox and American Banknote Corporation
10.2 Agreement for Services, effective October 1, 1995, between
Kelly, Anderson, Pethick & Associates, Inc. and American
Banknote Corporation
27 Article 5 Financial Data Schedule
<PAGE>
<PAGE>
BLANK PAGE
CITIBANK, N.A.
399 Park Avenue
New York, New York 10043
American Banknote Corporation, (as of) August 31, 1995
American Bank Note Company, and
American Bank Note Holographics, Inc.
51 West 52nd Street, 14th Floor
New York, New York 10019
Attention: Mr. Ward A.W. Urban, Treasurer
Re: New Credit Agreement and Temporary Commitment
Gentlemen:
American Bank Note Company ("ABN"), American Bank Note Holographics, Inc.
("ABH"), (ABN and ABH may be referred individually as a "Borrower" and
collectively as the "Borrowers"), and American Banknote Corporation
(formerly known as United States Banknote Corporation) ("ABC"),
Creditanstalt-Bankverein, The Nippon Credit Bank, Ltd. and we (as Agent
and/or a Bank) are parties to a Credit Agreement dated as of May 26, 1992,
as modified by letter agreements dated as of January 5, 1993, September 30,
1993, December 31, 1993 (two letters), December 31, 1994, and June 30, 1995,
and as amended by a First Amendment to Credit Agreement dated as of
une 23, 1993, a Second Amendment to Credit Agreement dated as of
March 25, 1994, and a Third Amendment to Credit Agreement dated as of
May 26, 1995 (as so modified and amended, the "Credit Agreement"),
which establishes various covenants and other terms and provisions.
Capitalized terms used and not otherwise defined herein shall have the
meanings respectively assigned to them in the Credit Agreement.
The Commitment of the Banks under the Credit Agreement expires on
August 31, 1995, in accordance with its terms, although certain Letters
of Credit (and the Credit Agreement as it pertains thereto) are continuing.
You have delivered to us a Commitment Letter from Chemical Bank
respecting a replacement facility, and you have requested that we extend
your existing Commitment until the end of September to permit you time to
close your new facility with Chemical Bank. Although the Banks as
a group are not extending the Commitment, we are willing to establish a
separate temporary commitment on the same terms and provisions as set
forth in the Credit Agreement except as otherwise provided herein.
By your signature below, you and we hereby enter into a new credit
agreement (as the same may be supplemented, modified, amended or restated
from time to time in the manner provided herein, the "New Credit
Agreement") upon the terms and provisions and subject to the
conditions set forth in the Credit Agreement (which are hereby
incorporated by reference) and the ABH Guaranty (as defined
in the Credit Agreement) as modified by this letter agreement and by the
Security Agreement between ABN and us dated as of the date hereof
(as the same may be supplemented, modified, amended or
restated from time to time in the manner provided herein, the
"Security Agreement"). In the event of any conflict between the
terms and provisions of the Credit Agreement incorporated by reference and
those of this letter or the Security Agreement, the terms and provisions
of this letter or the Security Agreement (as the case may be) shall
control and be given effect.
We hereby establish a Commitment under the New Credit
Agreement of $7,500,000.00 (with a sublimit of $2,500,000.00 in aggregate
face amount for Letters of Credit), with Advances being
and Letters of Credit being available to the Borrower upon the
same terms and subject to the same conditions as set forth in the
Credit Agreement. Each Letter of Credit must be cash collateralized
prior to its issuance in an amount that is not less than 100% of the
aggregate face amount of such Letter of Credit (or 105% of the U.S.
Dollar equivalent if denominated in a foreign currency), which cash
collateral shall be deposited with the Bank and held as security
pursuant to the Security Agreement. The Termination Date
for this Commitment is September 30, 1995. (The definitions of Commitment
and Termination Date as incorporated by reference from the Credit
Agreement are hereby modified accordingly.) The Borrowers shall
repay all of the Loans and other Obligations (other than
outstanding Letters of Credit that are cash collateralized as aforesaid)
in full on September 30, 1995.
This New Credit Agreement is between you and us (in our capacity
as both Agent and as all of the Banks). None of the other Banks under
the existing Credit Agreement have any rights or obligations under the
New Credit Agreement, which they and the parties hereto hereby confirm by
their signatures below.
In order to induce us to enter into the New Credit Agreement, you
hereby agree to execute and deliver to us the Security Agreement and a
Promissory Note in the form of Exhibit A hereto (as the same may be
supplemented, modified, amended or restated from time to time in the
manner provided therein, the "Note"), which Note shall evidence all
Advances under the New Credit Agreement.
Please acknowledge your acceptance and agreement of this New
Credit Agreement and its conditions by signing two of the enclosed
copies of this letter and returning them to us, c/o Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York 10036,
Attention: Lawrence David Swift, Esq.
Very truly yours,
Citibank, N.A.
By:ss/William G. Martens III, Managing Director
ACKNOWLEDGED, ACCEPTED AND AGREED:
American Banknote Corporation
By: ss/ Ward A.W. Urban, Vice President and Treasurer
American Bank Note Company
By: ss/Ward A.W. Urban, Vice President and Treasurer
American Bank Note Holographics, Inc.
By:
Ward A.W. Urban, Vice President and Treasurer
cc: Harvey Kesner, Esq.
Hillel M. Bennett, Esq.
<PAGE>
ACKNOWLEDGED AND CONSENTED TO:
Creditanstalt-Bankverein
By: _________________________________________
Gregory F. Mathis, Vice President
By: _________________________________________
Geoffrey D. Spillane, Senior Associate
The Nippon Credit Bank, Ltd.
By: _________________________________________
Clifford Abramsky, Vice President
<PAGE>
EXHIBIT A
to
NEW CREDIT AGREEMENT
with
AMERICAN BANK NOTE COMPANY and AMERICAN BANK NOTE HOLOGRAPHICS,
INC.
REVOLVING PROMISSORY NOTE
$7,500,000.00 New York, New York
Dated as of August 31, 1995
FOR VALUE RECEIVED, American Bank Note Company and American Bank
Note Holographics, Inc. (individually, a "Borrower", and collectively, the
"Borrowers"), jointly and severally promise to pay to the order of Citibank,
N.A. (the "Bank"), a 399 Park Avenue, New York, New York 10043, or at
such other place as may be designated in writing by the holder of this Note,
the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000.00), or so much thereof as may be advanced and outstanding,
with interest thereon, to be computed on each advance from the date of
its disbursement, all as provided in that certain New Credit Agreement (in
the form of a letter agreement incorporating other documents) among the
Borrowers, American Banknote Corporation (formerly known as United States
Banknote Corporation) and the Bank and the Security Agreement between ABN
and the Bank, each dated as of August 31, 1995 (as the same may be
supplemented, modified, amended or restated from time to time in the
manner provided therein, collectively, the "Loan Agreement").
Capitalized terms used and not otherwise defined in this Note
shall have the meanings respectively assigned to them in the Loan Agreement.
This Note is the Note referred to in the Loan Agreement.
Principal and interest shall be due and payable as provided in the Loan
Agreement, and all of the terms and provisions of the Loan Agreement,
including (without limitation) provision for prepayment and acceleration
of maturity, are incorporated herein by reference and made a part hereof.
This Note is secured by certain collateral pledged by ABN pursuant to the
Loan Agreement.
Presentment for payment, notice of dishonor, protest and notice
of protest are hereby waived by the Borrowers. This Note is made and
delivered in the City, County and State of New York, where all advances
and repayments shall be made, and shall be construed in accordance
with and governed by the applicable laws pertaining in such State.
This Note may not be changed or terminated orally, and in any
event may not be changed without the written consent of the holder hereof.
American Bank Note Company
By: Ward A.W. Urban, Vice President and Treasurer
American Bank Note Holographics, Inc.
By: Ward A.W. Urban, Vice President and Treasurer
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 1st day of September, 1995, before me personally came
Ward A.W. Urban, to me known, who, being by me duly sworn, did depose and
say: that he resides at 20 Ellsworth Street, Rye, New York 10580;
that he is the Vice President and Treasurer of American Banknote
Corporation, the corporation described in and which executed the above
instrument; and that he signed his name thereto by order of the board of
directors of said corporation.
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 1st day of September, 1995, before me personally came
Ward A.W. Urban, to me known, who, being by me duly sworn, did depose and
say: that he resides at 20 Ellsworth Street, Rye, New York 10580;
that he is the Vice President and Treasurer of American Bank Note
Holographics, Inc. the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of the
board of directors of said corporation.
SECURITY AGREEMENT
This Security Agreement, dated as of August 31, 1995 (as the
same may be supplemented, modified, amended, restated or replaced from
time to time in the manner provided herein, this "Agreement"), is by
and between American Bank Note Company, a New York corporation whose
chief executive office is currently located at the address set forth on
the signature page hereto (the "Borrower"), and Citibank, N.A., a
national banking association having an address at 399 Park Avenue, New
York, New York 10043 (the "Bank").
In order to induce the Bank to permit the issuance of certain
letters of credit and make and continue lother accommodations, the
Borrower has agreed to secure the obligations of the Borrower
respecting any and all letters of credit with certain securities,
investments and other collateral, all upon the terms and provisions and
subject to the conditions hereinafter set forth. Accordingly, in
consideration of the foregoing and the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration (the
receipt and adequacy of which is hereby acknowledged by the Borrower),
the parties hereto hereby agree as follows:
Section 1. Loan Documents and Obligations. The Borrower
has executed and delivered a new credit agreement with the Bank in the
form of a letter agreement dated as of August 31, 1995, to which
American Banknote Corporation (formerly known as United States Banknote
Corporation) ("ABC") also is a party (as the same may be supplemented,
modified, amended, or restated from time to time, the "New Credit
Agreement"). Pursuant to the New Credit Agreement, the Borrower
(together with ABH) has issued a Promissory Note to the Bank (as
executed, and as the same may be supplemented, modified, amended,
restated or replaced from time to time, the "Note"). The Borrower and
one or more other persons, including American Bank Note Holographics,
Inc. ("BH"), and any other guarantor, pledgor or surety (together with
ABH, each a "Surety"), have executed and from time to time may execute
one or more letter of credit applications, guaranties and other
instruments, applications, agreements or documents relating to the
Obligations (as hereinafter defined) in whole or in part (as executed,
and as the same may be supplemented, modified, amended, restated or
replaced from time to time, together with the Note, the New Credit
Agreement and this Agreement, individually, a "Loan Document", and
collectively, the "Loan Documents"). "Obligations" shall mean any and
all of (a) the letter of credit advances outstanding (including future
advances) under the New Credit Agreement (collectively, the "oans"),
together with accrued and unpaid interest thereon (including, without
limitation, any and all interest and other amounts accrued during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceedings, irrespective of whether such interest and other amounts
are allowed or allowable as claims in such proceedings), (b) any
guaranty or other credit support by the Borrower of any letter of
credit obligation of ABC or any of its affiliates, and (c) the payment
of all of the other amounts to be paid and the performance or
satisfaction of all other obligations to be performed or otherwise
satisfied by the Borrower (1) under this Agreement or (2) with respect
to any letter of credit under the New Credit Agreement and the other
Loan Documents. Event of Default and the other capitalized terms used
and not otherwise defined in this Agreement shall have the meanings
respectively assigned to them in the New Credit Agreement. Each use of
a neuter, masculine, feminine or plural pronoun shall be deemed to
refer to the form of pronoun appropriate to the circumstance.
Section 2. Grant of Security Interest. As security for the
timely and full payment and satisfaction of any and all of the
Obligations, the Borrower hereby absolutely, unconditionally and
irrevocably pledges, assigns, conveys, mortgages, transfers and
delivers to the Bank, and grants to the Bank a continuing security
interest in and to, the following: (a) any and all governmental
obligations, notes, certificates of deposit, money, bank and other
accounts, and other securities, investments and interests held by the
Bank in the account entitled "Citibank, N.A., Cash Collateral Account
f/b/o American Bank Note Company, No. 40680389", any and all other
securities, investments or interests received by the Borrower on
account of or related to any of the foregoing, any and all dividends,
interest and distributions with respect thereto (whether cash, stock or
otherwise) and splits and reclassifications thereof, and any and all
options, warrants and other rights to acquire any such securities,
investments or interests (collectively, the "Pledged Deposits"); (b)
any and all of the rights, powers, privileges, remedies and interests
of the Borrower in, to and under any and all instruments, indentures,
agreements, charters, by-laws, certificates and other documents and any
statutory equivalents, in each case whether now or hereafter existing,
and irrespective of whether reduced to writing, and as each has been
and hereafter may be supplemented, modified, amended or restated from
time to time, respecting (i) any of the Pledged Deposits or the
organization or governance of any issuer of any of the Pledged Deposits
(collectively, the "Organizational Documents") or (ii) the investment
or custody of any Pledged Deposits with or by any holder thereof
(collectively, the "Custody Documents"); (c) any and all advances,
indebtedness and other amounts (including interest) directly or
indirectly owed to the Borrower on account of or related to the Pledged
Deposits; and (d) any and all accounts, instruments, chattel paper,
contract rights, warranties, casualty and other insurance policies and
rights, litigation claims and rights, tradenames, other general
intangibles and books and records of the Borrower arising from or with
respect to all or any part of the foregoing subsections; in each case
whether any of the foregoing is now existing or hereafter acquired or
created, whether owned beneficially or of record and whether owned
individually, jointly or otherwise, together with the products and
proceeds thereof, all payments and other distributions with respect
thereto and any and all renewals, substitutions, modifications and
extensions of any and all of the foregoing (the foregoing items will be
referred to collectively as the "Collateral").
Section 3. Delivery and Documentation. The Borrower shall
deliver to the Bank any and all stock certificates and other
instruments evidencing or respecting the Collateral, which shall be
delivered with this Agreement if currently existing or delivered
promptly as hereafter received, acquired or created. Stock
certificates shall be delivered with corresponding stock powers, duly
endorsed in blank, and other instruments shall be duly endorsed to the
order of the Bank in such manner as the Bank may specify. Each
certificate shall be delivered free and clear of any and all
restrictive legends. If any of the Collateral is held by a broker,
investment adviser, trader, financial intermediary, custodian, clearing
corporation or other person, has been issued by any partnership, trust
or other non-corporate person, or has been issued in uncertified form,
the Borrower shall execute and deliver such notices, transfer
instructions and other documents to, and obtain such written consents
and acknowledgments from, each holder or issuer respecting any
Collateral (and the Bank's rights, powers, privileges, remedies and
interests in and to the Collateral) as the Bank from time to time may
request (as each may be executed, acknowledged, supplemented, modified,
amended or restated from time to time, (a) if signed by the Borrower,
individually a "Collateral Notice" and collectively, the "Collateral
Notices", and (b) if signed by a holder or issuer (other than the
Bank), individually, a "Collateral Acknowledgment", and collectively,
the "Collateral Acknowledgments"). From time to time upon request of
the Bank, the Borrower shall, or shall cause the holder or issuer of
any Collateral to, deliver to the Bank such Organizational Documents
and Custody Documents as the Bank may request. The Bank in its
discretion may at any time transfer or register any of the Collateral
into the name of the Bank or its nominee(s) without any notice to the
Borrower. In addition to the foregoing, the Borrower from time to time
shall deliver such assignments, financing statements and other
documents as the Bank may request to further evidence, confirm, effect
or perfect any security interest granted or intended to have been
granted under this Agreement or any other Loan Document, each in such
form and substance as may be acceptable to the Bank. The Borrower
hereby irrevocably authorizes the Bank in its discretion: (i) to file
without the signature of the Borrower any and all financing statements,
modifications and continuations in respect of the Collateral and the
transactions contemplated by this Agreement or any other Loan Document;
(ii) to sign any such statement, modification or continuation on behalf
of such Borrower if the Bank deems such signature necessary or
desirable under applicable law; and (iii) to file a carbon,
photographic or other reproduction of any financing statement or
modification if the Bank deems such filing necessary or desirable under
applicable law. The Bank shall send a copy of any such filing to the
Borrower; provided, however, that the failure to send that copy shall
not affect the validity or enforceability of any such filing. The Bank
shall not be liable for any mistake in or failure to file any financing
statement, modification or continuation.
Section 4. The Borrower's Independent Investment Decision,
Etc. The Borrower hereby acknowledges and agrees that: (a) the
Borrower (i) is a sophisticated and knowledgeable investor, both
generally and with respect to each item of Collateral, (ii) has
received directly from each holder or issuer of Collateral (which for
the purpose of this Section shall be deemed to not include the Bank),
reviewed, and evaluated all financial and other information necessary
or prudent to make the Borrower's investment decision, and will
continue to do so, (iii) has made, and will continue to make,
independent investment selections and decisions respecting the
Collateral without reliance upon or regard to any evaluation or
investigation by the Bank of any Collateral or any holder or issuer of
any Collateral, and (iv) does not directly or indirectly control, and
is not an officer, director, employee, general partner or trustee of,
any holder or issuer of any Collateral; (b)neither Bank nor any of its
representatives has, and none of them shall be deemed or construed to
have, (i) made any representation, warranty or guaranty, (ii) offered
or furnished any recommendation, advice, analysis or information, or
(iii) undertaken or assumed any liability, responsibility or other
obligation whatsoever respecting any Collateral or any holder or issuer
of any Collateral, whether oral or otherwise, and whether express or
implied, including (without limitation) anything with respect to any
existing or future (A) existence, enforceability, genuineness, value or
condition of any Collateral or (B) assets, business, financial
condition, investments, prospects, reputation, or strategies of any
holder or issuer of Collateral or any other person; (c) neither Bank
nor any of its representatives shall have any liability, obligation or
responsibility whatsoever for any acts or omissions of any issuer or
holder of Collateral or any other person or any failure by anyone to
perform any of its obligations under or with respect to any of the
Collateral; and (d) neither Bank nor any of its representatives has, or
shall be deemed or construed to have, any agreement, duty or obligation
to inform the Borrower of any matter relating to any of the Collateral
or any holder or issuer of any of the Collateral or to furnish to the
Borrower any information pertaining thereto.
Section 5. Certain Representations and Warranties. The
Borrower represents and warrants to the Bank that, as of the date
hereof and as of the date of each Loan or other advance or any
readvance, renewal or extension thereof:
(a) The Borrower is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, or
is an individual domiciled within the state and having his or her
primary residence at, and has its chief executive office at the
addresses set forth on the signature page, below. The Borrower has the
legal capacity, power, authority and unrestricted right to execute and
deliver this Agreement and each of the other Loan Documents to which
the Borrower is or will be a party, to grant to the Bank the security
interests respecting the Collateral contemplated hereunder and
thereunder, and to perform all of the Borrower's obligations hereunder
and thereunder. The execution and delivery by the Borrower of this
Agreement and each of the other Loan Documents to which the Borrower is
or will be a party and the performance by the Borrower of all of the
Borrower's obligations hereunder and thereunder will not violate or be
in conflict with any term or provision of (i) any applicable law
(including, without limitation, any applicable usury or similar law),
(ii) any judgment, order, writ, injunction, decree or consent of any
court or other judicial authority applicable to the Borrower or any
material part of the Borrower's assets and properties (an "Applicable
Order"), (iii) any Organizational Document or Custody Document (taking
into account the approvals contained in the Collateral Acknowledg-
ments), or (iv) any material instrument, indenture, agreement, document
or other obligation to which the Borrower is a party or by which the
Borrower or any material part of the Borrower's assets and properties
may be bound or subject (each a "Material Document"). No consent,
approval or authorization of, or registration, declaration or filing
with, any governmental authority or other person is required as a
condition precedent, concurrent or subsequent to or in connection with
the due and valid execution, delivery and performance by the Borrower
of this Agreement or any other Loan Document to which the Borrower is
or will be a party or the legality, validity, binding effect or
enforceability of any of their respective terms and provisions, except
for (A) the approval of the issuers or holders given under the
Collateral Acknowledgments, and (B) the filing of Uniform Commercial
Code financing or modification statements with the appropriate
authorities in the State where the Borrower has the Borrower's chief
executive office and/or primary residence. This Agreement is, and the
Note and the other Loan Documents to which the Borrower is or will be a
party when executed and delivered will be, legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms and provisions.
(b) The Borrower is, jointly or severally, the legal,
record and beneficial owner of, and has good title to, the Collateral
being, or purported to be, pledged by the Borrower. The Bank has
legal, valid, binding, enforceable and perfected security interests in
and to the Collateral pursuant to this Agreement and the other Loan
Documents. Except as otherwise disclosed in writing to and approved
(in its sole discretion) by the Bank: (i) no part of the Collateral is
subject to any security interest, filed financing statement, mortgage,
or other lien or encumbrance or any adverse claim of any kind
whatsoever (including, without limitation, any defense, counterclaim,
setoff, right of recoupment, abatement, or community property right),
except those in favor of the Bank; and (ii) no part of the Collateral
was purchased or is being carried directly or indirectly, in whole or
in part, with the proceeds of any indebtedness or other credit other
than the Loans (except for indebtedness wholly refinanced with the
Loans or wholly repaid prior to the pledge of the relevant Collateral).
Each of the Pledged Deposits is owned beneficially and of record solely
by the Borrower, is assignable (with the approvals contained in the
Collateral Acknowledgments), and has been duly assigned and transferred
as collateral to the Bank. Each of the Pledged Deposits was duly
authorized and validly issued, is fully paid and non-assessable, and
was acquired from the issuer in a transaction in compliance with and
either registered or exempt from registration under the Securities Act
(as hereinafter defined) and other applicable laws. Except as
otherwise contained in the Organizational Documents or Custody
Documents and waived in the Collateral Acknowledgments, none of those
Pledged Deposits (i) is subject to any warrant, option, put, call or
other right to acquire, redeem, sell, transfer or encumber it, (ii) is
governed by or otherwise subject to any shareholders agreement, voting
trust or similar agreement or arrangement, or (iii) is limited or
otherwise restricted in any way respecting assignability, transferabil-
ity or any voting, dividend, distribution or other ownership right
(whether or not reflected in any of the Organizational Documents).
Section 6. Certain Covenants of the Borrower. The Borrower
covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Bank (in its
sole discretion) shall consent otherwise in writing:
(a) The Borrower shall give, or cause to be given,
immediate written notice to the Bank of: (i) any change in the name,
domicile, primary residence, employer or chief executive office of the
Borrower, as applicable, or, to the best knowledge of the Borrower, the
name or chief executive office of any issuer or holder of any
Collateral; (ii) the institution or threat of, or any adverse
determination or change in, any action, suit, investigation or
proceeding (whether or not purportedly on behalf of the Borrower or any
issuer or holder of any Collateral) at law, in equity, in arbitration
or by or before any other authority involving or affecting (A) the
Borrower or, to the best knowledge of the Borrower, any issuer or
holder of any Collateral that, if adversely determined, would be
reasonably likely to have a Material Adverse Effect (individually or in
the aggregate with other events), (B) any alleged criminal act or
activity (other than a traffic misdemeanor or lesser traffic violation)
on the part of the Borrower, (c) any part of the Collateral or
Obligations, or (D) any of the transactions contemplated in this
Agreement and the other Loan Documents; (iii) any change in location or
any loss of or other material and adverse change in the Collateral;
(iv) any act or event known to the Borrower that in any material
respect violates, is in conflict with, results in a breach of or
constitutes a default (with or without the giving of notice or the
passage of time or both) under any term or provision of any of the
Organizational Documents, Custody Documents or Collateral
Acknowledgments; (v) any material change known to the Borrower in the
trading policies, trading strategies, business, management or control
of any investment company, fund or adviser respecting any of the
Collateral; (vi) any attachment, confiscation, detention, levy,
requisition, seizure or other taking of any part of the Collateral,
whether through process of law or otherwise, or any filing or other
imposition of any financing statement or other lien or encumbrance
against any part of the Collateral; (vii) any Event of Default ; or
(viii) any other event if such event would be reasonably likely to have
or has had any material and adverse effect, individually or in the
aggregate, upon (1) the assets, business, employment, properties or
financial condition of the Borrower, (2) the ability of the Borrower to
make payment as and when due of all or any part of the Borrower's
obligations under this Agreement or any other Loan Document, or (3) any
of the Collateral or its value or the validity, enforceability,
perfection or priority of any security interest of the Bank therein (a
"Material Adverse Effect").
(b) The Borrower shall provide to the Bank such financial
statements, accounts, reports, certificates, tax returns, statements,
documents and other information as the Bank from time to time may
request, each in such form and substance as may be acceptable to the
Bank. From time to time upon the request of the Bank, the Borrower
(upon receipt) will furnish copies to the Bank, and will direct such
other persons (including the issuers and prepares) as the Bank may
request to furnish copies directly to the Bank, of any and all
financial statements, account statements, notices and other reports and
information pertaining to the Collateral as the Bank may request. At
all reasonable times and as often as the Bank reasonably may request,
the Borrower shall permit representatives designated by the Bank to (A)
have complete and unrestricted access to the premises of the Borrower
and the books and records of the Borrower pertaining to the Collateral,
(B) make copies of, or excerpts from, those books and records and (c)
discuss the Collateral or the accounts, assets, business, operations,
properties or condition, financial or otherwise, of the Borrower with
the Borrower's accountants and other representatives.
(c) The Borrower shall not directly or indirectly (other
than pursuant to this Agreement): (i) make, create, incur, assume or
permit to exist any assignment, pledge, mortgage, security interest or
other lien or encumbrance of any nature in, to or against any part of
the Collateral; (ii) assign, pledge or in any way transfer or encumber
the Borrower's right to receive any income or other distribution or
proceeds from any part of the Collateral; (iii) sell, lease, sublease,
transfer, exchange, abandon or otherwise dispose of, surrender physical
possession or control of, physically alter or relocate all or any
portion of the Collateral, other than as may be otherwise provided in
any Custody Agreement with respect to the Pledged Deposits covered
thereby; (iv) cause, suffer or permit any supplement, modification or
amendment to, or any waiver of any term or provisions of, any stock
certificate, instrument, contract or other intangible included in the
Collateral; (v) enter into any shareholders' agreement, voting trust or
similar agreement or arrangement or any other restriction or limitation
in any way respecting assignability, transferability or any voting,
dividend, distribution or other ownership right with respect to any of
the Collateral; (vi) covenant or agree to a "negative pledge"
respecting the Collateral with any other person (i.e., that the
Borrower will not do any one or more of the foregoing); or (vii) offer
or agree to do or cause or assist the inception or continuation of any
of the foregoing.
(d) If at any time for any reason (i) the value of any
Collateral is insufficient to satisfy any minimum value or maximum
advance rate (however expressed) established by the Bank in making or
continuing any Letters of Credit or Loan(s) respecting any Collateral
(whether established by item, class or type or otherwise), (ii) the
value of any Collateral declines in any material respect, (iii) the
aggregate value of all Collateral declines to less than the amount
necessary to support the Letters of Credit, Loans and other Obliga-
tions, or (iv) the validity, enforceability, perfection or priority of
any security interest of the Bank in any Collateral is invalidated,
lapses, is challenged or repudiated or is otherwise lost or impaired
(in each case whether through any change in value, any loss,
destruction, termination, foreclosure or other impairment,
deterioration or diminution, any new or newly discovered security
interests or other encumbrances or adverse claims, or otherwise), which
events and resulting effects and amounts may be determined at any time
and from time to time by the Bank (in its sole discretion), then
promptly, but in any event within three business days, after notice
from the Bank, the Borrower shall repay or prepay the Letters of
Credit, Loans and other Obligations or deliver additional Collateral to
the Bank in such amount(s) as may have been requested by the Bank in
such notice in order to correct or compensate for any such decline or
deficiency in value or loss or impairment of security interest. For
the purposes of this subsection, the Bank (in its sole discretion) may
include as Collateral any and all security interests granted to the
Bank to secure any of the Letters of Credit, Loans or other Obligations
or any guaranty thereof by any person(s) other than the Borrower.
Section 7. Performance and Protection of Collateral by the
Bank. In the event the Borrower fails to pay or otherwise perform or
satisfy any of the Borrower's obligations to others or under or in
respect of any of the Collateral, the Bank shall have the right in its
sole and absolute discretion (but shall be under no duty or obligation)
to make any such payment or cause the performance or satisfaction of
any other such obligation, including (without limitation) the payment
of any tax, claim or insurance premium, the maintenance or defense of
any part of the Collateral or the purchase or discharge of any lien on
any part of the Collateral. The Bank will endeavor to give the
Borrower prior notice (which may be by telephone or telecopy) of any
such payment or action; provided, however, that the failure to give
such notice shall not affect the validity of the payment or action or
the Borrower's reimbursement obligations with respect thereto. The
Borrower shall pay or reimburse on demand any and all amounts advanced
or expenses incurred by the Bank or its designee under this subsection,
which shall constitute additional Loans under (and secured by) this
Agreement and shall bear interest at the rate applicable to the Loans.
No payment made or action taken by the Bank or its designee shall be
deemed or construed to be a waiver, cure or satisfaction of the
underlying default, which default shall be deemed to be continuing
until such time (if ever) as the Borrower has, prior to the Maturity
Date, (i) resumed the payment, performance and satisfaction required by
this Agreement and the other Loan Documents and (ii) repaid all Loans
advanced for such payments and actions, together with interest thereon,
and paid all others to whom the Bank has requested direct payment
respecting such payments and actions.
Section 8. Power of Attorney to the Bank. With respect to
the various assets and properties included or required to be included
in the Collateral hereunder, the Borrower hereby irrevocably makes,
constitutes and appoints the Bank and the Bank's executive officers
(Vice President or above), and each of them, with full power of
substitution, as such Borrower's true and lawful attorney-in-fact, with
full power and authority from time to time in such Borrower's name,
place and stead to: (a) take possession of and execute or endorse (to
the Bank or otherwise) any one or more contracts, pledges, assignments
and other documents, and any one or more Note, checks, or other
instruments received in payment for or on account of those assets and
properties; (b) demand, collect and receive any monies due on account
of those assets and properties and give receipts and acquittances in
connection therewith; (c) negotiate and compromise any claim, and
commence, prosecute, defend, settle or withdraw any claims, suits or
proceedings, pertaining to or arising out of those assets and
properties; and (d) sign, execute, acknowledge, swear to, verify,
deliver, file, record and publish any one or more of the foregoing;
provided, however, that the above-named attorneys-in-fact may exercise
the powers set forth in this Section only during the continuance of an
Event of Default, whether or not any notice is given under Section 9
hereof or any reference to this Power of Attorney is made in that
notice, and without regard to whether the Bank has taken any other
action under this Agreement or any other Loan Document. This Power of
Attorney is hereby declared to be irrevocable, with full power of
substitution and coupled with an interest. This Power of Attorney
shall survive the dissolution, reorganization or bankruptcy of the
Borrower and shall extend to and be binding upon the Borrower's
successors, assigns, heirs and legal representatives. A facsimile
signature shall be effective if so affixed. The Bank shall be liable
for any failure to collect or enforce the payment of any of those
assets and properties.
Section 9. Rights of the Bank to the Collateral. Upon the
occurrence and during the continuance of any Event of Default, the Bank
may take (and/or may cause one or more of its designees to take) any or
all of the following actions, all without notice to the Borrower or any
other person except as may otherwise be required by applicable law,
with a single notice (if required or otherwise given) being sufficient
to entitle the Bank from time to time thereafter to take any one or
more of the actions described below: (a) prohibit the Borrower from
taking any action otherwise permitted by this Agreement and the other
Loan Documents; (b) notify each of the obligors, lessees, issuers,
custodians and other parties with respect to or interested in any item
of the Collateral of the interest of the Bank therein or of any action
proposed to be taken with respect thereto, and direct one or more of
those parties to make all payments, distributions and proceeds
otherwise payable to the Borrower with respect thereto directly to the
Bank or its order until notified by the Bank that all of the Obli-
gations have been fully paid and satisfied; (c) receive and retain all
payments, distributions and proceeds of any kind with respect to any
and all of the Collateral; (d) take any action with respect to the
offer, sale, lease or other disposition, and delivery of the whole of,
or from time to time any one or more items of, the Collateral,
including, without limitation, (i) to sell, assign, lease or otherwise
dispose of the whole of, or from time to time any part of, the
Collateral, or offer or agree to do so, in any established market or at
any broker's board, private sale or public auction or sale (with or
without demand on the Borrower or any advertisement or other notice of
the time, place or terms of sale) for cash, credit or any other asset
or property, for immediate or future delivery, and for such
consideration and upon such terms and subject to such conditions as the
Bank in its sole and absolute discretion may determine, and the Bank
may purchase (the consideration for which may consist in whole or in
part of cancellation of indebtedness) or any other person may purchase
the whole or any one or more items of the Collateral, and all items
purchased shall be free and clear of any and all rights, powers,
privileges, remedies and interests of the Borrower (whether individual,
joint, several or otherwise), which the Borrower has expressly waived
pursuant to Section 11 hereof, (ii) to postpone or adjourn any such
auction, sale or other disposition or cause the same to be postponed or
adjourned from time to time to a subsequent time and place, or to
abandon or cause the abandonment of the same, all without any
advertisement or other notice thereof, and (iii) to carry out any
agreement to sell any item or items of the Collateral in accordance
with the terms and provisions of such agreement, notwithstanding that,
after the Bank shall have entered into such an agreement, all of the
Obligations may have been paid and satisfied in full; (e) exercise any
voting, consent, enforcement or other right, power, privilege, remedy
or interest of the Borrower pertaining to any item of Collateral to the
same extent as if the Bank were the outright owner thereof, including
(without limitation) any right that a record or beneficial owner of any
Collateral may have, provided that the Bank shall not be entitled to
exercise any of the voting rights of the Borrower pertaining to any
equity interest in any affiliate of the Borrower unless and until the
Bank has given specific written notice to the Borrower, apart from the
notice first referred to in this subsection, of the Bank's election to
exercise one or more, or all, such voting rights; (f) take possession
of and thereafter deal with or use from time to time all or any part of
the Collateral in all respects as if the Bank were the outright owner
thereof; (g) transfer or cause the transfer of the ownership of all or
any part of the Collateral to its own name and have such transfer
recorded in any jurisdiction(s) and publicized in any manner deemed
appropriate by the Bank; and (h) in addition to, and not by way of
limitation of, any of the rights specified above, exercise or enforce
any and all rights, powers, privileges, remedies and interests afforded
to the Bank under this Agreement, any relevant Collateral
Acknowledgment, the other Loan Documents and any and all provisions of
applicable law (including, without limitation, the Uniform Commercial
Code), whether as a secured party or mortgagee in possession of
collateral or otherwise.
Section 10. Application of Proceeds, Etc. The Bank shall
collect the cash proceeds received from any sale or other disposition
or from any other source contemplated by Section 9 hereof, and, after
deducting all costs and expenses incurred by the Bank and any person
designated by the Bank to take any of the actions enumerated in Section
9 hereof in connection with such collection and sale or disposition
(including attorneys' disbursements, expenses and fees), the Bank in
its discretion may retain the same as additional or substitute
Collateral or may apply the same to the Obligations in accordance with
the terms and provisions of the Note, this Agreement and the other Loan
Documents. In the event any funds remain after satisfaction in full of
all such obligations, then the remainder shall be returned to the
Borrower, subject, however, to any other rights or interests the Bank
may have therein under any other instrument, agreement or document or
applicable law. If the amount of all proceeds received with respect to
and in liquidation of the Collateral that shall be applied to payment
of the Obligations shall be insufficient to pay and satisfy all of the
Obligations in full, the Borrower acknowledges and agrees that the
Borrower shall remain and be liable for any deficiency.
Section 11. Certain Acknowledgments and Waivers of the
Borrower. The Borrower acknowledges and agrees that the rights,
powers, privileges, remedies and interests granted to or conferred upon
the Bank in respect of the Collateral by this Agreement, the other Loan
Documents and applicable law are purely discretionary and shall not,
and shall not be deemed or construed to, impose upon the Bank any duty
or other obligation (a) to sell, foreclose or otherwise realize upon
any Collateral, (b) to protect or preserve any of the Collateral, (c)
to perform or satisfy any obligation under or respecting any of the
Collateral or the Borrower, (d) to mitigate or otherwise reduce any
damage or other loss, or (e) to otherwise exercise or enforce any such
right, power, privilege, remedy or interest. Any sale, foreclosure or
other realization upon the Collateral, or any other exercise or
enforcement of any such right, power, privilege, remedy or interest, if
undertaken by the Bank in its discretion, may be delayed, discontinued
or otherwise not pursued or exhausted for any reason whatsoever
(whether intentionally or otherwise). Without limiting the generality
of the foregoing, to the extent waiver is not limited under applicable
law, the Borrower hereby expressly waives each and every claim or
defense, and agrees that the Borrower will not assert or pursue (by
action, suit, counterclaim or otherwise) any claim or defense,
respecting (i) any settlement or compromise with any obligor or other
third party under any account receivable, note, instrument, agreement,
document or general intangible included in the Collateral, irrespective
of any reduction in the potential proceeds therefrom, (ii) the
selection or order of disposition of the Collateral (which may be at
random or in any order(s) the Bank may select in its sole and absolute
discretion), (iii) the private sale of any Collateral, whether or not
any public market exists, or the sale or other disposition of any
Collateral pursuant to the relevant Collateral Acknowledgment, (iv)
the choice or timing of any sale date (which the Bank may select in its
sole and absolute discretion), irrespective of whether greater sale
proceeds would be realizable on a different sale date, (v) the
adequacy of the sale price of any Collateral, (vi) any insufficiency
of the proceeds to fully satisfy the Obligations, (vii) any sale of
Collateral to the first person to receive an offer or make a bid,
(viii) the selection of any purchaser of any Collateral, or (ix) any
default by any purchaser of any Collateral. The Borrower hereby
expressly waives the applicability of any and all applicable laws that
are or may be in conflict with the terms and provisions of this
Agreement and the other Loan Documents now or at any time in the future
to the extent waiver is not limited under applicable law, including
(without limitation) those pertaining to notice (other than notices
required by this Agreement or any other Loan Document), appraisal,
valuation, stay, extension, moratorium, marshaling of assets, exemption
and equity of redemption; provided, however, that the preceding
provision is not intended to confer upon the Bank any right, power,
privilege, remedy or interest not permissible under applicable law
notwithstanding the foregoing waivers. Neither the Bank nor any of its
representatives shall incur any liability in connection with any sale
of or other action taken respecting any Collateral in accordance with
the provisions of this Agreement, the Collateral Acknowledgments, any
other Loan Document or applicable law.
Section 12. Further Assurances; Termination. The Borrower
agrees to do such further acts and things and to execute and deliver
such statements, assignments, agreements, instruments and other
documents as the from time to time reasonably may request in
connection with the administration, maintenance, enforcement or
adjudication of this Agreement and the other Loan Documents in order
(a) to evidence, confirm, perfect or protect any lien or security
interest granted or required to have been granted under this Agreement
and the other Loan Documents, (b) to give the Bank or its designee
confirmation and assurance of the Bank's rights, powers, privileges,
remedies and interests under this Agreement, the other Loan Documents
and applicable law, (c) to better enable the Bank to exercise any such
right, power, privilege or remedy, or (d) to otherwise effectuate the
purpose and the terms and provisions of this Agreement and the other
Loan Documents, each in such form and substance as may be acceptable to
the Bank. Upon full payment and satisfaction of the Obligations: the
Bank shall reassign, release and/or deliver to the Borrower all Collat-
eral then held by or at the direction of the Bank; and, if requested by
the Borrower, the Bank shall execute and deliver to the Borrower for
filing in each office in which any financing statement, mortgage, or
lease, or assignment thereof, relating to the Collateral, or any part
thereof, shall have been filed, a termination statement under the
Uniform Commercial Code or an appropriate satisfaction, release,
reconveyance or reassignment releasing the Bank's interest therein, and
any other instrument or document that the Borrower deems reasonably
necessary to evidence the termination of the Bank's security interest,
each in such form and substance as may be acceptable to the Bank. Any
and all actions under this Section shall be without any recourse to or
representation or warranty by the Bank and shall be at the sole cost
and expense of the Borrower.
Section 13. Survival of Representations. Each of the
representations, warranties, covenants and other obligations and
agreements of the Borrower contained in this Agreement and the other
Loan Documents: (a) shall be absolute and unconditional; (b) shall
survive the execution and delivery of this Agreement and the other Loan
Documents, and any and all advances, repayments and readvances there-
under; (c) shall remain and continue in full force and effect without
regard (i) to any waiver, modification, extension, renewal,
consolidation, spreading, amendment or restatement of any other term or
provision of any Loan Document, (ii) to any full, partial or
non-exercise of any of the rights, powers, privileges, remedies and
interests of the Bank under any Loan Document or applicable law,
against any person or with respect to any collateral, which exercise or
enforcement may be delayed, discontinued or otherwise not pursued or
exhausted for any or no reason whatsoever, or which may be waived,
omitted or otherwise not exercised or enforced (whether intentionally
or otherwise), (iii) to any surrender, repossession, sequestration,
foreclosure, conveyance or assignment (by deed in lieu or otherwise),
sale, lease or other realization, dealing or disposition respecting any
collateral, (iv) to any release, subordination or impairment of all or
any part of any obligations or collateral or any security interest
therein (whether intentionally or otherwise), (v) to any extension,
stay, moratorium or statute of limitations or similar time constraint
under any applicable law, (vi) to any investigation, analysis or
evaluation by the Bank or its designees of the assets, business,
operations, properties or condition (financial or otherwise) of the
Borrower, any co-obligor or Surety or any other person, (vii) to any
act or omission on the part of the Bank, any co-obligor or Surety or
any other person, or (viii) to any other event that otherwise might
constitute a legal or equitable counterclaim, defense or discharge of a
borrower, surety or pledgor; (d) shall not be subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or
other claim or determination that the Borrower may have against the
Bank, any co-obligor or Surety or any other person; (e) shall not be
diminished or qualified by the death, disability, dissolution,
reorganization, insolvency, bankruptcy, custodianship or receivership
of the Borrower, any co-obligor or Surety or any other person, or the
inability of any of them to pay its debts or perform or otherwise
satisfy its obligations as they become due for any reason whatsoever;
and (f) shall remain and continue in full force and effect (i) until
all of the Obligations have been fully paid and satisfied and (ii)
thereafter with respect to events occurring prior to such payment and
satisfaction.
Section 14. Enforcement. The Bank, in its sole discretion,
may proceed to exercise or enforce any right, power, privilege, remedy
or interest that the Bank may have under this Agreement, any other Loan
Document or applicable law: (a) at law, in equity, in rem or in any
other forum available under applicable law; (b) without notice except
as otherwise expressly provided herein; (c) without pursuing,
exhausting or otherwise exercising or enforcing any other right, power,
privilege, remedy or interest that the Bank may have against or in
respect of the Borrower, any Surety or any other person or thing; and
(d) without regard to any act or omission of the Bank or any other
person. The Bank may institute one or more proceedings (which may be
separate proceedings) with respect to this Agreement and each of the
other Loan Documents in such order and at such times as the Bank may
elect in its sole and absolute discretion. This Agreement and the
other Loan Documents may be enforced: (i) without possession of the
Note or its production in any action, suit or proceeding; and (ii)
without the presence or participation of any co-obligor (joint or
several) or Surety, whether through lack of jurisdiction, venue or
service or otherwise; and the Borrower will not raise and hereby waives
any objection or defense respecting the need for any such production,
presence or participation.
Section 15. Consent to Jurisdiction, Etc. The Borrower
hereby consents and agrees that the Supreme Court of the State of New
York for the County of New York and the United States District Court
for the Southern District of New York each shall have personal
jurisdiction and proper venue with respect to any dispute between the
Bank and the Borrower; provided that the foregoing consent shall not
deprive the Bank of the right in its discretion to voluntarily commence
or participate in any action, suit or proceeding in any other court
having jurisdiction and venue over the Borrower. In any dispute with
the Bank, the Borrower will not raise, and hereby expressly waives, any
objection or defense to any such jurisdiction as an inconvenient forum.
The Borrower hereby waives personal service of any summons, complaint
or other process, which may be delivered by any of the means permitted
for notices under this Agreement or any other Loan Document.
Section 16. Waiver of Jury Trial. In any action, suit or
proceeding in any jurisdiction brought by the Bank against the
Borrower, or vice versa, the Borrower waives trial by jury.
Section 17. Waiver of Setoff, Etc. The Borrower hereby
waives, and agrees that it will not exercise, any and all rights of
extension, stay, moratorium, setoff, counterclaim, recoupment,
abatement or reduction or other claim or determination respecting any
payment due under this Agreement or any other Loan Document that may
now or hereafter be accorded to the Borrower under applicable law or
otherwise. To the extent not required as a compulsory counterclaim,
the Borrower (a) shall pursue separate exercise and enforcement of any
right, power, privilege, remedy or interest retained (and not waived)
by the Borrower under this Agreement, the other Loan Documents and
applicable law, and (b) shall not seek to exercise or enforce any such
right, power, privilege, remedy or interest in any proceeding
instituted by the Bank under or in respect of this Agreement or any
other Loan Document, whether through joinder, consolidation, setoff,
recoupment, abatement, reduction, counterclaim, defense or otherwise.
In any dispute with the Bank, the Borrower covenants and agrees that it
will not seek, recover or retain any, and the Borrower hereby expressly
waives any and all, special, exemplary, punitive and/or consequential
damages (whether through action, suit, counterclaim or otherwise) to
the extent waiver is not limited under applicable law.
Section 18. Relationship of the Borrower and the Bank, Etc.
The Borrower represents, warrants, acknowledges and agrees that: (a)
the Bank is acting solely in the capacity of lender respecting this
Agreement, the other Loan Documents, and the Collateral; (b) the
Borrower's sole relationship with the Bank is that of debtor and
creditor, respectively, and no term or provision of this Agreement or
any other Loan Document is intended to create, nor shall any such term
or provision be deemed or construed to have created, any joint venture,
partnership, trust, agency or other fiduciary or advisory relationship
with the Borrower; and (c) the Borrower has independently and fully
reviewed and evaluated the Loan Documents, the transactions
contemplated thereunder and the potential effects of such transactions
on the assets, business, operations, properties and condition
(financial or otherwise) of each of the Borrower and its subsidiaries
and affiliates (if any), which review and evaluation was made (i)
together with counsel and (to the extent deemed prudent by the
Borrower) financial and other advisors to the Borrower, and (ii)
without any reliance upon any oral or written advice, analysis or
assurance of any kind whatsoever from the Bank.
Section 19. Exculpation and Indemnification. The Bank and
its respective participants, affiliates, custodians and designees, and
their respective directors, officers, employees, attorneys and agents
(together with the Bank, an "indemnitee"), shall not incur any
liability for any acts or omissions (and the Borrower hereby expressly
waives any and all related claims and actions against each indemnitee),
and each indemnitee shall be indemnified, reimbursed and held harmless
by the Borrower on demand, and (at the request of the Bank) defended at
the expense of the Borrower with counsel selected by the Bank, from and
against any and all claims, liabilities, losses and expenses (includ-
ing, without limitation, the disbursements, expenses and fees of their
respective attorneys) that may be imposed upon, incurred by, or
asserted against any indemnitee, in each case arising out of or related
directly or indirectly to this Agreement, any other Loan Document, any
of the Collateral, any of the Loans or the application of any proceeds
thereof, or any environmental claim, except to the extent occasioned by
the indemnitee's own acts or omissions breaching a duty owed to the
Borrower and amounting to gross negligence or willful misconduct as
finally determined pursuant to applicable law by a governmental
authority having jurisdiction. The preceding general exculpation and
indemnification is not intended (and shall not be deemed or construed)
to in any way qualify, condition, diminish, restrict, limit or
otherwise affect any (and is in addition to each) other release,
waiver, consent, acknowledgment, agreement or other term or provision
of this Agreement or any other Loan Document.
Section 20. Notices. Except as otherwise expressly
provided, any notice, request, demand or other communication permitted
or required to be given under this Agreement or any other Loan Document
shall be in writing, shall be sent by one of the following means to the
addressee at the address set forth above or below (or at such other
address as shall be designated hereunder by notice to the other parties
and persons receiving copies, effective upon actual receipt) and shall
be deemed conclusively to have been given: (a) on the first Business
Day following the day timely deposited with Federal Express (or other
equivalent national overnight courier) or United States Express Mail,
with the cost of delivery prepaid or for the account of the sender; (b)
on the fifth Business Day following the day duly sent by certified or
registered United States mail, postage prepaid and return receipt
requested; or (c) when otherwise actually received by the addressee on
a Business Day (or on the next Business Day if received after the close
of normal business hours or on any non-Business Day), including
(without limitation) any telecopy. Notices also may be given by tele-
phone to the extent and for the purposes provided in this Agreement or
any other Loan Document. The Borrower acknowledges and agrees that the
Bank may record any and all telephone calls with the Borrower and its
representatives without any further or specific notice of such
recording.
Section 21. Bank's Right of Set Off, Etc. Upon the
occurrence and during the continuance of any Event of Default, the Bank
hereby is authorized at any time and from time to time, without notice
to the Borrower (any such notice being hereby expressly waived by the
Borrower), to set off and apply, directly or through any of its
affiliates, custodians, participants and designees, any and all
deposits (whether general or special, time or demand, provisional or
final, or individual or joint) and other assets and properties at any
time held in the possession, custody or control of the Bank and any of
its affiliates, custodians, participants and designees (including,
without limitation, any items held in any investment management or
custody account), and any indebtedness or other amount or obligation at
any time owing by the Bank or any of its affiliates or participants, to
or for the credit, account or benefit of the Borrower against any and
all of the Obligations now or hereafter existing under this Agreement
or the other Loan Documents, whether or not the Bank shall have
declared a default, accelerated the obligations or made any demand or
taken any other action under this Agreement or any other Loan Document,
and although such obligations may be contingent or unmatured. Without
limiting the foregoing, the Borrower hereby grants to the Bank a
continuing security interest in and to all such deposits, assets,
properties and indebtedness in the possession of the Bank and its
affiliates, custodians, participants and designees; and the Borrower
hereby authorizes each such person to so set off and apply such amounts
at such times and in such manner as the Bank may direct pursuant to
this Section, in each case to the fullest extent possible as if the
person making the Set off were a direct creditor of the Borrower in the
full amount of the Obligations. The debiting Bank shall notify the
Borrower after any such Set off and application; provided, however,
that the failure to give such notice shall not affect the validity of
such Set off and application. In debiting any such account, the
Obligations shall be deemed to have been paid or repaid only to the
extent of the funds actually available in that account notwithstanding
any internal procedure of the debiting Bank or any of its affiliates,
custodians, participants and designees to the contrary. The rights of
the Bank under this Section are in addition to and without limitation
of any other rights, powers, privileges, remedies and other interests
(including, without limitation, other rights of set off and security
interests) that the Bank may have under this Agreement, the other Loan
Documents and applicable law.
Section 22. Expenses, Etc. The Borrower shall pay or
reimburse on demand any and all costs and expenses incurred by the
Bank, whether directly or indirectly, in connection with the
preparation, execution and delivery of this Agreement and the other
Loan Documents, all waivers, releases, satisfactions, modifications,
amendments and consents, all payments made and actions taken in the
name of or on behalf of the Borrower or any Surety, and the
administration, maintenance, enforcement and adjudication of this
Agreement, any other Loan Document and the rights, powers, privileges
and other interests of the Bank under this Agreement, the other Loan
Documents and applicable law, including (without limitation) the
disbursements, expenses and fees of all counsel to the Bank (including
allocated costs of in-house counsel).
Section 23. Severability. In the event that any term or
provision of this Agreement or any other Loan Document shall be finally
determined to be superseded, invalid, illegal or otherwise
unenforceable pursuant to applicable law by a governmental authority
having jurisdiction and venue, that determination shall not impair or
otherwise affect the validity, legality or enforceability (a) by or
before that authority of the remaining terms and provisions of this
Agreement and the other Loan Documents, which shall be enforced as if
the unenforceable term or provision were deleted, or (b) by or before
any other authority of any of the terms and provisions of this
Agreement and the other Loan Documents.
Section 24. No Waiver by Action, Cumulative Rights, Etc.
Any waiver or consent respecting this Agreement or any other Loan
Document shall be effective only if in writing and signed by the Bank
and then only in the specific instance and for the specific purpose for
which given. No waiver or consent shall be deemed (regardless of
frequency given) to be a further or continuing waiver or consent. The
failure or delay of the Bank to require performance of, or to exercise
their rights with respect to, any term or provision of this Agreement
or any other Loan Document in no manner shall affect its right at a
later time to enforce any such term or provision. No notice to or
demand on the Borrower or any Surety in any case shall entitle such
party to an or further notice or demand. All rights, powers,
privileges, remedies and other interests of the Bank under this y
otherAgreement, the other Loan Documents and applicable law are
cumulative and not alternatives.
Section 25. Successors and Assigns, Assignment and Intended
Beneficiaries. Whenever in this Agreement or any other Loan Document
reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs and legal representatives of
such party, and, without limiting the generality of the foregoing, all
representations, warranties, covenants and other agreements made by or
on behalf of the Borrower in this Agreement and the other Loan
Documents shall inure to the benefit of the participants and other
successors and assigns of the Bank; provided, however, that nothing
herein shall be deemed to authorize or permit the Borrower to assign
any of its rights or obligations under this Agreement or any other Loan
Document to any other person (whether or not an affiliate of the
Borrower), and the Borrower covenants and agrees that it shall not make
any such assignment. The Bank from time to time may assign to one or
more banks or other persons all or any portion(s) of its rights and
interests and/or obligations under this Agreement and the other Loan
Documents, including (without limitation) the assignment to any Federal
Reserve Bank (as collateral or otherwise) of all or any portion(s) of
its rights to payments of principal and/or interest under the
Agreement(s), and may take any and all reasonable actions necessary or
appropriate in connection with any such assignment, all without notice
to or consent of the Borrower or any other person. The Bank from time
to time also may sell to one or more financial institutions or
institutional investors a participation interest in all or any
undivided portion of its rights, powers, privileges, remedies and
interests under this Agreement and the other Loan Documents. The Bank
from time to time may furnish and disclose financial statements,
documents and other information pertaining to the Borrower to any
potential assignee or participant. The representations, warranties and
other terms and provisions of this Agreement and the other Loan
Documents are for the exclusive benefit of the parties hereto, and,
except as otherwise expressly provided herein, no other person,
including creditors of any party hereto, shall have any right or claim
against any party by reason of any of those terms and provisions or be
entitled to enforce any of those terms and provisions against any
party.
Section 26. Counterparts, Governing Law, Amendments, Etc.
This Agreement shall be effective on the date (the "Effective Date") as
of which this Agreement shall be executed by all the parties hereto and
delivered to the Bank. This Agreement or any other Loan Document may
be executed in two or more counterpart copies of the entire document or
of signature pages to the document, each of which may be executed by
one or more of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the
parties hereto or thereto, as applicable. This Agreement and the other
Loan Documents have been executed and delivered, and shall be governed
by and construed in accordance with the applicable laws pertaining, in
the State of New York (other than those that would defer to the
substantive laws of another jurisdiction). The section headings
contained in this Agreement and the other Loan Documents are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement or any other Loan Document. Except as
otherwise provided in this Agreement or any other Loan Document with
respect hereto or thereto, respectively, each and every modification
and amendment of this Agreement or any other Loan Document shall be in
writing and signed by all of the parties hereto or thereto, as
applicable, and each and every waiver of, or consent to any departure
from, any representation, warranty, covenant or other term or provision
of this Agreement or any other Loan Document shall be in writing and
signed by each affected party hereto or thereto, as applicable. This
Agreement and the other Loan Documents contain the entire agreement of
the parties and supersede all other representations, warranties,
agreements and understandings, oral or otherwise, among the parties
with respect to the matters contained herein and therein.
In Witness Whereof, the parties hereto have executed and
delivered this Agreement as of the date first written above.
American Bank Note Company
By:s/Ward A.S. Urban, Vice President and Treasurer
ADDRESS FOR NOTICES AND SERVICE:
51 West 52nd Street, 14th Floor
New York, New York 10019
Citibank, N.A.
By:s/William G. Marten III, Managing Director
ADDRESS FOR NOTICES AND SERVICE:
399 Park Avenue
New York, New York 10043
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<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q
and is qualified in its entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 19052
<SECURITIES> 0
<RECEIVABLES> 37238
<ALLOWANCES> 916
<INVENTORY> 23867
<CURRENT-ASSETS> 95218
<PP&E> 283742
<DEPRECIATION> 54753
<TOTAL-ASSETS> 384597
<CURRENT-LIABILITIES> 40664
<BONDS> 191267
<COMMON> 194
0
0
<OTHER-SE> 52440
<TOTAL-LIABILITY-AND-EQUITY> 384597
<SALES> 153442
<TOTAL-REVENUES> 153442
<CGS> 109512
<TOTAL-COSTS> 150020
<OTHER-EXPENSES> (2714)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17293
<INCOME-PRETAX> (11157)
<INCOME-TAX> (1217)
<INCOME-CONTINUING> (9940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10352)
<EPS-PRIMARY> (.54)
<EPS-DILUTED> (.54)
</TABLE>
CITIBANK, N.A.
399 Park Avenue
New York, New York 10043
American Banknote Corporation, (as of) September 30, 1995
American Bank Note Company, and
American Bank Note Holographics, Inc.
51 West 52nd Street, 14th Floor
New York, New York 10019
Attention: Mr. Ward A.W. Urban,
Vice President and Treasurer
Re: One Month Extension of New Credit Agreement and
Temporary Commitment
Gentlemen:
American Bank Note Company ("ABN"), American Bank Note Holo-
graphics, Inc. ("ABH") (ABN and ABH may be referred individually as a
"Borrower" and collectively as the "Borrowers"), and American Banknote
Corporation (formerly known as United States Banknote Corporation)
("ABC"), and we (as Agent and/or a Bank) are parties to a Credit
Agreement (in the form of a letter agreement and incorporated terms and
provisions) dated as of August 31, 1995 (the "New Credit Agreement"),
which establishes a Commitment scheduled to expire on September 30,
1995. Capitalized terms used and not otherwise defined herein shall
have the meanings respectively assigned to them in the New Credit
Agreement.
You have delivered to us a Commitment Letter from Chemical
Bank respecting a replacement facility, and you have requested that we
extend your existing Commitment until the end of October to permit you
time to close your new facility with Chemical Bank. As a one time
accommodation, we hereby extend the Commitment and the Termination Date
to October 31, 1995. (The definitions of Commitment and Termination
Date as incorporated by reference from the New Credit Agreement are
hereby modified accordingly.) The Borrowers shall repay all of the
Loans and other Obligations (other than outstanding Letters of Credit
that are cash collateralized) in full on October 31, 1995. Any further
extension of the Commitment is not anticipated and in any event is
within our sole and absolute discretion.
Advances will continue to be subject to the terms and
provisions of the New Credit Agreement and evidenced by the Borrowers'
U.S.$7,500,000.00 Revolving Promissory Note dated (as of) August 31,
1995 (as the same may be supplemented, renewed, extended, modified,
amended, restated or replaced from time to time, the "Note"). The
Borrowers' payment, reimbursement and other obligations under the New
Credit Agreement, Note and other Loan Documents will continue to be
secured by the collateral granted by them under their Security
Agreement with us dated as of August 31, 1995 (as the same may be
supplemented, renewed, extended, modified, amended, restated or
replaced from time to time, the "Security Agreement").
By the Borrowers' signature below, the Borrowers each hereby
acknowledge, certify and agree that: (a) pursuant to the New Credit
Agreement, we have issued letters of credit that are outstanding as of
the date of this extension in the aggregate unadvanced face amount of
U.S.$93,500; (b) the Borrowers' obligations to repay those loans (with
interest) and letter of credit advances to us and to perform or
otherwise satisfy their other Obligations, as well as the security
interests in the Collateral granted by the Borrowers to us, under the
New Credit Agreement, the Note and the other Loan Documents remain and
shall continue in full force and effect, both before and after giving
effect to this extension, (ii) are not subject as of the date of this
extension to any defense, counterclaim, setoff, right of recoupment,
abatement, reduction or other claim or determination, and (iii) are and
shall continue to be governed by the terms and provisions of the New
Credit Agreement, the Note, the Security Agreement and the other Loan
Documents; and (c) the information set forth in the secretary's,
officer's, incumbency or similar certificate(s) most recently delivered
to us respecting (among other things) your authorizing resolutions and
the authorization and incumbency of your officers and other
representatives is true and complete in all respects as if such
certificate had been delivered on and as of the date hereof.
This letter is a Loan Document and shall be governed by and
construed in accordance with the terms and provisions of the New Credit
Agreement, the Note and the Security Agreement.
Please acknowledge your acceptance and agreement of this
temporary extension under the New Credit Agreement and its conditions
by signing two of the enclosed copies of this letter and returning them
to us, c/o Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York 10036, Attention: Lawrence David Swift,
Esq.
Very truly yours,
Citibank, N.A.
By:s/William G. Martens III
Managing Director
ACKNOWLEDGED, ACCEPTED AND AGREED:
American Banknote Corporation
By: s/ Ward A.W. Urban
Vice President and Treasurer
American Bank Note Company
By: s/ Ward A.W. Urban
Vice President and Treasurer
American Bank Note Holographics, Inc.
By: s/ Ward A.W. Urban
Vice President and Treasurer
cc: Harvey Kesner, Esq.
Hillel M. Bennett, Esq.
CHEMICAL
Chemical Bank Robert J. Arth
633 Third Avenue Vice President
New York, NY 10017-6764 Asset Based Region
212/1622-5273
Fax-212/622-5271
Mr Ward Urban
Vice President and Treasurer September 20, 1995
American Banknote Corporation
51 W 52nd Street
New York, N Y 10019
RE: Proposed $20,000,000 Revolving Credit Facility for American
Bank Note Company
& American Bank Note Holographics, Inc.
Dear Mr Urban:
We are pleased to advise you that the Credit Committee of
Chemical Bank ("Chemical", the "Bank" or the "Agent") has
approved a $20.000.000 senior secured. three year Revolving
Credit ("Credit Facility") for American Bank Note Company
("ABN") and American Bank Note Holographics. Inc ("ABNH")
(jointly and severally the "Borrowers") The Credit Facility
will be available to the Borrowers to (I) refinance outstanding
debt under the revolving credit agreement between the Borrowers
and Citibank, as agent, for itself and the lenders dated on or
about May 26, 1992; (ii) provide up to $ 10,000,000 towards
Letters of Credit. subject to certain Imitations outlined in
the attached Outline of Terms: (iii) provide up to $10,000,000
towards Permitted Acquisitions as defined in and subject to
certain limitations outlined in the attached Outline of Terms:
and (iv) provide ongoing working capital support for the
Borrowers.
The proposed transaction is subject to, without limitation, the
general terms and conditions contained in the attached Outline
of Terms, dated as of September 20, 1995 which, by reference,
is incorporated into this commitment letter. This commitment
-1-
letter and Outline of Terms supersedes all prior proposals
issued to you by the Agent. The text of this letter and Outline
is intended to provide a brief description of the principal
terms of this transaction as contemplated by the Agent and will
not be considered as prejudicing the final terms and conditions
which have yet to be negotiated and agreed and which will be
contained in the final documentation. Furthermore, this offer
is subject, but not limited, to (I) no situation occurring
which would, in the opinion of the Agent, materially adversely
affect (a) the ability of any Borrower or Guarantor (as defined
in the Outline of Terms) to perform its obligations under the
documents governing the proposed transaction and/or (b) the
assets and properties contemplated to be pledged as collateral
in connection with the proposed transaction: and (ii) the
preparation, completion and execution of legal documentation
that is satisfactory to the Agent and its counsel.
By executing this letter, the Borrowers agree to indemnify,
defend and hold harmless the Bank and its officers, directors,
controlling persons, agents, employees and counsel
(collectively the "Indemnified Persons") from and against any
and all losses, claims, damages, inabilities, deficiencies,
judgments or expenses incurred by any of them arising out of or
by result of any litigation, investigation, claim or
proceeding, pending or threatened,. which arise out of or are
in, any way based upon this letter and the financing facility
contemplated herein, including without limitation, amounts paid
in settlement, court costs and the fees and disbursements of
counsel incurred in connection with any such litigation
investigation, claim or proceeding, but excluding any loss,
claim, damage, liability deficiency, judgment or expense
arising from the gross negligence and willful misconduct of the
Indemnified Persons.
Based upon your acceptance of this commitment letter, and your
payment of and acknowledgment that the portion of the
Structuring Fee due upon acceptance of this commitment letter,
as detailed in the Structuring Fee definition in the attached
Outline of Terms (with the balance of such Structuring Fee due
at closing), is non-refundable, we shall authorize our
attorneys to prepare the necessary documentation, the charges
for which you agree to pay, whether or not the transaction
contemplated herein, is consummated. ln addition, this offer
is governed by the laws of the State of New York, shall not be
assignable, and may not be amended,
-2-
waived or modified without the Bank's prior written consent and
is contingent upon your acceptance by September 21, 1995 and
to documentation for the proposed transaction being executed
and delivered, and a closing occurring no later than November
2, 1995.
In addition, the Borrowers and the Bank agree that this letter
is delivered on the understanding that neither this letter nor
any of its terms or substance shall be disclosed by you,
directly or indirectly, to any other person, except to the
Borrower's and Citibank's respective employees, agents,
advisors and shareholders who are directly involved in the
consideration of this matter.
If this letter or the subject matter hereof becomes the subject
of any dispute, each of 'the parties waives trial by jury in
connection herewith. The Borrowers and Chemical waive any
claims for consequential damages with respect to any such
dispute.
If the Outline of Terms and this commitment letter correctly
set forth your understanding of the terms and conditions we
have discussed, please indicate your acceptance by signing in
the space provided below and returning the original to us,
together with the portion of the Structuring Fee in the amount
of $100,000. We appreciate this opportunity to work with you
and look forward to the continued development of our
relationship.
Very truly yours,
CHEMICAL BANK
Robert Arth
ss/ Robert J. Arth
Vice President
ACCEPTED THIS 21 DAY OF SEPT., 1995
American Bank Note Company
BY:ss/Ward Urban
Vice President & Treasurer
ACCEPTED THIS 21 DAY OF SEPT., 1995
American Bank Note Holographics, Inc.
BY: ss/Ward Urban
Vice President & Treasurer
-3-
American Banknote Corporation
51 West 52nd Street
New York, NY 10019
212-582-9200 LH
August 18, 1995
Mr. Robert Wilcox
5512 Atlantic View
St. Augustine, FL 32084
Dear Bob:
I'm very pleased to confirm the offer of employment we discussed
over the phone. The offer consists of the following:
Start Date Tuesday, September 5, 1995
Title Senior Vice President, Manufacturing, reporting to the
Chief Operating Officer/Executive Officer
Base Annual Salary $180,000, to be reviewed annually
Bonus Target bonus of 35% of base salary dependent upon the
achievement of mutually agreeable goals. Bonuses for a year are
generally payable at the end of the first quarter of the following
year as soon as the results of the prior year are known. For 1995,
we will set mutually agreeable goals to be acheived by the end of
the year. Your bonus will be pro-rated and your target will be 35%
of the salary you have earned.
Stock Options 25,000 options will be granted at the market
price on the date of grant, which will be as soon as practical
after your date of hire, but no later than the first Board Meeting
presently scheduled for September 21.
Car Allowance $500 per month
Club Dues $200 per month personal dues and use of a
corporate country club membership to be established at a new plant
site.
Benefits Participation in the Executive Benefits Program
(summary attached).
Relocation If necessary, the company will provide you with
moving expenses, $10,000 for interim living expenses, 3
house-hunting trips with your spouse, and closing and broker fees.
You will be grossed-up as necessary.
Company Paid Housing Only if necessary at a new site, the
company will provide for an apartment or house, depending on the
rental economics.
Severance Unless you are terminated due to cause, you will
receive 1 year base annual salary in severance, with continuation
of your basic health and dental benefits until the end of the
severance period or until you are eligible for coverage under
another employer's plan. In return for this severance arrangement,
you will be required to sign a release.
This offer is contingent upon your obtaining a release from
Transcontinental, your signing the Executive Employment Agreement
previously supplied to you, and a successful reference check.
We're all looking forward to seeing you on Tuesday after Labor Day,
and are sure you will make valuable contributions to the company in
a very short period of time.
Please countersign this letter and return it to me at your earliest
convenience.
Sincerely, Accepted:
s/ JoAnne Martinez S/ Robert Wilcox
JoAnne Martinez Robert Wilcox
Enclosure
Cover letter dated September 26, 1995, effective October 1, 1995
Kelly, Anderson, Pethick & Associates, Inc.
AGREEMENT FOR SERVICES
This agreement is made by and between Kelly, Anderson, Pethick &
Associates, Inc. (Kelly, Anderson, Pethick), 1020 19th Street,
NW; Suite 800; Washington, DC 20036 and American Banknote
Corporation (Company), 51 West 52nd Street, New York, NY 10019.
Whereas the Company wishes to engage the services of the Kelly,
Anderson, Pethick as specified herein, and Kelly, Anderson,
Pethick is ready, willing and able to undertake the rendition of
such services;
Now, therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES
As requested by the Company, Kelly, Anderson, Pethick shall
furnish business development services, advice, consultation
and related services pertaining to the Executive and
Legislative branches of the U.S. Government - to include,
but not limited to, the U.S. Department of State,
Agriculture, Treasury, Defense, the U.S. Postal Service,
U.S. Congress and the Government Printing Office.
2. INDEPENDENT CONTRACTOR
Kelly, Anderson, Pethick shall operate as, and have the
status of, an independent contractor and shall not act as or
be an agent or employee of the Company. As an independent
contractor, Kelly, Anderson, Pethick will be solely
responsible for determining the means and methods of
performing the commensurate services with the standard of
care, skill, and diligence normally provided by professional
organizations performing services similar to those to be
performed hereunder.
Consultant shall not have authority to obligate the Company
to any agreement or to exercise any supervision or direction
over Company's employees.
3. AUTHORITY OF COMPANY PERSONNEL
Kelly, Anderson, Pethick's contacts within the Company shall
be Morris Weissmsn, Robert Wilcox, Harvey Kesner, Joshua
Cantor and Jay Furick, who shall be responsible for
transmitting task orders, request for advice and
consultation from the company, and for providing and
coordinating provision of information to Kelly, Anderson,
Pethick when necessary to enable Kelly, Anderson, Pethick to
carry our responsibilities hereunder.
4. COMPENSATION
Company will retain the services of Kelly, Anderson, Pethick
on a monthly service fee of $5,000. Calculation of hours
expended per month will be based upon the rates provided
below.
TITLE RATE
Principal $175.00
Project Manager $150.00
Senior Associate level 1 $150.00
Senior Associate level 2 $125.00
Associate $100.00
Research/Administrative $ 75.00
Services or tasks which require Kelly, Anderson, Pethick to
expend more than the minimum monthly support during a
calendar month, will be billed and become payable at the end
of the month performed.
Company will reimburse Kelly, Anderson, Pethick for its
actual and reasonable out-of-pocket expenses incurred in
carrying out this agreement. These will include but not be
limited to such items as travel out of the Washington, DC
area which has been requested and approved in advance by
Company; local travel, long distance telephone calls;
meeting expenses; photocopying and printing of documents;
postage and messenger costs. Copy of receipt will be
provided for any expenses in excess of $50.00.
5. REPORTING AND INVOICING
Kelly, Anderson, Pethick will provide Company with an
invoice for the monthly or task services including: time
spent, tasks accomplished and actual expenses incurred.
Also, attached to the invoice, Kelly, Anderson, Pethick will
account for time expended and activities performed on behalf
of the Company. Payment of each invoice is due upon
receipt. A 1.5% monthly service charge will be incurred for
each invoice outstanding after thirty (30) days from invoice
date. Service charge will be calculated monthly until
payment is received.
6. CONFIDENTIALITY AND NON-DISCLOSURE OF INFORMATION
Consultant agrees that it will not divulge to third parties,
without the written consent of the Company any information
obtained from or through the Company, or developed or
obtained by consultant in connection with the performance of
its services under this Agreement unless (i) the information
is known to consultant prior to obtaining it from the
Company, (ii) the information is at the time of disclosure
by consultant, then in the public domain, or (iii) the
information is obtained by consultant from third party who
did not receive it directly or indirectly from the Company.
7. CONFLICT OF INTEREST
The parties understand and agree that the services of Kelly,
Anderson, Pethick are provided on a non-exclusive basis, and
that Kelly, Anderson, Pethick is retained by other Companies
for which Kelly, Anderson, Pethick provides similar
services. Kelly, Anderson, Pethick represents that there
currently exists no conflict of interest, real or apparent,
between work to be performed under this agreement and any
other work performed by Kelly, Anderson, Pethick for any
other government or private organization or Company. Kelly,
Anderson, Pethick agrees that it is obligated to inform the
Company in writing of any conflict of interest, real or
apparent, which exists now or in the future so long as the
terms of this agreement remain in effect.
8. INDEMNIFICATION
Kelly, Anderson, Pethick, its agents and employees, shall
comply with all applicable laws, rules and regulations with
respect to the representation of Company and shall perform
its obligations hereunder in good faith, care, diligence and
in a non-negligent manner. Company agrees to hold Kelly,
Anderson, Pethick harmless from any and all claims other
than those which may arise from a breach or default by
Kelly, Anderson, Pethick of this Paragraph 8.
<PAGE>
9. MODIFICATION
This Agreement constitutes the complete agreement between
the parties, and all prior negotiations, both orally and
written, are integrated into the Agreement. The Agreement
shall only be changed, altered, modified, amended,
supplemented, or novated in writing and signed by both
parties. This Agreement supersedes any previous Agreements
between Company and Kelly, Anderson, Pethick.
10. GOVERNING LAW
Kelly, Anderson, Pethick will comply with all applicable
laws and regulations in the course of its activities on the
Company's behalf and will file periodic reports of these
activities including identification of all principals and
subagents. This contract shall be construed under the
governed by the laws of the District of Columbia.
11. TERM
This agreement shall commence on October 1, 1995. Either
party may terminate this Agreement upon thirty (30) days'
advance written notice to the other party. Upon receipt of
notice or notice given of termination, Kelly, Anderson,
Pethick shall cease all activities on Company's behalf,
render a final report of activities, fees and expenses; the
reasonable sum for which shall be paid within 30 days. This
Agreement will be terminated without further liability or
obligation on the part of the company should Kelly,
Anderson, Pethick breach any of the covenants of this
Agreement.
12. CONFIRMATION
a. Failure on the part of either party to insist on strict
compliance by the other with any provisions of this
Agreement shall not constitute a waiver of the other
party's obligations in respect thereof, or of the first
party's right hereunder to require strict compliance
therewith in the future.
b. This Agreement sets forth the entire understanding of
the parties as to the matters included herein, and can
be amended or extended only by written agreement signed
by both parties.
12. CONFIRMATION (cont'd.)
c. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns, but this provision shall not be
construed as allowing Consultant to convey or assign
its rights or obligations hereunder without the prior
written consent of the Company.
d. The obligations set forth in this Agreement are
severable and divisible, and no clause or portion
thereof which is not enforceable shall cause the
remainder of such clause or other obligations contained
herein to be unenforceable.
IN WITNESS WHEREOF, this Agreement has been executed as of the
day, month and year above written.
For: For:
Kelly, Anderson, Pethick American Banknote Corporation
& Associates, Inc.
__________________________ ___________________________
Signature Signature
Bette B. Anderson Morris Weissman
President Chairman & Chief Executive Officer
[Kelly]
