UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,
1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-3410
AMERICAN BANKNOTE CORPORATION
A Delaware Corporation I.R.S. Employee ID
No. 13-0460520
200 Park Avenue, New York, New York 10166
Telephone number: (212) 557-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange
Preferred Stock Purchase Rights N/A
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
At March 26, 1996, the aggregate market value of the voting stock
held by non-affiliates was $34,120,000.
At March 26, 1996, 19,497,380 shares of Common Stock were
outstanding.
Documents incorporated by reference: Portions of the
Company's definitive proxy statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. Business
GENERAL
American Banknote Corporation is a holding company whose
subsidiaries operate the largest private-sector security printing
business in North and South America and the world's leading
security hologram manufacturer.
American Bank Note Company ("ABN"), the Company's United
States security printing subsidiary, produces counterfeit-resistant
documents of value using special paper, ink, elaborate steel-engraved
designs and intaglio printing. ABN also uses special
lithographic printing techniques for document security. ABN's
manufacturing, storage and distribution facilities employ high
levels of plant security through the use of guards, alarms,
monitoring activities and extensive accountability controls. ABN
is a major producer of government security documents including food
coupons, social security cards and treasury checks for the United
States government, currency and passports for foreign governments
and motor vehicle titles and birth certificates for state and local
governments. ABN's commercial products include travelers cheques,
stock and bond certificates, gift certificates, certificates of
deposit and bank checks. ABN and its predecessors have printed
security documents for over 150 years.
American Bank Note Company Grafica e Servicos Ltda. ("ABNB")
is the Company's 77.5% owned Brazilian subsidiary. ABNB is the
largest private-sector security printer in Brazil. In addition to
government and commercial security documents, ABNB produces
personalized checks, financial cards, such as MasterCardTM, VISATM,
and American Express cards, and drivers licenses. ABNB is a
leading supplier of pre-paid telephone stored-value cards for
Telebras, Brazil's national telephone company. ABNB was acquired
June 23, 1993 and was a wholly-owned subsidiary until July 1, 1995
when ABNB acquired the printing business and operations of Grafica
Bradesco Ltda. ("GB"), from Banco Bradesco, S.A., Brazil's largest
private bank.
American Bank Note Holographics, Inc. ("ABNH") produces
holograms primarily for security and anti-counterfeiting purposes.
A hologram is a laser generated, three-dimensional image that can
be permanently applied to a product, such as a credit card or
identification document. ABNH's holograms are used on credit
cards, identification cards, videocassette packages, computer
<PAGE>
software packages, clothing tags, tickets and other products. ABNH
is the principal producer of holograms for MasterCardTM, VISATM,
EuroPay and Discover financial cards and ABNH's holograms have been
used for national identification cards and drivers licenses.
The Company continues to focus its efforts on international
expansion through joint ventures, acquisitions and foreign agent
representations and on new product introductions. In 1995, 1994,
and 1993 the Company's sales in foreign markets (principally South
America) accounted for approximately 55%, 40% and 26%,
respectively, of consolidated sales.
The Company was incorporated in 1993 in Delaware as United
States Banknote Corporation and changed its name on July 1, 1995 to
American Banknote Corporation. During 1993, 1994 and 1995 the
Company undertook a series of consolidation and restructuring
actions affecting the former Jeffries Banknote facility in Los
Angeles, California and the Bedford Park, Illinois facility. The
Company also has significantly downsized its New York corporate
headquarters after a reorganization of its operating subsidiaries
to establish greater autonomy for each subsidiary. The Company's
domestic workforce is expected to be reduced by approximately 27%
from prior levels. The Company's principal executive offices are
located at 200 Park Avenue, New York, New York 10166, and its
telephone number is (212) 557-9100.
Product Lines
The following table presents the Company's sales and the
percentage of sales by product line for each of the three years
ended December 31, 1995, 1994 and 1993, respectively (dollars in
millions).
1995(2) 1994 1993(1)
Corporate and Commercial
Products . . . . . . $129.8 63.0% $121.1 58.2% $ 93.0 46.5%
Government Products . 48.5 23.5 65.0 31.2 82.5 41.2
Holographic Products. 27.9 13.5 22.0 10.6 24.6 12.3
$206.2 100.0% $208.1 100.0% $200.1 100.0%
(1) Includes sales of ABNB from June 23, 1993.
(2) Includes sales of Grafica Bradesco S.A. from July 1, 1995.
<PAGE>
CORPORATE AND COMMERCIAL PRODUCTS
The Company produces a variety of security documents for
corporate and commercial (non-government) customers including
travelers cheques, domestic and foreign stock and bond
certificates, pre-paid telephone cards, personalized checks and
direct mail and fulfillment services.
Travelers Cheques
ABN believes that it is one of the largest printers and
distributors of travelers cheques in the world, whose customer's
include American Express, Citicorp, MasterCardTM, VISATM and their
issuing banks.
Stock and Bond Certificates
Stock and bond printing accounted for in excess of 10% of the
Company's consolidated sales in 1995, 1994 and 1993. Stock and
bond certificate sales is a function of the volume of trading
activity, the number and size of public offerings, the mix of debt
and equity security issuances and regulatory considerations.
Although the number of new issues may vary substantially from year
to year, reprints of existing publicly traded securities provide
the Company with a continuing base of revenues. The New York Stock
Exchange (the "NYSE") requires certificates of listed companies to
be intaglio printed with unique border designs and vignettes. The
Company's library of engravings includes the plates containing the
border designs and vignettes for substantially all NYSE listed
companies.
The Company's sales of stock and bond certificates declined in
1995 primarily as a result of reduced sales in foreign markets. The
elimination of printed certificates continues to be advocated by
various banking and securities firms who favor the use of book-entry
systems for recording security ownership. The complete
elimination of or substantial reduction in the domestic use of
certificates would have a material adverse effect on the sales and
earnings of the Company. The growth of institutional investors and
shortened settlement periods has reduced demand for printed
certificates.
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Telephone Cards and Payment Cards
The Company is one of the largest producers of pre-paid
telephone cards in Brazil. Through its contracts with Telebras,
Brazil's national telephone company, the Company's Brazil
subsidiary has supplied embedded circuitry stored-value' cards to
the Brazilian market since 1993 while Telebras continues converting
the public telephones in Brazil from coin to card operation. ABNB
is currently supplying cards under a $105 million contract over a
15 month period which commenced October 1995 and ABNB has added
substantial new production capacity. Sales to Telebras were in
excess of 10% of consolidated sales during 1995.
ABNB is one of the largest producers of financial payment cards
supplying approximately 30 customers in Brazil and several other
South American countries. These cards include ATM, credit and
debit cards for financial institutions, including those issued for
American Express, VISATM and MasterCardTM. The Company believes that
the continuing progress of Brazil's Real Economic Plan could lead
to expansion of consumer credit and increasing demand for financial
payment cards in Brazil.
During early 1996 the Company acquired a 25% interest in
Ordacard HiTech Industries (1995) Ltd., a financial payment and
identification card company which produces both traditional
financial cards and smart cards.
Personalized Checks and Other Products
ABNB is the leading private sector supplier of personalized
checks in Brazil, serving major banks as customers, some of which
are among the largest in Brazil. ABNB's acquisition of the in-house
printing operations of Brazil's largest (non-government)
private bank, Banco Bradesco, S.A.,in exchange for 22.5% of ABNB
has resulted in ABNB becoming the print supplier to Brazil's
largest private bank under a multi-year contract for checks, check
personalization, continuous forms, deposit slips, financial cards,
insurance policies, and a wide array of additional printed
products. As a result of this combination, ABNB has acquired the
assets and taken over the operations and facilities of Banco
Bradesco's printing plant in Osasco, Sao Paulo, Brazil. Management
of the Company believes that Brazilian banks will continue to seek
to outsource their check printing requirements and additional
opportunities to expand ABNB's business in this manner are expected
to continue.
<PAGE>
Secure Commercial Products
Recent technological advancements in color copying, desktop
publishing and laser scanning and printing have resulted in more
companies requiring security in documents such as commercial paper,
certificates of deposit, bank checks and other financial
instruments, gift certificates and redemption coupons. The Company
believes that the intaglio printing process and other secure
printing methods greatly reduce the risk of copying and
counterfeiting of such documents. ABN believes it is the largest
producer of intaglio printed secure gift certificates in the United
States including those for K-mart, Bloomingdale's and Saks Fifth
Avenue. The Company has recently begun to sell and market gift
certificates in foreign countries and has increased its sales
efforts for non-intaglio printed commercial products and
processing, packaging and distribution services.
GOVERNMENT PRODUCTS
Government Products include a variety of security documents
printed for the United States government, numerous state and local
governments and foreign governments, including food coupons,
treasury checks, passports and currency.
Food Coupons
The United States Department of Agriculture ("USDA") is ABN's
largest government customer. Through 1995, the Company and its
predecessors had collectively printed the food coupon requirements
for the USDA since the printing of food coupons was fully
privatized more than 20 years ago. Food coupons are intaglio
printed documents that are accepted by food stores in lieu of
currency for the purchase of food. Sales of food coupons were in
excess of 10% of consolidated sales and were approximately $23.8
million, $46.0 million, and $40.6 million in 1995, 1994 and 1993,
respectively.
In September 1995, the food coupon production contract under
which the Company has produced food coupons expired and bids for
food coupon production have been solicited under a competitive bid
which is presently pending. The food coupon contract is expected
to be awarded during the second quarter of 1996 and the Company
believes the award will be for substantially lower volumes than
prior awards. See "Business - Competition". In June 1995 ABN was
awarded a three-year contract with USDA to store and distribute
food coupons to state and local government agencies that administer
the food coupon program.
<PAGE>
Food coupon production and distribution constitutes a
significant component of the Company's consolidated sales and
earnings. Although the Company's food coupon production has
increased during recent years, implementation of electronic
card-based systems, proposed benefit reforms and high levels of food
coupon inventory are expected to reduce the Company's volume of
food coupon production for 1996 and in future years. Card-based
programs have had a negative impact on the Company's printing of
food coupons and are expected to continue to have a negative
effect.
The USDA is promoting the issuance of electronic card-based food
coupon benefits and nationwide implementation is being pursued and
by 1996, eight states had begun implementation (although only
Maryland, Texas and South Carolina are statewide). The Company
believes that twenty-one additional states recently awarded or are
in the process of awarding contracts to perform similar services.
The elimination or a substantial reduction in the use of paper food
coupons or changes in federal benefit programs could have a
material adverse effect on the sales and earnings of the Company.
See "Management's Discussion and Analysis - Liquidity and Capital
Resources."
During 1994 and 1993, the Company believes that increases in the
number of eligible recipients as well as the USDA's increasing
inventory of food coupons, increased food coupon sales. Neither of
these factors are continuing.
Other Government Products
ABN prints all official United States government checks under a
contract with the United States Government Printing Office and
Social Security cards under a contract through January 1996. From
time to time, ABN has manufactured visas, currency, passports, gas
rationing coupons and similar products for government and similar
customers, such as NATO. ABN also manufactures motor vehicle title
certificates, as well as birth certificates and other vital
documents for various state and local governments. The Company
believes it is the largest supplier of such intaglio documents in
the United States.
<PAGE>
ABN presently prints American Commemorative Postage Stamp Panels
for the United States Postal Service ("USPS") under a three-year
contract with two one-year options. ABN's sales to the USPS
declined in 1994 following an award of a competitively bid contract
to print postage stamps. ABN's sales to the USPS were
approximately $1.3 million, $2.5 million and $23.5 million in 1995,
1994 and 1993, respectively.
Sales of Government Products, particularly to the United States
government and state and local governments, is principally
dependent on successful competitive bids. Competitive bids are
generally awarded on the basis of price, but may also consider
other factors. Multiple awards and requirements contract
provisions can affect the level of Government sales. Many of the
Company's contracts are re-bid annually or on a multiple year
basis. There can be no assurance that any particular bid by the
Company will be successful. Government sales are generally subject
to provisions which allow termination for the convenience of the
Government, and upon such termination, to reduce payment to the
contractor.
ABN competes directly with foreign security printing companies
and certain government-owned printing operations. Highly
specialized equipment is necessary for much of ABN's printing and
ABN believes that it is the only private sector company in the
United States with a Super Giori intaglio printing press. Special
equipment, such as a Giori intaglio press, is necessary for the
efficient printing of certain currencies.
ABNB produces a wide variety of lithographic and intaglio
documents for governmental customers in Brazil including motor
vehicle registrations, drivers licenses, fiscal stamps, identity
cards and transportation passes.
<PAGE>
HOLOGRAPHIC PRODUCTS
Holographic Products include holograms with security and
anticounterfeiting features for products such as credit cards and
identification cards and product authentication labels. ABNH's
security hologram sales are made primarily to the credit card
industry. To date, ABNH has produced and sold over 4 billion
holograms for use on bank credit cards. ABNH is the principal
producer of holograms for MasterCard , VISA , Europay and
Discover credit cards in use around the world. Holograms
manufactured by ABNH have been used as security labels to
authenticate computer equipment, computer software, video
cassettes, transit passes and auto parts with many
leading brand-name products. The Company's see-through holographic
laminates have been used for national identification cards and
for drivers licenses in the United States and abroad.
Part of ABNH's growth strategy focuses attention on markets in
the Pacific Rim and ABNH has entered into various third-party
distribution arrangements in Japan, Hong Kong, Taiwan, Malaysia,
Indonesia, Korea and Thailand.
OTHER ACTIVITIES
In 1992, the Company and Thomson-CSF ("Thomson"), a leading
French electronics and defense company, concluded a joint venture
agreement to combine their respective identification systems
businesses. In 1995, Thomson purchased the Company's interest in
the joint venture for approximately $4.7 million. Revenues
generated were not material in relation to the Company's total
revenues.
FOREIGN OPERATIONS AND EXPORT SALES
Information with respect to the Company's foreign operations and
export sales is disclosed in Note A to "Notes to Consolidated
Financial Statements."
COMPETITION
Competition in the Company's product markets is based upon
price, service, quality, and reliability. Each of the Company's
subsidiaries conduct their businesses in highly competitive
markets. In certain markets, the Company's competitors have
greater financial resources than the Company. In the United
States, ABN competes with other printers as well as companies
engaged in businesses unrelated to printing that provide goods or
<PAGE>
services which could replace or substantially reduce demand for
certain of the Company's printed products, including food coupons.
The market for holographic products is highly fragmented with no
dominant competitor to ABNH. ABNH believes it is the largest
producer of secure holographic products in the United States and
that it competes with various smaller, less technologically
advanced holographers and with companies producing non-holographic
optical devices. ABNB competes in Brazil with other printers who
offer various secure alternatives to ABNB's secure printed
products. Internationally, ABN and ABNB primarily compete with
private security printers located in the United Kingdom, Germany,
France and Canada, as well as various government printers.
PATENTS
ABN and ABNH presently hold, or are licensed under, numerous
United States and foreign patents. The Company continues to pursue
patent protection when patent protection can be obtained or
expanded in strategic markets. Patents held by the Company will
expire over the next several years and may be challenged or
ultimately declared invalid whenever the Company seeks to enforce
its patents in judicial proceedings. The Company has also granted
licenses to third parties for certain patents. Licensing and the
loss of patent protection may allow additional competition to
develop, particularly with respect to the business of ABNH. The
Company believes, however, that its patent rights are of less
significance to sales in the holography industry than factors such
as innovation and technological expertise. In addition, there can
be no assurance that others will not independently develop
substantially equivalent technology or obtain access to the
Company's trade secrets or technology.
BACKLOG
At December 31, 1995 and 1994, the Company had an overall
backlog of approximately $138 million and $81 million,
respectively.
1994 backlog included $23 million of firm orders for food
coupons and distribution with the USDA and 1995 includes none.
1995 backlog principally consists of orders relating to Telebras
pre-paid telephone cards, personal checks, travelers checks and
financial payment cards. The Company believes that substantially
all of its backlog will be produced and shipped in 1996.
<PAGE>
RAW MATERIALS
The Company is not materially dependent upon any one supplier
for raw materials used in its businesses. Certain raw materials
used are available from a limited number or only a single source
supplier and certain other products, particularly for national
governments, require domestic content which limits potential
suppliers. The Company regards its relationships with its primary
suppliers as reliable.
ENVIRONMENT
In connection with the Company's business, the Company engages
in the use or disposal of substances that may be considered to be
toxic or hazardous substances under applicable environmental laws.
The Company believes that its compliance with such laws has not had
and will not have a material effect on the capital expenditures,
earnings or competitive position of the Company.
EMPLOYEES
At December 31, 1995, the Company had approximately 2,380
employees consisting of 2,120 employees engaged in manufacturing,
230 engaged in plant administration and sales and 30 in executive,
corporate and administrative functions. Approximately 66% of the
Company's domestic employees and all of ABNB's employees are
represented by labor unions. The Company has multi-year contracts
with labor unions covering a substantial number of employees of
ABN, several of which were renegotiated during 1995. The Company's
future profitability will be dependent, in part, upon its ability
to maintain satisfactory relationships with labor unions and
employees and in avoiding strikes and work stoppages.
<PAGE>
ITEM 2. Properties
The following table describes the Company's facilities:
Size (in
Location square feet) Owned or Leased Operations
Corporate Headquarters
200 Park Avenue 12,500 Lease expiring Executive, administration
New York, New York in 1998 and sales offices (1)
Printing/Engraving Operations
Bedford Park, 156,000 Lease expiring Printing (2)
Illinois in 2009, with
purchase option
Columbia, 50,000 Leasing expiring Printing
Tennessee in 1999, with
purchase option
Elmsford, 59,000 Lease expiring Administration and
New York in 2007, with sales offices,
renewal option research and development
and hologram production
Horsham, 111,000 Owned Administration and
Pennsylvania sales offices; printing
Huntingdon Valley, 30,000 Lease expiring Hologram production
Pennsylvania in 1996, with
renewal option
Barueri, Sao Paulo 290,000 Leased, under Future consolidation of
Brazil construction Osasco, Brazil facility
with purchase
option
Osasco, Sao Paulo 280,000 Leased Checks, financial cards
Brazil bank forms and
publications
Rio de Janeiro, RJ 140,000 Owned Checks, financial and
Brazil telephone cards,
intaglio documents
and vouchers
Alphaville, Sao Paulo 27,000 Owned Personalization of
Brazil checks
<PAGE>
Size (in
Location square feet) Owned or Leased Operations
Other Facilities
Forest Park, 60,000 Lease expiring Storage
Illinois in 1997, with
renewal and
purchase option
Los Angeles, 148,000 Lease expiring Facility closed (3)
California in 2000
New York, 30,000 Lease expiring (1)
New York in 1997
Philadelphia, 104,000 Owned Product distribution
Pennsylvania (Caroline Road) and storage(4)
Philadelphia, 95,000 Owned Ink manufacturing and
Pennsylvania (55th Street) storage(4)
_____________________
(1) In connection with a new long-term lease for 22,000 square feet for
corporate offices entered in 1993, the landlord assumed the cost of
maintaining the Company's former headquarters lease through its expiration
in 1997. In 1996, as part of the Company's restructuring, the Company
terminated the 1993 lease and vacated those facilities in March 1996 to
move to smaller corporate offices. Notwithstanding termination of the
1993 lease, the landlord will continue to make the payments required under
the old lease through expiration of its term.
(2) The plant is to cease production in 1996 and the facility will be closed.
(3) In 1994 the Company decided to completely vacate its Los Angeles facility
and is seeking to sublease or otherwise terminate this lease.
(4) These former production or administration facilities are currently used for
storage of files, excess equipment and materials.
ITEM 3. Legal Proceedings
In January 1994, Vladimir v. United States Banknote Corporation,
et al., and in February 1994, Sinay v. United States Banknote
Corporation, et al. were filed in the United States District Court
for the Southern District of New York on behalf of a purported
class of purchasers of Common Stock between April 1, 1993 and
January 6, 1994. Also, in January 1994, Atencio v. Morris
Weissman, et al. was filed in the Court of Chancery for the State
of Delaware, New Castle County, against various directors and/or
officers of the Company, on behalf of a purported class and also
derivatively on behalf of the Company which was named as a nominal
defendant. In February 1994, Rosenberg v. Morris Weissman, et al.
was filed in the same court as Atencio, alleging similar claims to
Atencio, but not on behalf of a class of plaintiffs.
<PAGE>
The complaints in these four actions allege, among other things,
that the Company and the individual defendants knowingly or
recklessly caused the market price of its Common Stock to be
inflated artificially by making misleading statements and/or
omissions of material fact concerning the risk of loss of the
Company's stamp printing contracts with the USPS. The Vladimir and
Sinay actions seek unspecified damages. The Atencio and Rosenberg
actions also assert claims for breach of fiduciary duty by the
individual defendants, and allege that certain of the defendants
sold Common Stock while in possession of material non-public
information and seek recapture of the profits earned by the
defendants who purportedly traded, the repayment by the defendants
of their 1993 salaries, damages for the costs to the Company of
defending the Vladimir and Sinay actions and the annulment of the
1993 election of directors.
On June 16, 1995, the court granted plaintiff's motion for class
certification in Vladmir and defined the class to include persons
(other than defendants and related persons) who purchased the
Company's stock from April 1, 1993 through January 6, 1994. On
February 28, 1996, the Sinay action was voluntarily dismissed. The
Atencio and Rosenberg actions have been stayed pending the outcome
of the Vladimir action.
On November 1, 1994, the Company filed an action against De La
Rue, AG ("DLR")and its parent, De La Rue Plc in New York State
Supreme Court. The complaint alleges breach of contract in
connection with the 1993 purchase of the Company's Brazilian
subsidiary from DLR and seeks in excess of $1.5 million in damages.
In December 1994, the action was removed by the defendants to the
United States District Court for the Southern District of New York.
Defendants have filed an answer denying liability and asserting
counterclaims. Discovery is presently underway. On November 2,
1994, an action was commenced against the Company and certain of
its directors and officers entitled Thomas De La Rue AG v. United
States Banknote Corporation, et al. in the United States District
Court for the Southern District of New York. The complaint, as
amended, alleges, among other things, breach of contract by the
Company in connection with the Brazil purchase agreement and common
law fraud based on the alleged failure to disclose the risk of loss
of the Company's stamp printing contracts with the USPS and the
alleged failure to register the Common Stock paid to DLR
expeditiously with the SEC. The complaint seeks unspecified
damages as well as $6.8 million for the Common Stock received by
DLR in the transaction. On November 20, 1995, plaintiff amended
its complaint and eliminated all of its federal securities law
<PAGE>
claims and the individual defendants following dismissal of certain
of DLR's securities law claims by the court. Discovery is
presently underway.
The adverse determination of the above-described litigations
could have a material adverse effect on the financial condition or
results of operations of the Company in the event that the
Company's insurance was not available to cover such claims or an
award materially in excess of insurance coverage was made. The
Company believes, however, that it has good and meritorious
defenses to the litigations and intends to vigorously defend
against such actions. The Company maintains insurance coverage
which presently covers a majority of the expenses of defense of the
class action suits and, until November 1995, the DLR suit. In
addition to the foregoing, the Company is party to legal
proceedings that are considered to be either ordinary, routine
litigation incidental to its business or not material to the
Company's consolidated financial position.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders in
the fourth quarter of 1995.
<PAGE>
ITEM 10. Directors and Executive Officers of the Company
The following table sets forth certain information regarding the
current executive officers of the Company.
Positions and Offices Office Held
Name Age With the Company Since
Morris Weissman* . . . . . 54 Chairman of the Board and (1)
Chief Executive Officer
Bette B. Anderson . . . . 67 Director June 1994
Dr. Oscar Arias. . . . . . 56 Director July 1995
C. Gerald Goldsmith . . . 67 Director July 1990
Ira J. Hechler. . . . . . 76 Director February 1990
David S. Rowe-Beddoe. . . 57 Director July 1990
John T. Gorman*. . . . . . 51 Executive Vice President (1)
and Chief Financial Officer
Harvey J. Kesner*. . . . . 38 Senior Vice President, June 1991(1)
General Counsel and
Secretary
Robert K. Wilcox*. . . . . 49 Senior Vice President - (1)
Manufacturing, General
Manager ABN
Sidney Levy. . . . . . . . 39 Managing Director of February 1994
ABNB
Paul Amatucci. . . . . . . 49 Executive Vice President, (1)
ABN
Josh Cantor. . . . . . . . 36 Executive Vice President, (1)
General Manager ABNH
Sheldon Cantor . . . . . . 62 Vice President - Corporate (1)
Services and Assistant
Secretary
Patrick D. Reddy . . . . . 54 Vice President and Assistant (1)
Secretary
Ward A.W. Urban. . . . . . 35 Vice President, Treasurer and
Assistant Secretary (1)
Patrick J. Gentile . . . . 37 Vice President and Corporate (1)
Comptroller
___________________
* "Executive Officer" under the Securities Exchange Act of 1934, as amended.
(1) See below.
Morris Weissman. Mr. Weissman has served as Chairman of the
Board and Chief Executive Officer of the Company since July 1990
and as a Director of the Company since February 1990. Mr. Weissman
assumed the additional duties of Chief Operating Officer in July
1995. Mr. Weissman was Chairman and Chief Executive Officer of
United States Banknote Company, L.P. ("USBC") a predecessor of the
Company, from April 1986 to July 1990 and Vice Chairman and
Director of USBC's predecessor from 1976 to 1986. Mr. Weissman is
a Director of the Convenience and Safety Corporation and a Trustee
of the Jackie Robinson Foundation and the Business Council for the
United Nations.
Bette B. Anderson. Ms. Anderson has served as a Director of the
Company since June 1994. She has served as President of Kelly,
Anderson, Pethick & Associates, Inc., financial and corporate
<PAGE>
consultants, since 1989. Ms. Anderson served as Undersecretary of
the Treasury from 1977 to 1981 and held various Washington, D.C.
consulting posts from 1981 to 1991. Ms. Anderson is a Director and
Chairperson of the Compensation Committee of Manville Corporation,
a Director of ITT Corporation, a Director of ITT Financial
Corporation, a Director and Chairperson of the Compensation
Committee of Riverwood International Corporation, Chairperson of
the U.S. Treasury Historical Association, a member of the Council
for the Miller Foundation, University of Virginia, and a member of
the Advisory Council of the Girl Scouts of America.
C. Gerald Goldsmith. Mr. Goldsmith is a private investor. He
has served as a Director of the Company since July 1990. He is a
Director of Palm Beach National Bank and Trust, and since June
1993, a Director of Nine West Group, Inc.
Ira J. Hechler. Mr. Hechler is a private investor. He has
served as a Director of the Company since February 1990. He is a
Director of Leslie Fay Companies, Inc. and Concord Camera Corp.
David S. Rowe-Beddoe. Mr. Rowe-Beddoe has served as a Director
of the Company since July 1990. He has been Chairman of the Board
of Welsh Development Agency since 1993 and Chairman of the
Development Board of Rural Wales since 1994. Mr. Rowe-Beddoe is
also a Director of Cavendish Services Ltd. and Development
Securities plc. Mr. Rowe-Beddoe previously held various senior
management positions, including at Revlon Inc. and De La Rue plc,
where he was an Executive Director.
John T. Gorman. Mr. Gorman has served as Executive Vice
President and Chief Financial Officer of the Company since July
1990 and as Vice President of the Company from February 1990 to
July 1990. Mr. Gorman was Executive Vice President and Chief
Financial Officer of USBC from January 1983 to July 1990 and Senior
Vice President of Finance of USBC's predecessor from 1978 to 1983.
Harvey J. Kesner, Esq. Mr. Kesner has served as Senior Vice
President, General Counsel and Secretary of the Company since June
1994 and as Vice President, General Counsel and Secretary of the
Company from 1991 to 1994. Mr. Kesner was an attorney in private
practice for more than five years prior thereto.
Robert K. Wilcox. Mr. Wilcox has served as Senior Vice President
Manufacturing of the Company since August 1995 and as Executive
Vice President - Operations and General Manager of ABN since
<PAGE>
November 1995. Mr. Wilcox was Vice President of US Operations for
Transcontinental Printing and previously held senior positions at
the Bureau of Engraving and Printing as well as Gowe Printing,
Arcata Graphics and C.P.Y. Jeffries Banknote Co.
Sidney Levy. Mr. Levy has served as Managing Director of ABNB
since February 1994. Prior to joining ABNB, Mr. Levy was employed
as Managing Director of De La Rue Lerchundi in Spain since 1991 and
prior thereto was employed by Thomas De La Rue Grafica e Servicos
Ltda. in Brazil, serving in various management capacities.
Paul Amatucci. Mr. Amatucci has served as Executive Vice
President of ABN since September 1994. Mr. Amatucci was Vice
President - Sales of ABN for more than five years prior thereto.
Josh Cantor. Mr. Cantor has served as Executive Vice President
and General Manager of ABNH since November 1995 and Executive Vice
President of ABN since September 1994. Mr. Cantor was Vice
President - Sales of ABN for more than five years prior thereto.
Sheldon Cantor. Mr. Cantor has served as Vice President-Corporate
Services of the Company since August 1993. Mr. Cantor
was Treasurer of the Company from July 1990 to August 1993, and
Vice President and Assistant Secretary from February 1990. Mr.
Cantor was Treasurer of USBC and its predecessor from January 1983
to July 1990.
Patrick D. Reddy. Mr. Reddy has served as Vice President and
Assistant Secretary of the Company since July 1990 and as Vice
President, Treasurer and Secretary from February 1990 to July 1990.
Mr. Reddy had been a continuous employee of the Company's
predecessors since 1969 and has held many positions during that
period, including Comptroller, Secretary and Treasurer.
Ward A.W. Urban. Mr. Urban has served as Treasurer of the
Company since August 1993 and as Vice President and Assistant
Secretary since June 1995. Mr. Urban was employed as an Assistant
Vice President in the leveraged finance department of Citibank,
N.A. since August 1988.
Patrick J. Gentile. Mr. Gentile has served as Vice President of
the Company since June 1995 and as Comptroller since 1989 and has
been a continuous employee of the Company's predecessors since
1986.
<PAGE>
PART II
ITEM 5. Market Price for the Company's Common Stock and Related
Matters
The Company's Common Stock is traded on the New York Stock
Exchange. The following table sets forth, for the periods
indicated, the high and low sales price per share of the Company's
Common Stock.
1995 1994
High Low High Low
First Quarter $2 1/2 $1 1/2 $6 1/2 $3 1/4
Second Quarter $2 1/2 $1 3/4 $4 $3
Third Quarter $2 3/8 $1 5/8 $3 5/8 $2 1/2
Fourth Quarter $2 1/8 $1 1/4 $2 7/8 $1 3/4
During the first quarter of 1996 through March 25, 1996 the
high and low sales prices of the Company's stock was $2 and $1 1/4,
respectively.
No cash dividends have been paid during the two most recent
fiscal years on the Common Stock. The Company is restricted from
paying cash dividends on the Common Stock by the terms of the
Company's 10-3/8% Senior Notes due June 1, 2002 (the"10-3/8% Senior
Notes"), the 11-5/8% Senior Notes due August 1, 2002 (the"11-5/8%
Senior Notes") and the credit agreement with Chemical Bank. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -Liquidity and Capital Resources." The
Company does not expect to pay cash dividends on the Common Stock
in the foreseeable future.
There were 2,976 holders of record of the Company's Common
Stock at the close of business on March 26, 1996.
ITEM 6. Selected Financial Data
The selected financial data presented below is derived from
the Company's consolidated financial statements, and should be read
in conjunction with the Company's consolidated financial
statements, including the notes thereto, appearing elsewhere
herein.
<PAGE>
The historical financial data presented below reflects the
results of operations of ABNB from June 23, 1993, the date of its
acquisition by the Company and the acquisition of Grafica Bradesco
since July 1, 1995.
<TABLE>
Year Ended December 31
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
(Dollars in thousands, except share data)
INCOME STATEMENT DATA:
Sales. . . . . . . . . . . . . $206,164 $208,133 $200,079 $171,877 $161,192
Restructuring costs (1). . . . 14,304 5,000 12,000 -- --
Provision for idle equipment (2) -- 2,000 -- -- --
Depreciation and amortization 14,824 13,094 11,180 8,438 6,653
Operating income (loss). . . . . (11,850) 18,176 25,688 25,646 23,554
Interest expense . . . . . . . (23,147) (21,057) (14,605) (14,609) (16,768)
Foreign exchange losses, net (3) (38) (7,037) (5,161) -- --
Other income, net. . . . . . . 2,824 1,816 222 811 432
Income (loss) before
minority interest. . . . . . (20,852) (5,701) 1,855 6,481 5,607
Income (loss) before
extraordinary item (4) . . . . (22,415) (5,701) 1,593 5,684 4,758
Preferred stock dividend
requirements . . . . . . . . -- -- (20) (484) (1,557)
Weighted average common and
common equivalent shares . . . 19,095 19,000 19,200 16,690 12,358
Income (loss) per share
from operations . . . . $(1.17) $(0.30) $0.08 $0.31 $0.26
</TABLE>
At December 31
<TABLE>
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
(Dollars in thousands)
BALANCE SHEET DATA:
Cash and cash equivalents. . . .$ 23,525 $ 31,658 $ 15,437 $ 21,319 $ 5,579
Working capital. . . . . . . . 54,973 65,887 50,351 54,973 20,513
Total assets . . . . . . . . . 379,402 382,950 357,212 300,349 213,609
Long-term debt, excluding
current portion . . . . . . 194,156 191,192 167,782 128,272 113,193
Cumulative Preferred Stock . . -- -- -- -- 4,101
Stockholders' equity . . . . . 40,353 62,777 68,330 61,827 44,783
</TABLE>
Notes to Selected Financial Data
(1) Restructuring costs represent provisions principally for the consolidation
during 1995 of ABN's Chicago plant and its Los Angeles plant in 1994 and
1993. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(2) Consists primarily of charges for leases and equipment that will not be
utilized in the Company's business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) Results from the Company's translation of Brazilian local currency into
dollars in accordance with Statement of Financial Accounting Standards
("SFAS") No. 52, "Foreign Currency Translation." See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(4) 1995 includes a $2.8 million benefit and 1993 includes a $1.5 million
charge for adjustment of deferred tax assets and liabilities pursuant
to SFAS No. 109 for changes in enacted tax rates. The 1995 amount
pertained to decreases in ABNB local tax rates and the 1993 amount
pertained to increases in the US federal corporate tax rate.
<PAGE>
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The Company's growth during the past three years has been
generated principally by the acquisition of ABNB in June 1993,
increases in ABNB's major product lines and the acquisition of
Grafica Bradesco in July 1995. Operating income and operating
margins before restructuring charges were lower in 1995 due to
decreased domestic sales by ABN and changes in product mix and
start-up of new production capacity in Brazil for telephone cards
during the first half of 1995.
The Company has been consolidating its domestic facilities
to improve its competitive position. During 1994, the Company
closed its Los Angeles facility and consolidated its operations
in its remaining two domestic facilities. During 1995 and 1996,
the Company further consolidated domestic activities in ABN's
Horsham, Pennsylvania facility, and significantly downsized the
its corporate offices. The Company's domestic workforce is
expected to be reduced by approximately 27% from prior levels.
During the consolidation and downsizing, the Company expects
a short-term negative impact on operating margins, cash flow and
cash position while redundancies in fixed and other costs are
eliminated through 1996. The Company, in the fourth quarter of
1995, established a reserve for charges in connection with the
downsizing, consolidation and restructuring activities. See,
"Liquidity and Capital Resources." As a result of the
consolidation program described above, the Company believes it
has increased the overall productivity and efficiency of ABN's
operations which should begin to benefit the Company by the
second half of 1996 and thereafter.
The Company has experienced increasing competition in many
of the markets in which it competes. ABN and ABNB compete with
other printers, as well as companies engaged in businesses
unrelated to printing that provide goods or services which could
replace or substantially reduce demand for certain of the
Company's printed products. In addition, certain of ABN's
domestic product lines are mature.
<PAGE>
The Company's business strategy includes continuing its
growth by increasing its presence in selected foreign markets,
particularly Latin America and Asia, through strategic alliances,
selective acquisitions and expanded selling efforts. These
activities, particularly the Company's acquisitions, could
require the Company to commit portions of its cash balances in
order to consummate a transaction and to commit a portion, or
all, of the cash flow of any acquisition or similar transaction
for an indefinite period to debt service for such acquisition.
As part of this strategic plan, the Company acquired ABNB in June
1993 and in July 1995 ABNB acquired the printing operations and
business of Grafica Bradesco. Prior to the acquisition of ABNB,
the Company did not have any substantial foreign manufacturing
operations. The Company's financial condition could be adversely
affected if the Company cannot successfully integrate any
acquired business into its existing operations or if the Company
is required to materially increase the amount of its financial
commitment to such acquisitions, investments or joint ventures.
ABNB currently operates in a changing economic environment which
may cause volatility in the Company's financial results from time
to time. In addition, cash dividends from ABNB to the Company
have historically been subject to a 15% Brazilian withholding tax
and could be subject to government restrictions in the future,
including restrictions or prohibitions on the repatriation of
funds. As a result of recent legislation enacted by the
Brazilian government, effective for tax years beginning in 1996,
the 15% withholding tax on post-1995 repatriated earnings was
eliminated. In 1994, the Brazilian government introduced an
economic stabilization program designed to reduce the country's
hyperinflation. See "Impact of Inflation" for additional
information.
Recent Developments
In connection with the consolidation and restructuring, the
Company announced plans to close its Bedford Park, Illinois
facilities. The Company expects a substantial downsizing in its
domestic workforce to be completed during the first half of 1996
as the Company reduces operations, closes its Bedford Park,
Illinois facility and downsizes its corporate headquarters.
<PAGE>
During February 1996, ABN leased a 50,000 square foot
facility in Columbia, Tennessee and expects to be operational in
this new facility during the second quarter of 1996. The Company
expects the additional costs associated with start-up of this
facility to negatively affect operating margins and operating
income during 1996.
Results of Operations
General
On June 23, 1993, the Company acquired all of the
outstanding shares of ABNB and as of July 1, 1995, ABNB acquired
Grafica Bradesco in exchange for a 22.5% minority interest in
ABNB. The acquisitions were accounted for as a purchase
transactions and operations of the companies have been included
in the consolidated operations since the acquisition dates. The
acquisitions of ABNB in the third quarter of 1993 and Grafica
Bradesco in the third quarter of 1995, have had a significant
impact on the operations of the Company.
Comparison of Results of Operations 1995 with 1994
Sales in 1995 decreased by $2.0 million (1.0%) from 1994.
Corporate and Commercial and Holographic sales increased $8.7
million and $5.9 million, respectively. Government sales
decreased $16.5 million. The increase in Corporate and
Commercial sales is primarily due to increases in sales as a
result of the Grafica Bradesco acquisition ($25.4 million) and
increases in prepaid telephone cards ($19.0 million) offset by
decreases in sales of stocks and bonds ($5.7 million), foreign
security products ($15.1 million), personalized checks ($6.9
million), commercial products ($4.8 million), and other products
($3.2 million). The increase in holographic sales is primarily
attributable to holograms for credit cards. The decrease in
Government sales is primarily due to a decrease in food coupons
($22.5 million) and US Postal ($1.2 million) sales, partially
offset by increases in currency ($2.4 million) and automobile
vouchers, driver licenses and other product sales ($4.8 million).
The reduction in food coupon sales reflects a trend resulting in
a present level of sales that is not expected to increase and
which may experience further declines. See "Liquidity and
Capital Resources." The change in various components of sales
may be affected by the timing of contract awards and delivery
requirements of customers.
<PAGE>
Cost of goods sold increased $18.1 million (13.9%) from 1994
and as a percentage of sales was 72.3% in 1995 as compared to
62.9% in 1994. Cost of goods sold increased as a result of the
Grafica Bradesco acquisition in the third quarter of 1995, which
resulted in 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. The Company does not expect to incur
additional charges from these inventory and manufacturing losses
in the future. Manufacturing margins are expected to be
negatively affected while the Company continues to consolidate
ABN's operations and downsize, particularly in connection with
the closure of the Bedford Park, Illinois plant and the start-up
of the new Columbia, Tennessee facility. 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 Brazil economic stabilization program. While margins
were lower due to this stabilization program, earnings were
favorably impacted by the virtual elimination of translation
losses. The Company expects ABNB's margins to continue to be
affected by these factors. New prepaid telephone card production
lines in Brazil increased fixed manufacturing costs 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 $0.9
million from 1994 (2.3%) primarily as a result of the settlement
of an executive severance agreement and increased selling and
administrative expenses in Brazil due principally to the Grafica
Bradesco acquisition and increased sales. As a percentage of
sales, selling and administrative expenses increased to 19.3%
from 18.7% in 1994.
Depreciation expense increased $1.7 million in 1995, as a
result of the Grafica Bradesco acquisition ($0.7 million) and
other fixed asset additions.
Interest expense increased $2.1 million in 1995 primarily
due to the issuance in May 1994 of the $65 million 11-5/8% Senior
Notes 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.
<PAGE>
Foreign exchange losses, net, is a result of the Company's
translation of Brazilian local currency financial statements into
dollars in accordance with 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 $7.0 million reduction in
foreign exchange loss. See "Impact of Inflation."
Other income, net, increased $1.0 million principally due to
an unrealized gain in marketable securities.
Income taxes reflect a benefit in 1995 as a result of
losses. The benefit rate was lower than the 1994 effective tax
rate, principally due to limitations on deducting certain
expenses for state tax purposes. As a result of changes in
enacted tax rates in 1995 ABNB realized a reduction in the net
deferred tax liability of $2.8 million.
The minority interest represents Banco Bradesco's 22.5%
interest in ABNB's operations since the July 1, 1995 acquisition
of Grafica Bradesco by ABNB.
Comparison of Results of Operations 1994 with 1993
Sales in 1994 increased by $8.0 million (4.0%) from 1993.
The inclusion of ABNB for an entire year in 1994 represented
$24.5 million of increased sales. Corporate and Commercial
Products sales increased ($28.1 million), offset by decreased
Government Products sales ($17.5 million), and Holographic
Products sales ($2.6 million). The increase in Corporate and
Commercial Product sales is primarily due to the inclusion of
ABNB sales for an entire year ($20.4 million) and other sales,
principally stock and bonds ($7.7 million). The net decrease in
Government Product sales of $17.5 million is primarily due to the
loss of USPS postage stamp business ($21.0 million) and decreased
currency sales ($7.5 million) offset by ABNB government sales
($4.1 million) and increased food coupon and other government
sales ($6.9 million). The decrease in Holographic Product sales
($2.6 million) was due to lower commercial and product
authentication sales ($4.2 million) offset in part by increased
credit card sales ($1.6 million). The change in various
components of sales, particularly Government Product sales is
affected by the timing of contract awards and delivery
requirements of customers. Increased sales of food coupons, a
<PAGE>
major component of Government Product sales during 1994 was due
to an increase in the number of eligible recipients receiving
food coupon benefits and increased USDA inventory of food
coupons. ABNB's sales volume for the second half of 1994 was
reduced due to discontinuation of inflationary price increases
resulting from the country's economic stabilization plan begun in
July 1994 and the reduction in price increases reduced sales. In
addition, many contracts required re-negotiation and in certain
instances, selling prices were lowered due to the re-negotiations.
Cost of goods sold for 1994 increased $13.7 million (11.7%)
from 1993 and as a percentage of sales was 62.9% in 1994 as
compared to 58.6% in 1993. The increase in cost of goods sold in
absolute dollars and as a percentage of sales is due to several
factors. First, higher sales and product mix contributed to the
increase. Second, ABNB experienced lower margins in the second
half of the year due to a change in product mix and manufacturing
difficulties encountered in manufacturing the pre-paid telephone
card for Telebras. Third, fixed expenses were not immediately
reduced in line with the reduction in postage stamp business.
The product mix in any given period is not indicative of the
expected product mix for future periods.
Selling and administrative expenses in 1994 increased by
$5.0 million from 1993 (14.7%). As a percentage of sales,
selling and administrative expenses increased to 18.7% from
17.0%. The inclusion of ABNB for an entire year in 1994
represented $5.6 million of the increase. This increase was
offset by a decrease of $0.6 million in domestic costs, primarily
due to reduced sales volume in certain product areas.
In the fourth quarter of 1994, the Company made a decision
to completely vacate ABN's leased facility in Los Angeles and is
currently negotiating a final settlement with the landlord which,
if consummated, would eliminate any further liability for rental
and other payments under the lease. Accordingly, the Company
incurred an additional restructuring charge of $5 million in
1994, which included a provision for the remaining termination or
exit costs.
In prior years, the Company made investments in capital
equipment intended for use in connection with the products and
services supplied to the USPS. As a result of the loss of this
business, the Company re-evaluated the net carrying value of
<PAGE>
capitalized equipment and the cost of operating leases used for
postage stamp production and recorded in the fourth quarter of
1994 a $2 million provision for the write-down of idle postal
equipment.
Depreciation and amortization expense increased by $1.9
million in 1994, primarily as a result of the inclusion of ABNB's
operations for a full year ($2.3 million). This increase was
partially offset by a $0.4 million reduction in domestic
depreciation as a result of the Los Angeles plant closing.
Interest expense increased $6.4 million in 1994 primarily
due to increased borrowings resulting from the $65 million 11-5/8%
Senior Note private placement on May 5, 1994 at a higher
rate of interest than the $40 million of bank debt it replaced.
The bank debt was incurred to acquire ABNB in June 1993. In
addition, as a result of an increase in interest rates, the
Company incurred a net expense ($0.1 million) from its interest
rate swap agreements, which is included in interest expense.
The foreign exchange loss is a result of the Company's
translation of Brazilian local currency financial statements into
dollars in accordance with SFAS No. 52 "Foreign Currency
Translation." As a result, the translation adjustment is
recorded as a period item. During 1994, the Company experienced
a greater translation loss than anticipated due to the higher
inflation rate prior to the change in the monetary system in
Brazil. See "Impact of Inflation."
Other income increased by a net $1.6 million principally due
to increased interest income resulting from higher invested cash
balances and the inclusion of ABNB for a full year.
Income taxes reflect a benefit in 1994 as a result of
losses. The benefit rate was lower than the 1993 effective tax
rate, principally due to limitations on deducting certain
expenses for state tax purposes.
The 1994 extraordinary item of $0.1 million represents the
write off of deferred debt expenses, net of tax benefits
(approximately $0.1 million) related to the early extinguishment
of the Company's $40.0 million bank indebtedness.
<PAGE>
Restructuring
In 1993, the Company decided to cease manufacturing
operations at ABN's Los Angeles plant after considering its high
manufacturing and overhead costs. The Company incurred a $12
million restructuring charge which anticipated subleasing a
portion of the facility and retaining a portion for use by the
Company. The Company, in 1994, re-evaluated the Los Angeles real
estate market and decided that it would vacate the entire
facility, which resulted in an additional provision of $5.0
million. The net annual pre-tax cash flow savings were estimated
to be $3.9 million after allowing for the carrying cost of the
plant. This estimate was based on assumptions and estimates
which are subject to uncertainties and unforeseen events and may
not be indicative of the actual savings realized. However,
during the first year following the plant closure, the cash flow
benefit was approximately $2.5 million after allowing for moving
costs, leasehold improvements required at other plants to
accommodate increased volume and certain other non-recurring
closing costs. The remaining obligations under this
restructuring relate to lease commitments.
In 1995, the Company recorded a pre-tax restructuring charge
of approximately $14.3 million pursuant to a restructuring plan
developed by management for the Company's domestic security
printing operations and the relocation and downsizing of its
corporate offices. The plan is expected to be substantially
completed by the second quarter of 1996.
The 1995 restructuring charge provided for those reasonably
estimable costs resulting from the plan including costs that are:
(i) associated with and will not benefit activities that will
continue or generate future revenue and are incremental as a
result of the plan (ii) incurred under contractual agreements
(i.e. leases and employment agreements) that existed prior to the
commitment date that provide no future economic benefit; or (iii)
related to asset impairments and writedowns resulting directly
from the plan. The Company has estimated that the pre-tax annual
cost savings would be approximately $6.5 million, of which
approximately $5.3 million are manufacturing related fixed costs.
The realization of the cost savings is expected to commence
during the second quarter of 1996. Under the plan, the Company
plans to reduce the domestic workforce by approximately 27
percent from prior levels and has provided a $2.9 million reserve
for severance and related costs.
<PAGE>
Asset re-valuations and writedowns accounted for $5.0 million
of the charge which reduced certain assets to their net realizable
value and primarily relates to leasehold improvements.
Lease and other facility obligations accounted for $6.4
million of the charge for the facilities to be closed in 1996.
Liquidity and Capital Resources
For the year ended December 31, 1995, the Company's net cash
used by operating activities totaled approximately $4.5 million.
The net loss of $22.4 million was adjusted by $17.9 million net
to reconcile to the cash used by operating activities. The
adjustments consisted primarily of adding back $17.7 million of
depreciation and amortization, $1.6 million of minority interest
and $14.2 of restructuring costs and by subtracting $16.7 million
of deferred taxes and $1.1 million in unrealized gain in
marketable securities. In addition, the decrease in accounts and
other receivables of $5.5 million, inventory of $1.7 million and
other net of $2.4 million provided cash during the year. The
increase in prepaid expenses of $2.5 million, marketable
securities of $1.3 million and the decrease in accounts payable
and accrued expenses of $3.8 million required the use of cash
during the year.
Significant increases in certain balance sheet amounts at
December 31, 1995 compared to December 31, 1994 were due
principally to the acquisition of the business and certain
operating assets of Grafica Bradesco in 1995 by ABNB in exchange
for a 22.5% minority interest in ABNB. As a result of the
acquisition, the following balance sheet accounts increased:
inventories $5.2 million, prepaid expenses and other current
assets $1.6 million, property plant and equipment $17.7 million,
net excess cost of investment in subsidiaries over net assets
acquired $2.3 million, accounts payable and accrued expenses $2.0
million, deferred income tax liabilities $7.7 million and
minority interest $17.2 million.
Net cash used in investing activities totaled $6.1 million,
as a result of $10.4 million of capital expenditures for new
equipment, primarily at ABNB and an investment in an affiliate of
$0.6 million, offset by the proceeds from the sale of a joint
venture of $4.7 million and sale of assets $0.2 million.
<PAGE>
During the same period, consolidated net cash provided from
financing activities amounted to $3.0 million primarily on
proceeds from borrowings $3.4 million, offset by other payments
$0.4 million.
The Company's cash interest obligations under the 11-5/8%
Senior Notes and the 10-3/8% Senior Notes are approximately $7.6
million and $13.1 million per year, respectively. The Company
invests in short term investment grade obligations which
currently bear interest at approximately 5.25% and certain
marketable securities.
At December 31, 1995, the Company had approximately $23.5
million in cash and cash equivalents, $3.0 in marketable
securities, $126.5 million of 10-3/8% Senior Notes outstanding,
$65.0 million principal amount of 11-5/8% Senior Notes
outstanding, and approximately $3.3 million for outstanding
letters of credit.
On January 26, 1996, the Company's subsidiaries, ABN and
ABNH (the "Borrowers") as co-borrowers, entered into a three-year,
$20 million revolving credit facility with Chemical Bank
(the "Credit Agreement"). The Credit Agreement is a committed
facility and replaces the former Citibank agreement. The Credit
Agreement is available for general working capital purposes and
letters of credit and expires on October 30, 1998.
Under the Credit Agreement: (i) interest is based upon the
lender's Alternate Base Loan Rate (as defined) plus 1.00%, or at
the Company's option, LIBOR plus 2.50% (these margins will
automatically reduce to 0.50% and 2.00% respectively once the
Borrowers (ABN and ABNH) demonstrate compliance with the
financial covenants); and (ii) certain covenants apply to ABN and
ABNH's borrowings, including, but not limited to, interest
coverage ratios for both the consolidated Company and Borrowers,
EBITDA minimums for both ABN and ABNH, limitations on
indebtedness, capital expenditures, sales of assets and
acquisitions and restrictions on the payment of cash dividends.
The Credit Agreement is an asset-based facility secured by
accounts receivable and inventory of the Borrowers. Borrowings
under the Credit Agreement are restricted to a permissible amount
relating to the receivables and inventory borrowing base. At
December 31, 1995, the Borrowers would have had available
approximately $10 million under the Credit Agreement.
<PAGE>
In 1994, the Company amended its 10-3/8% Senior Notes to:
(i) permit the sale or issuance of up to 35% of the equity
interests of ABNB in certain circumstances; (ii) permit the
release of up to 35% of the voting interests of ABNB from their
pledge as security for the obligations of the Company under the
10-3/8% Senior Notes; and (iii) exclude from the definition of
Major Asset Sales any permitted issuances by ABNB of its capital
stock. In 1995, 35% of the equity interest of ABNB was released
from the pledge.
For the year ended December 31, 1995, the Company had made
all required interest payments and was in compliance with the
covenants of the 10-3/8% Senior Notes and the 11-5/8% Senior
Notes. Pursuant to the indentures, the Company and its
subsidiaries are restricted from incurring additional
indebtedness without consent, except for borrowings under certain
bank borrowing agreements, lease financings in the normal course
of business, intercompany indebtedness and other obligations
entered into in the ordinary course of business. Additionally,
the Company and its subsidiaries are restricted from declaring or
paying a cash dividend or making any distributions on its capital
stock, purchasing or redeeming any equity interests or making
investments, with certain exceptions.
The Company and its subsidiaries are highly leveraged. At
December 31, 1995, total consolidated long-term debt, excluding
the current portion, was approximately $194.2 million
(representing approximately 83% of total capitalization) and the
Company had approximately $23.5 million in cash and cash
equivalents and $3.0 million in marketable securities.
The high level of the Company's indebtedness, as well as any
acquisition debt permitted to be incurred in connection with any
of the Company's permitted acquisitions, poses certain risks to
holders of the Company's senior indebtedness, including the risk
that the Company might not generate sufficient cash flow to
service the Company's obligations and the risk that the Company's
capacity to respond to market conditions, extraordinary capital
needs and other factors could be adversely affected. The
Company's ability to service its debt depends upon the future
performance of the Company's subsidiaries, which will be subject
to prevailing economic and competitive conditions and to other
factors, including the continued ability to generate cash at the
Company's operating subsidiaries, to distribute that cash to the
<PAGE>
Company for debt service and to repatriate funds from foreign
subsidiaries, particularly ABNB. Other future acquisitions and
joint ventures in which the Company does not maintain 100%
ownership, foreign legal and tax requirements and the terms of
any acquisition debt incurred may further restrict the ability of
newly acquired subsidiaries and joint venture investments to
declare and pay dividends or make distributions.
The Company expects to seek to refinance the 11-5/8% Senior
Notes and the 10-3/8% Senior Notes at or before their respective
maturities; however, no assurance can be given as to the
Company's ability to refinance such obligations, that the
Company's revolving credit facility will be available when
required or that prevailing interest rates will be advantageous
to the Company. In the event that the Company is unable to
refinance its indebtedness as it matures or raise funds through
asset sales, sales of equity or otherwise, its ability to pay
principal of or interest on the 10-3/8% Senior Notes, the 11-5/8%
Senior Notes and other long-term indebtedness of the Company
would be adversely affected.
In December 1995, the existing interest rate swap and
interest rate cap agreements based upon a $60 million notional
amount were terminated at an approximate break-even cost. The
Company has no contingent liability under these agreements.
Certain states have adopted electronic programs which
replace the traditional methods of distribution of public
assistance benefits to recipients, including replacing food
coupons with debit-type cards. Several state-wide programs have
been implemented, while others have recently awarded contracts.
Other states are evaluating such programs. While sales of food
coupons have increased in recent years, proposed benefit reforms
as well as electronic programs will reduce the Company's volume
of food coupon production in 1996 and future years. It is not
anticipated that the USDA will maintain past levels of orders.
During the next two years, the Company may make aggregate
capital expenditures, including maintenance of existing equipment
and capital expenditures for new business, of up to $25 million,
principally to acquire modernized printing equipment and to
increase production capacity for pre-paid telephone cards in
Brazil. Such capital expenditures include amounts that will be
financed through equipment leasing and other financing
arrangements. The portion of capital expenditures not financed
through such leases will be financed with working capital.
<PAGE>
Management of the Company believes that cash flows from
operations of the Company, together with its existing cash
balances and available borrowings and leasing arrangements, will
be sufficient to service its working capital and debt service
requirements for the foreseeable future and to fund the capital
expenditures referred to above.
The future cash outlays for the remaining restructuring
reserve of $12.0 million (principally related to leases) at
December 31, 1995 are anticipated to be $5.1 million in 1996,
$2.1 million in 1997, $1.3 million in 1998 and $3.5 million
thereafter to 2009.
Tax Law Changes
As a result of Brazilian tax legislation, beginning in 1996
income tax rates have been reduced from approximately 48% to 31%.
Effective for tax years beginning in 1996, the 15% withholding
tax on post-1995 repatriated earnings was eliminated.
New Accounting Standards
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. Management estimates that the adoption will not
have a material effect on the Company's financial statements and
will be adopted in 1996.
In November 1995, SFAS No. 123 "Stock Based Compensation"
was issued. Management is evaluating the effect of the adoption
of this Standard on the Company's financial statements which
Standard will be adopted in 1996.
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
<PAGE>
rate has decreased substantially to approximately 23% for 1995 as
compared to 941% for 1994. The Company cannot predict what
impact, if any, such initiatives will have on the Brazilian
economy or on ABNB's consolidated results of operations
The Company's domestic operations are not significantly
affected by inflation. ABNB sales for 1995 contributed a
significant portion of consolidated sales of the Company (48%).
The Company's foreign exchange exposure policy generally calls
for selling its domestic manufactured product in US dollars and,
in the case of ABNB, selling in Brazilian national currency, in
order to minimize transactions occurring in currencies other than
those of the originating country. The Company has not engaged in
material hedging activities. In addition, the Company's
accounting policies require translation of local currency into US
dollars in accordance with SFAS No. 52, which provides for
appropriate accounting treatment where exchange rates are most
volatile. Any translation adjustments resulting from converting
ABNB's balance sheet and income statements into US dollars are
recorded as period costs in accordance with SFAS No. 52.
Currently, repatriation of earnings from ABNB is permitted,
subject to certain regulatory approvals. As a result of tax
legislation in Brazil in 1995, cash dividends from ABNB to the
Company from earnings after 1996 are not subject to the dividend
withholding tax. Dividends or distributions from Brazil could be
subject to government restrictions in the future. The Company
has not received any dividends from ABNB to date and the Company
may reinvest excess cash from ABNB and other activities outside
the United States.
Earnings on foreign investments, including operations and
earnings of foreign companies in which the Company may invest or
rely upon for sales, are generally subject to a number of risks,
including high rates of inflation, currency exchange rate
fluctuations, trade barriers, exchange controls, government
expropriation and political instability and other risks. These
factors may affect the results of operations of companies in
selected markets included in the Company's growth strategy, such
as in Latin America (including ABNB) and Asia. The Company's
financial performance on a dollar-denominated basis can be
significantly affected by changes in currency exchange rates and
inflation. The Company's cash balances and borrowings in foreign
currency can mitigate the effect of fluctuating currency exchange
rates; however, borrowings and investments in foreign currency
and markets may not be available or practical and may face local
<PAGE>
interest rate and principal risks. In addition, adverse changes
in foreign interest and exchange rates could adversely affect the
Company's ability to meet its interest and principal obligations
as well as applicable financial covenants with respect to its
dollar-denominated debt, including the 10-3/8% Senior Notes, the
11-5/8% Senior Notes and other indebtedness of the Company.
Prior to the acquisition of ABNB, the Company did not have
any substantial foreign domicile operations. See Note A of
"Notes to Consolidated Financial Statements" for the disclosure
of certain financial information relating to foreign operations.
Earnings of foreign subsidiaries are subject to foreign
income taxes that reduce cash flow available to meet required
debt service and other obligations of the Company. The ability
to utilize foreign taxes paid, as credits against US tax
liability, is based upon the determination of foreign source
income. In computing allowable foreign source income, certain
consolidated expenses are allocated which limit the utilization
of foreign tax credits.
The Company has from time to time reorganized and
restructured, and may in the future reorganize and restructure,
its foreign operations based on certain assumptions about the
various tax laws (including capital gains and withholding tax),
foreign currency exchange and capital repatriation laws and other
relevant laws of a variety of foreign jurisdictions. While
management believes that such assumptions are correct, there can
be no assurance that foreign taxing or other authorities will
reach the same conclusion. If such assumptions are incorrect, or
if such foreign jurisdictions were to change or modify such laws,
the Company may suffer adverse tax and other financial
consequences which could impair the Company's ability to meet its
payment obligations on the 10-3/8% Senior Notes, 11-5/8% Senior
Notes and other indebtedness of the Company.
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the Company and its
subsidiaries for the year ended December 31, 1995 are set forth herein:
Independent Auditors' Report
Consolidated Statements of Operations - Years Ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statement of Stockholders' Equity - Three Years
Ended December 31, 1995
Consolidated Statements of Cash Flows - Years Ended
December 31, 1995 1994 and 1993
Notes to Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Banknote Corporation
New York, New York
We have audited the accompanying consolidated balance sheets of American
Banknote Corporation (formerly named United States Banknote Corporation) and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of American Banknote
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
February 21, 1996
New York, New York
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Year Ended December 31
1995 1994 1993
Sales . . . . . . . . . . . . . . . . $206,164 $208,133 $200,079
Costs and expenses:
Cost of goods sold. . . . . . . . . . 149,035 130,889 117,200
Selling and administrative. . . . . . 39,851 38,974 34,011
Restructuring costs. 14,304 5,000 12,000
Provision for idle equipment. . . . . - 2,000 -
Depreciation and amortization . . . . 14,824 13,094 11,180
218,014 189,957 174,391
(11,850) 18,176 25,688
Other (expense) income:
Interest expense. . . . . . . . . . . (23,147) (21,057) (14,605)
Foreign exchange losses, net . . . . (38) (7,037) (5,161)
Other, net 2,824 1,816 222
(20,361) (26,278) (19,544)
Income (loss) before provision
for income taxes and
minority interest. . . . . . . . (32,211) (8,102) 6,144
Provision for income taxes:
Taxes (benefits) based on income. . . . (8,522) (2,401) 2,789
Effect of changes in income tax rates (2,837) - 1,500
(11,359) (2,401) 4,289
Income (loss) before minority
interest. . . . . . . . . (20,852) (5,701) 1,855
Minority interest. . . . . . . . . . 1,563 - 262
Income (loss) before
extraordinary item . . . . . . (22,415) (5,701) 1,593
Extraordinary item . . . . . . . . . . - (114) -
Net income (loss) . . . . . . . . . $(22,415) $ (5,815) $1,593
Income (loss) per share:
Operations. . . . . . . . . . . . . $ (1.17) $ (.30) $ .08
Extraordinary item. . . . . . . . . . - (.01) -
Net income (loss) per share . . . $ (1.17) $ (.31) $ .08
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for per share data)
December 31
1995 1994
ASSETS
Current assets
Cash and cash equivalents $ 23,525 $ 31,658
Marketable securities - at market 2,952 637
Accounts receivable, net of allowance for
doubtful accounts of $816 and $471 32,058 43,783
Other receivables 7,772 4,767
Inventories 23,243 20,497
Deferred income tax benefits 5,983 5,685
Prepaid expenses 4,755 2,334
Total current assets 100,288 109,361
Property, plant and equipment, at cost, net of
accumulated depreciation and amortization 225,974 215,859
Other assets 18,342 23,985
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $3,119 and $1,851 34,798 33,745
$379,402 $382,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portions of long-term debt $ 332 $ 359
Accounts payable and accrued expenses 44,983 43,115
Total current liabilities 45,315 43,474
Long-term debt, net of unamortized
discount of $1,120 and $1,221 194,156 191,192
Other liabilities 20,181 16,188
Deferred income taxes 60,579 69,319
Minority interest 18,818 -
339,049 320,173
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) (25,461) (3,046)
Treasury stock, at cost (281,000 shares
in both years) (1,253) (1,253)
Pension liability adjustment (218) -
Total stockholders' equity 40,353 62,777
$379,402 $382,950
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
Convertible Retained Pension
Preference Stock Common Stock Capital Earnings Treasury Liability Total
Shares Amount Shares Amount Surplus (Deficit) Stock Adjustment Equity
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1993 126 $126 18,009 $180 $60,564 $1,196 $(239) $61,827
Issuance in connection
with acquisition of
subsidiary 945 10 6,821 6,831
Exercise of warrants 31 -
Convertible Preference
Stock Conversions (30) (30) 15 (102) (132)
Dividends
($.21 per share) (20) (20)
Redemption (96) (96) (864) (960)
Purchase of
87,500 common
treasury shares (582) (582)
Issuances in connection
with option plans
and other 102 1 185 186
Pension liability
adjustment $(413) (413)
Net income 1,593 1,593
Balance -
December 31, 1993 - - 19,102 191 66,604 2,769 (821) (413) 68,330
Dividend of
Preferred Stock
Purchase Rights - -
Exercise of warrants 43 -
Purchase of 143,500
common treasury shares (432) (432)
Issuance in connection
with option plans
and other 145 2 279 281
Pension liability
adjustment 413 413
Net loss (5,815) (5,815)
Balance -
December 31, 1994 - - 19,290 193 66,883 (3,046) (1,253) - 62,777
Issuance in connection
with option plans 102 1 208 209
Net loss (22,415) (22,415)
Pension liability
adjustment (218) (218)
Balance -
December 31, 1995 - $ - 19,392 $194 $67,091 $(25,461) $(1,253) $(218) $40,353
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Operating Activities:
Income (loss) before extraordinary item
Adjustments to reconcile income (loss) to
net cash provided by operating activities: $(22,415) $ (5,701) $ 1,593
Depreciation and amortization 17,742 13,656 11,576
Unrealized gain on marketable securities (1,061) (104)
Extraordinary item - (215) -
Deferred taxes (16,650) (3,057) 724
Minority interest 1,563 - 262
Loss on writedown of idle equipment and sale
of assets, net - 1,966 244
Restructuring costs 14,223 4,109 4,382
Foreign exchange losses, net 38 7,037 5,161
Changes in operating assets and liabilities,
net of effects from acquisitions
Marketable securities (1,253) (533)
Accounts and other receivables 5,522 (11,171) (12,791)
Inventories 1,734 (4,676) 1,853
Prepaid expenses (2,487) 102 53
Accounts payable and accrued expenses (3,839) 7,447 2,459
Debt related costs - (3,939) -
Other 2,432 (2,670) (3,011)
Net cash (used in) provided by
operating activities (4,451) 2,251 12,505
Investing Activities:
Acquisition of subsidiary, net of
cash acquired - - (38,115)
Repurchase of minority interest shares
in subsidiary - - (15,000)
Investment in affiliate (650)
Proceeds from sale of joint venture 4,718 - -
Proceeds from sale of assets 211 1,694 22
Capital expenditures (10,378) (10,084) (4,263)
Repayment of loan - minority interest - - 1,325
Other - - (586)
Net cash used in investing activities (6,099) (8,390) (56,617)
Financing Activities:
Proceeds from 11-5/8% Senior Notes - 63,718 -
(Repayment) proceeds of bank financings - (40,000) 40,000
Redemption of Convertible Preference Stock - - (960)
Conversion of Convertible Preference Stock - - (132)
Proceeds from Common Stock and warrants 20 126 186
Proceeds from borrowings 3,415 - -
Acquisition of treasury stock - (432) (582)
Payment of other long-term obligations (451) (537) (588)
Net cash provided by financing activities 2,984 22,875 37,924
Effect of foreign currency exchange rate
changes on cash and cash equivalents (567) (515) 306
Increase (decrease) in cash and cash equivalents (8,133) 16,221 (5,882)
Cash and cash equivalents - beginning of year 31,658 15,437 21,319
Cash and cash equivalents - end of year $ 23,525 $ 31,658 $ 15,437
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation and Summary of Significant
Accounting Policies
American Banknote Corporation is a holding company whose
subsidiaries operate the largest private-sector security printing
business in North and South America and the world's leading
security hologram manufacturer.
On June 23, 1993, American Banknote Corporation (the "Company")
acquired 100% of the outstanding shares of Thomas De La Rue Grafica
e Servicos Ltda. (renamed American Bank Note Company Grafica e
Servicos Ltda.("ABNB"), a company engaged in the manufacturing and
printing of security documents, prepaid telephone cards and credit
cards in Brazil, for approximately $45 million. The purchase price
consisted of approximately $38.1 million in cash and 944,538 shares
of the Company's Common Stock, valued at approximately $6.9
million. The acquisition was accounted for as a purchase
transaction in accordance with Accounting Principles Board Opinion
("APB") No. 16, "Business Combinations," and the Company recorded
approximately $26 million as the cost in excess of the fair value
of the underlying net assets, which cost is being amortized over 30
years. The fair value of the assets acquired net of cash was
approximately $34 million and the fair value of the liabilities
assumed was approximately $15 million.
The Company acquired the remaining 20% minority interest in its
subsidiary, American Bank Note Holographics, Inc. ("ABNH") for a
net cash payment of $15 million. The acquisition has been accounted
for as a purchase transaction in accordance with APB No. 16. At
the June 23, 1993 acquisition date, the excess of cost of the
investment exceeded the fair value of the underlying net assets
acquired by approximately $10 million. Such amount is being
amortized over 30 years. Included in this transaction was the sale
by the Company of its 20% interest in a holography affiliate, which
was carried and sold at a nominal amount. The sale of this
interest had no impact on the Company's cash flows or operations.
As of July 1, 1995, ABNB 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 ABNB in exchange for the business and certain operating
assets of Grafica Bradesco valued at approximately $17 million.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Grafica Bradesco's business includes check printing, and other
forms for financial institutions. The acquisition was accounted
for as a purchase and approximately $2.3 million was recorded as
the cost in excess of the fair market value of the underlying net
assets acquired, which cost is being amortized over 20 years.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Grafica Bradesco had been
acquired as of the beginning of the periods presented, after
including the impact of certain adjustments, such as amortization
of intangibles, increased minority interest and the related income
tax effects (dollars in thousands, except per share amounts):
1995 1994
(Unaudited)
Sales $224,662 $242,803
Net income (loss) (20,177) 1,171
Net income (loss) per share ($1.06) $0.06
The unaudited pro forma financial information is presented for
informational purposes only and does not purport to represent what
the Company's result of operations would have been had the
transaction described actually occurred at the beginning of the
periods indicated or to project the Company's results of operations
for any future date or period. The pro forma adjustments are based
upon available information which the Company believes is reasonable
in the circumstances.
1. Principles of Consolidation: The accompanying consolidated
financial statements include the accounts of the Company and its
subsidiaries all of which are wholly-owned, except ABNB which is
77.5% owned. Certain reclassifications have been made to the 1994
balances in order to conform to 1995 presentation. All significant
intercompany items have been eliminated.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Pervasiveness of Estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
form those estimates.
3. Inventories and Profit Recognition on Long-Term Contracts:
Inventories are stated at the lower of cost or market with cost
being determined on the first-in, first-out (FIFO) method. Profit
is generally recognized when goods are shipped. However, pursuant
to contract terms with certain customers, completed items are
sometimes stored at the Company's premises and, in those instances,
profit is recognized when the goods are transferred to the on-site
storage location.
4. Depreciation and Amortization: Depreciation and amortization
of property, plant and equipment is computed principally on the
straight-line method over the estimated useful life of the asset as
follows:
Buildings 25 to 40 years
Rolls and dies 40 years
Machinery, equipment and fixtures 5 to 22 years
Amortization of improvements to leased properties is computed
using the straight-line method based upon the remaining term of the
applicable lease or the estimated useful life of the asset,
whichever is shorter.
5. Intangible Assets: Patents and other intangibles are
amortized over their useful lives. The excess cost of investment
in subsidiaries acquired is being amortized over a 30 year period
with the exception of Grafica Bradesco which is being amortized
over 20 years. These costs are amortized using the straight-line
method.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Income (Loss) Per Share: Income (loss) per share has been
computed based on the weighted average number of common shares and
common equivalent shares (in 1993) outstanding during the year
(approximately 19.1 million in 1995, 19.0 million in 1994 and 19.2
million in 1993). Primary and fully diluted income (loss) per
share are the same.
7. Research and Development: Research and development costs are
expensed as incurred (1995 - $0.4 million, 1994 - $1.6 million and
1993 - $0.9 million).
8. Deferred Debt Costs: Expenses incurred in connection with
debt financings are capitalized and amortized over the respective
loan terms ($6.3 million and $6.9 million at December 31, 1995 and
December 31, 1994, respectively, included in other assets). In
connection with certain early extinguishments of indebtedness in
1994, the Company wrote off related deferred debt expense and
unamortized discounts as a net extraordinary charge to income of
$0.1 million
9. Industry Information: The Company's principal business
activity consists of financial payments and prepaid telephone
cards, holograms, and engraving and printing of corporate and
government securities and other secure documents. Sales to the
United States government were 15%, 26% and 34% of consolidated
sales for the years ended December 31, 1995, 1994 and 1993,
respectively. Sales to a customer in Brazil (national telephone
company) were 13% of consolidated sales for the year ended December
31, 1995.
10. Supplemental Cash Flow Information: Cash tax payments, for
the year ended December 31, 1995, 1994 and 1993 amounted to
approximately $3.7 million, $1.6 million and $3.5 million,,
respectively. Cash interest payments for the years ended December
31, 1995, 1994 and 1993, amounted to approximately $21.9 million,
$16.2 million and $13.8 million, respectively. As a result of the
beneficial effects of an interest rate swap agreement that was
entered into in July 1992, net cash interest payments of $0.9
million and $1.3 million were received, in the years ended December
31, 1994 and 1993, respectively, however, in 1995 net cash payments
of $0.6 million were made. The interest rate swap agreements were
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
terminated in December 1995 at an approximately break-even cost to
the Company.
11. Cash and Cash Equivalents: All highly liquid investments with
a maturity of three months or less, when purchased, are considered
to be cash equivalents.
12. Marketable Securities: Such current investments are held for
trading purposes and changes in the market value are reflected in
earnings.
13. Foreign Exchange Losses, Net: ABNB's financial statements are
translated into dollars from the local currency. The foreign
exchange translation loss represents the Company's translation of
local currency into U.S. dollars in accordance with SFAS No. 52,
"Foreign Currency Translation," which provides for appropriate
accounting treatment of ABNB's exchange rate volatility in a
hyper-inflationary economy. As a result, the translation
adjustment is recorded as a period cost in accordance with SFAS No. 52.
14. Condensed Financial Information and Geographic Area Data:
The 10-3/8% Senior Notes are secured by a pledge of all issued
capital stock of its wholly-owned subsidiaries ABN and ABNH, and by
a pledge of 65% of ABNB. ABN, ABNH and the 77.5% interest owned in
ABNB constitutes substantially all the assets of the Company (see
Note F - Long-Term Debt). ABNB is domiciled in Brazil, and all
other subsidiaries of the Company are domiciled in the United States.
The following condensed consolidating financial information
illustrates the composition of the pledged subsidiaries and
provides additional material information which is useful in
assessing the financial composition of the pledged subsidiaries.
Investments in subsidiaries are accounted for by the parent on the
equity method for purposes of the condensed consolidating financial
information. Earnings of subsidiaries are therefore reflected in
the parent's investment accounts and earnings. Intercompany
investments and transactions are eliminated in consolidations.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following are the condensed financial statements (amounts
in millions):
Condensed Balance Sheets
Domestic Foreign Elim. Consol.
As at December 31, 1995
Cash and cash equivalents $16.5 $7.0 $23.5
Marketable securities 3.0 3.0
Accounts receivable, net 18.0 14.0 32.0
Other receivables 6.6 1.2 7.8
Inventories 12.3 10.9 23.2
Deferred income tax benefits 5.7 0.3 6.0
Prepaid expenses 3.3 1.5 4.8
Property, plant and equipment, net 176.6 49.4 226.0
Other assets 72.9 8.8 ($63.4) 18.3
Goodwill 9.5 25.3 . 34.8
Total assets $324.4 $118.4 ($63.4) $379.4
Total current liabilities $24.5 $20.8 $45.3
Senior debt, net of discounts 191.1 3.0 194.1
Other non-current liabilities 14.5 5.7 20.2
Deferred income taxes 53.9 6.7 60.6
Minority interest 18.8 18.8
Total stockholders' equity 40.4 63.4 ($63.4) 40.4
Total liabilities and stockholders'
equity $324.4 $118.4 ($63.4) $379.4
As at December 31, 1994
Cash and cash equivalents $29.7 $2.0 $31.7
Marketable securities 0.6 0.6
Accounts receivable, net 37.2 6.6 43.8
Other receivables 3.9 0.9 4.8
Inventories 13.1 7.4 20.5
Deferred income tax benefits 5.3 0.4 5.7
Prepaid expenses 2.3 0.1 2.4
Property, plant and equipment, net 188.9 26.9 215.8
Other assets 73.8 7.2 ($57.0) 24.0
Goodwill 9.8 23.9 . 33.7
Total assets $364.6 $75.4 ($57.0) $383.0
Total current liabilities $32.1 $11.4 $43.5
Senior debt, net of discounts 191.2 191.2
Other non-current liabilities 11.3 4.9 16.2
Deferred income taxes 67.2 2.1 69.3
Total stockholders' equity 62.8 57.0 ($57.0) 62.8
Total liabilities and stockholders'
equity $364.6 $75.4 ($57.0) $383.0
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Statements of Operations
Domestic Foreign Elim's Consol.
Year Ended December 31, 1995
Sales * $108.1 $ 98.1 $206.2
Cost of goods sold 76.5 72.5 149.0
Selling and administrative 30.0 9.9 39.9
Restructuring costs 14.3 14.3
Depreciation and amortization 9.3 5.6 14.9
130.1 88.0 218.1
(22.0) 10.1 (11.9)
Interest expense (23.1) (23.1)
Foreign exchange gain (loss), net - -
Other income (expense), net 8.5 .2 $(5.9) 2.8
Income (loss) before provision for
income taxes and
minority interest (36.6) 10.3 (5.9) (32.2)
Provision for income taxes (14.2) 2.8 . (11.4)
Income (loss) before
minority interest (22.4) 7.5 (5.9) (20.8)
Minority interest . 1.6 . 1.6
Net income (loss) $(22.4) $ 5.9 $(5.9) $(22.4)
Year Ended December 31, 1994
Sales * $150.0 $ 58.1 $208.1
Cost of goods sold 94.9 36.0 130.9
Selling and administrative 29.8 9.2 39.0
Restructuring costs and other costs 7.0 7.0
Depreciation and amortization 9.3 3.8 13.1
141.0 49.0 190.0
9.0 9.1 18.1
Interest expense (21.0) (21.0)
Foreign exchange (loss), net (7.0) (7.0)
Other income (expense), net 3.9 .2 $ (2.3) 1.8
Income (loss) before provision for income
taxes and extraordinary item (8.1) 2.3 (2.3) (8.1)
Provision for income taxes (2.4) . . (2.4)
Income (loss) before
extraordinary item (5.7) 2.3 (2.3) (5.7)
Extraordinary item (.1) . . (.1)
Net income (loss) $ (5.8) $ 2.3 $ (2.3) $ (5.8)
Year Ended December 31, 1993
Sales * $166.5 $ 33.6 $200.1
Cost of goods sold 103.6 13.6 117.2
Selling and administrative 29.5 4.5 34.0
Restructuring costs 12.0 12.0
Depreciation and amortization 9.6 1.6 11.2
154.7 19.7 174.4
11.8 13.9 25.7
Interest expense (14.6) (14.6)
Foreign exchange loss, net (5.2) (5.2)
Other income (expense), net 6.6 .2 $ (6.6) .2
Income before provision for income
taxes and minority interest 3.8 8.9 (6.6) 6.1
Provision for income taxes 2.0 2.3 . 4.3
Income before minority interest 1.8 6.6 (6.6) 1.8
Minority interest .2 . . .2
Net income $ 1.6 $ 6.6 $ (6.6) $ 1.6
* Represents sales to unaffiliated customers. Foreign
subsidiaries sales are to customers in South America.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Statements of Cash Flows
Domestic Foreign Elim's Consol.
Year Ended December 31, 1995
Net cash- operating activities $ (15.9) $ 11.4 $ . $ (4.5)
Investing activities
Investment in affiliates (.6) (.6)
Proceeds from sales of assets 4.9 4.9
Capital expenditures (1.2) (9.2) . (10.4)
Net cash - investing activities 3.1 (9.2) . (6.1)
Financing activities
Proceeds from bank financings 3.4 3.4
Other (0.4) . . (0.4)
Net cash - financing activities (0.4) 3.4 . 3.0
Effect of foreign currency exchange rate
changes on cash and cash equivalents . (0.6) . (0.6)
Net increase (decrease) (13.2) 5.0 (8.2)
Cash and cash equivalents:
Beginning of period 29.7 2.0 . 31.7
End of period $ 16.5 $ 7.0 $ . $ 23.5
Year Ended December 31, 1994
Net cash - operating activities $ (3.5) $ 5.8 $ . $ 2.3
Investing activities
Proceeds from sale of assets 1.7 1.7
Capital expenditures (3.2) (6.9) . (10.1)
Net cash - investing activities (1.5) (6.9) . (8.4)
Financing activities
Proceeds from 11 5/8% Senior Notes 63.7 63.7
(Repayment) proceeds from bank
financings (40.0) (40.0)
Other (0.8) . . (0.8)
Net cash - financing activities 22.9 . . 22.9
Effect of foreign currency exchange
rate changes on cash and
cash equivalents . (0.5) . (0.5)
Net increase (decrease) 17.9 (1.6) 16.3
Cash and cash equivalents:
Beginning of period 11.8 3.6 . 15.4
End of period $ 29.7 $ 2.0 $ . $31.7
Year Ended December 31, 1993
Net cash - operating activities $ 9.8 $ 2.7 $ . $12.5
Investing activities
Acquisition of subsidiary (38.1) (38.1)
Investment in subsidiary (40.0) 40.0
Repurchase of minority interest (15.0) (15.0)
Capital expenditures (3.0) (1.2) (4.2)
Repayment of loans and other 0.7 . . 0.7
Net cash - investing activities (57.3) (1.2) 1.9 (56.6)
Financing activities
Proceeds from bank financings 40.0 40.0
Other (2.0) (0.1) . (2.1)
Net cash - financing activities 38.0 (0.1) . 37.9
Effect of foreign currency exchange rate
changes on cash and cash equivalents . 0.3 . 0.3
Net increase (decrease) (9.5) 1.7 1.9 (5.9)
Cash and cash equivalents:
Beginning of period 21.3 1.9 (1.9) 21.3
End of period $ 11.8 $ 3.6 $ . $15.4
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Export Sales: US Export sales were 7%, 12% and 10% of
consolidated sales for the years ended December 31, 1995, 1994 and
1993, respectively.
Note B - Inventories
Inventories consist of the following (in thousands):
December 31
1995 1994
Work in process $ 15,874 $ 12,963
Raw materials and supplies 7,369 7,534
$ 23,243 $ 20,497
Note C - Property, Plant and Equipment
Property, plant and equipment consist of the following (in
thousands):
December 31
1995 1994
Land $ 2,727 $ 2,727
Buildings and improvements 20,858 19,090
Rolls and dies 177,154 177,300
Machinery, equipment
and fixtures 70,368 54,196
Leasehold improvements 1,522 3,335
Construction in progress 260 3,728
272,889 260,376
Accumulated depreciation
and amortization 46,915 44,517
$225,974 $215,859
Note D - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
December 31
1995 1994
Accounts payable - trade $ 11,335 $ 10,633
Accrued expenses 2,893 9,924
Customers' advances 7,026 6,656
Salaries and wages 5,666 5,645
Restructuring and merger-
related accruals 8,838 4,202
Interest payable 4,291 3,550
Other 4,934 2,505
$ 44,983 $ 43,115
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E - Income Taxes
The Company complies with SFAS No. 109 "Accounting for Income
Taxes" which requires the asset and liability approach to
accounting for income taxes and that deferred tax liabilities and
assets be adjusted in the period of enactment for the effect of a
change in tax laws or rates. Deferred income taxes arise from
temporary differences between the tax basis of assets and
liabilities, and their reported amounts in the financial
statements.
In 1995 and 1993 the Company adjusted its deferred tax assets and
liabilities for the estimated effect of a decrease in Brazil's tax
rates enacted in the fourth quarter of 1995 and an increase in the
US federal corporate tax rates enacted in the third quarter of
1993. The effect of these non-cash items was to decrease deferred
income taxes in 1995 and increase deferred income taxes in 1993.
Accordingly, the net loss decreased by $2.8 million or $.15 per
share in 1995 and net income decreased by $1.5 million or $.08 per
share in 1993.
As a result of Brazilian tax legislation, effective for tax years
after 1995, the 15% dividend withholding tax on post 1995 earnings
was eliminated. The unrepatriated earnings of ABNB at December 31,
1995 is approximately $16.7 million. Approximately $11.2 million
of such earnings have already been subject to US tax. The
remainder is subject to US tax when repatriated and may be
partially offset by US foreign tax credits when repatriated.
Pre-tax income from foreign operations in 1995, 1994 and 1993 was
$10.3 million, $2.3 million and $8.9 million, respectively.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company files a US corporate consolidated federal income tax
return which includes its subsidiaries. The provision for income
taxes, for the years ended December 31, follows (in thousands):
1995 1994 1993
Current
Federal $ - $ - $ 748
Foreign 4,755 - 2,131
State and local 536 656 1,324
Total current portion 5,291 656 4,203
Deferred
Federal (14,209) (2,892) (833)
Adjustments due to rate changes (2,837) - 1,500
Foreign 844 (31) 124
State and local (448) (134) (705)
Total deferred portion (16,650) (3,057) 86
Total provision for income taxes $(11,359) $(2,401) $ 4,289
A reconciliation of the provisions for income taxes recorded and
the amount computed by applying the federal income tax statutory
rate follows (in thousands):
1995 1994 1993
Pre-tax income (loss) $(32,211) $ (8,102) $ 6,144
Statutory tax on pre-tax income $(10,952) $ (2,755) $ 2,089
Adjustments due to rate changes (2,837) - 1,500
Difference between federal and
Brazilian statutory rates 1,390 - -
Non-deductible goodwill 601
State and local income taxes, net of
federal benefit 58 345 409
Other 381 9 291
Income tax provision $(11,359) $ (2,401) $ 4,289
The Company generated approximately $2.1 million of foreign tax
credits in 1993, of which $1.3 million was utilized in 1993. A
valuation allowance of $0.8 million was established for the
remaining amount. In 1995 and 1994, there were no foreign taxes
creditable against federal taxes. In 1993, the Company was taxed
under the alternative minimum tax method. The Company has an
alternative minimum tax credit carry forward of approximately $0.8
million, which is available to offset future taxable income
pursuant to the US federal tax laws. In addition, in 1995 and
1994, the Company generated net operating loss carry forwards of
approximately $21.4 million and $2.8 million, respectively which
are scheduled to expire in the years 2010 and 2009 respectively.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of the items comprising the Company's deferred
income tax assets and liabilities are as follows (in thousands):
December 31
1995 1994
Current deferred tax assets:
Accrued expenses deductible when paid $ 2,945 $ 1,753
Tax benefit of operating loss carry
forwards and tax credits - 2,930
Other temporary differences 3,038 1,002
Total current deferred tax assets $ 5,983 $ 5,685
Non-current deferred tax assets $16,176 $ 5,680
Deferred tax liabilities:
Difference between book and tax basis of assets
acquired in acquisitions and mergers $ 68,837 $66,535
Excess tax over book depreciation 5,882 5,185
Other temporary differences 2,036 3,279
Total deferred tax liabilities 76,755 74,999
Non-current deferred tax assets:
Tax benefit of operating loss carry
forwards and tax credits (8,929) -
Restructuring expenses
deductible when paid (3,205) -
Other temporary differences (4,042) (5,680)
Total non-current deferred tax assets 16,176) (5,680)
Net deferred tax liabilities $ 60,579 $69,319
Note F - Long-Term Debt
Long-term debt consists of the following (in thousands):
December 31
1995 1994
Senior Debt:
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 original issue
discount of $1,120 and $1,221 63,880 63,779
Other long-term obligations 4,108 1,272
Less current portions (332) (359)
Net long-term debt $194,156 $191,192
The 10-3/8% Senior Notes due June 1, 2002 (the "10 3/8 Senior
Notes") are redeemable at the option of the Company, in whole or in
part, at any time on or after June 1, 1997, at stated redemption
prices. Equal mandatory sinking fund payments on June 1, 2000 and
June 1, 2001 are calculated to retire an aggregate of 50% of the
original principal amount of the 10-3/8% Senior Notes.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 10-3/8% Senior Notes are senior indebtedness of the Company and
rank equally in right of payment, on a pari passu basis, with all
existing and future senior indebtedness of the Company. The
10-3/8% Senior Notes are secured by a pledge on all the issued and
outstanding shares of capital stock of the Company's wholly-owned
subsidiaries, ABN and ABNH, and by a pledge of 65% of the shares of
ABNB. ABN, ABNH and the 77.5% interest owned in ABNB constitute
substantially all of the assets of the Company. The 10-3/8% Senior
Notes' covenants restrict, among other things, incurrence of
additional debt by the Company and its subsidiaries, cash dividends
on and redemptions of capital stock of the Company and its
subsidiaries, mergers, sales of assets, sale and leaseback
transactions, liens, transactions with affiliates and issuance of
preferred stock by subsidiaries and prohibit certain limitations on
distributions from subsidiaries of the Company.
To allow the Company greater flexibility in tax planning
strategies, the Company amended its 10 3/8% Senior Notes in 1994 to
allow the release of 35% of ABNB's capital stock from the pledge.
In 1995, these shares were released from the pledge.
In May, 1994, the Company completed a private placement of $65
million principal amount of 11-5/8% Senior Notes due August 1, 2002
(the "11-5/8% Senior Notes"). A portion of the proceeds was used
to prepay all outstanding bank borrowings.
The 11-5/8% Senior Notes were issued at 98.028% of par and are
redeemable at the Company's option, in whole or in part, on and
after August 1, 1998, at stated redemption prices with accrued
interest. The 11-5/8% Senior Notes are unsecured senior
indebtedness of the Company and rank equally in right of payment,
on a pari passu basis, with all existing and future senior
indebtedness of the Company. The 11-5/8% Senior Notes restrict,
among other things, incurrence of additional debt, cash dividends
on and redemptions of capital stock, mergers, sales of assets, sale
and leaseback transactions, liens, and transactions with
affiliates, and prohibit certain limitations on distributions from
subsidiaries of the Company.
In connection with the above 1994 prepayment of all outstanding
bank borrowings, the Company wrote off as an extraordinary charge
to income, $0.1 million of existing deferred debt expense and
unamortized discounts net of associated tax benefits.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 11-5/8% Senior Notes are effectively subordinated to the
10-3/8% Senior Notes to the extent of the value of the above
collateral pledged to secure the 10-3/8% Senior Notes, which
constitutes substantially all the assets of the Company.
At December 31, 1995, the Company had made all required interest
payments and was in compliance with the covenants of the 10-3/8%
Senior Notes and the 11-5/8% Senior Notes.
The fair value of the 10-3/8% Senior Notes and the 11-5/8% Senior
Notes based on market quotes at December 31, 1995 was approximately
$84.8 million and $39.0 million, respectively and at December 31,
1994 was approximately $107.5 million and $57.2 million,
respectively. The fair value of all other debt approximates its
carrying value. The market values are not necessarily indicative
of the price at which the Company could acquire this indebtedness.
On January 26, 1996, the Company's subsidiaries, ABN and ABNH
("Borrowers"), entered into a three-year $20 million revolving
credit facility with Chemical Bank, N.A. (the "Credit Agreement")
as co-borrowers. The Credit Agreement is a committed facility and
replaces a credit facility which expired in October 1995. The
Credit Agreement is available for general working capital purposes
and letters of credit and expires on October 30, 1998.
Under the Credit Agreement interest is based upon the lenders
Alternate Base Loan Rate (as defined) plus 1.00%, or at the
Company's option, LIBOR plus 2.50% and certain covenants apply
which include but are not limited to, interest coverage ratios,
EBITDA minimums, limitations on indebtedness, capital expenditures,
sales of assets and acquisitions and restrictions on the payment of
cash dividends. The Credit Agreement is an asset-based facility
secured by accounts receivable and inventory of the Borrowers and
the borrowings are subject to a borrowing base. At December 31,
1995, the Company would have had available approximately $10.0
million under the Credit Agreement.
Principal maturities of long-term debt follow: 1996 - $0.3 million,
1997 - $1.7 million, 1998 - $1.4 million, 1999 - $0.1 million, 2000
- - $48.0 million, 2001 and thereafter - $144.1 million.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 1995, the existing interest rate swap and interest rate
cap agreements based upon a $60 million notional amount were
terminated at no cost to the Company. The Company has no
contingent liability under these agreements. The effect of these
agreements increased interest expense in 1995 and 1994 by
approximately $0.3 million and $0.1 million, respectively, and
reduced 1993 interest expense by approximately $1.3 million. The
Company does not expect to enter into any new agreements.
Note G - Capital Stock
The Company is authorized to issue 5,000,000 shares of Preferred
Stock, with such terms as the Board of Directors may determine.
In 1994, the Board of Directors adopted a Preferred Stock Purchase
Rights Plan pursuant to which it declared a dividend of one
Preferred Stock Purchase Right (the "Rights") for each outstanding
share of Common Stock on March 24, 1994. Each Right entitles the
registered holder to purchase from the Company one one-hundredth
(1/100) of a share of preferred stock of the Company, designated as
Series A Junior Preferred Stock, at a price of $15.50. The rights
will become exercisable only in the event, with certain exceptions,
an acquiring party accumulates 15 percent or more of the Company's
voting stock or if a party announces an offer to acquire 30 percent
or more of the voting stock. The Rights will expire on March 24,
2004. Upon the occurrence of certain events, holders of the Rights
will be entitled to purchase either the Company's stock or shares
in an "acquiring entity" at half of market value. The Company will
generally be entitled to redeem the Rights at $.01 per right at any
time until the tenth day following the acquisition of 15 percent of
its voting stock by an acquirer. The Rights are not exercisable if
redeemed by the Board of Directors.
In 1993, the Company issued to the operating management of the
Company warrants expiring in 2000 ("Performance Warrants") for the
purchase of 250,000 shares of Common Stock. In 1994 and 1993,
Performance Warrants for 43,000 and 30,500 common shares were
exercised at $.011 per share. At December 31, 1995, Performance
Warrants for 176,500 common shares are outstanding and exercisable.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1995, the Board of Directors issued warrants to purchase 200,000
shares of Common Stock over a three year period at an exercise
price of $2.213 which was the market price at the date of grant.
At December 31, 1995, the warrants for 200,000 common shares are
outstanding and exercisable.
In 1993, all outstanding shares of Convertible Preference Stock
(the "Preference Stock") were redeemed and in 1993 prior to
redemption, 29,557 shares were converted into approximately 13,700
shares of Common Stock and cash.
In 1994 and 1993, pursuant to a Common Stock repurchase program,
the Company purchased 143,500 shares and 87,500 shares,
respectively.
At December 31, 1995, approximately 4,755,000 shares of Common
Stock were reserved for warrants, performance plans, deferred stock
and compensation plans and stock options.
Note H - Stock Option Plans
Under the Company's Long-Term Performance Plan for officers and
other key employees (the "LTP Plan"), the Compensation Committee
(the "Committee") may grant to key employees awards up to a maximum
of 1,500,000 shares of Common Stock, as stock options, stock
appreciation rights, restricted stock, performance shares, or other
stock based awards. The maximum grant to any one participant is
limited to no more than 250,000 shares. Options are granted at not
less than the market price on the date of grant and become
exercisable in equal amounts over a three year period from the date
of grant. In 1994, the Committee authorized the issuance of 90,000
shares of restricted stock under the LTP Plan that become fully
vested to the employees after three years. The market value of the
shares on its date of grant was approximately $2.87 per share and
the cost of the grant based on the market price is being amortized
evenly over the vesting period. At December 31, 1995, 993,500
shares were available for awards under the LTP Plan.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of changes in options issued pursuant to the above plan
is as follows:
Outstanding at December 31, 1993 - - -
Granted in 1994 144,500 $2.94
Canceled (4,000) $2.94
Outstanding at December 31, 1994 140,500 $2.94
Granted in 1995 285,000 $2.19 - $2.25
Canceled (9,000) $2.94
Outstanding at December 31, 1995 416,500 $2.19 - $2.94
At December 31, 1995, options for 43,839 shares were exercisable.
Under the Company's Executive Incentive Plan, for Executive
Officers (the "Executive Incentive Plan") the Committee may grant
awards up to a maximum of 900,000 shares of Common Stock. In 1995,
an award for 91,875 shares was issued in lieu of a cash bonus and
the shares vest evenly over a three year period. At December 31,
1995, approximately 808,125 shares were available for the granting
of awards and no shares were vested at December 31, 1995.
Under the Deferred Stock and Compensation Plan for Non-Employee
Directors (the "Directors Plan") 200,000 shares of Common Stock may
be issued. Under the Directors Plan, each director is to receive
rights to the equivalent of 1,300 shares of Common Stock annually
following election to the Board of Directors. In 1995 and 1994, an
aggregate of 5,850 and 5,200 common share equivalents,
respectively, were granted. The market values of the equivalent
shares on the date of grant was approximately $2.19 and $3.69,
respectively, per share. The aggregate cost is charged to income.
At December 31, 1995, 188,950 shares were available under the plan.
The 1990 Employee Stock Option Plan (the "Plan") provides that
options to purchase shares of Common Stock may be granted at a
price determined by the Stock Option Committee of the Board of
Directors (the "Option Committee"); the exercise period may be
fixed by the Option Committee, but not to exceed ten years; and
only employees of the Company and its subsidiaries may be granted
options under the Plan. The options generally become exercisable
in equal amounts over three years from the date of grant.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The maximum number of shares available for grant pursuant to the
Plan, as amended, is 11% of the number of shares of the Company's
Common Stock authorized and issued or approximately 2,116,000
shares. At December 31, 1995, approximately 675,000 shares were
available for the granting of options under the Plan.
A summary of changes in options issued pursuant to the above plan
is as follows:
Outstanding at December 31, 1992 1,380,750 $1.81 - 6.19
Granted in 1993 312,500 $6.31 - 6.63
Canceled (3,000) $6.00
Exercised (84,967) $1.81 - 3.94
Outstanding at December 31, 1993 1,605,283 $1.81 - 6.63
Granted in 1994 275,000 $3.38 - 8.44
Canceled (233,000) $4.38 - 6.31
Exercised (61,000) $1.88 - 2.11
Outstanding at December 31, 1994 1,586,283 $1.81 - 8.44
Canceled in 1995 (336,000) $1.88 - 8.44
Exercised (10,000) $1.81
Outstanding at December 31, 1995 1,240,283 $1.81 - 6.63
At December 31, 1995, options for 1,140,784 shares were exercisable.
During 1993 and 1992 options were granted under the Non-Employee
Directors Plan to purchase 20,000 and 40,000 shares at a per share
exercise price of $7.44 and $6.13, respectively, and are
exercisable in equal amounts over three years from the date of
grant. In 1994, options for 15,000 shares at an exercise price of
$7.44 were canceled. At December 31, 1995, options for 43,334
shares were exercisable. No further options may be granted
pursuant to the Non-Employee Directors Plan.
Note I - Employee Benefits Plans
Postretirement Health Care and Life Insurance Plans. The Company
provides certain health care and life insurance benefits for
eligible retired employees. The Company's employees, including
employees subject to certain collective bargaining agreements, may
become eligible for these benefits if they reach normal retirement
age, with certain service requirements, while working for the
Company.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1993, the Company adopted SFAS No. 106. This Statement requires
the accrual of the estimated cost of retiree benefit payments other
than pensions during the years an employee provides services. The
cost of these benefits, which are principally health care and life
insurance, were previously expensed as incurred, although
approximately $3.6 million was recorded in connection with the
acquisition of ABN in 1990. The plan is not being funded; thus
there are no assets or expected return on assets. The Company has
elected to record the previously unrecognized obligation of
approximately $4.2 million over a twenty year period. Benefits for
active and retired employees are provided for through insured and
self-funded plans.
The following table sets forth the status of this obligation:
December 31
1995 1994
Accumulated postretirement benefit obligation
(in thousands):
Retirees $ 7,329 $ 6,295
Eligible active plan participants 419 568
Other active plan participants 1,812 2,054
Accumulated postretirement benefit
obligation 9,560 8,917
Unrecognized transition obligation (3,119) (3,758)
Unrecognized net loss (1,018) (627)
Accrued postretirement benefit obligation $ 5,423 $ 4,532
Net postretirement benefit cost consisted of the following
components (in thousands):
1995 1994
Service cost-benefits earned $ 154 $ 190
Interest cost on accumulated postretirement
benefit obligation 715 627
Partial plan termination (1) 430 -
Amortization of transition obligation 209 209
Net postretirement benefit cost $ 1,508 $ 1,026
(1) In connection with the 1995 restructuring, a portion of
the previously unrecognized transition obligation was charged to
the restructuring reserve.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation, as of January 1,
1995, was 12.00% for 1995 decreasing each successive year until it
reaches 6.0%, after which it remains constant. A
one-percentage-point increase in the assumed health care cost trend
rate for each year would increase service cost plus interest on the
accumulated postretirement benefit obligation by approximately
14.1%. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% at December
31, 1995 and 8.5% at December 31, 1994.
Postretirement Plans. The Company is obligated to make regular
defined contributions to several multi-employer plans and
contributions to one single employer defined benefit pension fund,
under the terms of various union contracts. The aggregate
contribution to such multi-employer plans for retirement and
welfare benefits was approximately $1.7 million, $1.8 million, and
$1.9 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Retirement benefits are also provided by the
Company, to eligible union and nonunion employees, through defined
contributions to an employees' retirement plan; the aggregate
contribution to such plan and charged to operations was $1.2
million, $1.5 million, and $1.7 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
The Company has a trusteed, noncontributory defined benefit pension
plan which covered substantially all employees of a company
acquired in 1990. As of December 31, 1990, the plan was frozen for
the nonunion employees and in 1992 for union employees who became
participants in the Company's defined contribution employees'
retirement plan. Benefits under the noncontributory defined
benefit plan were based on years of service and average final
compensation. The funding policy is to pay at least the minimum
amounts required by the Employee Retirement Income Security Act of
1974. The net pension expense for the Company's defined benefit
pension plan was approximately $0.2 million, $0.1 million, and $0.1
million in 1995, 1994 and 1993, respectively.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the 1995 and 1994 funded status and
amounts recognized for the Company's defined benefit pension plan
in the consolidated balance sheet (in thousands):
1995 1994
Actuarial present value of accumulated
plan benefits, including vested
benefits of $8,798 and $7,058 $ 8,862 $ 7,157
Projected benefit obligation for service
rendered to date $ 8,862 $ 7,157
Plan assets at fair value, primarily equity
securities . 7,612 6,113
Accrued pension liability $ 1,250 $ 1,044
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was
7.0% and 8.5% as of December 31, 1995 and 1994. The expected
long-term rate of return was 8.5% in 1995 and in 1994.
The Company adopted, as of April 1, 1994, a noncontributory
supplemental executive retirement plan ("SERP") for certain senior
management employees. Benefits under the noncontributory plan are
based on years of service and average final compensation. The plan
is unfunded and benefits will be paid from the assets of the
Company.
The following table sets forth at the status of this obligation at:
December 31
1995 1994
Accumulated benefit $ 1,501 $ 1,072
Projected benefit obligation (equals funded $ 2,706 $2,249
Prior service cost (1,558) (1,689)
Unrecognized net loss (362) (253)
Preliminary accrued pension costs 786 307
Additional minimum liability* 1,116 765
Accrued pension cost for financial statements $ 1,902 $ 1,072
*There is an intangible asset equal to the additional minimum
liability reported.
Net periodic pension cost consisted of the following components (in
thousands):
1995 1994
Service cost-benefits earned $ 185 $ 124
Interest cost on projected benefit obligation 191 106
Amortization of prior service cost 103 77
Net periodic pension cost $ 479 $ 307
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7%
and 8.5% as of December 31, 1995 and 1994. The expected long-term
rate of return is not applicable as benefits are not funded. The
above is from the adoption date.
Note J - Restructuring Costs
In 1995, the Company recorded a pre-tax restructuring charge of
approximately $14.3 million pursuant to a restructuring plan
developed by management for the Company's domestic security
printing operations, including the relocation and downsizing of its
corporate offices.
The restructuring charge provided for those reasonably estimable
costs resulting from the plan including costs that are: (i)
associated with and will not benefit activities that will continue
or generate future revenue and are incremental as a result of the
plan (ii) incurred under contractual agreements (i.e. leases and
employment agreements) that existed prior to the commitment date
that provide no future economic benefit; or (iii) related to asset
impairments and writedowns resulting directly from the plan. The
plan is expected to be substantially completed in the second
quarter of 1996.
Under the plan, the Company will reduce the domestic workforce by
27 percent and has provided a $2.9 million reserve for severance
and related costs.
Asset valuations and writedowns accounted for $5.0 million of the
charge which reduced certain assets to their net realizable value
and primarily relates to equipment not being relocated and
leasehold improvements.
Lease and other facility obligations accounted for $6.4 million of
the charge for the facilities to be closed in 1996.
Restructuring activities in 1994 and 1993 relate primarily to the
closing of ABN's Los Angeles plant. Remaining obligations under
this restructuring relate to lease commitments.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following represents the Company's restructuring activities for
the periods indicated (in millions):
Severance Asset Leases
and Related Revaluations and other
Costs and Writedowns Obligations Total
Restructuring charge 1993 $ 2.4 $ 2.7 $ 6.9 $12.0
Noncash items (1.0) (1.0)
Cash payments (2.1) (1.7) (2.8) (6.6)
Balance at
December 31, 1993 0.3 - 4.1 4.4
Restructuring charge - - 5.0 5.0
Imputed interest 0.3 0.3
Cash payments (0.3) -. (3.7) (4.0)
Balance at
December 31, 1994 - - 5.7 5.7
Restructuring charge 2.9 5.0 6.4 14.3
Imputed interest 0.3 0.3
Noncash items (1.8) (5.0) - (6.8)
Cash payments (0.1) -. (1.4) (1.5)
Balance at
December 31, 1995 $ 1.0 $ -. $11.0 $12.0
Future cash outlays for the remaining restructuring reserve of
$12.0 million at December 31, 1995 are anticipated to be $5.1
million in 1996, $2.1 million in 1997, $1.3 million in 1998 and
$3.5 million thereafter to 2009.
Note K - Provision for Idle Equipment
In January 1994, the Company was notified that it was not awarded
any portion of a contract by the United States Postal Service
("USPS") in response to a competitive bid for postage stamp
production. In prior years, the Company made investments in
capital equipment intended for use in connection with the products
and services supplied to the USPS. As a result of the loss of the
business, the Company re-evaluated the net carrying value of
capitalized equipment and the cost of operating leases used for
postage stamp production and recorded a $2 million provision for
the write-down of idle postal equipment.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note L - Commitments and Contingencies
In January 1994, Vladimir v. United States Banknote Corporation, et
al., and in February 1994, Sinay v. United States Banknote
Corporation, et al. were filed in the United States District Court
for the Southern District of New York on behalf of a purported
class of purchasers of Common Stock between April 1, 1993 and
January 6, 1994. Also, in January 1994, Atencio v. Morris
Weissman, et al. was filed in the Court of Chancery for the State
of Delaware, New Castle County, against various directors and/or
officers of the Company, on behalf of a purported class and also
derivatively on behalf of the Company which was named as a nominal
defendant. In February 1994, Rosenberg v. Morris Weissman, et al.
was filed in the same court as Atencio, alleging similar claims to
Atencio, but not on behalf of a class of plaintiffs.
The complaints in these four actions allege, among other things,
that the Company and the individual defendants knowingly or
recklessly caused the market price of its Common Stock to be
inflated artificially by making misleading statements and/or
omissions of material fact concerning the risk of loss of the
Company's stamp printing contracts with the USPS. The Vladimir and
Sinay actions seek unspecified damages. The Atencio and Rosenberg
actions also assert claims for breach of fiduciary duty by the
individual defendants, and allege that certain of the defendants
sold Common Stock while in possession of material non-public
information and seek recapture of the profits earned by the
defendants who purportedly traded, the repayment by the defendants
of their 1993 sala7.0% and 8.5% as of December 31, 1995 and 1994. The expected
long-term rate of return was 8.5% in 1995 and in 1994.
The Company adopted, as of April 1, 1994, a noncontributory
supplemental executive retirement plan ("SERP") for certain senior
management employees. Benefits under the noncontributory plan are
ated persons) who purchased the
Company's stock from April 1, 1993 through January 6, 1994. On
February 28, 1996, the Sinay action was voluntarily dismissed. The
Atencio and Rosenberg actions have been stayed pending the outcome
of the Vladimir action.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 1, 1994, the Company filed an action against De La Rue,
and its parent, De La Rue Plc in New York State Supreme
Court. The complaint alleges breach of contract in connection with
the 1993 purchase of the Company's Brazilian subsidiary from DLR
and seeks in excess of $1.5 million in damages. In December 1994,
the action was removed by the defendants to the United States
District Court for the Southern District of New York. Defendants
have filed an answer denying liability and asserting counterclaims.
Discovery is presently underway.
On November 2, 1994, an action was commenced against the Company
and certain of its directors and officers entitled Thomas De La Rue
AG v. United States Banknote Corporation, et al. in the United
States District Court for the Southern District of New York. The
complaint, as amended, alleges, among other things, breach of
contract by the Company in connection with the Brazil purchase
agreement and common law fraud based on the alleged failure to
disclose the risk of loss of the Company's stamp printing contracts
with the USPS and the alleged failure to register the Common Stock
paid to DLR expeditiously with the SEC. The complaint seeks
unspecified damages as well as $6.8 million for the Common Stock
received by DLR in the transaction. On November 20, 1995,
plaintiff amended its complaint and eliminated all of its federal
securities law claims and the individual defendants following
dismissal of certain of DLR's securities law claims by the court.
Discovery is presently underway.
The adverse determination of the above-described litigations could
have a material adverse effect on the financial condition or
results of operations of the Company in the event that the
Company's insurance was not available to cover such claims or an
award materially in excess of insurance coverage was made. The
Company believes, however, that it has good and meritorious
defenses to the litigations and intends to vigorously defend
against such actions. The Company maintains insurance coverage
which presently covers a majority of the expenses of defense of the
class action suits and, until November 1995, the DLR suit. In
addition to the foregoing, the Company is party to legal
proceedings that are considered to be either ordinary, routine
litigation incidental to its business or not material to the
Company's consolidated financial position.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1995, the Company had approximately $3.3 million
of outstanding letters of credit cash collateralized.
The Company has long-term operating leases for offices,
manufacturing facilities and equipment which expire through 2013.
The Company has renewal options on some locations, which provide
for renewal rents based upon increases tied to the consumer price
index.
At December 31, 1995, future minimum lease payments under
noncancelable operating leases are as follows: $6.6 million in
1996; $7.0 million in 1997; $6.6 million in 1998; $5.7 million in
1999; $5.7 million in 2000; and $10.0 million thereafter.
Net rental expense was $8.0 million, $8.1 million, and $7.0 million
for the years ended December 31, 1995, 1994 and 1993, respectively
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note M - Quarterly Results of Operations - unaudited
The following is a summary of the quarterly results of operations
for the years ended December 31, 1995 and 1994 (in thousands,
except per share data):
1995 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
(1)
Sales $49,068 $47,591 $56,783 $ 52,722
Cost of sales 31,949 38,149 39,414 39,523
Net income (loss) $ (797) $(9,608) $ 53 $(12,063)
Per share net income (loss) $(.04) $(.50) $ .00 $(.63)
(1) In the fourth quarter pre-tax income was charged an aggregate
of $14.3 million of restructuring charges (See Note J). The
after-tax charge was approximately $11.1 million.
1994 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
(2)
Sales $43,614 $52,688 $52,890 $58,941
Cost of sales 24,967 32,174 33,517 40,231
Income (loss) from operations (969) (465) 561 (4,828)
Extraordinary item (1) - (114) - -
Net income (loss) $ (969) $ (579) $ 561 $(4,828)
Per share net income (loss)
Operations $ (.05) $ (.02) $ .03 $ (.25)
Extraordinary item - (.01) - -
Net Income (loss) $ (.05) $(.03) $ .03 $ (.25)
(1) In connection with the early extinguishment of indebtedness.
(See Note A 8)
(2) In the fourth quarter, pre-tax income was charged $7.0 million
of restructuring charges (See Note J) and $2.0 million for idle
equipment (See Note K). The after-tax charge was approximately
$5.2 million.
<PAGE>
ITEM 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Company
See Item 13
ITEM 11. Executive Compensation
See Item 13
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management
See Item 13
ITEM 13. Certain Relationships and Related Transactions
Information required for Items 10, 11, 12 and 13 will be set
forth either (I) in the Company's definitive Proxy Statement for
the 1996 Annual Meeting of Stockholders, or (ii) in an amendment to
this Report on Form 10-K/A, which in either case will be filed with
the Securities and Exchange Commission not later than 120 days
after December 31, 1995, and which information is incorporated
herein by reference. In addition, reference is made to Item 10 in
Part I of this Report.
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a)(1) List of Financial Statements.
The following consolidated financial statements of American
Banknote Corporation and subsidiaries are included in Item 8:
Consolidated Statements of Operations - Years Ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statement of Stockholders' Equity -
Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows - Years Ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(a)(2) List of Financial Statement Schedules.
The following schedules of American Banknote
Corporation and subsidiaries are included in Item 14(d): None
All schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable, and therefore have been omitted.
<PAGE>
(a)(3) List of Executive Compensation Plans and
Arrangements.
Second Amended and Restated Employment Agreement
dated as of October 1, 1993, between the Company, American Bank
Note Company and Morris Weissman is hereby incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form
10-K (as amended) for the year ended December 31, 1993 (the"1993
10-K").
Severance Agreement effective as of July 19, 1995 is
hereby incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(the "June 30, 1995 10-Q").
Employment Agreement dated July 24, 1990 between the
Company and John T. Gorman is hereby incorporated by reference to
Exhibit (c)(32) to Amendment No. 3 to the Company's Rule 13E-3
Transaction Statement on Schedule 13E-3 dated July 31, 1990 (the
"Schedule 13E-3").
Amendment dated August 31, 1992 to Employment
Agreement dated July 24, 1990, between the Company and John T.
Gorman is hereby incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992 (the "1992 10-K").
Employment Letter effective August 18, 1995 between
Robert Wilcox and the Company is hereby incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (the "September 30, 1995 10-Q").
Form of Performance Warrants dated July 25, 1990,
issued to Morris Weissman, John T. Gorman and Sheldon Cantor is
hereby incorporated by reference to Exhibit (c)(29) to the
Company's Rule 13E-3 Transaction Statement on Schedule 13E-3 dated
April 18, 1990.
Amended and Restated 1990 Employee Stock Option Plan
dated as of February 19, 1992 is hereby incorporated by reference
to Exhibit 10.37 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991 (the "1991 10-K").
<PAGE>
Amendment dated September 23, 1993 to Amended and
Restated 1990 Employee Stock Option Plan dated as of February 19,
1992 is hereby incorporated by reference to Exhibit 10.13 to the
1993 10-K.
1992 Non-Employee Directors Stock Option Plan dated
as of February 19, 1992 is hereby incorporated by reference to
Exhibit 10.38 to the 1991 10-K.
Amendment dated as of June 11, 1992 to the 1992
Non-Employee Directors Stock Option Plan dated as of February 19,
1992 is hereby incorporated by reference to Exhibit 10.16 to the
1992 10-K.
Supplemental Executive Retirement Plan of the
Company effective as of April 1, 1994, is hereby incorporated by
reference to Exhibit 10.22 to Amendment No. 2 to the Company's
Registration Statement on Form S-4 (File No. 33-79726) filed July
18, 1994.
Amendments to SERP effective April 1, 1994.*
Form of severance agreement for designated officers
is hereby incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994 (the "1994 10-K").
Long-Term Performance Plan for key employees is
hereby incorporated by reference to Exhibit 10.26 to the 1994 10-K.
Executive Incentive Plan for executive officers, as
amended, is hereby incorporated by reference to Exhibit 10.27 to
the 1994 10-K.
Deferred Stock and Compensation Plan for
Non-employee Directors is hereby incorporated by reference to
Exhibit 10.28 of the 1994 10-K.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the
last quarter of the period covered by this Report.
<PAGE>
(c) Exhibits.
2.1 Agreement of Plan of Merger and Certificate of Merger of
United States Banknote Corporation (a New York corporation)
("USBN-NY") and United States Banknote Corporation (a Delaware
corporation) dated as of June 29, 1993 are hereby incorporated by
reference to Exhibits 2.1 and 2.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993 (the "June 30,
1993 10-Q").
2.2 Certificate of Ownership and Merger of USBN-NY into the
Company dated as of July 14, 1994 is hereby incorporated by
reference to Exhibit 3.1 to the Company's Registration of Successor
Issuer on Form 8-B filed September 30, 1993 (the "Form 8-B").
2.3 Certificate of Merger of USBN-NY into the Company dated
as of July 14, 1994 is hereby incorporated by reference to Exhibit
3.2 to the Form 8-B.
2.4 Certificate of merger of USBC Acquisition, Inc. with and
into USBN-NY is hereby incorporated by reference to Exhibit 4(b) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1990.
3.1 Certificate of Incorporation of the Company including
Amendment No. 1 thereto is hereby incorporated by reference to
Exhibit 3.1 to the June 30, 1995 10-Q.
3.2 Certificate of Designation of the Company authorizing
Preferred Stock as Series A is hereby incorporated by reference to
Exhibit 4 to the Company's Report on Form 8-A filed April 6, 1994.
3.3 By-Laws of the Company including amendments thereto are
hereby incorporated by reference to Exhibit 3.2 to the June 30,
1995 10-Q.
<PAGE>
4.1 Indenture dated as of May 15, 1992 between the Company
and Chemical Bank, as Trustee, relating to the 10-3/8% Senior Notes
due June 1, 2002 is hereby incorporated by reference to Exhibit 4.2
to the Company's Current Report on Form 8-K dated May 26, 1992 (the
"May 26, 1992 8-K").
4.2 Pledge Agreement, as amended, dated as of May 26, 1992
between the Company and Chemical Bank, as Trustee, relating to the
Company's 10-3/8% Senior Notes due June 1, 2002 is hereby
incorporated by reference to Exhibit 4.3 to the May 26, 1992 8-K.
4.3 First Amendment to the Pledge Agreement dated as of May
26, 1992 between the Company and Chemical Bank, N.A., dated as of
May 23, 1994 is hereby incorporated by reference to Exhibit 4.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994 (the "June 30, 1994 10-Q").
4.4 First Supplemental Indenture relating to 10-3/8% Senior
Notes due June 1, 2002 between the Company and Chemical Bank, N.A.,
dated as of May 23, 1994 is hereby incorporated by reference to the
June 30, 1994 10-Q.
4.5 Pledged Share Amendment dated as of July 31, 1995 between
the Company and Chemical Bank, as Trustee, relating to the 10-3/8%
Senior Notes due June 1, 2002.*
4.6 Indenture dated as of May 1, 1994 between the Company and
The First National Bank of Boston as Trustee, relating to the
11-5/8% Senior Notes Due August 1, 1002, Series B, of the Company
and Form of Series B Note, is hereby incorporated by reference to
Exhibit 4.1 and 4.3 to the Company's Registration Statement on Form
S-4 dated August 5, 1994.
<PAGE>
4.7 Rights Agreement dated as of March 24, 1994 between the
Company and Chemical Bank as Rights Agent including the form of
Rights Certificate and form of Certificate of Designation is hereby
incorporated by reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated March 24, 1994.
4.8 Credit Agreement dated as of January 29, 1996, among
American Bank Note Company and American Bank Note Holographics,
Inc., American Banknote Corporation and Chemical Bank, as Agent.*
4.9 Security Agreement dated as of January 29, 1996, among
American Bank Note Company and American Bank Note Holographics,
Inc. and Chemical Bank, as Agent.*
10.1 Second Amended and Restated Employment Agreement dated as
of October 1, 1993, between the Company, American Bank Note Company
and Morris Weissman is hereby incorporated by reference to Exhibit
10.1 to the 1993 10-K.
10.2 Severance Agreement effective July 19, 1995 is hereby
incorporated by reference to Exhibit 10.1 to the June 30, 1995
10-Q.
10.3 Employment Agreement dated July 24, 1990 between the
Company and John T. Gorman is hereby incorporated by reference to
Exhibit (c)(32) to the Schedule 13E-3.
10.4 Amendment dated August 31, 1992 to Employment Agreement
dated July 24, 1990, between the Company and John T. Gorman is
hereby incorporated by reference to Exhibit 10.3 to the 1992 10-K.
10.5 Employment Letter effective August 18, 1995 between
Robert Wilcox and the Company is hereby incorporated by reference
to the September 30, 1995 10-Q.
10.6 Form of Performance Warrants dated July 25, 1990, issued
to Morris Weissman, John T. Gorman and Sheldon Cantor is hereby
incorporated by reference to Exhibit (c)(29) to the Company's Rule
13E-3 Transaction Statement on Schedule 13E-3 dated April 18, 1990.
<PAGE>
10.7 Amended and Restated 1990 Employee Stock Option Plan
dated as of February 19, 1992 is hereby incorporated by reference
to Exhibit 10.37 to the 1991 10-K.
10.8 Amendment dated September 23, 1993 to Amended and
Restated 1990 Employee Stock Option Plan dated as of February 19,
1992, is hereby incorporated by reference to Exhibit 10.13 to the
1993 10-K.
10.9 1992 Non-Employee Directors Stock Option Plan dated as of
February 19, 1992 is hereby incorporated by reference to Exhibit
10.38 to the 1991 10-K.
10.10 Amendment dated as of June 11, 1992 to the 1992
Non-Employee Directors Stock Option Plan dated as of February 19,
1992 is hereby incorporated by reference to Exhibit 10.16 to the
1992 10-K.
10.11 Supplemental Executive Retirement Plan ("SERP") of
the Company effective as of April 1, 1994, is hereby incorporated
by reference to Exhibit 10.22 to Amendment No. 2 to the Company's
Registration Statement on Form S-4 (File No. 33-79726) filed July
18, 1994.
10.12 Amendments to SERP effective April 1, 1994.*
10.13 Form of severance agreement for designated officers
is hereby incorporated by reference to Exhibit 10.25 to the 1994
10-K.
10.14 Long-Term Performance Plan for Key employees is
hereby incorporated by reference to Exhibit 10.26 to the 1994 10-K.
10.15 Executive Incentive Plan for executive officers, as
amended, is hereby incorporated by reference to Exhibit 10.27 to
the 1994 10-K.
10.16 Deferred Stock and Compensation Plan for
Non-employee Directors is hereby incorporated by reference to
Exhibit 10.26 to the 1994 10-K.
<PAGE>
10.17 Sublease dated January 31, 1996 between Grow Group,
Inc. and the Company for the Company's headquarters at 200 Park
Avenue, New York.*
10.18 Real Estate Rental Agreement, dated February 29,
1996, between Walter Torre Junior LTDA. And American Bank Note
Company Grafica E Servicos Ltda for property located in Barueri,
Sao Paulo, Brazil.*
10.19 Agreement of Lease, dated as of July 23, 1992,
between Robert Martin Company and American Banknote Holographics,
Inc. is hereby incorporated by reference to Exhibit 10.17 to the
1992 10-K.
10.20 Stock Purchase Agreement dated as of June 7, 1993,
between the Company and Thomas De La Rue AG, relating to the
acquisition of Thomas De La Rue Grafica e Servicos Ltda is hereby
incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated June 23, 1993 (the "June 23, 1993 8-K").
10.21 Stock Purchase Agreement dated as of June 7, 1993,
by and among American Bank Note Holographics, Inc., the Company and
Thomas De La Rue, Inc. is hereby incorporated by reference to
Exhibit 10.2 to the June 23, 1993 8-K.
10.22 Stock Purchase Agreement dated as of June 7, 1993,
by and among De La Rue Holographics Limited (Amblehurst Limited),
De La Rue plc and the Company is hereby incorporate by reference to
Exhibit 10.3 to the June 23, 1993 8-K.
10.23 Non-Exclusive Patent License Agreement between
American Bank Note Holographics, Inc. and De La Rue Holographics
Limited dated June 23, 1993, is hereby incorporated by reference to
Exhibit 10.4 to the June 23, 1993 8-K.
10.24 Subscription Agreement dated June 2, 1995 regarding
Grafica Bradesco Ltda. and ABN-Brazil is hereby incorporated by
reference to the Company's Current Report on Form 8-K/A (Amendment
No. 1) dated July 10, 1995 (the "July 10, 1995 8-K").
10.25 By-Laws of ABN-Brazil, as amended, are hereby
incorporated by reference to the July 10, 1995 8-K.
<PAGE>
10.26 Contract dated September 4, 1995 with
Telecomunicacoes Brasileiras S/A - Telebras for production of
telephone cards.*
10.27 Agreement for Services, effective October 1, 1995
between Kelly, Anderson, Pethick & Associates, Inc. and the Company
is hereby incorporated by reference to Exhibit 10.2 to the
September 30, 1995 10-Q.
11 Computation of per share income (loss).*
21 Subsidiaries of the Registrant.*
23 Independent Auditors' Consent.*
* Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Registrant
By: s/ Morris Weissman
Morris Weissman
Chairman and Chief Executive Officer
March 29, 1996
By: s/ John T. Gorman
John T. Gorman
Executive Vice President,
Chief Financial Officer
and Chief Accounting Officer
March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated:
s/ Morris Weissman s/ C. Gerald Goldsmith
Morris Weissman C. Gerald Goldsmith
Director, Chairman and Director
Chief Executive Officer March 29, 1996
March 29, 1996
s/ Bette B. Anderson s/ Ira J. Hechler
Bette B. Anderson Ira J. Hechler
Director Director
March 29, 1996 March 29, 1996
s/ David S. Rowe-Beddoe
Dr. Oscar Arias S David S. Rowe-Beddoe
Director Director
March , 1996 March 29, 1996
<PAGE>
EXHIBIT INDEX
Page No. in
Manually
Exhibit No. Signed Report
2.1 Agreement of Plan of Merger and Certificate of Merger
of United States Banknote Corporation (a New York
corporation) ("USBN-NY") and United States Banknote
Corporation (a Delaware corporation) dated as of June
29, 1993 are hereby incorporated by reference to
Exhibits 2.1 and 2.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1993 (the "June 30, 1993 10-Q").
2.2 Certificate of Ownership and Merger of USBN-NY into
the Company dated as of July 14, 1994 is hereby
incorporated by reference to Exhibit 3.1 to the
Company's Registration of Successor Issuer on
Form 8-B filed September 30, 1993 (the "Form 8-B").
2.3 Certificate of Merger of USBN-NY into the Company
dated as of July 14, 1994 is hereby incorporated by
reference to Exhibit 3.2 to the Form 8-B.
2.4 Certificate of merger of USBC Acquisition, Inc. with
and into USBN-NY is hereby incorporated by reference
to Exhibit 4(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1990.
3.1 Certificate of Incorporation of the Company including
Amendment No. 1 thereto is hereby incorporated by
reference to Exhibit 3.1 to the June 30, 1995 10-Q.
3.2 Certificate of Designation of the Company authorizing
Preferred Stock as Series A is hereby incorporated by
reference to Exhibit 4 to the Company's Report on Form
8-A filed April 6, 1994.
3.3 By-Laws of the Company including amendments thereto
are hereby incorporated by reference to Exhibit 3.2
to the June 30, 1995 10-Q.
<PAGE>
4.1 Indenture dated as of May 15, 1992 between the
Company and Chemical Bank, as Trustee, relating to
the 10-3/8% Senior Notes due June 1, 2002 is hereby
incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated May 26,
1992 (the "May 26, 1992 8-K").
4.2 Pledge Agreement, as amended, dated as of May 26,
1992 between the Company and Chemical Bank, as
Trustee, relating to the Company's 10-3/8% Senior
Notes due June 1, 2002 is hereby incorporated by
reference to Exhibit 4.3 to the May 26, 1992 8-K.
4.3 First Amendment to the Pledge Agreement dated as of
May 26, 1992 between the Company and Chemical Bank,
N.A., dated as of May 23, 1994 is hereby incorporated
by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994 (the "June 30, 1994 10-Q").
4.4 First Supplemental Indenture relating to 10-3/8%
Senior Notes due June 1, 2002 between the Company and
Chemical Bank, N.A., dated as of May 23, 1994 is
hereby incorporated by reference to the June 30, 1994
10-Q.
4.5 Pledged Share Amendment dated as of July 31, 1995
between the Company and Chemical Bank, as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002.*
4.6 Indenture dated as of May 1, 1994 between the Company
and The First National Bank of Boston as Trustee,
relating to the 11-5/8% Senior Notes Due August 1,
1002, Series B, of the Company and Form of Series B
Note, is hereby incorporated by reference to Exhibit
4.1 and 4.3 to the Company's Registration Statement
on Form S-4 dated August 5, 1994.
4.7 Rights Agreement dated as of March 24, 1994 between
the Company and Chemical Bank as Rights Agent
including the form of Rights Certificate and form of
Certificate of Designation is hereby incorporated by
reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated March 24, 1994.
<PAGE>
4.8 Credit Agreement dated as of January 29, 1996, among
American Bank Note Company and American Bank Note
Holographics, Inc., American Banknote Corporation and
Chemical Bank, as Agent.*
4.9 Security Agreement dated as of January 29, 1996, among
American Bank Note Company and American Bank Note
Holographics, Inc. and Chemical Bank, as Agent.*
10.1 Second Amended and Restated Employment Agreement
dated as of October 1, 1993, between the Company,
American Bank Note Company and Morris Weissman is
hereby incorporated by reference to Exhibit 10.1 to
the 1993 10-K.
10.2 Severance Agreement effective July 19, 1995 is hereby
incorporated by reference to Exhibit 10.1 to the June
30, 1995 10-Q.
10.3 Employment Agreement dated July 24, 1990 between the
Company and John T. Gorman is hereby incorporated by
reference to Exhibit (c)(32) to the Schedule 13E-3.
10.4 Amendment dated August 31, 1992 to Employment
Agreement dated July 24, 1990, between the Company
and John T. Gorman is hereby incorporated by
reference to Exhibit 10.3 to the 1992 10-K.
10.5 Employment Letter effective August 18, 1995 between
Robert Wilcox and the Company is hereby incorporated by
reference to the September 30, 1995 10-Q.
10.6 Form of Performance Warrants dated July 25, 1990,
issued to Morris Weissman, John T. Gorman and Sheldon
Cantor is hereby incorporated by reference to Exhibit
(c)(29) to the Company's Rule 13E-3 Transaction
Statement on Schedule 13E-3 dated April 18, 1990.
10.7 Amended and Restated 1990 Employee Stock Option Plan
dated as of February 19, 1992 is hereby incorporated
by reference to Exhibit 10.37 to the 1991 10-K.
<PAGE>
10.8 Amendment dated September 23, 1993 to Amended and
Restated 1990 Employee Stock Option Plan dated as of
February 19, 1992, is hereby incorporated by
reference to Exhibit 10.13 to the 1993 10-K.
10.9 1992 Non-Employee Directors Stock Option Plan dated
as of February 19, 1992 is hereby incorporated by
reference to Exhibit 10.38 to the 1991 10-K.
10.10 Amendment dated as of June 11, 1992 to the 1992
Non-Employee Directors Stock Option Plan dated as of
February 19, 1992 is hereby incorporated by reference
to Exhibit 10.16 to the 1992 10-K.
10.11 Supplemental Executive Retirement Plan ("SERP") of
the Company effective as of April 1, 1994, is hereby
incorporated by reference to Exhibit 10.22 to
Amendment No. 2 to the Company's Registration
Statement on Form S-4 (File No. 33-79726) filed July
18, 1994.
10.12 Amendments to SERP effective April 1, 1994.*
10.13 Form of severance agreement for designated officers is
hereby incorporated by reference to Exhibit 10.25 to
the 1994 10-K.
10.14 Long-Term Performance Plan for Key employees is hereby
incorporated by reference to Exhibit 10.26 to the 1994
10-K.
10.15 Executive Incentive Plan for executive officers, as
amended, is hereby incorporated by reference to Exhibit
10.27 to the 1994 10-K.
10.16 Deferred Stock and Compensation Plan for Non-employee
Directors is hereby incorporated by reference to
Exhibit 10.26 to the 1994 10-K.
10.17 Sublease dated January 31, 1996 between Grow Group,
Inc. and the Company for the Company's headquarters at
200 Park Avenue, New York.*
<PAGE>
10.18 Real Estate Rental Agreement, dated February 29, 1996,
between Walter Torre Junior LTDA. And American Bank
Note Company Grafica E Servicos Ltda for property
located in Barueri, Sao Paulo, Brazil.*
10.19 Agreement of Lease, dated as of July 23, 1992,
between Robert Martin Company and American Banknote
Holographics, Inc. is hereby incorporated by
reference to Exhibit 10.17 to the 1992 10-K.
10.20 Stock Purchase Agreement dated as of June 7, 1993,
between the Company and Thomas De La Rue AG, relating
to the acquisition of Thomas De La Rue Grafica e
Servicos Ltda is hereby incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form
8-K dated June 23, 1993 (the "June 23, 1993 8-K").
10.21 Stock Purchase Agreement dated as of June 7, 1993, by
and among American Bank Note Holographics, Inc., the
Company and Thomas De La Rue, Inc. is hereby
incorporated by reference to Exhibit 10.2 to the June
23, 1993 8-K.
10.22 Stock Purchase Agreement dated as of June 7, 1993, by
and among De La Rue Holographics Limited (Amblehurst
Limited), De La Rue plc and the Company is hereby
incorporate by reference to Exhibit 10.3 to the June
23, 1993 8-K.
10.23 Non-Exclusive Patent License Agreement between American
Bank Note Holographics, Inc. and De La Rue Holographics
Limited dated June 23, 1993, is hereby incorporated by
reference to Exhibit 10.4 to the June 23, 1993 8-K.
10.24 Subscription Agreement dated June 2, 1995 regarding
Grafica Bradesco Ltda. and ABN-Brazil is hereby
incorporated by reference to the Company's Current
Report on Form 8-K/A (Amendment No. 1) dated July 10,
1995 (the "July 10, 1995 8-K").
10.25 By-Laws of ABN-Brazil, as amended, are hereby
incorporated by reference to the July 10, 1995 8-K.
10.26 Contract dated September 4, 1995 with Telecomunicacoes
Brasileiras S/A - Telebras for production of telephone
cards.*<PAGE>
10.27 Agreement for Services, effective October 1, 1995
between Kelly, Anderson, Pethick & Associates, Inc. and
the Company is hereby incorporated by reference to
Exhibit 10.2 to the September 30, 1995 10-Q.
11 Computation of per share income (loss).*
21 Subsidiaries of the Registrant.*
23 Independent Auditors' Consent.*
* Filed herewith
<PAGE>
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of July 31, 1995,
is delivered pursuant to Section 5 of the Pledge Agreement
referred to below. The undersigned hereby agrees that this
Pledged Share Amendment may be attached to the Pledge
Agreement dated as of May 26, 1992, as amended by the First
Amendment to the Pledge Agreement dated May 23, 1994,
between the undersigned and Chemical Bank, as Trustee, as
amended from time-to-time (the "Pledge Agreement,"
capitalized terms defined therein being used herein as
therein defined), and that the attached Schedule I shall
replace in its entirety Schedule I to the Pledge Agreement.
AMERICAN BANKNOTE CORPORATION
(Formerly United States Banknote Corporation)
By: s/Patrick D. Reddy
Title: Vice President
<PAGE>
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain Pledge
Agreement dated as of May 26, 1992, by United States
Banknote Corporation, as Pledgor, to Chemical Bank, as
Trustee, as amended from time-to-time.
Percentage
Class Stock Number of All
of Certificate Par of Capital Stock
Stock Issuer Stock No (s). Value Shares Outstanding
American Bank Common 4 $5.00 100 100%
Note Company
American Bank Common 8, 9,11 $0.01 10,000 100%
Note Holographics,
Inc.
NMI Common 3 $0.01 1,000 100%
ABN Common 3 $1.00 8.3871 83.871%
Investments,
Inc.
United States Common 1 $0.01 100 100%
Banknote
Corporation
International
Inc.
end
CREDIT AGREEMENT
Dated as of January 29, 1996
Among
AMERICAN BANK NOTE COMPANY,
AMERICAN BANK NOTE HOLOGRAPHICS, INC.,
AMERICAN BANKNOTE CORPORATION,
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
and
CHEMICAL BANK, AS AGENT
TABLE OF CONTENTS
Page
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.01. Certain Defined Terms. . . . . . . . . . . .1
SECTION 1.02. Accounting Terms . . . . . . . . . . . . . 18
II. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.01. Revolving Credit Commitments . . . . . . . 19
SECTION 2.02. Loans. . . . . . . . . . . . . . . . . . . 20
SECTION 2.03. Notice of Loans. . . . . . . . . . . . . . 21
SECTION 2.04. Notes; Repayment of Loans. . . . . . . . . 22
SECTION 2.05. Interest on Loans. . . . . . . . . . . . . 22
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . 23
SECTION 2.07. Termination and Reduction of
Revolving Credit Commitments. . . . . . . 23
SECTION 2.08. Interest on Overdue Amounts;
Alternate Rate of Interest . . . . . . . . 24
SECTION 2.09. Prepayment of Loans. . . . . . . . . . . . 24
SECTION 2.10. Reserve Requirements;
Change in Circumstances. . . . . . . . . . 28
SECTION 2.11. Change in Legality . . . . . . . . . . . . 30
SECTION 2.12. Indemnity. . . . . . . . . . . . . . . . . 30
SECTION 2.13. Pro Rata Treatment . . . . . . . . . . . . 31
SECTION 2.14. Sharing of Setoffs . . . . . . . . . . . . 32
SECTION 2.15. Taxes. . . . . . . . . . . . . . . . . . . 32
SECTION 2.16. Payments and Computations. . . . . . . . . 35
SECTION 2.17. Issuance of Letters of Credit. . . . . . . 35
SECTION 2.18. Payment of Letters of Credit;
Reimbursement . . . . . . . . . . . . . . .36
SECTION 2.19. Agent's Actions with respect to Letters of
Credit . . . . . . . . . . . . . . . . . . 38
SECTION 2.20. Letter of Credit Fees. . . . . . . . . . . 38
III. COLLATERAL SECURITY. . . . . . . . . . . . . . . . . . . 38
SECTION 3.01. Security Documents . . . . . . . . . . . . 38
SECTION 3.02. Filing and Recording . . . . . . . . . . . 38
IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 39
SECTION 4.01. Organization, Legal Existence. . . . . . . 39
SECTION 4.02. Authorization. . . . . . . . . . . . . . . 39
SECTION 4.03. Governmental Approvals . . . . . . . . . . 40
SECTION 4.04. Binding Effect . . . . . . . . . . . . . . 40
SECTION 4.05. Material Adverse Change. . . . . . . . . . 40
SECTION 4.06. Litigation; Compliance with Laws; etc. . . 40
SECTION 4.07. Financial Statements . . . . . . . . . . . 40
SECTION 4.08. Federal Reserve Regulations. . . . . . . . 41
SECTION 4.09. Taxes. . . . . . . . . . . . . . . . . . . 41
SECTION 4.10. Employee Benefit Plans . . . . . . . . . . 42
SECTION 4.11. No Material Misstatements. . . . . . . . . 43
SECTION 4.12. Investment Company Act; Public
Utility Holding Company Act. . . . . . . . 44
SECTION 4.13. Security Interest. . . . . . . . . . . . . 44
SECTION 4.14. Use of Proceeds. . . . . . . . . . . . . . 44
SECTION 4.15. Subsidiaries . . . . . . . . . . . . . . . 44
SECTION 4.16. Title to Properties; Possession
Under Leases; Trademarks . . . . . . . . . 44
SECTION 4.17. Solvency . . . . . . . . . . . . . . . . . 45
SECTION 4.18. Permits, etc.. . . . . . . . . . . . . . . 46
SECTION 4.19. Compliance with Environmental Laws . . . . 46
SECTION 4.20. No Change in Credit Criteria or Collection
Policies . . . . . . . . . . . . . . . . 46
V. CONDITIONS OF CREDIT EVENTS. . . . . . . . . . . . . . . . 47
SECTION 5.01. All Credit Events. . . . . . . . . . . . . 47
SECTION 5.02. First Borrowing. . . . . . . . . . . . . . 47
VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 51
SECTION 6.01. Legal Existence. . . . . . . . . . . . . . 51
SECTION 6.02. Businesses and Properties. . . . . . . . . 51
SECTION 6.03. Insurance. . . . . . . . . . . . . . . . . 52
SECTION 6.04. Taxes. . . . . . . . . . . . . . . . . . . 52
SECTION 6.05. Financial Statements, Reports, etc.. . . . 52
SECTION 6.06. Litigation and Other Notices . . . . . . . 55
SECTION 6.07. ERISA. . . . . . . . . . . . . . . . . . . 56
SECTION 6.08. Maintaining Records; Access to
Properties and Inspections; Right to
Audit. . . . . . . . . . . . . . . . . . . 57
SECTION 6.09. Use of Proceeds. . . . . . . . . . . . . . 57
SECTION 6.10. Fiscal Year-End. . . . . . . . . . . . . . 57
SECTION 6.11. Further Assurances . . . . . . . . . . . . 57
SECTION 6.12. Additional Grantors and Guarantors . . . . 57
SECTION 6.13. Environmental Laws . . . . . . . . . . . . 57
SECTION 6.14. Pay Obligations to Lenders and
Perform Other Covenants. . . . . . . . . . 59
SECTION 6.15. Maintain Operating Accounts. . . . . . . . 60
SECTION 6.16. Dividends, Distributions and Payments. . 60
VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 60
SECTION 7.01. Liens. . . . . . . . . . . . . . . . . . . 60
SECTION 7.02. Sale and Lease-Back Transactions . . . . . 61
SECTION 7.03. Indebtedness . . . . . . . . . . . . . . . 62
SECTION 7.04. Intentionally Omitted. . . . . . . . . . . 62
SECTION 7.05. Consolidations, Mergers and
Sales of Assets. . . . . . . . . . . . . . 62
SECTION 7.06. Investments. . . . . . . . . . . . . . . . 63
SECTION 7.07. Capital Expenditures . . . . . . . . . . . 64
SECTION 7.08. Interest Coverage Ratios . . . . . . . . . 64
SECTION 7.09. EBITDA . . . . . . . . . . . . . . . . . . 65
SECTION 7.10. Availability . . . . . . . . . . . . . . . 66
SECTION 7.11. Rental Obligations . . . . . . . . . . . . 66
SECTION 7.12 Business . . . . . . . . . . . . . . . . . 66
SECTION 7.13. Sales of Receivables . . . . . . . . . . . 66
SECTION 7.14. Use of Proceeds. . . . . . . . . . . . . . 67
SECTION 7.15. ERISA. . . . . . . . . . . . . . . . . . . 67
SECTION 7.16. Accounting Changes . . . . . . . . . . . . 67
SECTION 7.17. Prepayment or Modification of
Indebtedness; Modification of
Charter Documents . . . . . . . . . . . . .67
SECTION 7.18. Transactions with Affiliates . . . . . . . 67
SECTION 7.19. Negative Pledges, Etc. . . . . . . . . . . 68
VIII. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . 68
IX. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 71
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND
OTHER COLLATERAL. . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.01. Collection of Receivables; Management of
Collateral . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.02. Receivables Documentation . . . . . . . . 77
SECTION 10.03. Status of Receivables and
Other Collateral. . . . . . . . . . . . . 77
SECTION 10.04. Monthly Statement of Account. . . . . . . 78
SECTION 10.05. Collateral Custodian. . . . . . . . . . . 78
XI. GUARANTEES. . . . . . . . . . . . . . . . . . . . . . . . 78
XII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.01. Notices . . . . . . . . . . . . . . . . . 80
SECTION 12.02. Survival of Agreement . . . . . . . . . . 80
SECTION 12.03. Successors and Assigns; Participations. . 80
SECTION 12.04. Expenses; Indemnity . . . . . . . . . . . 83
SECTION 12.05. Applicable Law. . . . . . . . . . . . . . 85
SECTION 12.06. Right of Setoff . . . . . . . . . . . . . 85
SECTION 12.07. Payments on Business Days . . . . . . . . 85
SECTION 12.08. Waivers; Amendments . . . . . . . . . . . 85
SECTION 12.09. Severability. . . . . . . . . . . . . . . 87
SECTION 12.10. Entire Agreement; Waiver of Jury
Trial, etc. . . . . . . . . . . . . . . . 87
SECTION 12.11. Confidentiality . . . . . . . . . . . . . 87
SECTION 12.12. Submission to Jurisdiction. . . . . . . . 88
SECTION 12.13. Counterparts; Facsimile Signature . . . . 88
SECTION 12.14. Headings. . . . . . . . . . . . . . . . . 89
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Opinion of Counsel
EXHIBIT C Form of Security Agreement
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Borrowing Base Certificate
EXHIBIT F Form of Inventory Designations Certificate
SCHEDULES
SCHEDULE 1.01 Citibank Letters of Credit
SCHEDULE 1.02 Account Debtors
SCHEDULE 2.01 Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.10 Pension Plans and Multiemployer Plans
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Matters
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
<PAGE>
CREDIT AGREEMENT dated as of January 29, 1996,
among AMERICAN BANK NOTE COMPANY, a New York
corporation ("ABN"), AMERICAN BANK NOTE
HOLOGRAPHICS, INC. , a Delaware corporation
("ABNH") (each of ABN and ABNH, a "Borrower",
and, collectively, the "Borrowers"), the
Guarantors named herein, AMERICAN BANKNOTE
CORPORATION, a Delaware corporation formerly known
as United States Banknote Corporation ("ABNC"),
the lenders named in Schedule 2.01 annexed hereto
(collectively, the "Lenders"), and CHEMICAL BANK,
as agent for the Lenders (in such capacity, the
"Agent").
The Borrowers have applied to the Lenders for Loans
(such term and all other capitalized terms used in this paragraph
having the respective meanings ascribed to such terms above or
hereinafter) in the form of Revolving Credit Loans to the
Borrowers at any time and from time to time prior to the
Revolving Credit Termination Date in an aggregate principal
amount not in excess of $20,000,000 at any time outstanding. The
proceeds of the Revolving Credit Loans shall be used (i) to open
Letters of Credit, (ii) for Permitted Acquisitions, (iii) to
purchase foreign exchange and hedging instruments in the ordinary
course of business and (iv) for general working capital purposes.
The Grantors will provide Collateral in accordance with the
provisions of this Agreement and the Security Documents. The
Lenders are severally, and not jointly, willing to extend such
Loans to the Borrowers subject to the terms and conditions
hereinafter set forth. Accordingly, ABNC, the Borrowers, the
Guarantors, the Lenders and the Agent hereby agree as follows:
I. DEFINITIONS
SECTION 1.01. Certain Defined Terms. For purposes
hereof, the following terms shall have the meanings specified
below:
"ABN" shall have the meaning assigned to such term in
the preamble to this Agreement.
"ABNC" shall have the meaning assigned to such term in
the preamble to this Agreement.
"ABNH" shall have the meaning assigned to such term in
the preamble to this Agreement.
"ABN Availability" shall mean at any time (i) the
lesser at such time of (x) the Total Commitment and (y) the ABN
Borrowing Base, minus (ii) the sum at such time of (x) the unpaid
principal balance of, and accrued interest and fees on, the
Revolving Credit Loans made to ABN and (y) the Letter of Credit
Usage with respect to Letters of Credit issued for the account of
ABN.
"ABNH Availability" shall mean at any time (i) the
lesser at such time of (x) the Total Commitment and (y) the
ABNH Borrowing Base, minus (ii) the sum atsuch time of (x)
the unpaid principal balance of, and accrued interest and fees
on, the Revolving Credit Loans made to ABNH and (y) the
Letter of Credit Usage with respect to Letters of Credit issued
for the account of ABNH.
"ABN Borrowing Base" shall have the meaning assigned to
such term in Section 2.01 hereof.
"ABNH Borrowing Base" shall have the meaning assigned
to such term in Section 2.01 hereof.
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the product of (i) the LIBO Rate in effect for such
Interest Period and (ii) Statutory Reserves. For purposes
hereof, "Statutory Reserves" shall mean a fraction (expressed as
a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including, without limitation, any
marginal, special, emergency, or supplemental reserves) expressed
as a decimal established by the Board and any other banking
authority to which any Lender is subject with respect to the
Adjusted LIBO Rate for Eurocurrency Liabilities (as defined in
Regulation D). Such reserve percentages shall include, without
limitation, those imposed under Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as
such shall be deemed to be subject to such reserve requirements
without benefit of or credit for proration, exceptions or offsets
which may be available from time to time to any Lender under
Regulation D. Statutory Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve
percentage.
"Adjustment Date" shall mean the first day of the
fiscal quarter commencing after the date of delivery to the Agent
of monthly financial statements required pursuant to Section
6.05(b) and/or audited Fiscal Year end financial statements
required pursuant to Section 6.05(a), as the case may be, and the
corresponding compliance certificates required pursuant to
Section 6.05(c), together with a management prepared schedule,
demonstrating to the satisfaction of the Agent compliance by the
Borrowers with Sections 7.07, 7.08, 7.09 and 7.10 hereof for each of
the three (3) consecutive fiscal quarters most recently ended.
"Affiliate" of any person shall mean any other person
which, directly or indirectly, controls or is controlled by or is
under common control with such person and, without limiting the
generality of the foregoing, includes (i) any person which
beneficially owns or holds 5% or more of any class of voting
securities of such person or 5% or more of the equity interest in
such person, (ii) any person of which such person beneficially
owns or holds 5% or more of any class of voting securities or in
which such person beneficially owns or holds 5% or more of the
equity interest in such person and (iii) any director, officer or
employee of such person. For the purposes of this definition,
the term "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as used
with respect to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise;
provided, however, that for purposes of the definition of
"Eligible Receivables," the percentage interest which must
be owned or held in a person in order for such person to be
deemed an Affiliate under clause (i) or (ii) above shall be
10%; and, provided, further, that in any event International
Verifact, Inc., shall not be deemed an Affiliate hereunder or
under any other Loan Document.
"Agent" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Alternate Base Loan" shall mean a Loan based on the
Alternate Base Rate in accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate
per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the greatest of (a) the Prime Rate in effect on such
day, (b) the Base CD Rate in effect on such day plus 1%, and
(c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by the Agent at its
principal office in New York City as its prime rate in effect at
such time. "Base CD Rate" shall mean the sum of (a) the product
of (i) the Three-Month Secondary CD Rate and (ii) Statutory
Reserves and (b) the Assessment Rate. "Three-Month Secondary CD
Rate" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the
next preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of
New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such rate
shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day shall not be a Business
Day, on the next preceding Business Day) by the Agent from three
New York City negotiable certificate of deposit dealers of
recognized standing selected by it. "Statutory Reserves" shall
mean a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one
minus the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a
decimal, established by the Board and any other banking authority
to which the Agent is subject with respect to the Base CD Rate,
for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months.
Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Assessment Rate" shall mean the annual assessment rate (net of
refunds and rounded upwards, if necessary, to the next 1/16 of
1%) estimated by the Agent (in good faith, but in no event in
excess of statutory or regulatory maximums) to be payable by the
Agent to the Federal Deposit Insurance Corporation (or any
successor) for insurance by such Corporation (or such successor)
of time deposits made in dollars at the Agent's domestic offices
during the current calendar year. "Federal Funds Effective Rate"
shall mean, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of
such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain
the Base CD Rate or the Federal Funds Effective Rate, or both,
for any reason, including, the inability or failure of the Agent
to obtain sufficient quotations in accordance with the terms
hereof, the Alternate Base Rate shall be determined without
regard to clause (b) or (c), or both, of the first sentence of
this definition, as appropriate, until the circumstances giving
rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"Applicable Lending Office" shall mean, with respect to
each Lender, such Lender's Domestic Lending Office in the case of
an Alternate Base Loan and such Lender's Eurodollar Lending
Office in the case of a Eurodollar Loan.
"Archives" shall mean molds, dyes and other items of
historical interest no longer used in the ordinary course of
Borrowers' business.
"Asset Transfer" shall have the meaning assigned to
such term in Section 7.05 hereof.
"Assignment and Acceptance" shall mean an assignment
and acceptance entered into by a Lender and an assignee and
accepted by the Agent, in substantially the form of Exhibit D
annexed hereto.
" Bank of Boston Indenture" shall mean the Indenture
dated as of May 1, 1994 between ABNC and The First National Bank
of Boston, as trustee, with respect to the issuance of those
certain 11 5/8 % Series A Senior Notes due August 1, 2002 and 11
5/8% Series B Senior Notes due 2002, in the aggregate principal
amount of $65,000,000, as in effect on the Closing Date.
"Board" shall mean the Board of Governors of the
Federal Reserve System of the United States.
"Borrowers" shall have the meaning assigned to such
term in the preamble to this Agreement.
"Borrowing Base" shall have the meaning assigned to
such term in Section 2.01 hereof.
"Business Day" shall mean any day, other than a
Saturday, Sunday or legal holiday in the State of New York, on
which banks are open for substantially all their banking business
in New York City except that, if any determination of a "Business
Day" shall relate to a Eurodollar Loan, the term "Business Day"
shall in addition exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean the cost of any fixed
asset or improvement, or replacement, substitution, or addition
thereto, having a useful life of one year or more, including,
without duplication, as a cost the aggregate amount of expenses,
charges, goods exchanged or services rendered or payments due or
arising in connection with the direct or indirect acquisition of
such assets or improvements, replacements, substitutions or
additions by way of increased product or service charges or
offset items or barter exchange or in connection with Capital
Leases, and the principal payment amount of any Indebtedness
assumed or incurred in connection therewith.
"Capital Lease" shall mean any lease of any property
(whether real, personal or mixed) by a Borrower as lessee which,
in conformity with GAAP consistently applied, is, or is required
to be, accounted for as a capital lease on the balance sheet of
such Borrower.
"Capitalized Lease Obligation" shall mean an obligation
to pay rent or other amounts under any Capital Lease, and for
purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP,
consistently applied.
"Cash Interest Expense" shall mean, with respect to any
person for any period, the Interest Expense of such person for
such period less all non-cash items constituting Interest Expense
during such period (including, without limitation, amortization
of debt discounts and payments of interest on Indebtedness by
issuance of Indebtedness and amortization of reserve interest
accrual).
"Change of Control" shall mean the occurrence of any
of the following events:
(i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934
(as amended from time to time, the "Exchange Act")), other
than any employee benefit plan of ABNC or any of its
subsidiaries, shall file a Schedule 13D or 14D-1 under the
Exchange Act disclosing that such person or group has become
the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act) of more than twenty-five percent (25%) of the
total voting power of the then outstanding voting stock of
ABNC; or (ii) at any time ABNC ceases to own or control
100% of the voting stock of each of the Borrowers; provided,
however, that ABNC shall be permitted to transfer or issue
stock of either Borrower for the sole purpose of doing
Permitted Acquisitions so long as ABNC shall at all times
own and control at least seventy-five percent (75%) of the
voting stock of each of the Borrowers.
"Chemical Bank Indenture" shall mean the Indenture
dated as of May 15, 1992 between ABNC and Chemical Bank, as
trustee, with respect to the issuance of those certain 10 3/8 %
Senior Notes due June 1, 2002 in the aggregate principal amount
of $126,500,000, as in effect on the Closing Date.
"Citibank Agreement" shall mean the Credit Agreement
dated as of May 26, 1992 among ABN, ABNC, ABNH, the banks party
thereto and Citibank, N.A., as agent for the banks, as amended,
together with the "New Credit Agreement" established by way of
the Letter Agreements dated as of August 31, 1995 and September
30, 1995 among the aforementioned parties.
"Citibank L/C Cash Collateral" shall mean an amount
of up to $3,840,181.82 in cash of the Borrower deposited
in an account with Citibank, N.A. (designated Citibank, N.A.,
as Agent, Cash Collateral Account FBO American Bank Note Company
Investment Account No.3831-1541) which secures the reimbursement
obligations of the Borrower with respect to the Citibank Letters
of Credit.
"Citibank Letters of Credit" shall mean the Letters
of Credit issued by Citibank, N.A., for the account of the
Borrower pursuant to the Citibank Agreement and listed on
Schedule 1.01 hereto.
"Closing Date" shall mean the date on which all of the
conditions to the occurrence of the first Credit Event hereunder
shall have been satisfied but in any event not later than January
29, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all collateral and security as
described in the Security Documents.
"Combined Interest Coverage Ratio" shall mean, with
respect to the Borrowers and their Consolidated subsidiaries
for any period, the ratio of (i) the remainder of (x) EBITDA of
the Borrowers and their Consolidated subsidiaries less (y)
Capital Expenditures (including, without limitation,
Capitalized Lease Obligations) of the Borrowers and their
Consolidated subsidiaries to (ii) the sum of (x) the Cash
Interest Expense of the Borrowers and their Consolidated
subsidiaries plus (y) cash or other property, if any,
dividended or otherwise distributed (including, without
limitation, by means of loans or advances) by any Borrower
or any subsidiary of any Borrower to ABNC (other than, if
no Default or Event of Default shall have occurred and is
continuing at the time of distribution, (i) cash constituting
proceeds of an Asset Transfer and (ii) Citibank L/C
Cash Collateral).
"Commitment Letter" shall mean that certain letter
dated as of September 20, 1995 from Chemical Bank to ABNC,
accepted and agreed to by the Borrowers, as extended through
January 29, 1996.
"Compliance Certificate" shall have the meaning
assigned to such term in Section 6.16 hereof.
"Consolidated" shall mean, in respect of any person, as
applied to any financial or accounting term, such term determined
on a consolidated basis in accordance with GAAP (except as
otherwise required herein) for the person and all consolidated
subsidiaries thereof.
"Consolidated Interest Coverage Ratio" shall mean with
respect to ABNC and its Consolidated subsidiaries for any period,
the ratio of (i) the remainder of (x) EBITDA of ABNC and its
Consolidated subsidiaries less (y) Capital Expenditures of ABNC
and its Consolidated subsidiaries, and dividends of ABNC, to
(ii) Cash Interest Expense of ABNC and its subsidiaries.
"Contaminant" shall mean all Hazardous Materials and
all those substances which are regulated by or form the basis of
liability under Federal, state or local environmental, health and
safety statutes or regulations including, without limitation,
asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances, or any other material or substance which constitutes
a material health, safety or environmental hazard to any person
or property.
"Credit Event" shall mean each borrowing and each
issuance of a Letter of Credit hereunder.
"Customer" shall mean and include the account debtor or
obligor with respect to any Receivable.
"Default" shall mean any condition, act or event which,
with notice or lapse of time or both, would constitute an Event
of Default.
"dollars" or the symbol "$" shall mean dollars in
lawful currency of the United States of America.
"Domestic Lending Office" shall mean, with respect to
any Lender, the office of such Lender specified as its "Domestic
Lending Office" opposite its name in Schedule 2.02 annexed
hereto, or such other office of such Lender as such Lender may
from time to time specify to the Borrowers and the Agent.
"EBITDA" shall mean, with respect to any person for any
period, the sum of (i) Net Income, (ii) Interest Expense,
(iii) depreciation and amortization of assets, (iv) federal,
state and local taxes, (v) other noncash charges properly
deducted in calculating Net Income and (vi) foreign exchange
losses or gains included in calculating Net Income, in each case
of such person for such period, computed and calculated in
accordance with GAAP.
"Eligible Inventory" shall mean inventory of a Borrower
comprised solely of raw materials and finished goods which is, in
the reasonable opinion of the Agent, not obsolete, work-in-process,
slow-moving or unmerchantable and is and at all times
shall continue to be reasonably acceptable to the Agent in all
respects; provided, however, that Eligible Inventory shall in no
event include inventory which (i) is not located at one of the
addresses for locations of Collateral set forth on Schedule I to
the Security Agreement (it being hereby agreed that the Agent
may, in its sole discretion, require that a mortgagee and/or
landlord waiver be obtained with respect to any such location in
order that the applicable Inventory may be eligible) or (ii) has
been returned or rejected by a Customer. Standards of
eligibility may be fixed and revised from time to time solely by
the Agent in the Agent's reasonable judgment. In determining
eligibility, the Agent may, but need not, rely on reports and
schedules furnished by the Borrowers, but reliance by the Agent
thereon from time to time shall not be deemed to limit the right
of the Agent to revise standards of eligibility at any time as to
both present and future inventory of the Borrowers.
"Eligible Receivables" shall mean Receivables created
by a Borrower in the ordinary course of business arising out of
the sale or lease of goods or rendition of services by the
Borrowers, which are and at all times shall continue to be
reasonably acceptable to the Agent in all respects. Standards of
eligibility may be fixed and revised from time to time solely by
the Agent in the Agent's reasonable judgment. In general,
without limiting the foregoing, a Receivable shall in no event be
deemed to be an Eligible Receivable unless: (a) all payments due
on the Receivable have been invoiced and the underlying goods
have been shipped; (b) the payment due on the Receivable is not
more than 90 days past the invoice date; (c) the payments due on
more than 50% of all Receivables from the same Customer are less
than 90 days past the invoice date; (d) the Receivable arose from
a completed, outright and lawful sale of goods, to which title
has passed to the Customer, by or on behalf of a Borrower; (e)
the Receivable is in full conformity with the representations and
warranties made by the Borrowers to the Agent and the Lenders
with respect thereto and is free and clear of all security
interests and Liens of any nature whatsoever other than any
security interest deemed to be held by a Borrower or any security
interest created pursuant to the Security Documents or permitted
by Section 7.01 hereof; (f) the Receivable constitutes an
"account" or "chattel paper" within the meaning of the Uniform
Commercial Code of the state in which the Receivable is located;
(g) (i) the Customer has not asserted that the Receivable, and
such Borrower is not aware that the Receivable, (x) arises out of
a bill and hold (unless the Agent shall have been provided with a
letter from the applicable Customer confirming that such Customer
is obligated to pay for the goods even though not yet delivered
to the Customer), consignment or progress billing arrangement or
(y) is subject to any setoff, contras, net-out contract, offset,
deduction, dispute, credit, counterclaim or other defense arising
out of the transactions represented by the Receivables or
independently thereof (provided, that any Receivable deemed
ineligible pursuant to this clause (g)(i)(y) shall only be
ineligible to the extent of the applicable setoff, contra,
offset, deduction, dispute, credit counterclaim or other
defense), (ii) if the Customer has not finally accepted the goods
from the sale out of which the Receivable arose, such Borrower is
not aware that the Customer has objected to its liability thereon
or returned, rejected or repossessed any of such goods, except
for complaints made or goods returned in the ordinary course of
business for which, in the case of goods returned, goods of equal
or greater value have been shipped in return; (h) the Receivable
arose in the ordinary course of business of such Borrower; (i)
the Customer is not (x) the United States government or the
government of any state or political subdivision thereof or
therein, or any agency or department of any thereof (unless the
applicable Borrower has, to the satisfaction of the Agent, taken
all actions necessary to comply with the Federal Assignment of
Claims Act or similar state statutes) or (y) an Affiliate of any
Loan Party, (j) the Customer is a United States person or an
obligor in the United States or, if the Customer is not a person
or obligor of the United States, the applicable Borrower has
purchased insurance in form and amounts satisfactory to the Agent
with respect to such Receivable or a letter of credit in form and
substance satisfactory to the Agent covering such Receivable has
been collaterally assigned to the Agent; provided, however, that any
Receivable as to which any of the persons listed on Schedule 1.02
hereto shall be the account debtors need not be insured or backed
by a letter of credit or other credit instrument to be eligible
hereunder (but must otherwise comply with the requirements of
eligibility set forth herein);
(k) the Receivable complies with all material requirements of all
applicable laws and regulations, whether Federal, state or local
(including, without limitation, usury laws and laws, rules and
regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy); (l) to the knowledge of the
Borrowers, the Receivable is in full force and effect and
constitutes a legal, valid and binding obligation of the Customer
enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles;
(m) the Receivable is denominated in and provides for payment by
the Customer in dollars; provided, however, that any Receivable
as to which American Express Europe, Limited shall be the
Customer may be denominated in foreign currencies but the Agent
may in its reasonable discretion establish reserves against
availability with respect thereto; (n) the Receivable has not
been and is not required to be charged off or written off as
uncollectible in accordance with GAAP or the customary business
practices of the Borrowers; (o) the Agent on behalf of the
Lenders possesses a valid, perfected first priority security
interest in such Receivable as security for payment of the
Obligations; and (p) the Agent is satisfied with the credit
standing of the Customer in relation to the amount of credit
extended.
"Environmental Claim" shall mean any written notice of
violation, claim, demand, abatement or other order by any
governmental authority or any person for personal injury
(including sickness, disease or death), tangible or intangible
property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for
fines, penalties or deed or use restrictions, resulting from or
based upon (i) the existence, or the continuation of the
existence, of a Release (including, without limitation, sudden or
non-sudden, accidental or nonaccidental Releases), of, or
exposure to, any Contaminant at, in, by or from any of the
properties of the Borrowers or their subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment
or disposal of Contaminants in connection with the operation of
any of the properties of the Borrowers or their subsidiaries or
(iii) the violation, or alleged violation by Borrowers or any of
their subsidiaries, of any statutes, ordinances, orders, rules,
regulations, Permits or licenses of or from any governmental
authority, agency or court relating to environmental matters
connected with any of the properties of the Borrowers or their
subsidiaries, under any applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act (42
U.S.C. s 9601 et seq.), the Hazardous Material Transportation Act
(49 U.S.C. s 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. s 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. s 1251 et seq.), the Oil
Pollution Act of 1990 (P.L. 101-380), the Safe Drinking Water Act
(42 U.S.C. s 300(f), et seq.), the Clear Air Act (42 U.S.C.
s 7401 et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. s 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. s 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. s 651 et seq.), as such laws
have been and hereafter may be amended or supplemented, and any
related or analogous present or future Federal, state or local,
statutes, rules, regulations, ordinances, licenses, permits and
interpretations and orders of regulatory and administrative
bodies.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder, each as in effect and modified from time
to time.
"ERISA Affiliate" shall mean any trade or business
(whether or not incorporated) which together with any of the
Borrowers or any subsidiary of any thereof would be treated as a
single employer under the provisions of Title I or Title IV of
ERISA.
"Eurodollar Lending Office" shall mean, with respect to
any Lender, the office of such Lender specified as its
"Eurodollar Lending Office" opposite its name in Schedule 2.03
annexed hereto (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such
Lender may from time to time specify to the Borrowers and the
Agent.
"Eurodollar Loan" shall mean a Loan based on the
Adjusted LIBO Rate in accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to
such term in Article VIII hereof.
"Final Maturity Date" shall mean October 30, 1998.
"Financial Officer" shall mean, with respect to any
person, the chief financial officer or treasurer of such person.
"Fiscal Year" shall mean the fiscal year of each of the
Borrowers for accounting purposes which in each case ends on or
about December 31 of each year.
"GAAP" shall have the meaning assigned to such term in
Section 1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as
such terms are defined in any of the Security Documents.
"Guarantee" shall mean any obligation, contingent or
otherwise, of any person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or obligation of any
other person in any manner, whether directly or indirectly, and
shall include, without limitation, any obligation of such person,
direct or indirect, to (i) purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or
obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness or
obligation, (ii) purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness or
obligation of the payment of such Indebtedness or obligation, or
(iii) maintain working capital, equity capital, available cash or
other financial condition of the primary obligor so as to enable
the primary obligor to pay such Indebtedness or obligation;
provided, however, that the term Guarantee shall not include
endorsements for collection or collections for deposit, in either
case in the ordinary course of business.
"Guarantor" shall mean, collectively, each Borrower
with respect to the Obligations of the other Borrower and any
subsidiary of any of the Borrowers which becomes a guarantor of
the Obligations after the date hereof.
"Hazardous Material" shall mean any pollutant,
contaminant, chemical, or industrial or hazardous, toxic or
dangerous waste, substance or material, defined or regulated as
such in (or for purposes of) any Environmental Law; provided, in
the event that any Environmental Law is amended so as to broaden
the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment;
and provided, further, to the extent that the applicable laws of
any state establish a meaning for "hazardous material,"
"hazardous substance," "hazardous waste," "solid waste" or "toxic
substance" which is broader than that specified in any
Environmental Law, such broader meaning shall apply.
"Indebtedness" shall mean, with respect to any person,
(a) all obligations of such person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations
of such person evidenced by bonds, debentures, notes or other
similar instruments or upon which interest charges are
customarily paid, (c) all obligations of such person for the
deferred purchase price of property or services, except current
accounts payable arising in the ordinary course of business and
not overdue beyond such period as is commercially reasonable for
such person's business, (d) all obligations of such person under
conditional sale or other title retention agreements relating to
property purchased by such person and all Capitalized Lease
Obligations, (e) all net payment obligations of such person with
respect to interest rate, currency protection, "cap," "collar" or
other such hedging agreement, (f) all obligations of such person
as an account party under any letter of credit or in respect of
bankers' acceptances, (g) all obligations of any third party
secured by property or assets of such person (regardless of
whether or not such person is liable for repayment of such
obligations) not to exceed the fair market value of such
property, (h) all Guarantees of such person, (i) the redemption
price of all redeemable preferred stock of such person, but only
to the extent that such stock is redeemable at the option of the
holder or requires sinking fund or similar payments at any time
prior to the Final Maturity Date, and (j) all obligations,
liabilities and indebtedness in respect of equity or debt
commitments or to pay liquidated damages under any contract,
Guarantee, support or maintenance agreement or otherwise (without
duplication with clause (h)).
"Indemnitees" shall have the meaning assigned to such
term in Section 12.04(c) hereof.
"Indentures" shall mean the Bank of Boston Indenture
and the Chemical Bank Indenture.
"Information" shall have the meaning assigned to such
term in Section 12.11 hereof.
"Interest Expense" shall mean, with respect to any
person for any period, the interest expense of such person during
such period determined on a Consolidated basis in accordance with
GAAP, and shall in any event include, without limitation, (i) the
amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Indebtedness to the
extent included in interest expense, (iii) the portion of any
Capitalized Lease Obligation allocable to interest expense, (iv)
payments of interest expense in kind and (v) reserve interest
accrual amounts.
"Interest Margin" shall mean (x) from the Closing Date
through the Adjustment Date, if any, one percent (1%) with
respect to any Alternate Base Loan and two and one half percent
(2 1/2%) with respect to any Eurodollar Loan and (y) on and after
the Adjustment Date, if any, one half of one percent (1/2%) with
respect to any Alternate Base Loan and two percent (2%) with
respect to any Eurodollar Loan; provided, however, that if the
Borrowers shall fail to deliver the financial statements and
certificates (within the applicable period(s) set forth in
Section 6.05 hereof) required to demonstrate compliance with
financial covenants as specified in the definition "Adjustment
Date", or the other conditions to the occurrence of the Adjustment
Date shall not have been satisfied, then the Interest Margin
provided for in clause (x) hereof shall be applicable until the
financial statements and certificates shall be so delivered
and such conditions shall have been satisfied; provided further,
that no Adjustment Date shall be deemed to have occurred
hereunder so long as a Default or Event of Default shall have
occurred and be continuing on what would otherwise be an
Adjustment Date hereunder.
"Interest Payment Date" shall mean (i) as to each Loan,
the first Business Day of each subsequent month for the prior
month, commencing February 1, 1996, and, in addition, (ii) with
respect to any Eurodollar Loan, the first Business Day
immediately following the last day of the Interest Period
applicable thereto and, in addition, in respect of any Eurodollar
Loan of more than three (3) months duration, each earlier day
which is three (3) months after the first day of such Interest
Period.
"Interest Period" shall mean, as to any Eurodollar
Loan, the period commencing on the date of such Eurodollar Loan
and ending on the numerically corresponding day (or, if there is
no numerically corresponding day, on the last day) in the
calendar month that is one (1), two (2), three (3) or six (6)
months thereafter, as the Borrowers may elect with respect to
Eurodollar Loans; provided, however, that (x) if an Interest
Period would end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless, with respect to Eurodollar Loans, such next
succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding
Business Day, (y) no Interest Period shall end later than the
Final Maturity Date and (z) interest shall accrue from and
including the first day of an Interest Period to but excluding
the last day of such Interest Period.
"Lender" shall have the meaning assigned to such term
in the preamble to this Agreement.
"Letter of Credit" shall have the meaning assigned such
term in Section 2.17 hereof.
"Letter of Credit Usage" shall mean at any time,
(i) the aggregate undrawn amount of all outstanding Letters of
Credit at such time plus (ii) the unreimbursed drawings at such
time under all such Letters of Credit.
"LIBO Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the rate
at which dollar deposits approximately equal in principal amount
to the Eurodollar Loan of the Agent and for a maturity equal to
the applicable Interest Period are offered in immediately
available funds to the London branch of the Agent by leading
banks in the London interbank market for Eurodollars at approxi-
mately 11:00 A.M., London time, two (2) Business Days prior to
the first day of such Interest Period.
"Lien" shall mean, with respect to any asset, (i) any
mortgage, lien, pledge, encumbrance, charge or security interest
in or on such asset, (ii) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset, (iii) in the
case of securities, any purchase option, call or similar right of
a third party with respect to such securities or (iv) any other
right of or arrangement with any creditor to have such creditor's
claim satisfied out of such assets, or the proceeds therefrom,
prior to the general creditors of the owner thereof.
"Loan" shall mean any Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, each
Security Document, each Guarantee executed and delivered at any
time with respect to the Obligations, the Notes and each other
document, instrument, or agreement now or hereafter delivered to
the Agent or any Lender in connection herewith or therewith.
"Loan Party" shall mean ABNC, the Borrowers and each
subsidiary of the Borrowers (other than those subsidiaries
designated on Schedule 4.15 hereto as "inactive").
"Margin Stock" shall have the meaning assigned to such
term in Regulation U.
"Material Adverse Effect" shall mean a material adverse
effect on (i) the business, assets, prospects, operations or
financial or other condition of any person or its subsidiaries,
(ii) the ability of any Loan Party to perform or pay the
Obligations in accordance with the terms hereof or of any other
Loan Document, (iii) the rights of, or benefits available to, the
Lenders or the Agent under any Loan Document or (iv) the Agent's
Lien on any material portion of the Collateral or the priority of
such Lien.
"Multiemployer Plan" shall mean a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA and which is subject to
Title IV of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any
time, the aggregate value, computed at the lower of cost (on a
FIFO basis) and current market value, of Eligible Inventory of
the Borrowers.
"Net Amount of Eligible Receivables" shall mean and
include at any time, without duplication, the gross amount of
Eligible Receivables at such time less (i) sales, excise or
similar taxes and (ii) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed.
"Net Income" shall mean, with respect to any person and
its subsidiaries, on a Consolidated basis, for any period, the
aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items
of income for such person less the aggregate for such person of
any and all items that are treated as expenses under GAAP, and
less Federal, state and local income taxes, but excluding any
extraordinary gains or losses or any gains or losses from the
sale or disposition of assets other than in the ordinary course
of
business, all computed and calculated in accordance with GAAP
applied on a consistent basis.
"Notes" shall mean the Revolving Credit Notes.
"Obligations" shall mean all obligations, liabilities
and Indebtedness of the Borrowers to the Lenders and the Agent,
whether now existing or hereafter created, direct or indirect,
due or not, whether created directly or acquired by assignment,
participation or otherwise, including without limitation all
obligations, liabilities and Indebtedness of the Borrowers with
respect to the Security Documents and other Loan Documents, the
principal of and interest on the Revolving Credit Loans and the
payment or performance of all other obligations, liabilities, and
Indebtedness of the Borrowers to the Lenders and the Agent
hereunder, under the Letters of Credit or under any one or more
of the other Loan Documents, including without limitation all
fees, costs, expenses and indemnity obligations hereunder and
thereunder.
"Ordinary Course of Business" shall mean, with
respect to the sale or other transfer of assets contemplated
by Section 7.05(iv) hereof, the transfer, for fair market value
cash consideration, of assets of the Borrowers consistent with
historical practices of the Borrowers.
"Other Taxes" shall have the meaning assigned to such
term in Section 2.15(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Pension Plan" shall mean any Plan which is subject to
the provisions of Title IV of ERISA.
"Permits" shall have the meaning assigned to such term
in Section 4.18 hereof.
"Permitted Acquisition" shall have the meaning assigned
to such term in Section 7.05 hereof.
"Permitted Dividend" shall have the meaning assigned to
such term in Section 6.16 hereof.
"person" shall mean any natural person, corporation,
business trust, association, company, joint venture, partnership
or government or any agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA and which is maintained (in
whole or in part) for employees of the Borrowers, any subsidiary
or any ERISA Affiliate.
"Receivables" shall mean and include all of the
Borrowers' accounts, instruments, documents, chattel paper and
general intangibles, arising out of the sale or lease of goods or
rendition of services, whether secured or unsecured, whether now
existing or hereafter created or arising, and whether or not
specifically assigned to the Agent for the ratable benefit of the
Lenders.
"Register" shall have the meaning assigned to such term
in Section 12.03(e) hereof.
"Regulation D" shall mean Regulation D of the Board, as
the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board, as
the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board, as
the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board, as
the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board, as
the same is from time to time in effect, and all official rulings
and interpretations thereunder or thereof.
"Release" shall mean any releasing, spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping, in each case
as defined in Environmental Law, and shall include any
"Threatened Release," as defined in Environmental Law.
"Remedial Work" shall mean any investigation, site
monitoring, containment, cleanup, removal, restoration or other
remedial work of any kind or nature with respect to any property
of the Borrowers or their subsidiaries (whether such property is
owned, leased, subleased or used), including, without limitation,
with respect to Contaminants and the Release thereof.
"Reportable Event" shall mean a Reportable Event as
defined in Section 4043(b) of ERISA other than a Reportable Event
for which the 30-day notice requirement is waived pursuant to
regulations.
"Required Lenders" shall mean Lenders having 67% of the
Total Commitment.
"Responsible Officer" shall mean, with respect to any
person, any vice president or president, or the chief financial
officer, treasurer or controller, of such person.
"Revolving Credit Alternate Base Loan" shall mean a
Revolving Credit Loan that is an Alternate Base Loan.
"Revolving Credit Commitment" shall mean, with respect
to any Lender, the Revolving Credit Commitment of such Lender as
set forth in Schedule 2.01 annexed hereto, as the same may be
reduced from time to time pursuant to Section 2.07 hereof.
"Revolving Credit Commitment Fee" shall have the
meaning set forth in Section 2.06(a) hereof.
"Revolving Credit Eurodollar Loan" shall mean a
Revolving Credit Loan that is a Eurodollar Loan.
"Revolving Credit Loan" shall mean a Revolving Credit
Loan made pursuant to Sections 2.01 and 2.02 hereof.
"Revolving Credit Notes" shall mean the Revolving
Credit Notes of the Borrowers, executed and delivered as provided
in Section 2.04 hereof, in substantially the form of Exhibit A
annexed hereto, as amended, modified or supplemented from time to
time.
"Revolving Credit Termination Date" shall mean the
earlier to occur of (i) the Final Maturity Date and (ii) such
date as the Revolving Credit Loans shall otherwise be payable in
full and the Revolving Credit Commitment shall terminate, expire
or be canceled in accordance with the terms of this Agreement.
"Security Agreement" shall mean the Security Agreement
dated as of the date hereof, between the Grantor(s) and the
Agent, for the benefit of the Lenders, substantially in the form
of Exhibit C annexed hereto, as amended, modified or supplemented
from time to time.
"Security Documents" shall mean the Security Agreement
and each other agreement now existing or hereafter created
providing collateral security for the payment or performance of
any Obligations.
"Senior Notes" shall mean those certain (i) 11 5/8 %
Series A Senior Notes due August 1, 2002 and 11 5/8% Series B
Senior Notes due 2002, in the aggregate principal amount of
$65,000,000 issued by ABNC pursuant to the Bank of Boston
Indenture and (ii) 10 3/8 % Senior Notes due June 1, 2002 in the
aggregate principal amount of $126,500,000 issued by ABNC
pursuant to the Chemical Bank Indenture, in each case as in
effect on the Closing Date.
"Subordinated Indebtedness" shall mean, with respect to
any of the Borrowers, Indebtedness subordinated in right of
payment to such person's monetary obligations under this
Agreement upon terms satisfactory to and approved in writing by
the Agent, to the extent it does not by its terms mature or
become subject to any mandatory prepayment or amortization of
principal prior to the Final Maturity Date.
"subsidiary" shall mean, with respect to any person,
any corporation, association or other business entity of which
securities or other ownership interests representing more than
50% of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled, directly or
indirectly, by such person or one or more subsidiaries of such
person.
"Taxes" shall have the meaning assigned to such term in
Section 2.15(a) hereof.
"Total Availability" at any time shall mean the sum of
ABN Availability and ABNH Availability.
"Total Commitment" shall mean the sum of the Lenders'
Revolving Credit Commitments, as the same may be reduced from
time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof.
"Transactions" shall have the meaning assigned to such
term in Section 4.02 hereof.
SECTION 1.02. Accounting Terms. Unless otherwise
expressly provided herein, each accounting term used herein shall
have the meaning given it under GAAP in effect from time to time
in the United States applied on a basis consistent with those
used in preparing the financial statements referred to in Section
6.05 hereof ("GAAP"); provided, however, that each reference in
Article VII hereof, or in the definition of any term used in
Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof.
II. THE LOANS
SECTION 2.01. Revolving Credit Commitments. Subject
to the terms and conditions and relying upon the representations
and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Revolving Credit Loans to the Borrowers,
at any time and from time to time from the date hereof to the
Revolving Credit Termination Date, in an aggregate principal
amount at any time outstanding not to exceed the amount of such
Lender's Revolving Credit Commitment set forth opposite its name
in Schedule 2.01 annexed hereto, as such Revolving Credit
Commitment may be reduced from time to time in accordance with
the provisions of this Agreement, including, without limitation,
Section 2.07 hereof. Notwithstanding the foregoing, (A) the
aggregate principal amount of Revolving Credit Loans outstanding
at any time to the Borrowers shall not exceed (i) the lesser of
(x) the Total Commitment (as such amount may be reduced from time
to time pursuant to this Agreement) and (y) the Borrowing Base
(as hereinafter defined) minus (ii) the Letter of Credit Usage at
such time (not to exceed $10,000,000 at any time) and minus
(iii) all accrued interest, fees and expenses at such time and
(B) the aggregate principal amount of Revolving Credit Loans
outstanding at any time to (i) ABN shall not exceed an amount
equal to the sum (the "ABN Borrowing Base") of (x) up to 85% of
the Net Amount of Eligible Accounts of ABN, plus (y) up to 50% of
the Net Amount of Eligible Inventory of ABN, minus the Letter of
Credit Usage of ABN at such time and (ii) ABNH shall not exceed
an amount equal to the sum (the "ABNH Borrowing Base" and,
together with the ABN Borrowing Base, the "Borrowing Base") of
(x) up to 85% of the Net Amount of Eligible Accounts of ABNH plus
(y) up to 50% of the Net Amount of Eligible Inventory of ABNH,
minus the Letter of Credit Usage of ABNH at such time.
Notwithstanding the foregoing, it is hereby
acknowledged and agreed that (i) the advance rate with respect to
Eligible Receivables may be reduced at any time by the Agent in
its reasonable discretion if a receivable dilution percentage in
excess of five percent (5%) is confirmed in any field examination
conducted by or on behalf of the Agent and (ii) reserves may be
reasonably established at any time by the Agent in its sole
reasonable discretion including, without limitation, reserves
with respect to (x) exposure under foreign exchange contracts,
hedging and other financial instruments and (y) collateral
locations for which landlord waiver and consent agreements in
form and substance satisfactory to the Agent have not been
obtained.
Subject to the foregoing and within the foregoing
limits, the Borrowers may borrow, repay (or, subject to the
provisions of Section 2.09 hereof, prepay) and reborrow Revolving
Credit Loans, on and after the Closing Date and prior to the
Revolving Credit Termination Date, subject to the terms,
provisions and limitations set forth herein, including, without
limitation, the requirement that no Revolving Credit Loan shall
be made hereunder if after giving effect thereto (A) with respect
to all Borrowers, the sum of (i) the aggregate principal amount
of the Revolving Credit Loans outstanding hereunder, plus (ii)
the Letter of Credit Usage, plus (iii) accrued interest, fees and
expenses, would exceed the lesser of (i) the Total Commitment
(as such amount may be reduced pursuant to the provisions of this
Agreement) and (ii) the Borrowing Base, (B) with respect to ABN,
the sum of (i) the aggregate principal amount of the Revolving
Credit Loans outstanding hereunder to ABN plus (ii) the Letter of
Credit Usage with respect to Letters of Credit issued for the
account of ABN, would exceed the lesser of (i) the Total
Commitment (as such amount may be reduced pursuant to the
provisions of this Agreement) and (ii) the ABN Borrowing Base and
(C) with respect to ABNH, the sum of (i) the aggregate principal
amount of Revolving Credit Loans outstanding hereunder to ABNH
plus (ii) the Letter of Credit Usage with respect to Letters of
Credit issued for the account of ABNH, would exceed the lesser of
(i) the Total Commitment (as such amount may be reduced pursuant
to the provisions of this Agreement) and (ii) the ABNH Borrowing
Base. In accordance with Section 6.05(i) hereof, a Responsible
Officer of each Borrower shall furnish on each date required
thereunder a separate Borrowing Base Certificate substantially in
the form of Exhibit E hereto with respect to such Borrower.
SECTION 2.02. Loans. (a) The Revolving Credit Loans
made by the Lenders on any date shall be in integral multiples of
$100,000; provided, however, that the Eurodollar Loans made on
any date shall be in a minimum aggregate principal amount of
$500,000.
(b) Loans shall be made ratably by the Lenders in
accordance with their Revolving Credit Commitments; provided,
however, that the failure of any Lender to make any Loan shall
not in itself relieve any other Lender of its obligation to lend
hereunder. The initial Revolving Credit Loans shall be made by
the Lenders against delivery of Revolving Credit Notes, payable
to the order of the Lenders, as referred to in Section 2.04
hereof.
(c) Each Loan shall be either an Alternate Base Loan
or a Eurodollar Loan as the Borrowers may request pursuant to
Section 2.03 hereof. Each Lender may fulfill its obligations
under this Agreement by causing its Applicable Lending Office to
make such Loan; provided, however, that the exercise of such
option shall not affect the obligation of the Borrowers to repay
such Loan in accordance with the terms of the applicable Note.
Not more than three (3) Eurodollar Loans may be outstanding at
any one time.
(d) Subject to the provisions of paragraph (e) below,
each Lender shall make its Revolving Credit Loans on the proposed
dates thereof by paying the amount required to the Agent in
New York, New York in immediately available funds not later than
12:00 noon, New York City time, and the Agent shall as soon as
practicable, but in no event later than 3:00 p.m., New York City
time, credit the amounts so received to the general deposit
account of the applicable Borrower with the Agent in immediately
available funds or, if Loans are not to be made on such date
because any condition precedent to a borrowing herein specified
is not met, return the amounts so received to the respective
Lenders.
(e) Each Borrower shall have the right at any time
upon prior irrevocable written, telex or facsimile notice
(promptly confirmed in writing) to the Agent given in the manner
and at the times specified in Section 2.03 with respect to the
Loans into which conversion or continuation is to be made, to
convert all or any portion of Eurodollar Loans into Alternate
Base Loans, to convert all or any portion of Alternate Base Loans
into Eurodollar Loans (specifying the Interest Period to be
applicable thereto), to convert the Interest Period with respect
to all or any portion of any Eurodollar Loans to another
permissible Interest Period, and to continue all or any portion
of any Loans into a subsequent Interest Period of the same
duration, subject to the terms and conditions of this Agreement
(including the last sentence of Section 2.02(c) hereof) and to
the following:
(i) in the case of a conversion or continuation
of fewer than all the Loans, the aggregate principal
amount of Loans converted or continued shall not be
less than $100,000 in the case of Alternate Base Loans
or $500,000 in the case of Eurodollar Loans and shall
be an integral multiple of $100,000;
(ii) accrued interest on a Loan (or portion
thereof) being converted or continued shall be paid by
the Borrowers at the time of conversion or
continuation;
(iii) if any Eurodollar Loan is converted at any
time other than the end of an Interest Period
applicable thereto, the Borrowers shall make such
payments associated therewith as are required pursuant
to Section 2.12;
(iv) any portion of a Revolving Credit Loan which
is subject to an Interest Period ending on a date that
is less than one (1) month prior to the Revolving
Credit Termination Date may not be converted into, or
continued as, a Eurodollar Loan and shall be
automatically converted at the end of such Interest
Period into an Alternate Base Loan; and
(v) no Event of Default shall have occurred and
be continuing.
The Interest Period applicable to any Eurodollar Loan
resulting from a conversion shall be specified by the applicable
Borrower in the irrevocable notice of conversion delivered
pursuant to this Section; provided, however, that if no such
Interest Period shall be specified, such Borrower shall be deemed
to have selected an Interest Period of three (3) months'
duration. If a Borrower shall not have given timely notice to
continue any Eurodollar Loan into a subsequent Interest Period
(and shall not otherwise have given notice to convert such Loan),
such Loan (unless repaid or required to be repaid pursuant to the
terms hereof) shall, subject to (iv) above, automatically be
converted into an Alternate Base Loan. The Agent shall promptly
advise the Lenders of any notice given pursuant to this Section
and of each Lender's portion of the continuation or conversion
hereunder.
SECTION 2.03. Notice of Loans. Each Borrower shall,
through a Responsible Officer of such Borrower, give the Agent
irrevocable written, telex or facsimile notice (promptly
confirmed in writing), of each borrowing by such Borrower
(including, without limitation, a conversion as permitted by
Section 2.02(e) hereof) not later than 11:00 A.M., New York City
time, (i) three (3) Business Days before a proposed Eurodollar
Loan borrowing or conversion and (ii) one (1) Business Day before
an Alternate Base Loan borrowing or conversion; provided,
however, that notwithstanding the foregoing, the Borrowers shall
give notice in the manner set forth above three (3) Business Days
before the first borrowing under this Agreement. Such notice
shall specify (w) whether the Loans then being requested are to
be Alternate Base Loans or Eurodollar Loans, (x) the date of such
borrowing (which shall be a Business Day) and amount thereof and
(y) if such Loans are to be Eurodollar Loans, the Interest Period
with respect thereto. If no election as to the type of Loan is
specified in any such notice, all such Loans shall be Alternate
Base Loans. If no Interest Period with respect to any Eurodollar
Loan is specified in any such notice, then an Interest Period of
three (3) months' duration shall be deemed to have been selected.
The Agent shall promptly advise the Lenders of any notice given
pursuant to this Section 2.03 and of each Lender's portion of the
requested borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) All
Revolving Credit Loans made by a Lender to the Borrowers shall be
evidenced by a single Revolving Credit Note, duly executed on
behalf of the Borrowers, dated the Closing Date, in substantially
the form of Exhibit A annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Revolving Credit
Commitment in respect of the Borrowers on such date. The
outstanding balance of each Revolving Credit Loan, as evidenced
by any such Revolving Credit Note, shall mature and be due and
payable on the Revolving Credit Termination Date.
(b) Each Revolving Credit Note shall bear interest
from its date on the outstanding principal balance thereof, as
provided in Section 2.05 hereof.
(c) Each Lender, or the Agent on its behalf, shall,
and is hereby authorized by the Borrowers to, endorse on the
schedule attached to the Revolving Credit Note of such Lender (or
on a continuation of such schedule attached to such Note and made
a part thereof) an appropriate notation evidencing the date and
amount of each Loan to each Borrower from such Lender, as well as
the date and amount of each payment and prepayment with respect
thereto; provided, however, that the failure of any person to
make such a notation on a Note shall not affect any obligations
of the Borrowers under such Note. Any such notation shall be
conclusive and binding as to the date and amount of such Loan or
portion thereof, or payment or prepayment of principal or
interest thereon, absent manifest error.
(d) The Borrowers hereby agree and confirm that the
obligations of the Borrowers under this Agreement and the other
Loan Documents (including, without limitation, with respect to
principal, interest, fees and other obligations) are the joint
and several undertaking of each Borrower.
SECTION 2.05. Interest on Loans. (a) Subject to the
provisions of Section 2.05(c) and Section 2.08 hereof, each
Alternate Base Loan shall bear interest at a rate per annum equal
to the Alternate Base Rate plus the applicable Interest Margin.
(b) Subject to the provisions of Section 2.05(c) and
Section 2.08 hereof, each Eurodollar Loan shall bear interest at
a rate per annum equal to the Adjusted LIBO Rate plus the
applicable Interest Margin.
(c) Interest on each Loan shall be payable in arrears
on each applicable Interest Payment Date and on the Final
Maturity Date. Interest on each Alternate Base Loan and
Eurodollar Loan shall be computed based on the number of days
elapsed in a year of 360 days. The Agent shall determine each
interest rate applicable to the Loans and shall promptly advise
the Borrowers and the Lenders of the interest rate so determined.
SECTION 2.06. Fees. (a) The Borrowers shall pay each
Lender, through the Agent, (i) on the first Business Day of each
December, March, June and September commencing March 1, 1996,
(ii) on the date of any reduction of the Revolving Credit
Commitments pursuant to Section 2.07 hereof and (iii) on the
Revolving Credit Termination Date, in immediately available
funds, a commitment fee (the "Revolving Credit Commitment Fee")
of one-half of one percent (1/2 of 1%) per annum on the average daily
unused amount of the Revolving Credit Commitment of such Lender,
during the quarter (or shorter period commencing with the date
hereof or ending with the Revolving Credit Termination Date)
ending on such date. The Revolving Credit Commitment Fee due to
each Lender under this Section 2.06 shall commence to accrue on
the date hereof and cease to accrue on the earlier of (i) the
Revolving Credit Termination Date and (ii) the date on which the
Revolving Credit Commitment of such Lender is terminated pursuant
to Section 2.07 hereof and all Obligations due and owing such
Lender are paid in full in cash. The Revolving Credit Commitment
Fee shall be calculated on the basis of the actual number of days
elapsed in a year of 360 days.
(b) The Borrowers shall pay to the Agent for its
account on the Closing Date and thereafter on each anniversary of
the Closing Date until the Revolving Credit Termination Date, an
administration fee in the amount of $25,000 per annum.
(c) On the Closing Date, in addition to the other fees
specified in the Commitment Letter, the Borrowers shall pay to
the Agent for its own account the remaining balance of a
structuring fee which is in the aggregate amount of $325,000.
SECTION 2.07. Termination and Reduction of Revolving
Credit Commitments. (a) Upon at least three (3) Business Days'
prior irrevocable written notice (or facsimile notice promptly
confirmed in writing) to the Agent, the Borrowers may at any time
in whole permanently terminate, or from time to time in part
permanently reduce, the Total Commitment, ratably among the
Lenders in accordance with the amounts of their Revolving Credit
Commitments; provided, however, that the Total Commitment shall
not be reduced at any time to an amount less than the Revolving
Credit Loans outstanding under the Revolving Credit Commitments
and the Letter of Credit Usage at such time. Each partial
reduction of the Total Commitment shall be in a minimum of
$500,000 and an integral multiple of $100,000.
(b) Simultaneously with any termination or reduction
of the Total Commitment pursuant to paragraph (a) of this
Section 2.07, the Borrowers shall pay to each Lender, through the
Agent, the Revolving Credit Commitment Fee due and owing through
and including the date of such termination or reduction on the
amount of the Revolving Credit Commitment of such Lender so
terminated or reduced.
(c) In any event, the Revolving Credit Commitment of
each Lender shall automatically and permanently terminate on the
Revolving Credit Termination Date, and all Revolving Credit Loans
and all other Obligations still outstanding on such date shall be
due and payable in full together with accrued interest thereon.
SECTION 2.08. Interest on Overdue Amounts; Alternate
Rate of Interest. (a) Upon the occurrence of an Event of
Default, the Borrowers shall on demand from time to time pay
interest, to the extent permitted by law, on all Obligations
until such time as such Event of Default shall be cured or waived
at a rate per annum equal to two percent (2%) in excess of the
rates otherwise applicable.
(b) In the event, and on each occasion, that on the
day two (2) Business Days prior to the commencement of any
Interest Period for a Eurodollar Loan the Agent shall have
determined that dollar deposits in the amount of each Eurodollar
Loan are not generally available in the London interbank market,
or that the rate at which dollar deposits are being offered will
not reflect adequately and fairly the cost to any Lender of
making or maintaining such Eurodollar Loan during such Interest
Period, or that reasonable means do not exist for ascertaining
the Adjusted LIBO Rate, the Agent shall as soon as practicable
thereafter give written notice (or facsimile notice promptly
confirmed in writing) of such determination to the Borrowers and
the Lenders, and any request by a Borrower for the making of a
Eurodollar Loan pursuant to Section 2.03 hereof or conversion or
continuation of any Loan into a Eurodollar Loan pursuant to
Section 2.02 hereof shall, until the circumstances giving rise to
such notice no longer exist, be deemed to be a request for an
Alternate Base Loan. Each determination by the Agent made
hereunder shall be conclusive absent manifest error.
SECTION 2.09. Prepayment of Loans. (a) Subject to
the terms and conditions contained in this Section 2.09 and else-
where in this Agreement (including, without limitation, Section
10.01(a)), each Borrower shall have the right to prepay any Loan
made to such Borrower at any time in whole or from time to time
in part (except in the case of a Eurodollar Loan only on the last
day of an Interest Period unless all costs associated with such
prepayment are paid in accordance with Section 2.12 hereof)
without penalty (except as otherwise provided for herein);
provided, however, that except as provided in Article X, each
such partial prepayment of a Loan shall be in an integral
multiple of $100,000.
(b) On the date of any termination or reduction of the
Total Commitment pursuant to Section 2.07(a) hereof or elsewhere
in this Agreement, the Borrowers shall pay or prepay so much of
the Revolving Credit Loans as shall be necessary in order that
each of ABN Availability, ABNH Availability and Total Availability
equals or exceeds zero following such termination or reduction.
Any prepayments required by this paragraph (b) shall be applied
to outstanding Revolving Credit Alternate Base Loans up to the
full amount thereof before they are applied to outstanding
Revolving Credit Eurodollar Loans; provided, however, that the
Borrowers shall not be required to make any prepayment of any
Eurodollar Loan pursuant to this Section until the last day of
the Interest Period with respect thereto so long as an amount
equal to such prepayment is deposited by the Borrowers in a cash
collateral account with the Agent to be held in such account on
terms satisfactory to the Agent.
(c) The Borrowers shall make prepayments of the
Revolving Credit Loans from time to time such that each of ABN
Availability, ABNH Availability and Total Availability equals or
exceeds zero at all times. Any prepayments required by this
paragraph (c) shall be applied to outstanding Revolving Credit
Alternate Base Loans up to the full amount thereof before they
are applied to outstanding Revolving Credit Eurodollar Loans;
provided, however, that the Borrowers shall not be required to
make any prepayment of any Eurodollar Loan pursuant to this
Section until the last day of the Interest Period with respect
thereto so long as an amount equal to such prepayment is
deposited by the Borrowers in a cash collateral account with the
Agent to be held in such account on terms satisfactory to the
Agent.
(d) Within five (5) days of (A) the sale or other
transfer or disposition of any assets of any of the Borrowers
(excluding (i) Asset Transfers so long as no Default or Event of
Default shall have occurred and be continuing at the time of such
Asset Transfer, (ii) sales of inventory in the ordinary course of
business and (iii) sales of machinery and equipment (so long as
(x) the proceeds of any such sale are used within 180 days of
receipt thereof to purchase replacement machinery or equipment,
(y) any proceeds of any such sale in excess of that used for
purchasing machinery and equipment within such 180 day period are
applied to repayment of the Loans as specified below and (z) no
Default or Event of Default shall have occurred and be continuing
at the time of any such purchase of replacement machinery and
equipment)), (B) the sale of the capital stock of any of the
Borrowers (subject to Section 7.05 hereof), or (C) the
consummation of the issuance of any debt or equity securities of
any of the Borrowers (subject to Section 7.05 hereof), the
Borrowers shall make a mandatory prepayment of the Loans in an
amount equal to (aa) with respect to the events described in
clauses (A) and (B) above, 100% of the proceeds received, and
(bb) with respect to clause (C) above, 100% of the proceeds
received in excess of $2,000,000 in the aggregate during the
term of this Agreement (provided, that if a Default or Event
of Default shall have occurred and be continuing at the time of
any issuance described in such clause (C), a prepayment shall be
made as set forth below in an amount equal to 100% of the
proceeds of any such issuance), in each case net of taxes due and
any reasonable expenses of sale, which proceeds shall be applied
as set forth in paragraph (f) below. Nothing contained in this
paragraph (d) shall be or be deemed to be a consent to the sale
or other transfer or disposition of any assets or stock or the
issuance of any equity or debt securities.
(e) (i) Except as provided in clause (ii) below,
promptly and in any event not more than five (5) Business Days
following the receipt by the Agent or any Borrower or any
subsidiary of any Borrower of any net proceeds of (x) any
casualty insurance required to be maintained pursuant to
Section 6.03 hereof on account of each separate loss, damage or
injury (each, a "Casualty Event") in excess of $250,000 (or, if
there shall be continuing a Default or an Event of Default, of
the full amount of net proceeds) to any asset of such Borrower or
such subsidiary (including, without limitation, any Collateral),
or (y) any business interruption insurance required to be
maintained pursuant to Section 6.03 hereof on account of any
business interruption event (each, a "BI Event") in excess of
$250,000 (or, if there shall be continuing a Default or Event of
Default, of the full amount of net proceeds), such Borrower or
subsidiary shall notify the Agent of such receipt in writing or
by telephone promptly confirmed in writing, and not later than
five (5) Business Days following receipt by the Agent or such
Borrower or subsidiary of any such proceeds, there shall become
due and payable a prepayment of the Loans in an amount equal to
100% of such proceeds. Prepayments from such net proceeds shall
be applied as set forth in paragraph (f) below.
(ii) In the case of the receipt of net proceeds
described in clause (i) above with respect to a Casualty Event or
BI Event, the Borrowers may elect, by written notice delivered to
the Agent not later than the day on which a prepayment would
otherwise be required under clause (i), (x) in the case of
proceeds received with respect to a BI Event, to use such
proceeds in the ordinary course of such Borrower's business and
(y) in the case of proceeds received with respect to any Casualty
Event, to apply all or a portion of such net proceeds for the
purpose of replacing the relevant tangible property, and, in any
such event, any required prepayment under clause (i) above shall
be reduced dollar for dollar by the amount of such election under
clause (x) or clause (y) of this sentence. An election under
this clause (ii) shall not be effective unless: (x) at the time
of such election there is continuing no Default or Event of
Default; (y) the Borrowers shall have certified to the Agent
that: (i) the net proceeds of the insurance adjustment with
respect to a Casualty Event, together with other funds available
to the Borrowers, shall be sufficient to complete such
replacement of the applicable property; and (ii) no Default or
Event of Default has arisen or will arise as a result of such BI
Event, Casualty Event or replacement of the applicable property;
and (z) if the amount of net proceeds in question exceeds
$2,000,000, the Borrowers shall have obtained the written consent
of the Required Lenders to such election.
(iii) In the event of an election under
clause (ii) above, pending application of the net proceeds to
business operations with respect to a BI Event or to replacement
of applicable property with respect to a Casualty Event, the
Borrowers shall not later than the time at which prepayment would
have been, in the absence of such election, required under
clause (i) above, apply such net proceeds to the prepayment of
the outstanding principal balance, if any, of the Revolving
Credit Loans (not in permanent reduction of the Revolving Credit
Commitment), and deposit (the "Special Deposit") with the Agent,
the balance, if any, of such net proceeds remaining after such
application, pursuant to agreements in form, scope and substance
reasonably satisfactory to the Agent. The Special Deposit,
together with all earnings on such Special Deposit, shall be
available to the Borrowers solely for the applicable replacement
of applicable property or ordinary course business operations, as
the case may be; provided, however, that at such time as a
Default or Event of Default shall occur, the balance of the
Special Deposit and earnings thereon may be applied by Agent to
repay the Obligations in such order as the Agent shall elect.
The Agent shall be entitled to require proof, as a condition to
the making of any withdrawal from the Special Deposit, that the
proceeds of such withdrawal are being applied for the purposes
permitted hereunder.
(f) When making a prepayment, whether mandatory or
otherwise, pursuant to paragraph (a), (b), (c), (d) or (e) above,
the Borrowers shall furnish to the Agent, not later than 11:00
a.m. (New York City time) (i) three (3) Business Days prior to
the date of such prepayment of Alternate Base Loans and (ii) five
(5) Business Days prior to the date of such prepayment of
Eurodollar Loans, written, telex or facsimile notice (promptly
confirmed in writing) of prepayment which shall specify the
prepayment date and the principal amount of each Loan (or portion
thereof) to be prepaid, which notice shall be irrevocable and
shall commit the Borrowers to prepay such Loan by the amount
stated therein on the date stated therein. All prepayments shall
be accompanied by accrued interest on the principal amount being
prepaid to the date of prepayment. Prepayments made pursuant to
paragraph (d) or (e) above shall be applied as follows: to
outstanding Revolving Credit Alternate Base Loans up to the full
amount thereof and then to outstanding Revolving Credit
Eurodollar Loans up to the full amount thereof; provided,
however, that if at the time of the making of any prepayment,
there are undrawn Letters of Credit outstanding, then in the
discretion of the Agent, all or a portion of any such prepayment
(not to exceed an amount equal to the aggregate undrawn amount of
all such outstanding Letters of Credit) shall be deposited by the
Borrowers in a cash collateral account to be held by the Agent
for the benefit of the Lenders for application by the Agent to
the payment of any drawing made under any such Letters of Credit;
and, provided, further, that the Borrowers shall not be required
to make any prepayment of any Revolving Credit Eurodollar Loan
required pursuant to this Section 2.09(f) until the last day of
the Interest Period with respect thereto so long as an amount
equal to such prepayment is deposited by the Borrowers into a
cash collateral account with the Agent to be held in such account
pursuant to terms satisfactory to the Agent.
(g) All prepayments made pursuant to Sections 2.09(b),
(d) and (e) shall be applied as set forth in Section 2.09(f)
above and shall be in permanent reduction of the Total
Commitments; provided, however, that proceeds from sales and
other transfers of assets specified in Section 2.09(d)(A) which
are applied to such prepayment shall not permanently reduce the
Total Commitments unless such sale or transfer shall constitute a
"Major Asset Sale" under Section 4.15 of the Bank of Boston
Indenture.
(h) All prepayments under this Section 2.09 shall be
subject to Section 2.12 hereof.
(i) Except as otherwise expressly provided in this
Section 2.09, payments with respect to any paragraph of this
Section 2.09 are in addition to payments made or required to be
made under any other paragraph of this Section 2.09.
SECTION 2.10. Reserve Requirements; Change in
Circumstances. (a) Notwithstanding any other provision herein,
if after the date of this Agreement (or in the case of any
assignee of any Lender, the date of assignment) any change in
applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with
the interpretation or administration thereof (whether or not
having the force of law), or any change in GAAP or regulatory
accounting principles applicable to the Agent or any Lender,
shall: (i) subject the Agent or any Lender (which shall for the
purpose of this Section 2.10 include any assignee or lending
office of the Agent or any Lender) to any charge, fee, deduction
or withholding of any kind or to any tax with respect to any
amount paid or to be paid by either the Agent or any Lender with
respect to any Eurodollar Loans made by a Lender to the Borrowers
or with respect to the obligations of any Lender under
Sections 2.17 through 2.20 hereof or under any Letter of Credit
(other than (x) taxes imposed on or measured by the net income of
the Agent or such Lender and (y) franchise taxes imposed on the
Agent or such Lender, in either case by the jurisdiction in which
such Lender or the Agent has its principal office or its lending
office with respect to such Eurodollar Loan or any political
subdivision or taxing authority of either thereof or where such
Lender or the Agent does business); (ii) change the basis of
taxation of payments to any Lender or the Agent of the principal
of or interest on any Eurodollar Loan or any other fees or
amounts payable with respect to any Letter of Credit or otherwise
hereunder (other than taxes imposed on or measured by the net
income of such Lender or the Agent by the jurisdiction in which
such Lender or the Agent has its principal office or by any
political subdivision or taxing authority therein or where such
Lender or the Agent does business); (iii) impose, modify or deem
applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or loans
or loan commitments extended by, or Letters of Credit issued and
maintained by, such Lender; or (iv) impose on any Lender or, with
respect to Eurodollar Loans, the London interbank market, any
other condition affecting this Agreement, Letters of Credit
issued and maintained by or Eurodollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the
cost to any such Lender of making or maintaining any Eurodollar
Loan or Letter of Credit, or to reduce the amount of any payment
(whether of principal, interest, fee, compensation or otherwise)
receivable by such Lender or to require such Lender to make any
payment in respect of any Eurodollar Loan or Letter of Credit,
then the Borrowers shall pay to such Lender or the Agent, as the
case may be, upon such Lender's or the Agent's demand, such addi-
tional amount or amounts as will compensate such Lender or the
Agent for such additional costs or reduction. The Agent and each
Lender agree to give notice to the Borrowers of any such change
in law, regulation, interpretation or administration with
reasonable promptness after becoming actually aware thereof and
of the applicability thereof to the Transactions. Notwith-
standing anything contained herein to the contrary, nothing in
clause (i) or (ii) of this Section 2.10(a) shall be deemed to (x)
permit the Agent or any Lender to recover any amount thereunder
which would not be recoverable under Section 2.15 hereof or (y)
require the Borrowers to make any payment of any amount to the
extent that such payment would duplicate any payment made by the
Borrowers pursuant to Section 2.15 hereof.
(b) If at any time and from time to time after the
date of this Agreement, any Lender shall determine that the
adoption of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change in any applicable law,
rule, regulation or guideline regarding capital adequacy,
including, without limitation, the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and
Capital Standards", or any change in the interpretation or admin-
istration of any thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its
lending office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or will have
the effect of reducing the rate of return on such Lender's
capital or on the capital of such Lender's holding company, if
any, as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such
adoption, change or compliance (taking into consideration such
Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy), then from time to time
the Borrowers shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. Each
Lender agrees to give notice to the Borrowers of any adoption of,
change in, or change in interpretation or administration of, any
such law, rule, regulation or guideline with reasonable
promptness after becoming actually aware thereof and of the
applicability thereof to the Transactions.
(c) A statement of any Lender or the Agent setting
forth such amount or amounts, supported by calculations in
reasonable detail, as shall be necessary to compensate such
Lender (or the Agent) as specified in paragraphs (a) and (b)
above shall be delivered to the Borrowers and shall be conclusive
absent manifest error. The Borrowers shall pay each Lender or
the Agent the amount shown as due on any such statement within
ten (10) days after its receipt of the same.
(d) Failure on the part of any Lender or the Agent to
demand compensation for any increased costs, reduction in amounts
received or receivable with respect to any Interest Period or any
Letter of Credit or reduction in the rate of return earned on
such Lender's capital, shall not constitute a waiver of such
Lender's or the Agent's rights to demand compensation for any
increased costs or reduction in amounts received or receivable or
reduction in rate of return in such Interest Period or in any
other Interest Period or with respect to such Letter of Credit.
The protection under this Section 2.10 shall be available to each
Lender and the Agent regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other
condition which shall give rise to any demand by such Lender or
the Agent for compensation.
(e) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts
(consistent with legal and regulatory restrictions) to designate
a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of,
any such additional amounts and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such
Lender.
SECTION 2.11. Change in Legality. (a) Notwith-
standing anything to the contrary herein contained, if any change
in any law or regulation or in the interpretation thereof by any
governmental authority charged with the administration or inter-
pretation thereof shall make it unlawful for any Lender to make
or maintain any Eurodollar Loan or to give effect to its obliga-
tions to make Eurodollar Loans as contemplated hereby, then, by
written notice to Borrowers and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not
thereafter be made by such Lender hereunder, whereupon
the Borrowers shall be prohibited from requesting
Eurodollar Loans from such Lender hereunder unless such
declaration is subsequently withdrawn; and
(ii) require that all outstanding
Eurodollar Loans made by such Lender be converted to
Alternate Base Loans, in which event (A) all such
Eurodollar Loans shall be automatically converted to
Alternate Base Loans as of the effective date of such
notice as provided in paragraph (b) below and (B) all
payments of principal which would otherwise have been
applied to repay the converted Eurodollar Loans shall
instead be applied to repay the Alternate Base Loans
resulting from the conversion of such Eurodollar Loans.
(b) For purposes of Section 2.11(a) hereof, a notice
to the Borrowers by any Lender shall be effective, if lawful, on
the last day of the then current Interest Period or, if there are
then two or more current Interest Periods, on the last day of
each such Interest Period, respectively; otherwise, such notice
shall be effective with respect to the Borrowers on the date of
receipt by the Borrowers.
SECTION 2.12. Indemnity. The Borrowers shall
indemnify the Agent and each Lender against any loss or
reasonable expense (including, but not limited to, any loss or
reasonable expense sustained or incurred or to be sustained or
incurred by reason of or in connection with the execution and
delivery or assignment of, or payment under, any Letter of
Credit, or in liquidating or employing deposits from third
parties acquired to affect or maintain any Loan or part thereof
as a Eurodollar Loan) which the Agent or such Lender may sustain
or incur as a consequence of the following events (regardless of
whether such events occur as a result of the occurrence of an
Event of Default or the exercise of any right or remedy of the
Agent or the Lenders under this Agreement or any other agreement,
or at law): any failure of the Borrowers to fulfill on the date
of any borrowing hereunder the applicable conditions set forth in
Article V hereof applicable to it; any failure of the Borrowers
to borrow hereunder after irrevocable notice of borrowing
pursuant to Section 2.03 hereof has been given; any payment,
prepayment or conversion of a Eurodollar Loan on a date other
than the last day of the relevant Interest Period; any default in
payment or prepayment of the principal amount of any Eurodollar
Loan or any part thereof or interest accrued thereon, or with
respect to any Letter of Credit, in each case as and when due and
payable (at the due date thereof, by irrevocable notice of
prepayment or otherwise) resulting in any loss or expense
specified in the first parenthetical of this sentence; or the
occurrence of an Event of Default resulting in any loss or
expense specified in the first parenthetical of this sentence.
Without limiting the foregoing, the Borrowers further agree to
indemnify and hold harmless the Agent, each Lender as well as
their respective officers and directors, each person who controls
the Agent or Lender within the meaning of Section 15 of the
Securities Act of 1933 or any applicable state securities law and
their respective successors, from and against any and all claims,
damages, losses, liabilities, costs or expenses, joint or
several, to which they or any of them may become subject under
any Federal or state securities law, rule or regulation, at
common law or otherwise, insofar as such claims, damages, losses,
liabilities, costs or expenses arise out of or are based upon the
execution and delivery by the Agent or any Lender of any Letter
of Credit or the execution and delivery of any other document in
connection therewith. Such loss or reasonable expense shall
include, without limitation, an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on
the principal or other amount so paid, prepaid or converted or
not borrowed for the period from the date of such payment,
prepayment or conversion or failure to borrow to, in the case of
a Loan, the last day of the Interest Period for such Loan (or, in
the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to
borrow), at the applicable rate of interest for such Loan
provided for herein over (ii) the amount of interest (as
reasonably determined by such Lender) that would be realized by
such Lender in reemploying the funds so paid, prepaid or
converted or not borrowed in United States Treasury obligations
with comparable maturities for comparable periods. Any such
Lender shall provide to the Borrowers a statement, signed by an
officer of such Lender, explaining any loss or expense and
setting forth, if applicable, the computation pursuant to the
preceding sentence, and such statement shall be conclusive absent
manifest error. The Borrowers shall pay such Lender the amount
shown as due on any such statement within ten (10) days after the
receipt of the same. The indemnities contained herein shall
survive the expiration or termination of this Agreement and of
the Letters of Credit.
SECTION 2.13. Pro Rata Treatment. (a) Except as
permitted under Section 2.11 hereof, each borrowing, each payment
or prepayment of principal of the Notes, each payment of interest
on the Notes, each payment of any fee or other amount payable
hereunder and each reduction of the Total Commitment shall be
made pro rata among the Lenders in the proportions that their
Revolving Credit Commitments bear to the Total Commitment.
(b) Unless the Agent shall have been notified in
writing by any Lender prior to the date of a proposed borrowing
that such Lender will not make the amount that would constitute
its pro rata share of the borrowing on such date available to the
Agent, the Agent may assume that such Lender has made such amount
available to the Agent on such date, and the Agent may, in
reliance upon such assumption, make available to the Borrowers a
corresponding amount. If such amount is made available to the
Agent on a date after such borrowing date, such Lender shall pay
to the Agent on demand an amount equal to the product of (i) the
daily average Federal funds rate during such period as quoted by
the Agent, times (ii) the amount of such Lender's pro rata share
of such borrowing, times (iii) a fraction the numerator of which
is the number of days that elapse from and including such
borrowing date to the date on which such Lender's pro rata share
of such borrowing shall have become immediately available to the
Agent and the denominator of which is 360. A certificate of the
Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of
manifest error. If such Lender's pro rata share of such
borrowing is not in fact made available to the Agent by such
Lender within three (3) Business Days of such borrowing date, the
Agent shall be entitled to recover such amount with interest
thereon at the rate per annum applicable to the Loans hereunder,
on demand, from the Borrowers.
SECTION 2.14. Sharing of Setoffs. Each Lender agrees
that if it shall, through the exercise of a right of banker's
lien, setoff or counterclaim against the Borrowers, including,
but not limited to, a secured claim under Section 506 of Title 11
of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender
under any applicable bankruptcy, insolvency or other similar law
or otherwise, obtain payment (voluntary or involuntary) in
respect of a Note held by it as a result of which the unpaid
principal portion of the Notes held by it shall be
proportionately less than the unpaid principal portion of the
Notes held by any other Lender, it shall be deemed to have
simultaneously purchased from such other Lender a participation
in the Notes held by such other Lender, so that the aggregate
unpaid principal amount of the Notes and participations in Notes
held by it shall be in the same proportion to the aggregate
unpaid principal amount of all Notes then outstanding as the
principal amount of the Notes held by it prior to such exercise
of banker's lien, setoff or counterclaim was to the principal
amount of all Notes outstanding prior to such exercise of
banker's lien, setoff or counterclaim; provided, however, that if
any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.14 and the payment giving rise thereto
shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustments restored without
interest. The Borrowers expressly consent to the foregoing
arrangements and agree that any Lender holding a participation in
a Note deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to
any and all moneys owing by the Borrowers to such Lender as fully
as if such Lender held a Note in the amount of such
participation.
SECTION 2.15. Taxes. (a) Any and all payments by the
Borrowers hereunder shall be made, in accordance with Sec-
tion 2.16 hereof, free and clear of and without deduction for,
any and all present or future taxes, levies, imposts, deductions,
charges or withholdings in any such case imposed by the United
States or any political subdivision thereof, excluding:
(i) in the case of the Agent and each Lender,
taxes imposed or based on its net income, and franchise
or capital taxes imposed on it, (A) if the Agent or
such Lender is organized under the laws of the United
States or any political subdivision thereof and (B) if
the Agent or such Lender is not organized under the
laws of the United States or any political subdivision
thereof and has a lending office located in the United
States, and in the case of both (A) and (B), withhold-
ing taxes payable with respect to payments to the Agent
or such Lender at its principal office or Applicable
Lending Office under laws (including, without limita-
tion, any treaty, ruling, determination or regulation)
in effect on the date hereof, but not any increase in
withholding tax resulting from any subsequent change in
such laws (other than withholding with respect to taxes
imposed or based on its net income or with respect to
franchise or capital taxes), and
(ii) taxes (including withholding taxes)
imposed by reason of the failure of the Agent or any
Lender, in either case that is organized outside the
United States, to comply with Section 2.15(f) hereof
(or the inaccuracy at any time of the certificates,
documents and other evidence delivered thereunder)
(all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred
to as "Taxes"). If the Borrowers shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder
to the Lenders or the Agent, (x) the sum payable shall be
increased by the amount necessary so that after making all
required deductions (including without limitation deductions
applicable to additional sums payable under this Section 2.15)
such Lender or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions
been made, (y) the Borrowers shall make such deductions and
(z) the Borrowers shall pay the full amount deducted to the
relevant tax authority or other authority in accordance with
applicable law.
(b) In addition, the Borrowers agree to pay any
present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) The Borrowers will indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction (except as specified in clauses (a)(i) and (ii)) on
amounts payable under this Section 2.15) paid by such Lender or
the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Agent (as the case may be)
makes written demand therefor. If any Lender receives a refund
in respect of any Taxes or Other Taxes for which such Lender has
received payment from the Borrowers hereunder, such Lender shall
promptly notify the Borrowers of such refund and such Lender
shall, within 30 days of receipt of a request by the Borrowers,
repay such refund to the Borrowers, provided that the Borrowers,
upon the request of such Lender, agrees to return such refund
(plus any penalties, interest or other charges) to such Lender in
the event such Lender is required to repay such refund.
(d) Within 30 days after the date of any payment of
Taxes or Other Taxes withheld by the Borrowers in respect of any
payment to any Lender, the Borrowers will furnish to the Agent,
at its address referred to in Section 12.01 hereof, such certifi-
cates, receipts and other documents as may be reasonably required
to evidence payment thereof.
(e) Without prejudice to the survival of any other
agreement hereunder, the agreements and obligations contained in
this Section 2.15 shall survive the payment in full of principal
and interest hereunder.
(f) Each Lender that is organized outside of the
United States shall deliver to the Borrowers on the date hereof
(or, in the case of an assignee, on the date of the assignment)
and from time to time as required for renewal under applicable
law duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or any successor or additional forms),
as appropriate, indicating in each case that such Lender is
entitled to receive payments under this Agreement without any
deduction or withholding of any United States federal income
taxes. The Agent (if the Agent is an entity organized outside
the United States) and each Lender that is organized outside the
United States shall promptly notify the Borrowers and the Agent
of any change in its Applicable Lending Office and upon written
request of the Borrowers such Lender shall, prior to the
immediately following due date of any payment by the Borrowers or
any Guarantor hereunder or under any other Loan Document, deliver
to the Borrowers or such Guarantor, as the case may be (with
copies to the Agent), such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued
pursuant thereto, including without limitation Internal Revenue
Service Form 4224, Form 1001 and any other certificate or
statement of exemption required by Treasury Regulation Sec-
tion 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version
thereof, properly completed and duly executed by such Lender
establishing that such payment is (i) not subject to withholding
under the Code because such payment is effectively connected with
the conduct by such Lender of a trade or business in the United
States or (ii) totally exempt from United States tax under a
provision of an applicable tax treaty. The Borrowers shall be
entitled to rely on such forms in their possession until receipt
of any revised or successor form pursuant to this Section
2.15(f). If the Agent or a Lender fails to provide a certifi-
cate, document or other evidence required pursuant to this Sec-
tion 2.15(f), then (i) the Borrowers shall be entitled to deduct
or withhold on payments to the Agent or such Lender as a result
of such failure, as required by law, and (ii) the Borrowers shall
not be required to make payments of additional amounts with
respect to such withheld Taxes pursuant to clause (x) of Sec-
tion 2.15(a) to the extent such withholding is required solely by
reason of the failure of the Agent or such Lender to provide the
necessary certificate, document or other evidence.
(g) Each Lender and the Agent shall use reasonable
efforts to avoid or minimize any amounts which might otherwise be
payable pursuant to this subsection 2.15 (including seeking
refunds of any amounts that are reasonably believed not to have
been correctly or legally asserted); provided, however, that such
efforts shall not include the taking of any actions by such
Lender or the Agent that would result in any tax, costs or other
expense to such Lender or the Agent (other than a tax, cost or
other expense for which such Lender or the Agent shall have been
reimbursed or indemnified by the Borrowers pursuant to this
Agreement or otherwise) or any action which would or might in the
reasonable opinion of such Lender or the Agent have an adverse
effect upon its business, operations or financial condition or
otherwise be disadvantageous to such Lender or the Agent.
SECTION 2.16. Payments and Computations. The
Borrowers shall make each payment hereunder and under any
instrument delivered hereunder not later than 12:00 noon (New
York City time) on the day when due in lawful money of the United
States (in freely transferable dollars) to the Agent at its
offices at 200 Jericho Quadrangle, Jericho, New York 11753 for
the account of the Lenders, in immediately available funds. The
Agent may charge, when due and payable, the Borrowers' accounts
with the Agent for all interest, principal and commitment fees or
other fees owing to the Agent or the Lenders on or with respect
to this Agreement and/or the Loans and other Loan Documents. If
at any time there is not sufficient ABN Availability, ABNH
Availability or Total Availability to cover any of the payments
referred to in the prior sentence, and in any event upon the
occurrence of any Default or Event of Default, the Borrowers
shall make any such payments upon demand.
SECTION 2.17. Issuance of Letters of Credit. Upon the
request of a Borrower, and subject to the conditions set forth in
Article V hereof and such other conditions to the opening of
Letters of Credit as the Agent requires of its customers
generally, the Agent shall from time to time open documentary and
standby letters of credit (each, a "Letter of Credit") for the
account of such Borrower, the aggregate undrawn amount of all
outstanding Letters of Credit to all Borrowers not at any time to
exceed $10,000,000; provided, however, that the face amount of
any Letter of Credit that (A) the Borrowers may request the Agent
to open at any time shall not exceed the lesser of (i) the Total
Commitment at such time (as such may have been reduced in
accordance with the terms of this Agreement) and (ii) the
Borrowing Base at such time, minus (i) the Letter of Credit Usage
at such time and (ii) the aggregate principal amount of Revolving
Credit Loans, accrued interest, fees and expenses outstanding at
such time, (B) ABN may request the Agent to open at any time
shall not exceed the ABN Borrowing Base minus the undrawn amount
of all outstanding Letters of Credit at such time as to which ABN
is the account party and the aggregate principal amount of the
Revolving Credit Loans outstanding to ABN at such time, and (C)
ABNH may request the Agent to open at any time shall not exceed
the ABNH Borrowing Base minus the undrawn amounts of all Letters
of Credit at such time as to which ABNH is the account party and
the aggregate outstanding principal amount of the Revolving
Credit Loans outstanding to ABNH at such time. The issuance of
each Letter of Credit shall be made on at least two (2) Business
Days' prior written notice from a Borrower to the Agent, at its
Domestic Lending Office, which written notice shall be an
application for a Letter of Credit on the Agent's customary form
completed to the satisfaction of the Agent, together with the
proposed form of the Letter of Credit (which shall be
satisfactory to the Agent) and such other certificates, documents
and other papers and information as the Agent may reasonably
request. The Agent shall not at any time be obligated to issue
any Letter of Credit if such issuance would conflict with, or
cause the Agent or any Lender to exceed any limits imposed by,
any applicable requirements of law. The expiration date of any
Letter of Credit shall not be later than 360 days from the date
of issuance thereof and in any event, no Letter of Credit shall
have an expiration date later than the Revolving Credit
Termination Date. The Letters of Credit shall be issued with
respect to transactions occurring in the ordinary course of
business of the Borrowers.
SECTION 2.18. Payment of Letters of Credit;
Reimbursement. Upon the issuance of any Letter of Credit, the
Agent shall notify each Lender of the principal amount, the
number, and the expiration date thereof and the amount of such
Lender's participation therein. By the issuance of a Letter of
Credit hereunder and without further action on the part of the
Agent or the Lenders, each Lender hereby accepts from the Agent a
participation (which participation shall be nonrecourse to the
Agent) in such Letter of Credit equal to such Lender's pro rata
(based on its Revolving Credit Commitment) share of such Letter
of Credit, effective upon the issuance of such Letter of Credit.
Each Lender hereby absolutely and unconditionally assumes, as
primary obligor and not as a surety, and agrees to pay and
discharge, and to indemnify and hold the Agent harmless from
liability in respect of, such Lender's pro rata share of the
amount of any drawing under a Letter of Credit. Each Lender
acknowledges and agrees that its obligation to acquire
participations in each Letter of Credit issued by the Agent and
its obligation to make the payments specified herein, and the
right of the Agent to receive the same, in the manner specified
herein, are absolute and unconditional and shall not be affected
by any circumstance whatsoever, including, without limitation,
the occurrence and continuance of a Default or an Event of
Default hereunder, and that each such payment shall be made
without any offset, abatement, withholding or reduction
whatsoever. The Agent shall review, on behalf of the Lenders,
each draft and any accompanying documents presented under a
Letter of Credit and shall notify each Lender of any such
presentment. Promptly after it shall have ascertained that any
draft and any accompanying documents presented under such Letter
of Credit appear on their face to be in substantial conformity
with the terms and conditions of the Letter of Credit, the Agent
shall give telephonic or facsimile notice to the Lenders and the
Borrowers of the receipt and amount of such draft and the date on
which payment thereon will be made, and the Lenders shall, by
11:00 A.M., New York City time on the date such payment is to be
made, pay the amounts required to the Agent in New York, New York
in immediately available funds, and the Agent, not later than
3:00 p.m. on such day, shall make the appropriate payment to the
beneficiary of such Letter of Credit. If the Lenders shall pay
any draft presented under a Letter of Credit, then the Agent, on
behalf of the Lenders, shall charge the general deposit account
of the Borrowers with the Agent for the amount thereof, together
with the Agent's customary overdraft fee in the event the funds
available in such account shall not be sufficient to reimburse
the Lenders for such payment and the Borrowers shall not
otherwise have discharged such reimbursement obligation by
11:00 a.m., New York City time, on the date of such payment. If
the Lenders have not been reimbursed with respect to such drawing
as provided above, the Borrowers shall pay to the Agent, for the
account of the Lenders, the amount of the drawing together with
interest on such amount at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of
360 days) equal to the Alternate Base Rate plus three percent
(3%), payable on demand. The obligations of the Borrowers under
this Section 2.18 to reimburse the Lenders and the Agent for all
drawings under Letters of Credit shall be joint and several,
absolute, unconditional and irrevocable and shall be satisfied
strictly in accordance with their terms, irrespective of:
(a) any lack of validity or enforceability of any
Letter of Credit;
(b) the existence of any claim, setoff, defense or
other right which the Borrowers or any other person may at
any time have against the beneficiary under any Letter of
Credit, the Agent or any Lender (other than the defense of
payment in accordance with the terms of this Agreement or a
defense based on the gross negligence or willful misconduct
of the Agent or any Lender) or any other person in connec-
tion with this Agreement or any other transaction;
(c) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(d) payment by the Agent or any Lender under any
Letter of Credit against presentation of a draft or other
document which does not comply with the terms of such Letter
of Credit; and
(e) any other circumstance or event whatsoever,
whether or not similar to any of the foregoing.
It is understood that in making any payment under any
Letter of Credit (x) the Agent's and any Lender's exclusive
reliance on the documents presented to it under such Letter of
Credit as to any and all matters set forth therein, including,
without limitation, reliance on the amount of any draft presented
under such Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not
any document presented pursuant to such Letter of Credit proves
to be insufficient in any respect, if such document on its face
appears to be in order, and whether or not any other statement or
any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to
be inaccurate or untrue in any respect whatsoever and (y) any
noncompliance in any immaterial respect of the documents
presented under such Letter of Credit with the terms thereof
shall, in each case, not be deemed willful misconduct or gross
negligence of the Agent or any Lender.
SECTION 2.19. Agent's Actions with respect to Letters
of Credit. Any Letter of Credit may, in the discretion of the
Agent or its correspondents, be interpreted by them (to the
extent not inconsistent with such Letter of Credit) in accordance
with the Uniform Customs and Practice for Documentary Credits of
the International Chamber of Commerce, as adopted or amended from
time to time, or any other rules, regulations and customs
prevailing at the place where any Letter of Credit is available
or the drafts are drawn or negotiated. The Agent and its
correspondents may accept and act upon the name, signature, or
act of any party purporting to be the executor, administrator,
receiver, trustee in bankruptcy, or other legal representative of
any party designated in any Letter of Credit in the place of the
name, signature, or act of such party.
SECTION 2.20. Letter of Credit Fees. The Borrowers
agree to pay to the Agent at its Domestic Lending Office in
immediately available funds with respect to each Letter of Credit
(i) for the (x) ratable benefit of the Lenders, a letter of
credit fee equal to two percent (2%) of the face amount thereof
per annum and (y) Agent's own account, a letter of credit fee
equal to one quarter of one percent (1/4%) of the face amount
thereof per annum, in each case quarterly in advance; provided,
however, that the applicable fee shall be reduced by one-half of
one percent (1/2%) upon the occurrence of the Adjustment Date,
and (ii) an issuance fee charged by the Agent for transactions of
this nature payable to the Agent on the date of issuance of such
Letter of Credit. In addition, the Borrowers shall pay to the
Agent at its Domestic Lending Office with respect to any
amendment to a Letter of Credit a fee charged by the Agent for
transactions of this nature. The Agent shall disburse to each
Lender such Lender's pro rata share of any payment of the Letter
of Credit fees referred to in clause (i) of the first sentence of
this paragraph in immediately available funds within two (2)
Business Days of the Agent's receipt of such payment.
III. COLLATERAL SECURITY
SECTION 3.01. Security Documents. The Obligations
shall be secured by the Collateral described in the Security
Documents and are entitled to the benefits thereof. The
Borrowers shall duly execute and deliver the Security Documents,
all consents of third parties necessary to permit the effective
granting of the Liens created in such agreements, financing
statements pursuant to the Uniform Commercial Code and other
documents, all in form and substance satisfactory to the Agent,
as may be reasonably required by the Agent to grant to the
Lenders a valid, perfected and enforceable first priority Lien on
and security interest in (subject only to the Liens permitted
under Section 7.01 hereof) the Collateral.
SECTION 3.02. Filing and Recording. The Borrowers
shall, at their sole cost and expense, cause all instruments and
documents given as evidence of security pursuant to this Agree-
ment to be duly recorded and/or filed or otherwise perfected in
all places necessary, in the opinion of the Agent, and take such
other actions as the Agent may reasonably request, in order to
perfect and protect the Liens of the Agent and Lenders in the
Collateral. The Borrowers, to the extent permitted by law,
hereby authorize the Agent to file any financing statement in
respect of any Lien created pursuant to the Security Documents
which may at any time be required or which, in the opinion of the
Agent, may at any time be desirable although the same may have
been executed only by the Agent or, at the option of the Agent,
to sign such financing statement on behalf of the Borrowers and
file the same, and the Borrowers hereby irrevocably designate the
Agent, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose. In the event that any
re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is
required to protect and preserve such Lien, the Borrowers shall,
at the Borrowers' cost and expense, cause the same to be recorded
and/or refiled at the time and in the manner requested by the
Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers jointly and severally represents
and warrants to each of the Lenders that both before and after
giving effect to the consummation of the Transactions:
SECTION 4.01. Organization, Legal Existence. Each
Loan Party is a legal entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization, has the requisite power and authority to own its
property and assets and to carry on its business as now conducted
and as currently proposed to be conducted and is qualified to do
business in every jurisdiction where such qualification is
required (all such jurisdictions being listed in Schedule 4.01
annexed hereto). Each Loan Party has the power to execute,
deliver and perform its obligations under this Agreement and the
other Loan Documents to which it is a party, and the Borrowers
have the power to execute and deliver the Notes and to borrow
hereunder.
SECTION 4.02. Authorization. The execution, delivery
and performance by the Borrowers and each Guarantor of this
Agreement and by the Loan Parties of each of the other Loan
Documents to which they are party, the borrowings hereunder by
the Borrowers, the execution and delivery by the Borrowers of the
Notes, and the grant of security interests in the Collateral
created by the Security Documents (collectively, the
"Transactions") (a) have been duly authorized by all requisite
corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation
or the certificate or articles of incorporation or other
applicable constitutive documents or the by-laws of any Loan
Party, (B) any order of any court, or any rule, regulation or
order of any other agency of government binding upon any Loan
Party, or (C) any provisions of any material indenture
(including, without limitation, the Indentures), agreement or
other instrument to which any Loan Party, or any of its
properties or assets are or may be bound, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under any material indenture,
agreement or other instrument referred to in (b)(i)(C) above or
(iii) result in the creation or imposition of any Lien of any
nature whatsoever (other than in favor of the Agent, for the
benefit of the Lenders, as contemplated by this Agreement and the
Security Documents) upon any property or assets of any Loan
Party.
SECTION 4.03. Governmental Approvals. No registration
or filing (other than the filings necessary to perfect the Liens
created by the Security Documents) with, consent or approval of,
or other action by, any Federal, state or other governmental
agency, authority or regulatory body is or will be required in
connection with the Transactions, other than any which have been
made or obtained.
SECTION 4.04. Binding Effect. This Agreement and each
of the other Loan Documents to which it is a party constitutes,
and each of the Notes when duly executed and delivered will
constitute, a legal, valid and binding obligation of each
applicable Loan Party enforceable in accordance with its terms.
SECTION 4.05. Material Adverse Change. Except as
specified in Schedule 4.05, there has been no material adverse
change in the business, assets, operations or financial condition
of any Loan Party since December 31, 1994.
SECTION 4.06. Litigation; Compliance with Laws; etc.
(a) There are not any actions, suits or proceedings at law or in
equity or by or before any governmental instrumentality or other
agency or regulatory authority now pending or, to the knowledge
of any Responsible Officer of any Loan Party threatened against
or affecting any Loan Party or the businesses, assets or rights
of any Loan Party (i) which involve any of the Transactions or
(ii) as to which it is probable (within the meaning of Statement
of Financial Accounting Standards No. 5) that there will be an
adverse determination and which, if adversely determined, would,
individually or in the aggregate, materially impair the ability
of any Loan Party to conduct business substantially as now
conducted, or have a Material Adverse Effect.
(b) No Loan Party is in violation of any law, or in
default with respect to any judgment, writ, injunction, decree,
rule or regulation of any court or governmental agency or
instrumentality, which violation has or is reasonably likely to
have a Material Adverse Effect.
SECTION 4.07. Financial Statements. (a) The
Borrowers have heretofore furnished to the Agent (i) Consolidated
and consolidating balance sheets, and statements of income and
cash flows of ABNC and its subsidiaries for the Fiscal Years
ending December 31, 1992, 1993 and 1994, audited by and
accompanied by the unqualified opinion of Deloitte & Touche, LLP,
together with the December 31, 1994 management letter prepared by
Deloitte & Touche, LLP and (ii) unaudited Consolidated and
consolidating balance sheets and statements of income and cash
flows of ABNC and its subsidiaries dated as of September 30,
1995. Such balance sheets and statements of income and cash
flows present fairly the financial condition and results of
operations of ABNC and its subsidiaries as of the dates and for
the periods indicated, and such balance sheets and the notes
thereto disclose all material liabilities, direct or contingent,
of ABNC and its subsidiaries, as of the dates thereof.
(b) The Borrowers have heretofore furnished to the
Agent (i) annual projected income statements, balance sheets and
cash flows of ABNC and its subsidiaries dated January 24, 1996 on
a Consolidated basis for each of the full Fiscal Years through
December 31, 1999, and (ii) quarterly projected income statements
and capital expenditures of ABNC and its subsidiaries dated
January 24, 1996 on a Consolidated basis for the Fiscal Year
ending December 31, 1996 which are consistent with the annual
projected statements referred to in clause (i) (the projections
referred in clauses (i) and (ii), collectively, the "Projections"),
together with a schedule confirming the ability of ABNC and its
subsidiaries to consummate the Transactions and demonstrating
prospective compliance with all financial covenants contained in
this Agreement, such Projections disclosing all assumptions made
by ABNC and the Borrowers in formulating such Projections and
giving effect to the Transactions. The Projections are based
upon reasonable estimates and assumptions, all of which are
reasonable in light of the conditions which existed at the time
the Projections were made, have been prepared on the basis of the
assumptions stated therein, and reflect as of the Closing Date
the reasonable estimate of ABNC and the Borrowers of the results
of operations and other information projected therein.
(c) The financial statements referred to in this
Section 4.07 have been prepared in accordance with GAAP.
SECTION 4.08. Federal Reserve Regulations. (a) No
Loan Party is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose
of purchasing or carrying Margin Stock.
(b) No part of the proceeds of the Loans will be used,
whether directly or indirectly, and whether immediately, inciden-
tally or ultimately, (i) to purchase or carry Margin Stock or to
extend credit to others for the purpose of purchasing or carrying
Margin Stock or to refund indebtedness originally incurred for
such purpose, or (ii) for any purpose which entails a violation
of, or which is inconsistent with, the provisions of the Regula-
tions of the Board, including, without limitation, Regulation G,
T, U or X thereof. If requested by any Lender, the Borrowers or
any subsidiary of any thereof shall furnish to such Lender a
statement on Federal Reserve Form U-1 referred to in said
Regulation U.
SECTION 4.09. Taxes. Each Loan Party has filed or
caused to be filed all Federal, state, local and foreign tax
returns which are required to be filed by it, on or prior to the
date hereof, other than tax returns in respect of taxes that
(x) are not franchise, capital or income taxes, (y) in the
aggregate are not material and (z) would not, if unpaid, result
in the imposition of any material Lien on any property or assets
of any Loan Party. Each Loan Party has paid or caused to be paid
all taxes shown to be due and payable on such filed returns or on
any assessments received by it, other than (i) any taxes or
assessments the validity of which such Loan Party is contesting
in good faith by appropriate proceedings, and with respect to
which such Loan Party shall, to the extent required by GAAP have
set aside on its books adequate reserves and (ii) taxes other
than income, capital or franchise taxes that in the aggregate are
not material and which would not, if unpaid, result in the
imposition of any material Lien on any property or assets of such
Loan Party. The Federal income tax returns of the Loan Parties
were last audited by the United States Internal Revenue Service
for Fiscal Year 1975. As of the Closing Date, no Loan Party has
requested or been granted any extension of time to file any
Federal, state, local or foreign tax return. No Loan Party is
party to or has any obligation under any tax sharing agreement.
SECTION 4.10. Employee Benefit Plans. With respect to
the provisions of ERISA, except as set forth on Schedule 4.10
annexed hereto:
(i) No Reportable Event has occurred or is
continuing with respect to any Pension Plan.
(ii) No prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the
Code) has occurred with respect to any Plan subject to
Part 4 of Subtitle B of Title I of ERISA which could
result in liability of ABNC or any ERISA Affiliate.
(iii) None of ABNC or any ERISA Affiliate is now,
or has been during the preceding five years, obligated
to contribute to a Pension Plan or a Multiemployer
Plan. None of ABNC or any ERISA Affiliate has (A)
ceased operations at a facility so as to become subject
to the provisions of Section 4062(e) of ERISA,
(B) withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA,
(C) ceased making contributions to any Pension Plan
subject to the provisions of Section 4064(a) of ERISA
to which ABNC, any subsidiary or any ERISA Affiliate
made contributions, (D) incurred or caused to occur a
"complete withdrawal" (within the meaning of Section
4203 of ERISA) or a "partial withdrawal" (within the
meaning of Section 4205 of ERISA) from a Multiemployer
Plan that is a Pension Plan so as to incur withdrawal
liability under Section 4201 of ERISA (without regard
to subsequent reduction or waiver of such liability
under Section 4207 or 4208 of ERISA), or (E) been a
party to any transaction or agreement under which the
provisions of Section 4204 of ERISA were applicable.
(iv) No notice of intent to terminate a Pension
Plan has been filed, nor has any Plan been terminated
pursuant to the provisions of Section 4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to
terminate (or appoint a trustee to administer) a
Pension Plan and no event has occurred or condition
exists which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination
of (or the appointment of a trustee to administer) any
such Plan.
(vi) With respect to each Pension Plan (other
than any Multiemployer Plans) that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the
funding method used in connection with such Plan is
acceptable under ERISA, and the actuarial assumptions
and methods used in connection with funding such
Pension Plan satisfy the requirements of Section 302 of
ERISA. As of the Closing Date, the present value of
the accrued benefits (both vested and non-vested) under
each such Pension Plan (other than the Multiemployer
Plans) will not exceed the market value of the assets
of such Plan as of the latest actuarial valuation date
for such Plan (determined in accordance with the same
actuarial assumptions and methods as those used by the
Plan's actuary in its valuation of such Plan as of such
valuation date) by more than $1,000,000. No such
Pension Plan has incurred any "accumulated funding
deficiency" (as defined in Section 412 of the Code),
whether or not waived.
(vii) There are no actions, suits or claims
pending (other than routine claims for benefits) or, to
the knowledge of ABNC or any ERISA Affiliate, which
could reasonably be expected to be asserted, against
any Plan or the assets of any such Plan.
(viii) All of the Plans comply currently,
and have complied in the past, both as to form and
operation, in all material respects with their terms
and with the provisions of ERISA and the Code, and all
other applicable laws, rules and regulations; all
necessary governmental approvals for the Plans have
been obtained and a favorable determination as to the
qualification under Section 401(a) of the Code of each
of the Plans which is an employee pension benefit plan
(within the meaning of Section 3(2) of ERISA) has been
made by the Internal Revenue Service and a recognition
of exemption from federal income taxation under Section
501(c) of the Code of each of the funded employee
welfare benefit plans (within the meaning of Section
3(1) of ERISA) has been made by the Internal Revenue
Service, and nothing has occurred since the date of
each such determination or recognition letter that
would adversely affect such qualification.
SECTION 4.11. No Material Misstatements. No informa-
tion, report, financial statement, exhibit or schedule prepared
or furnished by or on behalf of any Loan Party to the Agent or
any Lender pursuant to the terms of any of the Transactions or
this Agreement, the Security Documents, the Notes or any other
Loan Documents or included therein contained or contains any
material misstatement of fact or omitted or omits to state any
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
SECTION 4.12. Investment Company Act; Public Utility
Holding Company Act. No Loan Party is an "investment company" as
defined in, or is otherwise subject to regulation under, the
Investment Company Act of 1940. No Loan Party is a "holding
company" as that term is defined in or is otherwise subject to
regulation under, the Public Utility Holding Company Act of 1935.
SECTION 4.13. Security Interest. Each of the Security
Documents creates and grants to the Agent, for the benefit of the
Lenders, a legal, valid and perfected first (except as permitted
pursuant to Section 7.01 hereof) priority security interest in
the collateral identified therein. Such collateral or property
is not subject to any other Liens whatsoever, except Liens
permitted by Section 7.01 hereof.
SECTION 4.14. Use of Proceeds. All proceeds of each
borrowing under the Revolving Credit Commitment, if any, on the
Closing Date shall be used (i) for general working capital
purposes and (ii) for payment of fees and expenses in connection
with the Transactions. All proceeds of each subsequent borrowing
under the Revolving Credit Commitment after the Closing Date
shall be used (i) to open Letters of Credit, (ii) for Permitted
Acquisitions (subject to the limitations specified in Section
7.05), (iii) to purchase foreign exchange and hedging instruments
in the ordinary course of business and (iv) for general working
capital purposes of the Borrowers.
SECTION 4.15. Subsidiaries. As of the Closing Date,
Schedule 4.15 annexed hereto sets forth each (i) subsidiary of
ABNC, whether it is an active or inactive subsidiary, the
ownership of capital stock of each such subsidiary and, with
respect to each active subsidiary, its jurisdiction of incorporation
and its capitalization, and (ii) joint venture of the Borrowers.
SECTION 4.16. Title to Properties; Possession Under
Leases; Trademarks. (a) Each Loan Party has good and marketable
title to, or valid leasehold interest in, all of its respective
properties and assets shown on the most recent balance sheet
referred to in Section 4.07(a) hereof and all assets and
properties acquired since the date of such balance sheet, except
for such properties as are no longer used or useful in the
conduct of its business or as have been disposed of in the
ordinary course of business, and except for minor defects in
title that do not interfere with the ability of such Loan Party
to conduct its business as now conducted. All such assets and
properties are free and clear of all Liens other than those
permitted by Section 7.01 hereof.
(b) Each Loan Party has complied in all material
respects with all obligations under all leases to which it is a
party and under which it is in occupancy, and all such leases are
in full force and effect and each Loan Party enjoys peaceful and
undisturbed possession under all such leases.
(c) Each Loan Party owns or controls all material
trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights and licenses which are
necessary for the conduct of the business of such Loan Party. No
Loan Party is infringing upon or otherwise acting adversely to
any of such trademarks, trademark rights, trade names, trade name
rights, copyrights, patent rights or licenses owned by any other
person or persons. There is no claim or action by any such other
person pending, or to the knowledge of any Responsible Officer of
any Loan Party threatened, against any Loan Party with respect to
any of the rights or property referred to in this
Section 4.16(c).
SECTION 4.17. Solvency. (a) The fair salable value
of the assets of ABNC and its Consolidated subsidiaries is not
less than the amount that will be required to be paid on or in
respect of the probable liability on the existing debts and other
liabilities (including contingent liabilities) of ABNC and its
Consolidated subsidiaries, as they become absolute and mature.
(b) The assets of ABNC and its Consolidated
subsidiaries do not constitute unreasonably small capital for
ABNC and its Consolidated subsidiaries to carry out their
business as now conducted and as proposed to be conducted
including the capital needs of ABNC and its Consolidated
subsidiaries, taking into account the particular capital
requirements of the business conducted by ABNC and its
Consolidated subsidiaries and projected capital requirements and
capital availability thereof.
(c) Neither ABNC nor any subsidiary thereof intends to
incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be
received by ABNC and such subsidiary, and of amounts to be
payable on or in respect of debt of ABNC and such subsidiary).
The cash flow of ABNC and its Consolidated subsidiaries, after
taking into account all anticipated uses of the cash of ABNC and
its Consolidated subsidiaries, will at all times be sufficient to
pay all such amounts on or in respect of debt of ABNC and its
Consolidated subsidiaries when such amounts are required to be
paid.
(d) Neither ABNC nor any subsidiary thereof believes
that final judgments against it in actions for money damages
presently pending will be rendered at a time when, or in an
amount such that, it will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions
and the earliest reasonable time at which such judgments might be
rendered). The cash flow of ABNC and its Consolidated
subsidiaries, after taking into account all other anticipated
uses of the cash of ABNC and its Consolidated subsidiaries
(including the payments on or in respect of debt referred to in
paragraph (c) of this Section), will at all times be sufficient
to pay all such judgments promptly in accordance with their
terms.
SECTION 4.18. Permits, etc. Each Loan Party possesses
all licenses, permits, approvals and consents, including, without
limitation, all environmental, health and safety licenses,
permits, approvals and consents (collectively, "Permits") of all
Federal, state and local governmental authorities as required to
conduct properly its business other than such permits, the
failure of which to obtain would not cause a Material Adverse
Effect, each such Permit is and will be in full force and effect,
each Loan Party is in compliance in all material respects with
all such Permits, and no event (including, without limitation,
any violation of any law, rule or regulation) has occurred which
allows the revocation or termination of any such Permit or any
restriction thereon.
SECTION 4.19. Compliance with Environmental Laws.
Except as set forth on Schedule 4.19, (i) the operations of the
Loan Parties comply in all material respects with all applicable
Environmental Laws; (ii) the Loan Parties and all of their
present facilities and operations, as well as, to the best of the
knowledge of the Loan Parties, their past facilities and
operations, are not subject to any judicial proceeding or
administrative proceeding or any outstanding written order or
agreement with any governmental authority or private party
respecting (a) any Environmental Law, (b) any Remedial Work, or
(c) any Environmental Claims arising from the Release of a
Contaminant into the environment; (iii) to the best of the
knowledge of the Loan Parties none of their operations is the
subject of any Federal or state investigation evaluating whether
any Remedial Work is needed to respond to a Release of any
Contaminant into the environment; (iv) no Loan Party or, to best
of the knowledge of the Loan Parties, any predecessor of any Loan
Party, has filed any notice under any Environmental Law
indicating past or present treatment, storage, or disposal of a
Hazardous Material or reporting a spill or Release of a
Contaminant into the environment; (v) to the best of the
knowledge of the Loan Parties, no Loan Party has any contingent
liability in connection with any Release of any Contaminant into
the environment; (vi) none of the operations of any Loan Party
involve the generation, transportation, treatment or disposal of
Hazardous Materials other than those Hazardous Materials used in
the ordinary course of such Loan Party's business in compliance
with applicable Environmental Laws; (vii) except in compliance
with Environmental Laws, no Loan Party disposed of any
Contaminant by placing it in or on the ground or waters of any
premises owned, leased or used by any of them and to the best of
knowledge of the Loan Parties neither has any lessee, prior
owner, or other person; (viii) except in compliance with
Environmental Laws, no underground storage tanks or surface
impoundments are on any property of any Loan Party and (ix) no
Lien in favor of any governmental authority for (A) any liability
under any Environmental Law or regulations, or (B) damages
arising from or costs incurred by such governmental authority in
response to a Release of a Contaminant into the environment, has
been filed or attached to the property of any Loan Party.
SECTION 4.20. No Change in Credit Criteria or
Collection Policies. There has been no material change in credit
criteria or collection policies concerning account receivables of
any of the Borrowers since December 31, 1994. Without
duplication, to the knowledge of the Borrowers, all Eligible
Receivables of the Borrowers are valid, binding and enforceable
obligations of account debtors and are not subject to any claims,
defenses or setoffs. To the knowledge of the Borrowers, all
account receivables (other than Eligible Receivables) are valid,
binding and enforceable obligations of account debtors.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend
Letters of Credit hereunder shall be subject to the following
conditions precedent:
SECTION 5.01. All Credit Events. On each date on
which a Credit Event is to occur:
(a) The Agent shall have received a request for the
issuance of a Letter of Credit pursuant to Section 2.17
hereof or a request for borrowing as required by Section
2.03 hereof.
(b) The representations and warranties set forth in
Article IV hereof and in any documents delivered herewith,
including, without limitation, the Loan Documents, shall be
true and correct in all material respects with the same
effect as though made on and as of such date (except insofar
as such representations and warranties relate expressly to
an earlier date).
(c) Each Borrower shall be in compliance with all the
terms and provisions contained herein on its part to be
observed or performed, and at the time of and immediately
after such Credit Event, no Default or Event of Default
shall have occurred and be continuing.
(d) The Agent shall have received a certificate signed
by the Financial Officer of each Borrower (i) as to the
compliance with (b) and (c) above and (ii) with respect to
each Revolving Credit Loan and each Letter of Credit, demon-
strating that after giving effect thereto each of ABN
Availability, ABNH Availability and Total Availability is
zero or greater.
SECTION 5.02. First Borrowing. The obligations of the
Lenders in respect of the first Credit Event hereunder is subject
to the following additional conditions precedent:
(a) The Lenders shall have received the favorable
written opinion of counsel for the Borrowers and each of the
Guarantors and Grantors, substantially in the form of
Exhibit B hereto, dated the Closing Date, addressed to the
Lenders and satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation or constitutive or
charter documents, in each case as amended to date, of each
of the Loan Parties, certified as of a recent date by the
Secretary of State or other appropriate official of the
state of its organization, and a certificate as to the good
standing of each from such Secretary of State or other
official, in each case dated as of a recent date; (ii) a
certificate of the Secretary of each Loan Party dated the
Closing Date and certifying (A) that attached thereto is a
true and complete copy of such person's By-laws as in effect
on the date of such certificate and at all times since a
date prior to the date of the resolution described in item
(B) below, (B) that attached thereto is a true and complete
copy of a resolution adopted by such person's Board of
Directors authorizing the execution, delivery and perfor-
mance of this Agreement, the Security Documents, the Notes,
the other Loan Documents and the Credit Events hereunder, as
applicable, and that such resolution has not been modified,
rescinded or amended and is in full force and effect,
(C) that such person's certificate or articles of
incorporation or constitutive documents has not been amended
since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to
(i) above, and (D) as to the incumbency and specimen
signature of each of such person's officers executing this
Agreement, the Notes, each Security Document or any other
Loan Document delivered in connection herewith or therewith,
as applicable; (iii) a certificate of another of such
person's officers as to incumbency and signature of its
Secretary; and (iv) such other documents as the Agent or any
Lender may reasonably request.
(c) The Agent shall have received a certificate, dated
the Closing Date and signed by the Financial Officer of each
Borrower, confirming compliance with the conditions
precedent set forth in paragraphs (b) and (c) of Sec-
tion 5.01 hereof and the conditions set forth in this
Section 5.02.
(d) Each Lender shall have received its Revolving
Credit Note duly executed by the Borrowers, payable to its
order and otherwise complying with the provisions of Sec-
tion 2.04 hereof.
(e) The Agent shall have received the Security
Documents.
(f) Each document (including, without limitation, each
Uniform Commercial Code financing statement) required by law
or requested by the Agent to be filed, registered or
recorded in order to create in favor of the Agent for the
benefit of the Lenders a first priority perfected security
interest in the Collateral shall, in the sole discretion of
the Agent, be delivered in a form such that it can be, or
shall previously have been properly filed, registered or
recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or
requested. The Agent shall have received an acknowledgment
copy, or other evidence satisfactory to it, of each such
filing, registration or recordation.
(g) The Agent shall have received the results of a
search of tax and other Liens, and judgments and of the
Uniform Commercial Code filings made with respect to each
Borrower and each Grantor in the jurisdictions in which each
Borrower is doing business and/or in which any Collateral is
located. With respect to any Liens not permitted pursuant
to Section 7.01 hereof, the Agent shall, have received
termination statements in form and substance satisfactory to it.
(h) The Lenders and the Agent shall have received and
determined to be in form and substance satisfactory to them:
(i) the most recent (dated as of December 31,
1995) schedule and aging of accounts receivable and
inventory designations of the Borrowers;
(ii) landlord and mortgagee waivers and
warehouseman's letters, as applicable, with respect to
each Collateral location;
(iii) evidence of the compliance by the Borrowers
with Section 6.03 hereof;
(iv) the financial statements described in Sec-
tion 4.07 hereof; the monthly financial statements
referred to in Section 4.07(a)(ii) shall demonstrate to
the Agent's satisfaction that for the Borrowers and
their Consolidated subsidiaries on a combined basis,
EBITDA minus (x) Capital Expenditures, (y) Cash
Interest Expense and (z) cash dividended or otherwise
distributed by the Borrowers to ABNC for such month,
was not less than $1,000,000;
(v) evidence that the Transactions are in
compliance with all applicable laws and regulations;
(vi) evidence of payment of all non-refundable
fees owed to the Agent and the Lenders by the
Borrowers under this Agreement, the Commitment
Letter or otherwise;
(vii) evidence that all requisite third
party consents (including, without limitation, consents
with respect to each of the Borrowers and each of the
Grantors and Guarantors) to the Transactions have been
received;
(viii) evidence that except as set forth on
Schedule 4.05 hereto, there has been no material
adverse change in the business, assets, operations or
financial condition of the Loan Parties since December
31, 1994;
(ix) evidence that there are no actions,
suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency
or regulatory authority now pending or threatened
against or affecting any Loan Party or any of their
respective businesses, assets or rights which involve
any of the Transactions;
(x) evidence that there shall be no
obligations of any Loan Party outstanding under the
Citibank Agreement and that all further commitments to
lend thereunder shall be terminated and all Liens
securing such obligations shall be released; provided,
that the Citibank Letters of Credit may be
outstanding and the reimbursement obligations of the
Borrowers thereunder may be secured by the Citibank
L/C Cash Collateral;
(xi) evidence that after giving effect to
the Transactions (a) exclusive of the Citibank L/C Cash
Collateral, the Borrowers will have not less than
$5,000,000 in cash on hand and (b) the Loan Parties
will have not less than $15,000,000 in cash on hand;
and
(xii) the results of an environmental audit
with respect to the properties and operations of the
Borrowers conducted by a firm or firms satisfactory to
the Agent, together with the results of the Phase I
audit by McLaren/Hart Environmental Engineering
Corporation with respect to the properties and
operations of the Borrowers at each of 680 Blair Mill
Road, Horsham, Pennsylvania (dated December 14, 1995),
5858 West 73rd Street, Bedford Park, Illinois (dated
December 12, 1995), and 11600 Caroline Road,
Philadelphia, Pennsylvania (dated January 19, 1996);
the scope, method and results of such audits shall be
satisfactory to the Agent in all respects.
(i) The Agent shall have completed its customer and
supplier checkings, examined the books of account and other
records and files of the Loan Parties and made copies
thereof, and conducted a pre-closing audit which shall
include, without limitation, verification of Eligible
Receivables, examination of Eligible Inventory, payment of
payroll taxes and accounts payable and formulation of an
opening Borrowing Base, and the results of such checkings,
examination and audit shall have been satisfactory to the
Agent in all respects.
(j) The Agent shall have received and had the
opportunity to review and determine to be in form and
substance satisfactory to it:
(i) copies of all lease agreements entered into
by any of the Borrowers and their subsidiaries;
(ii) copies of all loan agreements, notes,
mortgages and other documentation evidencing
Indebtedness for borrowed money (including, without
limitation, the Indentures and all amendments,
modifications and waivers with respect thereto) of each
Loan Party; and
(iii) copies of all major customer and supplier
contracts.
(k) Messrs. Kaye, Scholer, Fierman, Hays & Handler,
LLP, a New York limited liability partnership, counsel to
the Agent, shall have received payment in full for all legal
fees charged, and all costs and expenses incurred, by such
counsel through the Closing Date in connection with the
transactions contemplated under this Agreement, the Security
Documents, and the other Loan Documents and instruments in
connection herewith and therewith.
(l) The corporate structure and capitalization of the
Loan Parties shall be satisfactory to the Agent in all
respects.
(m) All legal matters in connection with the
Transactions shall be satisfactory to the Agent, the Lenders
and their respective counsel in their sole discretion.
(n) The Borrowers shall have executed and delivered to
the Agent a disbursement authorization letter with respect
to the disbursement of the proceeds of the Credit Events
made on the Closing Date, in form and substance satisfactory
to the Agent.
(o) The Agent shall have received a Borrowing Base
Certificate as of the Closing Date evidencing not less than
$8,000,000 in Total Availability after giving effect to the
Transactions.
(p) The Agent shall have received such other documents
as the Lenders or the Agent or Agent's counsel shall
reasonably deem necessary.
VI. AFFIRMATIVE COVENANTS
Each of ABNC and the Borrowers covenants and agrees
with each Lender that, so long as this Agreement shall remain in
effect or the principal of or interest on any Note, any amount
under any Letter of Credit or any fee, expense or other
Obligation payable hereunder or in connection with any of the
Transactions shall be unpaid, it will, and each Borrower will
cause each of its subsidiaries and, with respect to Section 6.07
hereof, each ERISA Affiliate, to:
SECTION 6.01. Legal Existence. Do or cause to be done
all things necessary to preserve, renew and keep in full force
and effect its legal existence.
SECTION 6.02. Businesses and Properties. At all times
do or cause to be done all things necessary to preserve, renew
and keep in full force and effect the rights, licenses, Permits,
franchises, patents, copyrights, trademarks and trade names
material to the conduct of its businesses; maintain and operate
such businesses in the same general manner in which they are
presently conducted and operated; comply with all laws, rules,
regulations and governmental orders (whether Federal, state or
local) applicable to the operation of such businesses whether now
in effect or hereafter enacted (including, without limitation,
all applicable laws, rules, regulations and governmental orders
relating to public and employee health and safety and all
Environmental Laws) and with any and all other applicable laws,
rules, regulations and governmental orders, the lack of
compliance with which would have a Material Adverse Effect; take
all actions which may be required to obtain, preserve, renew and
extend all Permits and other authorizations which are material to
the operation of such businesses; and at all times maintain,
preserve and protect all property material to the conduct of such
businesses and keep such property in good repair, working order
and condition and from time to time make, or cause to be made,
all needful and proper repairs, renewals, additions, improvements
and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at
all times.
SECTION 6.03. Insurance. (a) Keep its insurable
properties adequately insured at all times by financially sound
and reputable insurers, (b) maintain such other insurance, to
such extent, in such amount, and against such risks, including
fire, theft, fraud, product liability, business interruption and
other risks insured against by extended coverage, as is customary
with companies similarly situated and in the same or similar
businesses, provided, however, that such insurance shall insure
the property of the Borrowers against all risk of physical
damage, including, without limitation, loss by fire, explosion,
theft, fraud and such other casualties as may be reasonably
satisfactory to the Agent, but in no event at any time in an
amount less than the replacement value of the Collateral, (c)
maintain in full force and effect public liability insurance
against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by any Loan Party, in
such amount as the Agent shall reasonably deem necessary, and (d)
maintain such other insurance as may be required by law or as may
be reasonably requested by the Agent for purposes of assuring
compliance with this Section 6.03. All insurance covering
tangible personal property subject to a Lien in favor of the
Agent for the benefit of the Lenders granted pursuant to the
Security Documents shall provide that, in the case of each
separate loss the full amount of insurance proceeds shall be
payable to the Agent and shall further provide for at least 30
days' prior written notice to the Agent of the cancellation or
substantial modification thereof.
SECTION 6.04. Taxes. Pay and discharge promptly when
due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of
its property (except to the extent (i) such are contested in good
faith by appropriate proceedings, (ii) the applicable Loan Party
has set aside cash reserves therefor in accordance with GAAP and
(iii) such contest shall not in any event affect the Agent's
Lien, or the priority thereof, on any Collateral except to the
extent permitted by Section 7.01) before the same shall become
delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give
rise to Liens upon such properties or any part thereof.
SECTION 6.05. Financial Statements, Reports, etc.
Furnish to the Agent, with copies for each of the Lenders:
(a) within ninety (90) days after the end of each
Fiscal Year, (i) Consolidated and consolidating balance
sheets and Consolidated and consolidating income statements
showing the financial condition of ABNC and its subsidiaries
as of the close of such Fiscal Year and the results of their
operations during such year, and (ii) a Consolidated and
consolidating statement of shareholders' equity and a Con-
solidated and consolidating statement of cash flow, as of
the close of such Fiscal Year, comparing such financial
condition and results of operations to such financial
condition and results of operations for the comparable
period during the immediately preceding Fiscal Year, all the
foregoing financial statements to be audited by independent
public accountants acceptable to the Agent (which report
shall not contain any qualification except with respect to
new accounting principles mandated by the Financial
Accounting Standards Board), and to be in form and substance
satisfactory to the Agent.
(b-1) within forty-five (45) days after the end of
each of the first two months of each fiscal quarter (i)
unaudited Consolidated and consolidating balance sheets and
income statements showing the financial condition and
results of operations of ABNC and its subsidiaries as of the
end of each such month, and (ii) a Consolidated and
consolidating statement of cash flow, in each case for the
month just ended and for the period commencing at the end of
the immediately preceding fiscal quarter and ending with the
last day of such month, and comparing such financial
condition and results of operations to the results for the
comparable period during the immediately preceding Fiscal
Year, prepared and certified by the Financial Officer or
corporate controller of ABNC as presenting fairly the
financial condition and results of operations of ABNC and
its subsidiaries and as having been prepared in accordance
with GAAP, in each case subject to normal year-end audit
adjustments;
(b-2) within forty-five (45) days after the end of
each fiscal quarter (i) unaudited Consolidated and
consolidating balance sheets and income statements showing
the financial condition and results of operations of ABNC
and its subsidiaries as of the end of each such fiscal
quarter, and (ii) a Consolidated and consolidating statement
of cash flow, in each case for the fiscal quarter just ended
and for the period commencing at the end of the immediately
preceding fiscal quarter and ending with the last day of such
fiscal quarter, and comparing such financial condition
and results of operations to the projections for the
applicable period provided under paragraph (g) below and to
the results for the comparable period during the immediately
preceding Fiscal Year, prepared and certified by the Financial
Officer of ABNC as presenting fairly the financial condition and
results of operations of ABNC and its subsidiaries and as having
been prepared in accordance with GAAP, in each case subject to
normal year-end audit adjustments;
(c) promptly after the same become publicly available,
copies of such registration statements, annual, periodic and
other reports, and such proxy statements and other
information, if any, as shall be filed by any Loan Party
with the Securities and Exchange Commission pursuant to the
requirements of the Securities Act of 1933 or the Securities
Exchange Act of 1934;
(d) (i) concurrently with any delivery under (a) or
(b-2) above, a certificate of the firm or person referred to
therein (x) which certificate shall, in the case of the
certificate of the Financial Officer of ABNC, certify that
to the best of his or her knowledge no Default or Event of
Default has occurred (including calculations demonstrating
compliance, as of the dates of the financial statements
being furnished, with the covenants set forth in
Sections 7.03, 7.05, 7.07, 7.08, 7.09, 7.10 and 7.11 hereof)
and, if such a Default or Event of Default has occurred,
specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto
and (y) which certificate, in the case of the certificate
furnished by the independent public accountants referred in
paragraph (a) above, may be limited to accounting matters
and disclaim responsibility for legal interpretations, but
shall in any event certify that to the best of such
accountants' knowledge, as of the dates of the financial
statements being furnished no Default or Event of Default
has occurred under any of the covenants set forth in
Sections 7.03, 7.05, 7.07, 7.08, 7.09, 7.10 and 7.11 hereof
(such certificate to include calculations demonstrating
compliance with such covenants) and, if such a Default or
Event of Default has occurred, specifying the nature and
extent thereof, and shall in addition certify that in the
course of preparing the audit and the certificate referred
to herein, such accountants have not become aware of the
occurrence of any other Default or Event of Default and, if
such a Default or Event of Default has occurred, specifying
the nature thereof; provided, however, that any certificate
delivered concurrently with (a) above shall be signed by the
Financial Officer of ABNC;
(e) promptly upon receipt thereof but in any event not
later than 150 days after the beginning of each Fiscal Year,
a management letter prepared by the independent public
accountants who reported on the financial statements
delivered under (a) above, with respect to the internal
audit and financial controls of ABNC and its subsidiaries;
(f) within twenty (20) days of the end of each fiscal
month, (i) an aging schedule of Receivables in the form of
the aging schedule of Receivables dated December 31, 1995
previously furnished to the Agent, together with
accompanying reconciliation, duly executed by the Financial
Officer or corporate controller of each Borrower, (ii) a
certificate, substantially in the form of Exhibit F hereto,
executed by the Financial Officer or corporate controller of
each Borrower with respect to inventory designations, (iii)
an aging schedule of the payables of each Borrower, together
with accompanying reconciliation, executed by the Financial
Officer or corporate controller of each Borrower, (iv) a
copy of the bank statement of each Borrower with respect to
each lock-box account and (v) such other sales, collections,
debit and credit adjustment schedules as the Agent may
request; provided, however, that (x) upon the occurrence and
during the continuance of a Default or Event of Default or
(y) if Total Availability shall at any time be less than
$5,000,000, then the schedules referred to in clause (v)
shall be delivered each Business Day;
(g) within fifteen (15) days prior to the beginning of
each Fiscal Year, a summary of business plans and financial
operation projections for ABNC and its subsidiaries on a
quarterly basis for such Fiscal Year and annual projections
through the Final Maturity Date, in each case on a
Consolidated and consolidating basis, prepared by management
and in form, substance and detail (including, without
limitation, principal assumptions) satisfactory to the
Agent;
(h) as soon as practicable, copies of all reports,
forms, filings, loan documents and financial information
submitted to governmental agencies and/or its shareholders;
(i) within twenty (20) days after the end of each
fiscal month, a certificate, substantially in the form of
Exhibit E hereto (each, a "Borrowing Base Certificate"),
executed by the Financial Officer or corporate controller of
each of ABN and ABNH, setting forth the ABN Borrowing Base
and ABNH Borrowing Base, respectively, and ABN Availability
and ABNH Availability, respectively;
(j) immediately upon becoming aware thereof, notice to
the Agent of the breach by any party of any material
agreement with any Loan Party; and
(k) such other information as the Agent or any Lender
may reasonably request.
SECTION 6.06. Litigation and Other Notices. Give the
Agent prompt written notice of the following:
(a) the issuance by any court or governmental agency
or authority of any injunction, order, proceeding,
investigation, audit by federal, state or city taxing
authorities, decision or other restraint prohibiting, or
having the effect of prohibiting, the making of the Loans or
occurrence of other Credit Events, or invalidating, or
having the effect of invalidating, any provision of this
Agreement, the Notes or the other Loan Documents, or the
initiation of any litigation or similar proceeding seeking
any such injunction, order, decision or other restraint;
(b) the filing or commencement of any action, suit or
proceeding against any Loan Party, whether at law or in
equity or by or before any court or any Federal, state,
municipal or other governmental agency or authority,
(i) which is material and is brought by or on behalf of any
governmental agency or authority, or in which injunctive or
other equitable relief is sought or (ii) as to which it is
probable (within the meaning of Statement of Financial
Accounting Standards No. 5) that there will be an adverse
determination and which, if adversely determined, would
(A) reasonably be expected to result in liability of one or
more Loan Parties in an aggregate amount of $250,000 or
more, not reimbursable by insurance, or (B) materially
impair the right of any Loan Party to perform its obliga-
tions under this Agreement, any Note or any other Loan Docu-
ment to which it is a party;
(c) any Default or Event of Default, specifying the
nature and extent thereof and the action (if any) which is
proposed to be taken with respect thereto; and
(d) any development in the business, affairs or
business development of any Loan Party which has had or
which is likely, in the reasonable judgment of any
Responsible Officer of such Loan Party, to have, a Material
Adverse Effect.
SECTION 6.07. ERISA. (a) Pay and discharge promptly
any liability imposed upon it pursuant to the provisions of
Title IV of ERISA; provided, however, that neither ABNC, any
subsidiary, nor any ERISA Affiliate shall be required to pay any
such liability if (1) the amount, applicability or validity
thereof shall be diligently contested in good faith by
appropriate proceedings, and (2) such person shall have set aside
on its books reserves which, in the opinion of the independent
certified public accountants of such person, are adequate with
respect thereto.
(b) Deliver to the Agent, promptly, and in any event
within 30 days, after (i) the occurrence of any Reportable Event,
a copy of the materials that are filed with the PBGC, (ii) ABNC,
any subsidiary or any ERISA Affiliate or an administrator of any
Pension Plan files with participants, beneficiaries or the PBGC a
notice of intent to terminate any such Plan, a copy of any such
notice, (iii) the receipt of notice by ABNC or any ERISA
Affiliate or an administrator of any Pension Plan from the PBGC
of the PBGC's intention to terminate any Pension Plan or to
appoint a trustee to administer any such Plan, a copy of such
notice, (iv) the filing thereof with the Internal Revenue
Service, copies of each annual report that is filed on Treasury
Form 5500 with respect to any Pension Plan, together with
certified financial statements (if any) for the Plan and any
actuarial statements on Schedule B to such Form 5500, (v) ABNC or
any ERISA Affiliate knows or has reason to know of any event or
condition which might constitute grounds under the provisions of
Section 4042 of ERISA for the termination of (or the appointment
of a trustee to administer) any Pension Plan, an explanation of
such event or condition, (vi) the receipt by ABNC or any ERISA
Affiliate of an assessment of withdrawal liability under Section
4201 of ERISA from a Multiemployer Plan, a copy of such
assessment, (vii) ABNC or any ERISA Affiliate knows or has reason
to know of any event or condition which might cause any one of
them to incur a liability under Section 4062, 4063, 4064 or 4069
of ERISA or Section 412(n) or 4971 of the Code, an explanation of
such event or condition, and (viii) ABNC or any ERISA Affiliate
knows or has reason to know that an application is to be, or has
been, made to the Secretary of the Treasury for a waiver of the
minimum funding standard under the provisions of Section 412 of
the Code, a copy of such application, and in each case described
in clauses (i) through (iii) and (v) through (vii) together with
a statement signed by the Financial Officer setting forth details
as to such Reportable Event, notice, event or condition and the
action which such Borrower or such ERISA Affiliate proposes to
take with respect thereto.
SECTION 6.08. Maintaining Records; Access to
Properties and Inspections; Right to Audit. Maintain financial
records in accordance with accepted financial practices and, upon
notice (which may be telephonic), at all times and as often as
any Lender may reasonably request, permit any authorized
representative designated by such Lender to visit and inspect the
properties and financial records of any Loan Party and to make
extracts from such financial records at such Lender's expense,
and permit any authorized representative designated by such
Lender to discuss the affairs, finances and condition of any Loan
Party with the appropriate Financial Officer and such other
officers as such Loan Party shall deem appropriate and such Loan
Party's independent public accountants, as applicable. The Agent
agrees that it shall schedule any meeting with any such
independent public accountant through ABNC and a Responsible
Officer of one or more Loan Parties shall have the right to be
present at any such meeting. At the Borrowers' expense, the
Agent shall have the right to audit as often as it may reasonably
request the existence and condition of the accounts receivable,
inventory, books and records of the Loan Parties and to review
compliance thereof with the terms and conditions of this
Agreement and the other Loan Documents.
SECTION 6.09. Use of Proceeds. Use the proceeds of
the Credit Events only for the purposes set forth in Section 4.14
hereof.
SECTION 6.10. Fiscal Year-End. Cause its Fiscal Year
to end on or about December 31, in each year.
SECTION 6.11. Further Assurances. Execute any and all
further documents and take all further actions which may be
required under applicable law, or which the Agent may reasonably
request, to grant, preserve, protect and perfect the first
priority security interest created by the Security Documents in
the Collateral.
SECTION 6.12. Additional Grantors and Guarantors.
Promptly inform the Agent of the creation or acquisition of any
direct or indirect subsidiary of a Borrower or any of its
existing subsidiaries (subject to the provisions of Section 7.06
hereof) and cause each direct or indirect subsidiary not in
existence on the date hereof to enter into a Guarantee in form
and substance satisfactory to the Agent, and to execute the
Security Documents, as applicable, as a Grantor, and cause each
such subsidiary to pledge its accounts receivable and inventory,
together with all proceeds and products thereof, pursuant to the
Security Agreement.
SECTION 6.13. Environmental Laws. (a) Comply, and
cause each of their subsidiaries to comply, in all material
respects with the provisions of all Environmental Laws, and shall
keep their properties and the properties of their subsidiaries
free of any Lien imposed pursuant to any Environmental Law. The
Borrowers shall not cause or suffer or permit, and shall not
suffer or permit any of their respective subsidiaries to cause or
suffer or permit, the property of such Borrower or its
subsidiaries to be used for the generation, production,
processing, handling, storage, transporting or disposal of any
Hazardous Material, except for Hazardous Materials used in the
ordinary course of business of such Borrower and its subsidiaries
in compliance with applicable Environmental Laws, in which case
such Hazardous Materials shall be used, stored, generated,
treated and disposed of only in compliance with Environmental
Law.
(b) Supply to the Agent copies of all submissions by
any Loan Party to any governmental body and of the reports of all
environmental audits and of all other environmental tests,
studies or assessments (including the data derived from any
sampling or survey of asbestos, soil, or subsurface or other
materials or conditions) that may be conducted or performed (by
or on behalf of any Loan Party) on or regarding the properties
owned, operated, leased or occupied by any Loan Party or
regarding any conditions that might have been affected by
Hazardous Materials on or Released or removed from such
properties. ABNC shall also permit and authorize, and shall
cause each other Loan Party to permit and authorize, the
consultants, attorneys or other persons that prepare such
submissions or reports or perform such audits, tests, studies or
assessments to discuss such submissions, reports or audits with
the Agent and the Lenders.
(c) Promptly (and in no event more than two (2)
Business Days after any Loan Party becomes aware or are otherwise
informed of such event) provide oral and written notice to the
Agent upon the happening of any of the following:
(i) any Loan Party or any tenant or other
occupant of any property of such Loan Party receives
notice of any claim, complaint, charge or notice of a
violation or potential violation of any Environmental
Law;
(ii) there has been a spill or other
Release of Hazardous Materials upon, under or about or
affecting any of the properties owned, operated, leased
or occupied by any Loan Party, or Hazardous Materials
at levels or in amounts that may have to be reported,
remedied or responded to under Environmental Law are
detected on or in the soil or groundwater;
(iii) any Loan Party is or may be liable for
any costs of cleaning up or otherwise responding to a
Release of Hazardous Materials;
(iv) any part of the properties owned,
operated, leased or occupied by any Loan Party is or
may be subject to a Lien under any Environmental Law;
or
(v) any Loan Party undertakes any Remedial
Work with respect to any Hazardous Materials.
(d) Timely undertake and complete any Remedial Work
required by any Environmental Law.
(e) Without in any way limiting the scope of
Section 12.04(c) and in addition to any obligations thereunder,
each Borrower hereby indemnifies and agrees to hold the Agent and
the Lenders harmless from and against any liability, loss,
damage, suit, action or proceeding arising out of its business or
the business of its subsidiaries pertaining to Hazardous
Materials, including, but not limited to, claims of any
governmental body or any third person arising under any
Environmental Law or under tort, contract or common law. To the
extent laws of the United States or any applicable state or local
law in which property owned, operated, leased or occupied by a
Borrower or any subsidiary thereof is located provided that a
Lien upon such property of such Borrower or such subsidiary may
be obtained for the removal of Hazardous Materials which have
been or may be Released, then in the event of a Release no later
than sixty days after notice is given by the Agent to a Borrower
or such subsidiary, a Borrower or such subsidiary shall deliver
to the Agent a report issued by a qualified third party engineer
specifying the existence of any Hazardous Materials located upon
or beneath the specified property. To the extent any Hazardous
Materials located therein or thereunder either subject the
property to Lien or require removal to safeguard the health of
any persons, the removal thereof shall be an affirmative covenant
of Borrower and their subsidiaries hereunder.
(f) In the event that any Remedial Work is required to
be performed by a Borrower or any subsidiary thereof under any
applicable Environmental Law, any judicial order, or by any
governmental entity, such Borrower or such subsidiary shall
commence all such Remedial Work at or prior to the time required
therefor under such Environmental Law or applicable judicial
orders and thereafter diligently prosecute to completion all such
Remedial Work in accordance with and within the time allowed
under such applicable Environmental Laws or judicial orders.
This Section 6.13(f) shall not prohibit the Borrower from
contesting the applicability of such Environmental Laws or the
propriety of such judicial orders, in good faith and by
appropriate proceedings to the extent permitted by law.
SECTION 6.14. Pay Obligations to Lenders and Perform
Other Covenants. (a) Cause the Borrowers to make full and timely
payment of the Obligations, whether now existing or hereafter
arising, (b) duly comply with all the terms and covenants
applicable thereto contained in this Agreement (including,
without limitation, the borrowing limitations and mandatory
prepayments in accordance with Article II hereof) in each of the
other Loan Documents, all at the times and places and in the
manner set forth therein, and (c) except for the filing of
continuation statements and the making of other filings by the
Agent as secured party or assignee, at all times take all actions
necessary to maintain the Liens and security interests provided
for under or pursuant to this Agreement and the Security
Documents as valid and perfected first Liens on the property
intended to be covered thereby (subject only to Liens expressly
permitted hereunder) and supply all information to the Agent
necessary for such maintenance.
SECTION 6.15. Maintain Operating Accounts. Maintain
all of the Borrowers' operating accounts and cash management
arrangements (other than payroll accounts) with the Agent.
SECTION 6.16. Dividends, Distributions and Payments.
With respect to the declaration or payment by the Borrowers and
their subsidiaries to any other Loan Party of any cash dividends
or other distribution, whether in cash (and whether deemed to be
a loan, advance or otherwise), property, securities or a
combination thereof (each a "Permitted Dividend"), deliver to the
Agent a certificate (each, a "Compliance Certificate")
demonstrating to the Agent's satisfaction whether the Borrowers
are in compliance with each of, and the effect of the making of a
proposed Permitted Dividend payment on, Borrower's compliance
with any of, Sections 7.07, 7.08, 7.09 or 7.10. It shall
constitute an Event of Default under this Agreement if the
proceeds of any Permitted Dividend payment shall be used by ABNC
to (i) acquire all or substantially all the capital stock or
assets of any person, or merge with or permit another person to
merge into it, (ii) invest in a joint venture or (iii) prepay,
redeem, purchase or retire any Indebtedness (including, without
limitation, under the Indentures) or any amount (including,
without limitation, interest) thereon prior to its regularly
scheduled amortization or other due date.
VII. NEGATIVE COVENANTS
Each of the Borrowers and, where specifically
indicated, ABNC, jointly and severally, covenants and agrees with
each Lender that, so long as this Agreement shall remain in
effect or the principal of or interest on any Note, any amount
under any Letter of Credit, or any fee, expense or other
Obligation payable hereunder or in connection with any of the
Transactions shall be unpaid, it will not and each Borrower will
not cause or permit any of its subsidiaries and, in the case of
Section 7.15 hereof, any ERISA Affiliate to, either directly or
indirectly:
SECTION 7.01. Liens. Incur, create, assume or permit
to exist any Lien on any of its property or assets (including the
stock of any direct or indirect subsidiary), whether owned at the
date hereof or hereafter acquired, or assign or convey any rights
to or security interests in any future revenues, except:
(a) Liens incurred and pledges and deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance, old-age pensions and
other social security benefits (not including any lien
described in Section 412(m) of the Code);
(b) Liens imposed by law, such as carriers', ware-
housemen's, mechanics', materialmen's and vendors' liens and
other similar liens, incurred in good faith in the ordinary
course of business and securing obligations which are not
overdue for a period of more than 30 days or which are being
contested in good faith by appropriate proceedings as to
which any Borrower or any of its subsidiaries, as the case
may be, shall, to the extent required by GAAP, have set
aside on its books adequate reserves;
(c) Liens securing the payment of taxes, assessments
and governmental charges or levies, that are not delinquent
or are being diligently contested in good faith by appro-
priate proceedings and as to which adequate cash reserves
have been established in accordance with GAAP; provided,
however, that in no event shall the aggregate amount of such
reserves be less than the aggregate amount secured by such
Liens; and, provided further, that in any event the
obligations giving rise to any such Lien shall be paid by
the Borrowers immediately upon any action being taken to
foreclose upon or otherwise transfer or dispose of the
applicable property by the lienholder ;
(d) zoning restrictions, easements, licenses, reser-
vations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor irregularities
of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising
by, through or under a landlord or owner of the leased
property, with or without consent of the lessee) which do
not in the aggregate materially detract from the value of
its property or assets or materially impair the use thereof
in the operation of its business;
(e) Liens upon any equipment acquired through the
purchase or lease by any Borrower or any of its subsidiaries
which are created or incurred contemporaneously with such
acquisition to secure or provide for the payment of not more
than 100% of the purchase price of, or lease payments on,
such equipment (and no other amounts); provided, however,
that any such Lien shall not apply to any other property of
the Borrowers or any of their subsidiaries; and provided,
further, that after giving effect to such purchase or lease,
compliance is maintained with each other provision of this
Agreement including, without limitation,
Section 7.07 hereof;
(f) Liens existing on the date of this Agreement and
set forth in Schedule 7.01 annexed hereto; provided,
however, that the Indebtedness with respect to such existing
Lien shall not exceed the amount corresponding to such Lien
set forth in Schedule 7.01;
(g) Liens created in favor of the Agent for the
benefit of the Lenders; or
(h) Liens securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed
money), statutory obligations, surety, customs and appeal
bonds and other obligations of like nature, incurred as an
incident to and in the ordinary course of business.
SECTION 7.02. Sale and Lease-Back Transactions. Enter
into any arrangement, directly or indirectly, with any person
whereby the Borrowers or any of their subsidiaries shall sell or
transfer any property, real or personal, and used or useful in
its business, whether now owned or hereafter acquired, and there-
after rent or lease such property or other property which such
Borrower or such subsidiary intends to use for substantially the
same purpose or purposes as the property being sold or
transferred, except for sale and lease-back transactions in the
ordinary course of business not to exceed $4,000,000 in the
aggregate during the term of this Agreement.
SECTION 7.03. Indebtedness. With respect to ABNC, the
Borrowers and the Borrowers' subsidiaries, incur, create, assume
or permit to exist any Indebtedness other than (i) Indebtedness
of the Borrowers and their subsidiaries secured by Liens
permitted under Section 7.01, (ii) Indebtedness (including,
without limitation, Guarantees) existing on the date hereof and
listed in Schedule 7.03 annexed hereto, but not the extension,
renewal or refunding thereof, unless, with respect solely to the
Borrowers, any such extension, renewal or refunding is on
substantially the same terms as the original Indebtedness,
(iii) Indebtedness incurred hereunder, (iv) Indebtedness to trade
creditors incurred in the ordinary course of business,
(v) Guarantees constituting the endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business, (vi) Guarantees of the Obligations, (vii) purchase
money Indebtedness not to exceed $1,000,000 at any time
outstanding and subject in any event to the restrictions
contained in Sections 7.01(e) with respect to the Borrowers and
their subsidiaries, and 7.07 hereof, (viii) Subordinated
Indebtedness, (ix) in addition to other Indebtedness permitted
hereunder, unsecured Indebtedness of the Borrowers incurred in
the ordinary course of business not to exceed $500,000 at any
time outstanding, (x) Indebtedness of any Loan Party to another
Loan Party, providing, that prior to the incurrence of any such
Indebtedness, the applicable Loan Party or Loan Parties shall
have delivered a Compliance Certificate to the Agent, (xi)
Indebtedness in respect of interest rate swap agreements,
currency swap agreements and other similar agreements designed to
hedge against fluctuations in interest rates or exchange rates,
so long as the aggregate notional principal amount thereof does
not exceed $75,000,000 at any time; and (xii) Indebtedness of
ABNC to its subsidiaries that are not Loan Parties.
SECTION 7.04. Intentionally Omitted.
SECTION 7.05. Consolidations, Mergers and Sales of
Assets. Consolidate with or merge into any other person, or
sell, lease, transfer or assign to any persons or otherwise
dispose of (whether in one transaction or a series of transac-
tions) any portion of its assets (whether now owned or hereafter
acquired), or permit another person to merge into it, or acquire
all or substantially all the capital stock or assets of any other
person, other than the following: (i) sales of inventory in the
ordinary course of business; (ii) sales of obsolete and idle
property, plant and equipment not to exceed (x) $3,000,000 in
aggregate amount in any Fiscal Year and (y) $5,000,000 in
aggregate amount during the term of this Agreement; (iii) the
sale or transfer of Archives of the Borrowers or any of their
subsidiaries not to exceed (x) $3,000,000 in aggregate amount in
any Fiscal Year and (y) $6,000,000 in aggregate amount during the
term of this Agreement (each, an "Asset Transfer"); (iv) so long
as a Compliance Certificate shall have been delivered to the
Agent, the sale or transfer of assets, in each case in the
Ordinary Course of Business, of (x) either Borrower to the other
Borrower, to ABNC, to any subsidiary of ABNC, or to any
subsidiary of either Borrower or (y) any subsidiary of either
Borrower to another subsidiary of a Borrower, to either Borrower,
to ABNC or to any subsidiary of ABNC; and (v) on or after the
Adjustment Date, the acquisition by the Borrowers (each, a
"Permitted Acquisition") of the stock or assets of domestic
persons engaged in businesses substantially similar to that
engaged in by the Borrowers on the Closing Date, subject to the
following additional terms and conditions:
(a) the Borrowers shall give the Agent not less than 30 days
prior notice of the anticipated closing of the proposed acquisition;
(b) the Agent shall be provided with such financial information
as it shall request regarding the person to be acquired and such
information shall demonstrate to the Agent's satisfaction that
such person has had cumulative positive net income for the two most
recent fiscal years just ended; (c) no Default or Event of Default
shall have occurred and be continuing or would occur after giving
effect to any proposed acquisition (including, without limitation,
under clause (g) of Article VIII hereof with respect to the
Indentures); (d) the Borrowers may borrow not more than $10,000,000
in Revolving Credit Loans outstanding at any time for the purpose of
making Permitted Acquisitions; (e) amounts in excess of the
$10,000,000 in Revolving Credit Loans available hereunder which
the Borrowers require for Permitted Acquisitions shall be financed
with a combination of (i) net proceeds from the issuance of capital
stock of the Borrowers and ABNC and (ii) stock received from the
sellers of the acquired person in exchange for the capital stock
of either Borrower or of ABNC (providing, that in any event ABN
and ABNH shall be the survivor of any Permitted Acquisition);
(f) the aggregate purchase price of any single Permitted
Acquisition shall not exceed $25,000,000; (g) the acquisition is
not hostile; and (h) after giving effect to the Permitted
Acquisition, pro forma Total Availability shall be not less
than $3,000,000.
SECTION 7.06. Investments. Own, purchase or acquire
any stock, obligations, assets or securities of, or any interest
in, or make any capital contribution or loan or advance to, any
other person, or make any other investments, except:
(a) certificates of deposit in dollars of any com-
mercial banks registered to do business in any state of the
United States (i) having capital and surplus in excess of
$500,000,000 and (ii) whose long-term debt rating is at
least investment grade as determined by either Standard &
Poor's Ratings Group or Moody's Investors Service, Inc.;
(b) readily marketable direct obligations of the
United States government or any agency thereof which are
backed by the full faith and credit of the United States;
(c) investments in money market mutual funds having
assets in excess of $2,000,000,000;
(d) commercial paper at the time of acquisition having
the highest rating obtainable from either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc.;
(e) federally tax exempt securities and money market
preferred stock, in each case rated A or better by either
Standard & Poor's Ratings Group or Moody's Investors
Service, Inc.;
(f) investments in the stock of any subsidiary of
either Borrower existing on the Closing Date, but not any
additional investments by any Borrower in any subsidiary of
any Borrower, or by any subsidiary of any Borrower in
another subsidiary of any Borrower;
(g) loans and advances by (i) either Borrower to
the other Borrower, (ii) either Borrower and its
subsidiaries to its own subsidiaries or to the subsidiaries
of the other Borrower, (iii) the Borrowers and their
subsidiaries to ABNC and (iv) the Borrowers and their
subsidiaries to other subsidiaries of ABNC in an aggregate
amount not to exceed $5,000,000 in the aggregate during
the term of this Agreement (provided, that in the case
of clauses (ii), (iii) and (iv), loans and advances shall
not be made to any subsidiary of the Borrowers or ABNC
designated on Schedule 4.15 hereto as "inactive");
(h) Permitted Acquisitions; and
(i) on and after the Adjustment Date, and so long as no
Default or Event of Default shall have occurred and be
continuing or would occur after giving effect to the
following, the Borrowers shall be permitted to invest not
more than $2,500,000 in the aggregate during the term of
this Agreement in joint ventures;
provided that, in each case mentioned in (a), (b), (d) and (e)
above, such obligations shall mature not more than one year from
the date of acquisition thereof.
SECTION 7.07. Capital Expenditures. Permit the
aggregate amount of payments made for Capital Expenditures,
including Capitalized Lease Obligations and Indebtedness secured
by Liens permitted under Section 7.01(e) hereof, in each of the
periods indicated below to exceed the following amounts for the
Borrowers and their subsidiaries:
Period Maximum Amount
Fiscal Year ending December 31, 1996 $1,900,000
Fiscal Year ending December 31, 1997
2,500,000
and each Fiscal Year thereafter
SECTION 7.08. Interest Coverage Ratios. A. Permit
the Consolidated Interest Coverage Ratio to be less than (i)
1.10:1.00 for the two fiscal quarters ending September 30, 1996,
(ii) 1.20:1.00 for the three fiscal quarters ending December 31,
1996, (iii) 1.20:1.00 for the four fiscal quarters ending March
31, 1997, (iv) 1.40:1.00 for the four fiscal quarters ending
June 30, 1997 and (v) 1.50:1.00 for the four fiscal quarters
ending September 30, 1997 and for the four fiscal quarters ending
on each December 31, March 31, June 30 and September 30
thereafter.
B. Permit the Combined Interest Coverage Ratio to be
less than (i) 1.15:1.00 for each of the fiscal quarters ending
March 31, 1996, June 30, 1996,
September 30, 1996 and December 31, 1996 and (ii) 1.25:1.00 for
the fiscal quarter ending March 31, 1997 and for each fiscal
quarter thereafter.
SECTION 7.09. EBITDA. A. Permit the EBITDA of ABN to
be less than (i) $400,000 for the fiscal quarter ending March 31,
1996, (ii) $1,900,000 for the two fiscal quarters ending June 30,
1996, (iii) $4,300,000 for the three fiscal quarters ending
September 30, 1996, (iv) $6,500,000 for each of the four fiscal
quarters ending December 31, 1996 and the four fiscal quarters
ending March 31, 1997, (v) $7,000,000 for the four fiscal
quarters ending June 30, 1997, (vi) $8,500,000 for the four
fiscal quarters ending September 30, 1997 and (vii) $9,000,000
for the four fiscal quarters ending December 31, 1997 and for the
four fiscal quarters ending each March 31, June 30, September 30
and December 31 thereafter.
B. Permit the EBITDA of ABNH to be less than (i)
$1,800,000 for the fiscal quarter ending March 31, 1996, (ii)
$4,300,000 for the two fiscal quarters ending June 30, 1996,
(iii) $6,700,000 for the three fiscal quarters ending September
30, 1996, (iv) $9,500,000 for the four fiscal quarters ending
December 31, 1996, (v) $9,750,000 for the four fiscal quarters
ending March 31, 1997 and (vi) $10,000,000 for the four fiscal
quarters ending June 30, 1997 and for the four fiscal quarters
ending each September 30, December 31, March 31 and June 30
thereafter.
SECTION 7.10. Availability. Permit ABN Availability,
ABNH Availability or Total Availability to be less than $-0- at
any time.
SECTION 7.11. Rental Obligations. Incur, create,
assume or permit to exist, in respect of leases of real and
personal property (other than finance leases), rental obligations
or other commitments thereunder to make any direct or indirect
payment, whether as rent or otherwise, for fixed or minimum
rentals, percentage rentals, property taxes, or insurance
premiums, in an aggregate amount for the Borrowers and their
Consolidated subsidiaries in excess of (i) $8,000,000 for the
Fiscal Year ending December 31, 1995 and (ii) in any Fiscal Year
thereafter, an amount equal to the amount of the preceding Fiscal
Year increased by fifteen percent (15%).
SECTION 7.12 Business. Alter the nature of its
business as operated on the date of this Agreement in any
material respect.
SECTION 7.13. Sales of Receivables. Sell, assign,
discount, transfer, or otherwise dispose of any accounts
receivable, promissory notes, drafts or trade acceptances or
other rights to receive payment held by it, with or without
recourse, except (i) for the purpose of collection or settlement
in the ordinary course of business or (ii) the sale of any such
accounts to Chemical Bank.
SECTION 7.14. Use of Proceeds. Permit the proceeds of
any Credit Event to be used for any purpose which entails a
violation of, or is inconsistent with, Regulation G, T, U or X of
the Board, or for any purpose other than those set forth in
Section 4.14 hereof.
SECTION 7.15. ERISA. (a) Engage in any transaction
in connection with which any Loan Party or any ERISA Affiliate
could be subject to either a material civil penalty assessed
pursuant to the provisions of Section 502 of ERISA or a material
tax imposed under the provisions of Section 4975 of the Code.
(b) Terminate any Pension Plan in a "distress
termination" under Section 4041 of ERISA, or take any other
action which could result in a material liability of any Loan
Party or any ERISA Affiliate to the PBGC.
(c) Fail to make payment when due of all amounts
which, under the provisions of any Plan, any Loan Party or any
ERISA Affiliate is required to pay as contributions thereto,
where such failure could have a Material Adverse Effect or, with
respect to any Pension Plan, permit to exist any material
"accumulated funding deficiency" (within the meaning of Section
302 of ERISA and Section 412 of the Code), whether or not waived,
with respect thereto.
(d) Adopt an amendment to any Pension Plan requiring
the provision of security under Section 307 of ERISA or
Section 401(a)(29) of the Code.
SECTION 7.16. Accounting Changes. Make, or permit any
subsidiary to make any change in their accounting treatment or
financial reporting practices except as required or permitted by
GAAP.
SECTION 7.17. Prepayment or Modification of
Indebtedness; Modification of Charter Documents. (a) Directly
or indirectly prepay, redeem, purchase or retire any
Indebtedness, including, without limitation, any Subordinated
Indebtedness, other than Indebtedness incurred hereunder.
(b) Modify, amend or otherwise alter the terms and
provisions of any Subordinated Indebtedness.
(c) Modify, amend or otherwise alter the terms and
provisions of the Indentures.
(d) Modify, amend or alter their certificates or
articles of incorporation or other constitutive charter document
if such modification, amendment or alteration could have a
Material Adverse Effect.
SECTION 7.18. Transactions with Affiliates. Except as
otherwise specifically set forth in this Agreement, including
without limitation, Section 7.05 hereof, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer
or lease any property to, or enter into any other transaction
with, any stockholder, Affiliate or agent of any Loan Party,
except at prices and on terms not less favorable to it than that
which would have been obtained in an arm's-length transaction
with a non-affiliated third party.
SECTION 7.19. Negative Pledges, Etc. Enter into any
agreement (other than this Agreement or any other Loan Document)
which (a) prohibits the creation or assumption of any Lien upon
any of the Collateral, including, without limitation, any
hereafter acquired property, or (b) specifically prohibits the
amendment or other modification of this Agreement or any other
Loan Document.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events
(herein called "Events of Default"):
(a) any representation or warranty made or deemed made
in or in connection with this Agreement, any of the Security
Documents, the Notes or other Loan Documents or any Credit
Events hereunder, shall prove to have been incorrect in any
material respect when made or deemed to be made;
(b) default shall be made in the payment of any
principal of any Note when and as the same shall become due
and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any
interest on any Note, or any fee or any other amount payable
hereunder, or under the Notes, Letters of Credit or any
other Loan Document or in connection with any other Credit
Event or the Transactions when and as the same shall become
due and payable;
(d) (i) default shall be made in the due observance or
performance of any covenant, condition or agreement to be
observed or performed pursuant to the terms of this
Agreement (except as set forth in clause (ii) below), any of
the Notes, any of the Security Documents, or any other Loan
Document; or (ii) default shall be made in the due
observance or performance of any covenant, condition or
agreement to be observed or performed pursuant to Sections
6.02, 6.06, 6.07, 6.11, 6.12 or 6.13 and such default shall
continue for a period of 30 consecutive days;
(e) any Loan Party shall (i) voluntarily commence any
proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal,
state or foreign bankruptcy, insolvency, liquidation or
similar law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any such
proceeding or the filing of any such petition, (iii) apply
for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Loan
Party or for a substantial part of its property or assets,
(iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take corporate
action for the purpose of effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of any Loan
Party, or of a substantial part of the property or assets of
any Loan Party, under Title 11 of the United States Code or
any other Federal state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a
receiver, trustee, custodian, sequestrator or similar
official for any Loan Party or for a substantial part of the
property of any Loan Party, or (iii) the winding-up or
liquidation of any Loan Party; and such proceeding or
petition shall continue undismissed for 30 days or an order
or decree approving or ordering any of the foregoing shall
continue unstayed and in effect for 30 days;
(g) default shall be made with respect to any
Indebtedness or obligations under a capitalized lease of any
Loan Party (excluding Indebtedness outstanding hereunder)
including, without limitation the Indentures, in excess,
individually or in the aggregate, of $250,000, if the effect
of any such default shall be to accelerate, or to permit the
holder or obligee of any such Indebtedness or obligations
under a capitalized lease (or any trustee on behalf of such
holder or obligee) at its option to accelerate, the maturity
of such Indebtedness or obligations under a capitalized
lease;
(h) (i) a Reportable Event shall have occurred with
respect to a Pension Plan, (ii) the filing by any Loan
Party, any ERISA Affiliate, or an administrator of any Plan
of a notice of intent to terminate such a Plan in a
"distress termination" under the provisions of Section 4041
of ERISA, (iii) the receipt of notice by any Loan Party, any
ERISA Affiliate, or an administrator of a Plan that the PBGC
has instituted proceedings to terminate (or appoint a
trustee to administer) such a Pension Plan, (iv) any other
event or condition exists which might, in the opinion of the
Agent, constitute grounds under the provisions of Section
4042 of ERISA for the termination of (or the appointment of
a trustee to administer) any Pension Plan by the PBGC, (v) a
Pension Plan shall fail to maintain the minimum funding
standard required by Section 412 of the Code for any plan
year or a waiver of such standard is sought or granted under
the provisions of Section 412(d) of the Code, (vi) any Loan
Party or any ERISA Affiliate has incurred, or is likely to
incur, a liability under the provisions of Section 4062,
4063, 4064 or 4201 of ERISA, (vii) any Loan Party or any
ERISA Affiliate fails to pay the full amount of an install-
ment required under Section 412(m) of the Code, (viii) the
occurrence of any other event or condition with respect to
any Plan which would constitute an event of default under
any other agreement entered into by any Loan Party or any
ERISA Affiliate, and in each case in clauses (i) through
(viii) of this subsection (h), such event or condition,
together with all other such events or conditions, if any,
could subject any Loan Party or any ERISA Affiliate to any
taxes, penalties or other liabilities which, in the opinion
of the Agent, could have a Material Adverse Effect;
(i) any Loan Party or any ERISA Affiliate (i) shall
have been notified by the sponsor of a Multiemployer Plan
that it has incurred any material withdrawal liability to
such Multiemployer Plan which could have a Material Adverse
Effect, and (ii) does not have reasonable grounds for
contesting such withdrawal liability and is not in fact
contesting such withdrawal liability in a timely and
appropriate manner;
(j) a judgment (not reimbursed by insurance policies
of any Loan Party) or decree for the payment of money, a
fine or penalty which when taken together with all other
such judgments, decrees, fines and penalties shall exceed
$250,000 shall be rendered by a court or other tribunal
against any Loan Party and (i) shall remain undischarged or
unbonded for a period of 30 consecutive days during which
the execution of such judgment, decree, fine or penalty
shall not have been stayed effectively or (ii) any judgment
creditor or other person shall legally commence actions to
collect on or enforce such judgment, decree, fine or
penalty;
(k) this Agreement, any Note, any of the Security
Documents, any Guarantee or other Loan Documents shall for
any reason cease to be, or shall be asserted by any Loan
Party not to be, a legal, valid and binding obligation of
any Loan Party, enforceable in accordance with its terms, or
the security interest or Lien purported to be created by any
of the Security Documents shall for any reason cease to be,
or be asserted by any Loan Party not to be, a valid, first
priority perfected security interest in any Collateral
(except to the extent otherwise permitted under this
Agreement or any of the Security Documents);
(l) a Change of Control shall occur; or
(m) a Lien arising from unpaid federal, state or
local taxes shall be filed against the properties or assets
of any Loan Party;
then, and in any such event (other than an event described in
paragraph (e) or (f) above), and at any time thereafter during
the continuance of such event, the Agent may, and upon the
written request of the Required Lenders shall, by written notice
(or facsimile notice promptly confirmed in writing) to the
Borrowers, take any or all of the following actions at the same
or different times: (i) terminate forthwith all or any portion
of the Total Commitment and the obligations of the Lenders to
issue Letters of Credit hereunder; (ii) demand that the Borrowers
provide to the Lenders, and the Borrowers upon such demand agree
to provide, cash collateral in an amount equal to the aggregate
undrawn amount of all outstanding Letters of Credit plus the
aggregate amount of all drawings under Letters of Credit for
which the Lenders shall not have been reimbursed as provided in
Section 2.18 hereof, such cash collateral to be deposited in a
cash collateral account to be held by the Agent for the benefit
of the Lenders; and (iii) declare the Notes and any amounts then
owing to the Lenders on account of drawings under any Letters of
Credit to be forthwith due and payable, whereupon the principal
of such Notes, together with accrued interest and fees thereon
and any amounts then owing to the Lenders on account of drawings
under any Letters of Credit and other liabilities of the
Borrowers accrued hereunder, shall become forthwith due and
payable both as to principal and interest, without presentment,
demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained
herein or in the Notes to the contrary notwithstanding; provided,
however, that with respect to a default described in
paragraph (e) or (f) above, the Total Commitment and the
obligation of the Lenders to issue Letters of Credit shall auto-
matically terminate and the principal of the Notes, together with
accrued interest and fees thereon and any amounts then owing to
the Lenders on account of drawings under any Letters of Credit
and any other liabilities of the Borrowers accrued hereunder
shall automatically become due and payable, both as to principal
and interest, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by
the Borrowers, anything contained herein or in the Notes to the
contrary notwithstanding.
IX. AGENT
In order to expedite the transactions contemplated by
this Agreement, Chemical Bank is hereby appointed to act as Agent
on behalf of the Lenders. Each of the Lenders and each subse-
quent holder of any Note or issuer of any Letter of Credit by its
acceptance thereof, irrevocably authorizes the Agent to take such
action on its behalf and to exercise such powers hereunder and
under the Security Documents and other Loan Documents as are
specifically delegated to or required of the Agent by the terms
hereof and the terms thereof together with such powers as are
reasonably incidental thereto. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable as such
for any action taken or omitted to be taken by it or them
hereunder or under any of the Security Documents and other Loan
Documents or in connection herewith or therewith (a) at the
request or with the approval of the Required Lenders (or, if
otherwise specifically required hereunder or thereunder, the
consent of all the Lenders) or (b) in the absence of its or their
own gross negligence or willful misconduct.
The Agent is hereby expressly authorized on behalf of
the Lenders, without hereby limiting any implied authority,
(a) to receive on behalf of each of the Lenders any payment of
principal of or interest on the Notes outstanding hereunder and
all other amounts accrued hereunder paid to the Agent, and
promptly to distribute to each Lender its proper share of all
payments so received, (b) to distribute to each Lender copies of
all notices, agreements and other material as provided for in
this Agreement or in the Security Documents and other Loan
Documents as received by such Agent and (c) to take all actions
with respect to this Agreement and the Security Documents and
other Loan Documents as are specifically delegated to the Agent.
In the event that (a) any Borrower fails to pay when
due the principal of or interest on any Note, any amount payable
under any Letter of Credit, or any fee payable hereunder or
(b) the Agent receives written notice of the occurrence of a
Default or an Event of Default, the Agent within a reasonable
time shall give written notice thereof to the Lenders, and shall
take such action with respect to such Event of Default or other
condition or event as it shall be directed to take by the
Required Lenders; provided, however, that, unless and until the
Agent shall have received such directions, the Agent may take
such action or refrain from taking such action hereunder or under
the Security Documents or other Loan Documents with respect to a
Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
The Agent shall not be responsible in any manner to any
of the Lenders for the effectiveness, enforceability, perfection,
value, genuineness, validity or due execution of this Agreement,
the Notes or any of the other Loan Documents or Collateral or any
other agreements or certificates, requests, financial statements,
notices or opinions of counsel or for any recitals, statements,
warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as
to the performance or observance of any of the terms, provisions,
covenants, conditions, agreements or obligations of this
Agreement or any of the other Loan Documents or any other
agreements on the part of the Borrowers and, without limiting the
generality of the foregoing, the Agent shall, in the absence of
knowledge to the contrary, be entitled to accept any certificate
furnished pursuant to this Agreement or any of the other Loan
Documents as conclusive evidence of the facts stated therein and
shall be entitled to rely on any note, notice, consent,
certificate, affidavit, letter, telegram, teletype message,
statement, order or other document which it believes in good
faith to be genuine and correct and to have been signed or sent
by the proper person or persons. It is understood and agreed
that the Agent may exercise its rights and powers under other
agreements and instruments to which it is or may be a party, and
engage in other transactions with the Borrowers, as though it
were not Agent of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of
the receipt or sending of any notice, schedule, report, projec-
tion, financial statement or other document or information
pursuant to this Agreement or any of the other Loan Documents and
shall promptly forward a copy thereof to each Lender.
Neither the Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the
Borrowers on account of the failure or delay in performance or
breach by any Lender other than the Agent of any of its
obligations hereunder or to any Lender on account of the failure
of or delay in performance or breach by any other Lender or the
Borrowers of any of their respective obligations hereunder or in
connection herewith.
The Agent may consult with legal counsel selected by it
in connection with matters arising under this Agreement or any of
the other Loan Documents and any action taken or suffered in good
faith by it in accordance with the opinion of such counsel shall
be full justification and protection to it. The Agent may
exercise any of its powers and rights and perform any duty under
this Agreement or any of the other Loan Documents through agents
or attorneys.
The Agent and the Borrowers may deem and treat the
payee of any Note as the holder thereof until written notice of
transfer shall have been delivered as provided herein by such
payee to the Agent and the Borrowers.
With respect to the Loans made hereunder, the Notes
issued to it and any other Credit Event applicable to it, the
Agent in its individual capacity and not as an Agent shall have
the same rights, powers and duties hereunder and under any other
agreement executed in connection herewith as any other Lender and
may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrowers
or other affiliate thereof as if it were not the Agent.
Each Lender agrees (i) to reimburse the Agent in the
amount of such Lender's pro rata share (based on its Total
Commitment hereunder) of any expenses incurred for the benefit of
the Lenders by the Agent, including counsel fees and compensation
of agents and employees paid for services rendered on behalf of
the Lenders, not reimbursed by the Borrowers and (ii) to
indemnify and hold harmless the Agent and any of its directors,
officers, employees or agents, on demand, in the amount of its
pro rata share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted
against it in its capacity as the Agent or any of them in any way
relating to or arising out of this Agreement or any of the other
Loan Documents or any action taken or omitted by it or any of
them under this Agreement or any of the other Loan Documents, to
the extent not reimbursed by the Borrowers; provided, however,
that no Lender shall be liable to the Agent for any portion of
such liabilities, obligations, losses, damages, penalties,
actions, judgment, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement
and any other Loan Document to which such Lender is party. Each
Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan
Document, any related agreement or any document furnished
hereunder.
Subject to the appointment and acceptance of a suc-
cessor Agent as provided below, the Agent may resign at any time
by notifying the Lenders and the Borrowers. Upon any such resig-
nation, the Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by
such Lenders and shall have accepted such appointment within 30
days after the retiring Agent gives notice of its resignation,
then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a bank with an office (or an
affiliate with an office) in New York, New York, having a
combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor
bank, such successor shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the
retiring Agent and the retiring Agent shall be discharged from
its duties and obligations hereunder and under each of the other
Loan Documents. After any Agent's resignation hereunder, the
provisions of this Article shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
The Lenders hereby acknowledge that the Agent shall be
under no duty to take any discretionary action permitted to be
taken by the Agent pursuant to the provisions of this Agreement
or any of the other Loan Documents unless it shall be requested
in writing to do so by the Required Lenders.
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND
OTHER COLLATERAL
SECTION 10.01. Collection of Receivables; Management
of Collateral. (a) The Borrowers will, at their own cost and
expense, within 90 days of the Closing Date, (i) arrange for
remittances on Receivables (including, without limitation,
Receivables as to which the Customer is the United States
government or the government of any state or political subdivision
thereof or therein, or any agency or department of
any thereof) to be made directly to lockboxes designated by the
Agent or in such other manner as the Agent may direct, and (ii)
promptly deposit all payments received by the Borrowers on
account of Receivables, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in
one or more accounts designated by the Agent in precisely the
form received (but with any endorsements of the Borrowers
necessary for deposit or collection), and until such payments are
deposited, such payments shall be deemed to be held in trust by
the Borrowers for and as the Lenders' property and shall not be
commingled with the Borrowers' other funds. At any time that (i)
Total Availability shall be less than $5,000,000 or (ii) a
Default or Event of Default shall have occurred, all remittances
and payments that are deposited in accordance with the foregoing
sentence will be immediately applied by the Agent to reduce the
outstanding balance of the Revolving Credit Loans, subject to the
continued accrual of interest on such remittances and payments
for two (2) Business Days (or three (3) Business Days in the case
of remittances and payments received after 12:00 noon (New York
time)) and in any event subject to final collection in cash of
the item deposited.
So long as the procedures set forth in the preceding
paragraph remain in effect, the arrangements between the Agent
and the Lenders with respect to making of Revolving Credit Loans
shall be handled on the following basis: On a weekly basis (or,
in the Agent's discretion, on a daily basis) the Agent will
provide each Lender with a statement showing for the period since
the last statement the aggregate principal amount of new
Revolving Credit Loans made to the Borrowers, the amount of
remittances and payments actually collected and applied by the
Agent to reduce the outstanding principal balance of the
Revolving Credit Loans during such period and the outstanding
principal balance of the Revolving Credit Loans at the end of
such period. If a Lender's pro rata share (based on such
Lender's Revolving Credit Commitment) of Revolving Credit Loans
made during such period exceeds such Lender's pro rata share of
remittances and payments applied to reduce the Revolving Credit
Loans during such period, the difference will be paid in same day
funds by such Lender to the Agent, and if such Lender's pro rata
share of remittances and payments applied to reduce the Revolving
Credit Loans during such period exceeds such Lender's pro rata
share of Revolving Credit Loans made during such period, the
difference will be paid in same day funds by the Agent to such
Lender.
In addition to the provisions regarding repayment of
Loans in the last sentence of the first paragraph of this clause
(a), at any time that (i) Total Availability shall be less than
$5,000,000 or (ii) a Default or Event of Default shall have
occurred, the Agent may send a notice of assignment and/or notice
of the Agent's security interest to any and all Customers or any
third party holding or otherwise concerned with any of the
Collateral, and thereafter the Agent shall have the sole right to
collect the Receivables and/or take possession of the Collateral
and the books and records relating thereto. All amounts collected
on Receivables when received by the Agent shall be credited to
the Borrowers' account, after adding two Business Days for
collection, clearance and transfer of remittances, conditional
upon final payment to the Agent, and all amounts collected on
Receivables may be applied to reduce the Loans in the Agent's
sole discretion. The Borrowers shall not, without the Agent's
prior written consent, grant any extension of the time of payment
of any Receivable, compromise or settle any Receivable for less
than the full amount thereof, release, in whole or in part, any
person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon except, prior to the
occurrence and continuance of an Event of Default, as permitted
by Section 10.03 hereof.
(b) (i) Each of the Borrowers hereby constitutes the
Agent or the Agent's designee as such Borrower's attorney-in-fact
with power to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of
payment or Collateral that may come into its possession; to sign
such Borrower's name on any invoice or bill of lading relating to
any Receivables, drafts against Customers, assignments and
verifications of Receivables and notices to Customers; to send
verifications of Receivables; upon the occurrence of an Event of
Default, to notify the Postal Service authorities to change the
address for delivery of mail addressed to such Borrower to such
address as the Agent may designate; and to do all other acts and
things necessary to carry out this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission
or commission, for any error of judgment or for any mistake of
fact or law, provided that the Agent or its designee shall not be
relieved of liability to the extent it is determined by a final
judicial decision that its act, error or mistake constituted
gross negligence or willful misconduct. This power of attorney
being coupled with an interest is irrevocable until all of the
Obligations are paid in full and this Agreement and the Total
Commitment is terminated.
(ii) The Agent, without notice to or consent of
the Borrowers, upon the occurrence and during the continuance of
an Event of Default, (A) may sue upon or otherwise collect,
extend the time of payment of, or compromise or settle for cash,
credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or
release the obligor thereon; (B) is authorized and empowered to
accept the return of the goods represented by any of the
Receivables; and (C) shall have the right to receive, endorse,
assign and/or deliver in its name or the name of any of the
Borrowers any and all checks, drafts and other instruments for
the payment of money relating to the Receivables, and each
Borrower hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed.
(c) Nothing herein contained shall be construed to
constitute any Borrower as agent of the Agent for any purpose
whatsoever, and the Agent shall not be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any
part of the Collateral wherever the same may be located and
regardless of the cause thereof (except to the extent it is
determined by a final judicial decision that the Agent's or a
Lender's act or omission constituted gross negligence or willful
misconduct). The Agent and the Lenders shall not, under any
circumstances or in any event whatsoever, have any liability for
any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof or for any damage
resulting therefrom (except to the extent it is determined by a
final judicial decision that the Agent's or such Lender's error,
omission or delay constituted gross negligence or willful
misconduct). The Agent and the Lenders do not, by anything
herein or in any assignment or otherwise, assume any of the
Borrowers' obligations under any contract or agreement assigned
to the Agent or the Lenders, and the Agent and the Lenders shall
not be responsible in any way for the performance by the
Borrowers of any of the terms and conditions thereof.
(d) If any of the Receivables includes a charge for
any tax payable to any governmental tax authority, the Agent is
hereby authorized (but in no event obligated) in its discretion
to pay the amount thereof to the proper taxing authority for the
account of the applicable Borrower and to charge the Borrowers'
account therefor. The Borrowers shall notify the Agent if any
Receivables include any tax due to any such taxing authority and,
in the absence of such notice, the Agent shall have the right to
retain the full proceeds of such Receivables and shall not be
liable for any taxes that may be due from any Borrower by reason
of the sale and delivery creating such Receivables.
SECTION 10.02. Receivables Documentation. The
Borrowers will, in addition to the monthly Receivables agings
delivered pursuant to this Agreement, at such intervals as the
Agent may require, furnish such further schedules and/or
information as the Agent may require relating to the Receivables,
including, without limitation, sales invoices. In addition, the
Borrowers shall notify the Agent of any non-compliance in respect
of the representations, warranties and covenants contained in
Section 10.03 hereof. The items to be provided under this
Section 10.02 are to be in form satisfactory to the Agent and are
to be executed and delivered to the Agent from time to time
solely for its convenience in maintaining records of the
Collateral; the Borrowers' failure to give any of such items to
the Agent shall not affect, terminate, modify or otherwise limit
the Agent's Lien or security interest in the Collateral.
SECTION 10.03. Status of Receivables and Other
Collateral. Each Borrower covenants, represents and warrants
that: (a) it shall be the sole owner, free and clear of all
Liens except in favor of the Agent or otherwise permitted
hereunder, of and fully authorized to sell, transfer, pledge
and/or grant a security interest in each and every item of said
Collateral owned by it; (b) each Receivable shall be a good and
valid account representing an undisputed bona fide indebtedness
incurred or an amount indisputably owed by the Customer therein
named, for a fixed sum as set forth in the invoice relating
thereto with respect to an absolute sale and delivery upon the
specified terms of goods sold by a Borrower, or work, labor
and/or services theretofore rendered by a Borrower; (c) no
Receivable is or shall be subject to any defense, offset,
counterclaim, discount or allowance (as of the time of its
creation) except as may be stated in the invoice relating thereto
or discounts and allowances as may be customary in such
Borrowers's business; (d) none of the transactions underlying or
giving rise to any Receivable shall violate any applicable state
or federal laws or regulations, and all documents relating to any
Receivable shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with
their terms; (e) to the best of its knowledge, each Customer,
guarantor or endorser with respect to any Receivable is solvent
and will continue to be fully able to pay all Receivables on
which it is obligated in full when due; (f) all documents and
agreements relating to Receivables shall be true and correct and
in all respects what they purport to be; (g) to the best of its
knowledge, all signatures and endorsements that appear on all
documents and agreements relating to Receivables shall be genuine
and all signatories and endorsers with respect thereto shall have
full capacity to contract; (h) it shall maintain books and
records pertaining to the Collateral in such detail, form and
scope as the Agent shall require; (i) it will immediately notify
the Agent if any accounts arise out of contracts with the United
States or any department, agency or instrumentality thereof, and
will execute any instruments and take any steps required by the
Agent in order that all monies due or to become due under any
such contract shall be assigned to the Agent and notice thereof
given to the United States Government under the Federal
Assignment of Claims Act; (j) it will, immediately upon learning
thereof, report to the Agent any material loss or destruction of,
or substantial damage to, any of the Collateral, and any other
matters affecting the value, enforceability or collectability of
any of the Collateral; (k) if any amount payable under or in
connection with any Receivable is evidenced by a promissory note
or other instrument, as such terms are defined in the Uniform
Commercial Code, such promissory note or instrument shall be
immediately pledged, endorsed, assigned and delivered to the
Agent as additional collateral; (l) it shall not re-date any
invoice or sale or make sales on extended dating beyond that
customary in the industry; (m) it shall conduct a physical count
of its inventory not less than once each Fiscal Year and, upon
the occurrence and during the continuance of an Event of Default,
at such intervals as the Agent may request, and promptly supply
the Agent with a copy of such counts accompanied by a report of
the value (based on the lower of cost (on a FIFO basis) or market
value) of such inventory; (n) it is not nor shall it be entitled
to pledge the Lenders' credit on any purchases or for any purpose
whatsoever and; (o) except in the ordinary course of business, it
shall not grant any extension of time of payment of any
Receivable, compromise or settle any Receivable for less than the
full amount thereof, release, in whole or in part, any person or
property liable for the payment thereof, or allow any credit or
discount thereon, provided, that in any event it shall take none
of the foregoing actions, or permit any of the foregoing actions
to occur, so long as an Event of Default shall have occurred and
be continuing.
SECTION 10.04. Monthly Statement of Account. The
Agent shall render to the Borrowers each month a statement of the
Borrowers' account, which shall constitute an account stated and
shall be deemed to be correct and accepted by and be binding upon
the Borrowers unless the Agent receives a written statement of
the Borrowers' exceptions within 30 days after such statement was
rendered to the Borrowers.
SECTION 10.05. Collateral Custodian. Upon the
occurrence and continuance of an Event of Default, the Agent may
at any time and from time to time employ and maintain in the
premises of the Borrowers a custodian selected by the Agent who
shall have full authority to do all acts necessary to protect the
Agent's and Lenders' interests and to report to the Agent
thereon. The Borrowers hereby agree to cooperate with any such
custodian and to do whatever the Agent may reasonably request to
preserve the Collateral. All costs and expenses incurred by the
Agent by reason of the employment of the custodian shall be
charged to the Borrowers' account and added to the Obligations.
XI. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary
obligor and not merely as a surety, jointly and severally with
each other Guarantor, the due and punctual payment of the
principal of and interest on each of the Notes, when and as due,
whether at maturity, by acceleration, by notice of prepayment or
otherwise, and the due and punctual performance of all other
Obligations. Each Guarantor further agrees that the Obligations
may be extended and renewed, in whole or in part, without notice
to or further assent from it, and that it will remain bound upon
its guarantee notwithstanding any extension or renewal of any
Obligations.
Each Guarantor waives presentment to, demand of payment
from and protest to the Borrowers of any of the Obligations, and
also waives notice of acceptance of its guarantee and notice of
protest for nonpayment. The obligations of a Guarantor hereunder
shall not be affected by (a) the failure of any Lender or the
Agent to assert any claim or demand or to enforce any right or
remedy against the Borrowers or any other Guarantor under the
provisions of this Agreement, the Notes or any of the other Loan
Documents or otherwise; (b) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Agreement,
the Notes, any of the other Loan Documents, any guarantee or any
other agreement; (c) the release of any security held by the
Agent for the Obligations or any of them; or (d) the failure of
any Lender to exercise any right or remedy against any other
Guarantor of the Obligations.
Each Guarantor further agrees that its guarantee
constitutes a guarantee of payment when due and not of collec-
tion, and waives any right to require that any resort be had by
any Lender to any security (including, without limitation, any
Collateral) held for payment of the Obligations or to any balance
of any deposit account or credit on the books of any Lender in
favor of any Borrower or any other person.
The obligations of each Guarantor hereunder shall not
be subject to any reduction, limitation, impairment or termina-
tion for any reason, including, without limitation, any claim of
waiver, release, surrender, alteration or compromise, and shall
not be subject to any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality
or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each
Guarantor hereunder shall not be discharged or impaired or
otherwise affected by the failure of the Agent or any Lender to
assert any claim or demand or to enforce any remedy under this
Agreement, the Notes or under any other Loan Document, any
guarantee or any other agreement, by any waiver or modification
of any provision thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or
by any other act or omission which may or might in any manner or
to any extent vary the risk of such Guarantor or otherwise
operate as a discharge of such Guarantor as a matter of law or
equity.
Each Guarantor further agrees that its guarantee shall
continue to be effective or be reinstated, as the case may be, if
at any time payment, or any part thereof, of principal of or
interest on any Obligation is rescinded or must otherwise be
returned by the Agent or any Lender upon the bankruptcy or
reorganization of any Borrower or otherwise.
Each Guarantor hereby waives and releases all rights of
subrogation against each Borrower and its property and all rights
of indemnification, contribution and reimbursement from each
Borrower and its property, in each case in connection with this
guarantee and any payments made hereunder, and regardless of
whether such rights arise by operation of law, pursuant to
contract or otherwise.
XII. MISCELLANEOUS
SECTION 12.01. Notices. Notices, consents and other
communications provided for herein shall be in writing and shall
be delivered or mailed (or in the case of telex or facsimile
communication, delivered by telex, graphic scanning, telecopier
or other telecommunications equipment, with receipt confirmed)
addressed,
(a) if to any Loan Party, at American Bank Note
Company or American Bank Note Holographics, Inc., 51 West
52nd Street, New York, New York 10019, Attention: Mr. Ward
Urban with a copy to Stroock Stroock & Lavan, 7 Hanover
Square, 19th Floor, New York, NY 10022, Attention: Hillel
Bennett, Esq.;
(b) if to the Agent, at Chemical Bank, Asset Based
Region, 633 Third Avenue, 7th Floor, New York, NY 10017,
Attention: Credit Deputy, with a copy to Kaye, Scholer,
LLP, et al., at 425 Park Avenue, New York, New York 10022,
Attention: Jeffrey M. Epstein, Esq.; and
(c) if to any Lender, at the address set forth below
its name in Schedule 2.01 annexed hereto.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed
to have been given on the date of receipt if hand delivered or
three days after being sent by registered or certified mail,
postage prepaid, return receipt requested, if by mail, or upon
receipt if by any telex, facsimile or other telecommunications
equipment, in each case addressed to such party as provided in
this Section 12.01 or in accordance with the latest unrevoked
direction from such party.
SECTION 12.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Loan Party
herein and in the certificates or other instruments prepared or
delivered in connection with this Agreement, any of the Security
Documents, any Guarantee or any other Loan Document, shall be
considered to have been relied upon by the Lenders and shall
survive the making by the Lenders of the Loans and the execution
and delivery to the Lenders of the Notes and occurrence of any
other Credit Event and shall continue in full force and effect as
long as the principal of or any accrued interest on the Notes or
any other fee or amount payable under the Notes or this Agreement
or any other Loan Document is outstanding and unpaid and so long
as the Total Commitment has not been terminated.
SECTION 12.03. Successors and Assigns; Participations.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of any Borrower, any other Loan
Party or any ERISA Affiliate or subsidiary thereof, the Agent or
the Lenders, that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.
Without limiting the generality of the foregoing, ABNC and the
Borrowers specifically confirm that any Lender may at any time
and from time to time pledge or otherwise grant a security
interest in any Loan or any Note (or any part thereof) to any
Federal Reserve Bank. No Loan Party may assign or transfer any
of its rights or obligations hereunder without the written
consent of all the Lenders.
(b) Each Lender, without the consent of any Loan
Party, may sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion
of its Revolving Credit Commitment) and the Loans owing to it and
undrawn Letters of Credit and the Notes held by it); provided,
however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment
shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations, (iii) the banks or other entities buying
participations shall be entitled to the cost protection
provisions contained in Sections 2.10(a) (except to the extent
that application of such Section 2.10(a) to such banks and
entities would cause the Borrowers to make duplicate payments
thereunder), 2.11 and 2.12 hereof, but only to the extent any of
such Sections would be available to the Lender which sold such
participation, and (iv) the Loan Parties, the Agent and the other
Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations
under this Agreement; provided, further, however, that each
Lender shall retain the sole right and responsibility to enforce
the obligations of the Borrowers, Grantors, the Guarantors and
other Loan Parties relating to the Loans, including, without
limitation, the right to approve any amendment, modification or
waiver of any provision of this Agreement, other than amendments,
modifications or waivers with respect to any fees payable
hereunder or the amount of principal or the rate of interest
payable on, or the dates fixed for any payment of principal of or
interest on, the Loans or the release of all Collateral.
(c) Each Lender may assign by novation, to any one or
more banks or other entities with the prior written consent of
the Borrowers, which shall not be unreasonably withheld, and
with the prior written consent of the Agent, all or a portion of
its interests, rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or a
portion of its Revolving Credit Commitment and the same portion
of the Loans and undrawn Letters of Credit at the time owing to
it and the Note or Notes held by it), provided, however, that
(i) each such assignment shall be of a constant, and not a
varying, percentage of all of the assigning Lender's rights and
obligations under this Agreement, which shall include the same
percentage interest in the Loans, Letters of Credit and Notes and
(ii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the
Register (as defined below), an Assignment and Acceptance,
together with any Note subject to such assignment and a
processing and recordation fee of $5,000. Upon such execution,
delivery, acceptance and recording and after receipt of the
written consent of the Agent, from and after the effective date
specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution
thereof, (x) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have
the rights and obligations of a Lender hereunder and under the
other Loan Documents and (y) the Lender which is assignor
thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a
party hereto).
(d) By executing and delivering an Assignment and
Acceptance, the Lender which is assignor thereunder and the
assignee thereunder confirm to, and agree with, each other and
the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial
owner of the interest being assigned thereunder free and clear of
any adverse claim, such Lender makes no representation or war-
ranty and assumes no responsibility with respect to any state-
ments, warranties or representations made in or in connection
with this Agreement or the execution, legality, validity,
enforceability, perfection, genuineness, sufficiency or value of
this Agreement, the other Loan Documents or any Collateral with
respect thereto or any other instrument or document furnished
pursuant hereto or thereto; (ii) such Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, or any
Grantor or Guarantor or other Loan Party or the performance or
observance by any Borrower, Grantor, Guarantor or other Loan
Party of any of their respective obligations under this
Agreement, any Guarantees or any of the other Loan Documents or
any other instrument or document furnished pursuant hereto or
thereto; (iii) such assignee confirms that it has received a copy
of this Agreement, any Guarantees and of the other Loan
Documents, together with copies of financial statements and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Agent, such Lender or any other
Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement;
(v) such assignee appoints and authorizes the Agent to take such
action as the Agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental
thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a
Lender.
(e) The Agent shall maintain at its address referred
to in Section 12.01 hereof a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the Revolving Credit
Commitment, of, and principal amount of the Loans owing to, each
Lender from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Agent and the Lenders may treat each
person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall
be available for inspection by the Borrowers or any Lender at any
reasonable time and from time to time upon reasonable prior
notice.
(f) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee together with any
Note or Notes subject to such assignment and the written consent
to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed and is precisely in the form of
Exhibit D annexed hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders and
the Borrowers. Within five (5) Business Days after receipt of
such notice, the Borrowers, at their own expense, shall execute
and deliver to the Agent in exchange for each surrendered Note or
Notes a new Note or Notes to the order of such assignee in an
amount equal to its portion of the Revolving Credit Commitment,
assumed by it pursuant to such Assignment and Acceptance and, if
the assigning Lender has retained any Revolving Credit Commitment
hereunder, a new Note or Notes to the order of the assigning
Lender in an amount equal to the Revolving Credit Commitment, as
the case may be, retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes and
shall otherwise be in substantially the form of Exhibit A. Notes
surrendered to the Borrowers shall be canceled by the Borrowers.
(g) Notwithstanding any other provision herein, any
Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Sec-
tion 12.03, disclose to the assignee or participant or proposed
assignee or participant, any information, including, without
limitation, any Information, relating to the Borrowers furnished
to such Lender by or on behalf of the Borrowers in connection
with this Agreement; provided, however, that prior to any such
disclosure, each such assignee or participant or proposed
assignee or participant shall agree to preserve the
confidentiality of any confidential Information relating to the
Borrowers received from such Lender.
SECTION 12.04. Expenses; Indemnity. (a) Each
Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Agent in connection with the preparation of this
Agreement and the other Loan Documents or with any amendments,
modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not
the transactions hereby contemplated shall be consummated) or
incurred by the Agent or any of the Lenders in connection with
the enforcement or protection of its rights in connection with
this Agreement or any of the other Loan Documents or with the
Loans made or the Notes or Letters of Credit issued hereunder, or
in connection with any pending or threatened action, proceeding,
or investigation relating to the foregoing, including but not
limited to the reasonable fees and disbursements of counsel for
the Agent and ongoing field examination expenses and charges,
and, in connection with such enforcement or protection, the
reasonable fees and disbursements of counsel for the Lenders.
Each Borrower further indemnifies the Lenders from and agrees to
hold them harmless against any documentary taxes, assessments or
charges made by any governmental authority by reason of the
execution and delivery of this Agreement or the Notes.
(b) Each Borrower indemnifies the Agent and each
Lender and their respective directors, officers, employees and
agents against, and agrees to hold the Agent, each Lender and
each such person harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable
counsel fees and expenses, incurred by or asserted against the
Lender or any such person arising out of, in any way connected
with, or as a result of (i) the use of any of the proceeds of the
Loans, (ii) this Agreement, the Guarantees, any of the Security
Documents or the other documents contemplated hereby or thereby,
(iii) the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder (including but
not limited to the making of the Total Commitment) and consumma-
tion of the transactions contemplated hereby and thereby,
(iv) breach of any representation or warranty, or (v) any claim,
litigation, investigation or proceedings relating to any of the
foregoing, whether or not the Agent, any Lender or any such
person is a party thereto; provided, however, that such indemnity
shall not, as to the Agent or any Lender, apply to any such
losses, claims, damages, liabilities or related expenses to the
extent that they result from the gross negligence or willful
misconduct of the Agent or any Lender.
(c) Each Borrower indemnifies, and agrees to defend
and hold harmless the Agent and the Lenders and their respective
officers, directors, shareholders, agents and employees
(collectively, the "Indemnitees") from and against any loss,
cost, damage, liability, lien, deficiency, fine, penalty or
expense (including, without limitation, reasonable attorneys'
fees and reasonable expenses for investigation, removal, cleanup
and remedial costs and modification costs incurred to permit,
continue or resume normal operations of any property or assets or
business of the Borrowers or any subsidiary thereof) arising from
a violation of, or failure to comply with any Environmental Law
and to remove any Lien arising therefrom except to the extent
caused by the gross negligence or willful misconduct of any
Indemnitee, which any of the Indemnitees may incur or which may
be claimed or recorded against any of the Indemnitees by any
person.
(d) The provisions of this Section 12.04 shall remain
operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the
Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation
made by or on behalf of the Agent or any Lender. All amounts due
under this Section 12.04 shall be payable on written demand
therefor.
SECTION 12.05. Applicable Law. THIS AGREEMENT AND THE
NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS
PRINCIPLES THEREOF).
SECTION 12.06. Right of Setoff. If an Event of
Default shall have occurred and be continuing, upon the request
of the Required Lenders each Lender shall and is hereby
authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of any
Borrower against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement and the Notes held
by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or the Notes and
although such obligations may be unmatured. Each Lender agrees
to notify promptly the Agent and the Borrowers after any such
setoff and application made by such Lender, but the failure to
give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without
limitation, other rights of setoff) which may be available to
such Lender.
SECTION 12.07. Payments on Business Days. (a) Should
the principal of or interest on the Notes or any fee or other
amount payable hereunder become due and payable on other than a
Business Day, payment in respect thereof may be made on the next
succeeding Business Day (except as otherwise specified in the
definition of "Interest Period"), and such extension of time
shall in such case be included in computing interest, if any, in
connection with such payment.
(b) All payments by any Borrower hereunder and all
Loans made by the Lenders hereunder shall be made in lawful money
of the United States of America in immediately available funds at
the office of the Agent set forth in Section 12.01 hereof.
SECTION 12.08. Waivers; Amendments. (a) No failure
or delay of any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment
or discontinuance of steps to enforce such right or power, pre-
clude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of the Lenders
hereunder are cumulative and not exclusive of any rights or reme-
dies which they may otherwise have. No waiver of any provision
of this Agreement or the Notes nor consent to any departure by
any Borrower or other Loan Party therefrom shall in any event be
effective unless the same shall be authorized as provided in
paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Borrower or other
Loan Party in any case shall entitle it to any other or further
notice or demand in similar or other circumstances. Each holder
of any of the Notes shall be bound by any amendment,
modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such
amendment, modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof
may be waived, amended or modified except pursuant to an agree-
ment or agreements in writing entered into by the Borrowers and
the Required Lenders; provided, however, that no such agreement
shall (i) change the principal amount of, or extend or advance
the maturity of or the dates for the payment of principal of or
interest on, any Note or reduce the rate of interest on any Note,
(ii) change the Revolving Credit Commitment of any Lender or
amend or modify the provisions of this Section, Section 2.06,
Section 2.13, Section 4.14 or Section 12.04 hereof or the defini-
tion of "Required Lenders," or (iii) release any material portion
of Collateral, in each case without the prior written consent of
each Lender affected thereby and provided, further, however, that
no such agreement shall amend, modify or otherwise affect the
rights or duties of the Agent under this Agreement or the other
Loan Documents without the written consent of the Agent. Each
Lender and holder of any Note shall be bound by any modification
or amendment authorized by this Section regardless of whether its
Notes shall be marked to make reference thereto, and any consent
by any Lender or holder of a Note pursuant to this Section shall
bind any person subsequently acquiring a Note from it, whether or
not such Note shall be so marked.
(c) In the event that the Borrowers request, with
respect to this Agreement or any other Loan Document, an
amendment, modification or waiver and such amendment,
modification or waiver would require the unanimous consent of all
of the Lenders in accordance with Section 12.08(b) above, and
such amendment, modification or waiver is agreed to in writing by
the Borrowers and the Required Lenders but not by all of the
Lenders, then notwithstanding anything to the contrary in Section
12.08(b) above, with the written consent of the Borrowers and
such Required Lenders, the Borrowers and Required Lenders may,
but shall not be obligated to, amend this Agreement without the
consent of the Lender or Lenders who did not agree to the
proposed amendment, modification or waiver (the "Minority
Lenders") solely to provide for (i) the termination of the
Revolving Credit Commitment of each Minority Lender, (ii) the
assignment in accordance with Section 12.03 hereof to one or more
persons of each Minority Lender's interests, rights and
obligations under this Agreement (including, without limitation,
all of such Minority Lender's Revolving Credit Commitment as well
as its portion of all outstanding Loans and the Note or Notes
held by such Minority Lender) and the other Loan Documents and/or
an increase in the Revolving Credit Commitment of one or more
Required Lenders, in each case so that after giving effect
thereto the Total Commitment shall be in the same amounts as
prior to the events described in this paragraph, (iii) the
repayment to the Minority Lenders in full of all Loans
outstanding and accrued interest thereon at the time of the
assignment and/or increase in Revolving Credit Commitments
described in clause (ii) above with the proceeds of Loans made by
such persons who are to become Lenders by assignment or with the
proceeds of Loans made by Required Lenders who have agreed to
increase their Revolving Credit Commitment, (iv) the payment to
the Minority Lenders by the Borrowers of all fees and other
compensation due and owing such Minority Lenders under the terms
of this Agreement and the other Loan Documents and (v) such other
modifications as the Required Lenders and Borrower shall deem
necessary in order to effect to changes specified in clauses (i)
through (iv) hereof.
SECTION 12.09. Severability. In the event any one or
more of the provisions contained in this Agreement or in the
Notes should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any
way be affected or impaired thereby.
SECTION 12.10. Entire Agreement; Waiver of Jury Trial,
etc. (a) This Agreement, the Notes and the other Loan Documents
constitute the entire contract between the parties hereto
relative to the subject matter hereof. Any previous agreement
among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan
Documents. Except as expressly provided herein or in the Notes
or the Loan Documents (other than this Agreement), nothing in
this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other
than the parties hereto, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, the Notes or
the other Loan Documents.
(b) Except as prohibited by law, each party hereto
hereby waives any right it may have to a trial by jury in respect
of any litigation directly or indirectly arising out of, under or
in connection with this Agreement, the Notes, any of the other
Loan Documents or the Transactions.
(c) Except as prohibited by law, each party hereto
hereby waives any right it may have to claim or recover in any
litigation referred to in paragraph (b) of this Section 12.10 any
special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages.
(d) Each party hereto (i) certifies that no
representative, agent or attorney of any Lender has represented,
expressly or otherwise, that such Lender would not, in the event
of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this
Agreement, the Notes or the other Loan Documents, as applicable,
by, among other things, the mutual waivers and certifications
herein.
SECTION 12.11. Confidentiality. The Agent and the
Lenders agree to keep confidential (and to cause their respective
officers, directors, employees, agents and representatives to
keep confidential) all information, materials and documents
furnished to the Agent or any Lender (the "Information"). Not-
withstanding the foregoing, the Agent and each Lender shall be
permitted to disclose Information (i) to such of its officers,
directors, employees, agents and representatives as need to know
such Information in connection with its participation in any of
the Transactions or the administration of this Agreement or the
other Loan Documents; (ii) to the extent required by applicable
laws and regulations or by any subpoena or similar legal process,
or requested by any governmental agency or authority; (iii) to
the extent such Information (A) becomes publicly available other
than as a result of a breach of this Agreement, (B) becomes
available to the Agent or such Lender on a non-confidential basis
from a source other than any Borrower, any Guarantor, any Grantor
or any of their respective subsidiaries or (C) was available to
the Agent or such Lender on a non-confidential basis prior to its
disclosure to the Agent or such Lender by any Borrower, any
Guarantor, any Grantor or any of their respective subsidiaries;
(iv) to the extent any Borrowers, any Guarantor or any of their
respective subsidiaries shall have consented to such disclosure
in writing; (v) in connection with the sale of any Collateral
pursuant to the provisions of any of the other Loan Documents; or
(vi) pursuant to Section 12.03(g) hereof.
SECTION 12.12. Submission to Jurisdiction. (a) Any
legal action or proceeding with respect to this Agreement or the
Notes or any other Loan Document may be brought in the courts of
the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of
this Agreement, each of the Borrowers and the other Loan Parties
hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid
courts.
(b) Each of the Borrowers and the other Loan Parties
hereby irrevocably waive, in connection with any such action or
proceeding, any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum
non convenient, which it may now or hereafter have to the
bringing of any such action or proceeding in such respective
jurisdictions.
(c) Each of the Borrowers and the other Loan Parties
hereby irrevocably consents to the service of process of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail,
postage prepaid, to each such person, as the case may be, at its
address set forth in Section 12.01 hereof.
(d) Nothing herein shall affect the right of the Agent
or any Lender to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against
any Borrower or any other Loan Party in any other jurisdiction.
SECTION 12.13. Counterparts; Facsimile Signature.
This Agreement may be executed in counterparts, each of which
shall constitute an original but all of which when taken together
shall constitute but one contract, and shall become effective
when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered to
the Agent. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as
delivery of a manually executed signature page hereto.
SECTION 12.14. Headings. Article and Section headings
and the Table of Contents used herein are for convenience of
reference only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
IN WITNESS WHEREOF, ABNC, the Borrowers, the
Guarantors, the Agent and the Lenders have caused this Agreement
to be duly executed by their respective authorized officers as of
the day and year first above written.
AMERICAN BANK NOTE COMPANY, as
a Borrower and Guarantor
By: s/ Ward A.W. Urban
Name: Ward A.W. Urban
Title: V.P & Treasurer
AMERICAN BANK NOTE HOLOGRAPHICS,
INC., as a Borrower and Guarantor
By: s/ Ward A.W. Urban
Name: Ward A.W. Urban
Title: V.P & Treasurer
AMERICAN BANKNOTE CORPORATION
By: s/ Ward A.W. Urban
Name: Ward A.W. Urban
Title: V.P & Treasurer
UNITED STATES BANKNOTE COMPANY L.P., as
a Guarantor
By: AMERICAN BANK NOTE COMPANY,
its general partner
By: s/ Ward A.W. Urban
Name: Ward A.W. Urban
Title: V.P & Treasurer
HORSHAM HOLDING COMPANY, INC., as a
Guarantor
By: s/ Ward A.W. Urban
Name: Ward A.W. Urban
Title: V.P & Treasurer
CHEMICAL BANK, as Agent
By: s/ Robert J. Arth
Name:Robert J. Arth
Title: Vice-President
CHEMICAL BANK, as Lender
By: s/ Robert J. Arth
Name:Robert J. Arth
Title: Vice-President
SCHEDULE 2.01
Revolving Credit Commitments
Approximate
Revolving Percentage of
Credit Total Revolving
Lender Commitment Credit Commitment
Chemical Bank
200 Jericho Quadrangle
Jericho, New York 11753 $20,000,000 100%
Attention: Credit Deputy
SCHEDULE 2.02
Domestic Lending Offices
Lender Domestic Lending Office
Chemical Bank Chemical Bank
200 Jericho Quadrangle
Jericho, New York 11753
Attn: Credit Deputy
SCHEDULE 2.03
Eurodollar Lending Offices
Lender Eurodollar Lending Office
Chemical Bank Chemical Bank
200 Jericho Quadrangle
Jericho, New York 11753
Attn: Credit Deputy
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 29, 1996, among
AMERICAN BANK NOTE COMPANY, a New York corporation ("ABN"), and
AMERICAN BANK NOTE HOLOGRAPHICS, INC., a Delaware corporation
("ABNH"; ABNH and ABN are each sometimes referred to herein as a
"Grantor" and collectively as the "Grantors"), and CHEMICAL BANK,
a New York banking corporation, as agent ("Agent") for (i) the
Lenders (the "Lenders") named in Schedule 2.01 of the Credit
Agreement dated as of the date hereof, among the Grantors, the
Guarantors named therein (the "Guarantors"), American Banknote
Corporation, a Delaware corporation, the Agent and the Lenders
(as amended, modified or supplemented from time to time in
accordance with its terms, the "Credit Agreement") and (ii)
itself as issuer of the Letters of Credit.
The Agent and the Lenders have agreed to extend Loans
and certain other financial accommodations, including, without
limitation, the issuance of the Letters of Credit to the Grantors
pursuant to, and subject to the terms and conditions of, the
Credit Agreement. The obligation of the Lenders to extend such
Loans and of the Agent to issue the Letters of Credit under the
Credit Agreement is conditioned on the execution and delivery by
the Grantors of a security agreement in the form hereof to secure
the Obligations (such Obligations to include, without limitation,
the due and punctual payment and performance of (a) the principal
of and interest on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (b) Indebtedness at any time and from
time to time under the Letters of Credit, (c) all obligations of
the Grantors at any time and from time to time under this
Agreement and (d) all obligations of the Grantors and Guarantors
at any time and from time to time under the Credit Agreement and
the other Loan Documents).
Accordingly, each Grantor and the Agent hereby agree as
follows:
1. Definitions of Terms Used Herein. All capitalized
terms used herein but not defined herein shall have the meanings
set forth in the Credit Agreement. As used herein, the following
terms shall have the following meanings:
(a) "Accounts Receivable" shall mean (i) all of
the Grantors' present and future accounts, general intangibles,
chattel paper, documents and instruments, as such terms are
defined in the Uniform Commercial Code as in effect in the State
of New York ("NYUCC"), arising out of the sale or lease of goods
or rendition of services, (ii) all of the Grantors' right, title
and interest, and all of the Grantors' rights, remedies, security
and Liens, in, to and in respect of any accounts receivable,
including, without limitation, rights of stoppage in transit,
replevin, repossession and reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, guaranties
or other contracts of suretyship with respect to accounts
receivable, deposits or other security for the obligation of any
account debtor, and credit and other insurance, and (iii) all of
the Grantors' right, title and interest in, to and in respect of
all goods relating to, or which by sale have resulted in,
accounts receivable, including, without limitation, all goods
described in invoices or other documents or instruments with
respect to, or otherwise representing or evidencing, any account
receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts
Receivable, (ii) Inventory, and (iii) Proceeds.
(c) "Inventory" shall mean all of the Grantors'
right, title and interest in and to raw materials, work in
process, finished goods and all other inventory (as such term is
defined in the NYUCC), whether now owned or hereafter acquired,
and all wrapping, packaging, advertising and shipping materials,
and any documents relating thereto.
(d) "Proceeds" shall mean any consideration
received from the sale, exchange, lease or other disposition of
any asset or property which constitutes Collateral, any other
value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or
other involuntary conversion of whatever nature of any asset or
property that constitutes Collateral, and shall include, without
limitation, all cash and negotiable instruments received or held
by any of the Lenders pursuant to any lockbox or similar
arrangement relating to the payment of Accounts Receivable.
2. Security Interests. As security for the payment
or performance, as the case may be, of the Obligations, the
Grantors hereby create and grant to the Agent, its successors and
its assigns, for its own benefit and for the pro rata benefit of
the Lenders, their successors and their assigns, a security
interest in the Collateral (the "Security Interest"), except to
the extent such creation and grant would violate the Federal
Assignment of Claims Act or any similar state statute. Without
limiting the foregoing, the Agent is hereby authorized to file
one or more financing statements, continuation statements or
other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest, naming
the Grantors as debtors and the Agent as secured party.
The Grantors agree at all times to keep in all material
respects accurate and complete accounting records with respect to
the Collateral, including, but not limited to, a record of all
payments and Proceeds received.
3. Further Assurances. Each Grantor agrees, at its
expense, to execute, acknowledge, deliver and cause to be duly
filed all such further instruments and documents and take all
such actions as the Agent may from time to time reasonably
request for the assuring and preserving of the Security Interest
and the rights and remedies created hereby, including, without
limitation, the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing
statements or other documents in connection herewith and any
actions necessary to comply with the Federal Assignment of Claims
Act or similar state statute with respect to any Accounts
Receivable owed by the United States government or by any state
or political subdivision thereof or therein or by any agency or
department of any thereof. If any amount payable under or in
connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument, such note
or instrument shall be promptly pledged and delivered to the
Agent, duly endorsed in a manner satisfactory to the Agent. Each
Grantor agrees to notify promptly the Agent of any change in its
corporate name or in the location of its chief executive office,
its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it and the
location of any Collateral. Each Grantor agrees promptly to
notify the Agent if any material portion of the Collateral is
damaged or destroyed.
4. Inspection and Verification. The Agent and such
persons as the Agent may designate shall have the right, at any
reasonable time or times during a Grantor's usual business hours,
and upon reasonable notice (which may be telephonic), to inspect
the Collateral owned by such Grantor, all records related thereto
(and to make extracts and copies from such records), and the
premises upon which any such Collateral is located, to discuss
such Grantor's affairs with the officers of such Grantor and its
independent accountants and to verify under reasonable procedures
the validity, amount, quality, quantity, value, and condition of
or any other matter relating to, such Collateral, including, in
the case of Accounts Receivable or Collateral in the possession
of a third person, contacting account debtors and upon the
occurrence of a Default or an Event of Default, a third person
possessing such Collateral for the purpose of making such a
verification. Subject to the provisions of Section 12.11 of the
Credit Agreement, the Agent shall have the absolute right to
share any information it gains from such inspection or veri-
fication with any or all of the Lenders.
5. Taxes; Encumbrances. Except to the extent taxes,
assessments or governmental charges or levies are being contested
by a Grantor in good faith in accordance with clauses (i), (ii)
and (iii) of Section 6.04 of the Credit Agreement, at its option,
the Agent may discharge past due taxes, liens, security interests
or other encumbrances at any time levied or placed on the Col-
lateral and not permitted under the Credit Agreement, and may pay
for the maintenance and preservation of the Collateral to the
extent a Grantor fails to do so as required by the Credit
Agreement, and each Grantor agrees to reimburse the Agent on
demand for any payment made or any expense incurred by it pur-
suant to the foregoing authorization; provided, however, that
nothing in this Section 5 shall be interpreted as excusing a
Grantor from the performance of any covenants or other promises
with respect to taxes, liens, security interests or other en-
cumbrances and maintenances as set forth herein or in the Credit
Agreement.
6. Assignment of Security Interest. If at any time a
Grantor shall take and perfect a security interest in any
property of an account debtor or any other person to secure
payment and performance of an Account Receivable, such Grantor
shall promptly assign such security interest to the Agent. Such
assignment need not be filed of public record unless necessary to
continue the perfected status of the security interest against
creditors of and transferees from the account debtor or other
person granting the security interest.
7. Representations and Warranties. Each Grantor
represents and warrants to the Agent that:
(a) Title and Authority. It has (i) rights in
and good title to the Collateral in which it is granting a
security interest hereunder and (ii) the requisite power and
authority to grant to the Agent the Security Interest in such
Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement,
without the consent or approval of any other person other than
any consent or approval which has been obtained.
(b) Filing. Fully executed Uniform Commercial
Code financing statements containing a description of the
Collateral shall have been, or shall be delivered to the Agent in
a form such that they can be, filed of record in every govern-
mental, municipal or other office in every jurisdiction in which
any portion of the Collateral is located necessary to publish
notice of and protect the validity of and to establish a valid,
legal and perfected security interest in favor of the Agent in
respect of the Collateral in which a security interest may be
perfected by filing in the United States and its territories and
possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under ap-
plicable law with respect to the filing of Uniform Commercial
Code continuation statements.
(c) Validity of Security Interest. The Security
Interest constitutes a valid, legal and perfected first priority
security interest in all of the Collateral for payment and
performance of the Obligations, except as otherwise permitted
under the Credit Agreement.
(d) Information Regarding Names. It has
disclosed in writing to the Agent any trade names used to
identify it in its business or in the ownership of its
properties.
(e) Absence of Other Liens. The Collateral is
owned by it free and clear of any Lien of any nature whatsoever,
except as granted pursuant to this Agreement and as permitted by
the Credit Agreement, and, except as provided by paragraph (b) of
this Section 7, no financing statement has been filed, under the
Uniform Commercial Code as in effect in any state or otherwise,
covering any Collateral except as indicated on Schedule 7.01 to
the Credit Agreement.
(f) Additional Representations for Accounts
Receivable. (i) All Accounts Receivable owned by the Grantors
on the Closing Date constitute bona fide receivables arising in
the ordinary course of business, the amount of which is actually
owing and payable to the Grantors in the ordinary course of
business, subject to no defense, claim of disability, counter-
claim or offset with respect thereto. All such Accounts
Receivable, net of a bad debt reserve determined in
accordance with generally accepted accounting principles, are
collectible in accordance with their terms.
(ii) Each Account Receivable arising after the
Closing Date shall be on the date of its creation a good and
valid account representing an undisputed bona fide indebtedness
incurred or an amount indisputably owed by the Customer therein
named, for a fixed sum to the extent set forth in the invoice
relating thereto, with respect to an absolute sale and delivery
upon the specified terms of goods sold by such Grantor, or work,
labor and/or services theretofore rendered by such Grantor; no
such Account Receivable is or shall be subject to any defense,
offset, counterclaim, discount or allowance (as of the time of
its creation) except as may be stated in the invoice relating
thereto or discounts and allowances as may be customary in such
Grantor's business; none of the transactions underlying or giving
rise to any such Account Receivable shall violate any applicable
State or Federal laws or regulations, and all documents relating
to any such Account Receivable shall be legally sufficient under
such laws or regulations and shall be legally enforceable in
accordance with their terms; to the best knowledge of such
Grantor, each Customer, guarantor or endorser is solvent and will
continue to be fully able to pay all such Accounts Receivable on
which it is obligated in full when due; all documents and
agreements relating to such Accounts Receivable shall be true and
correct and in all respects what they purport to be; to the best
of each Grantor's knowledge, all signatures and endorsements that
appear on all documents and agreements relating to such Accounts
Receivable are genuine and all signatories and endorsers shall
have full capacity to contract.
(g) Survival of Representations and Warranties.
All representations and warranties of the Grantors contained in
this Agreement shall survive the execution, delivery and
performance of this Agreement until the termination of this
Agreement pursuant to Section 28.
8. Records of Accounts Receivable; Physical Count of
Inventory. (a) Each Grantor shall keep or cause to be kept
records of its Accounts Receivable which are accurate in all
material respects. In addition, each Grantor will provide the
Agent with such further schedules and/or information respecting
each Account Receivable as the Agent may reasonably require.
(b) Each Grantor shall conduct a physical count
of its Inventory not less than once each Fiscal Year and, upon
the occurrence and during the continuance of an Event of Default,
at such intervals as the Agent may request, and promptly supply
the Agent with a copy of such counts accompanied by a report of
the value (based on the lower of cost (on a FIFO basis) or market
value) of such Inventory.
9. Supplemental Documentation. In connection with
the execution and delivery of this Agreement, each Grantor shall
furnish or cause to be furnished to the Agent on or prior to the
Closing Date a certificate, signed by a Responsible Officer of
such Grantor dated the Closing Date, certifying that, as of the
date of such certificate, all representations and warranties of
such Grantor in Section 7 are true and correct and that such
Grantor is in compliance with all conditions, agreements and
covenants to be observed or performed hereunder.
10. Protection of Security. Each Grantor shall, at
its own cost and expense, take any and all actions reasonably
necessary to defend title to the Collateral owned by it against
all persons and to defend the Security Interest of the Agent in
such Collateral, and the priority thereof, against any adverse
mortgage, pledge, security interest, Lien, charge or other
encumbrance of any nature whatsoever except for Liens permitted
pursuant to Section 7.01 of the Credit Agreement.
11. Continuing Obligations of the Grantors. Each
Grantor shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it
under each contract, agreement, interest or obligation relating
to the Collateral, all in accordance with the terms and
conditions thereof, and shall indemnify and hold harmless the
Agent and the Lenders from any and all such liabilities.
12. Use and Disposition of Collateral. Except as set
forth in Sections 7.01 and 7.13 of the Credit Agreement, no
Grantor shall make or permit to be made any assignment, pledge or
hypothecation of the Collateral, or grant any security interest
in the Collateral except for the Security Interest. No Grantor
shall make or permit to be made any transfer of any Collateral,
except Inventory in the ordinary course of business and as
otherwise permitted by the Credit Agreement, and each Grantor
shall remain at all times in possession of the Collateral owned
by it other than transfers to the Agent pursuant to the
provisions hereof and as otherwise provided in this Agreement or
the Credit Agreement.
13. Limitation on Modifications of Accounts
Receivable. Except in the ordinary course of business, no
Grantor shall grant any extension of the time of payment of any
of its Accounts Receivable, compromise, compound or settle the
same for less than the full amount thereof, release, in whole or
in part, any person or property liable for the payment thereof,
or allow any credit or discount whatsoever thereon; provided,
however, that in any event no Grantor shall take any of the
foregoing actions, or permit any of the foregoing actions, so
long as an Event of Default shall have occurred and be
continuing.
14. Collections. (a) At the times set forth in
Section 10.01 of the Credit Agreement, each Grantor shall (i)
arrange for remittances on any of its Account Receivable to be
made directly to lockboxes designated by the Agent or in such
other manner as the Agent may direct, and (ii) promptly deposit
all payments received by such Grantor on account of Accounts
Receivable, whether in the form of cash, checks, notes, drafts,
bills of exchange, money orders or otherwise, in one or more
accounts designated by the Agent in precisely the form received
(but with any endorsements of such Grantor necessary for deposit
or collection), subject to withdrawal by the Agent only, as
provided in the Credit Agreement and as hereinafter provided, and
until such payments are deposited, such payments shall be deemed
to be held in trust by such Grantor for and as the Agent's
property on its own behalf and on behalf of the Lenders and shall
not be commingled with such Grantor's other funds.
(b) The Agent shall have the right, as the true
and lawful agent of the Grantors, with power of substitution for
the Grantors and in the applicable Grantor's name, the Agent's
name or otherwise, for the use and benefit of the Agent and the
Lenders (i) to endorse the applicable Grantor's name upon any
notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral that may come into its
possession; (ii) to sign the name of the applicable Grantor on
any invoice or bill of lading relating to any of the Collateral,
drafts against Customers, assignments and verifications of
Accounts Receivable and notices to Customers; (iii) to send
verifications of Accounts Receivable to any Customer; and (iv)
upon the occurrence and during the continuance of an Event of
Default, (A) to receive, endorse, assign and/or deliver any and
all notes, acceptances, checks, drafts, money orders or other
evidences or instruments of payment relating to the Collateral or
any part thereof, and each Grantor hereby waives notice of
presentment, protest and non-payment of any instrument so
endorsed, (B) to demand, collect, receive payment of, give
receipt for, extend the time of payment of and give discharges
and releases of all or any of the Collateral and/or release the
Obligor thereon, (C) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or
any of the Collateral or to enforce any rights in respect of any
Collateral, (D) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to or pertaining to
all or any of the Collateral, (E) to notify, or to require the
applicable Grantor to notify, the account debtors obligated on
any or all of the Accounts Receivable to make payment thereof
directly to the Agent, (F) to notify the Postal Service
authorities to change the address for delivery of mail addressed
to any Grantor to such address as the Agent may designate, (G) to
accept the return of goods represented by any of the Accounts
Receivable, and (H) to use, sell, assign, transfer, pledge, make
any agreement with respect to or otherwise deal with all or any
of the Collateral, and to do all other acts and things necessary
to carry out the purposes of this Agreement, as fully and
completely as though the Agent were the absolute owner of the
Collateral for all purposes; provided, however, that nothing
herein contained shall be construed as requiring or obligating
the Agent or any Lender to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received
by the Agent or such Lender or to present or file any claim or
notice, or to take any action with respect to the Collateral or
any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by
the Agent or any Lender or omitted to be taken with respect to
the Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Agent or any Lender in the absence of
the gross negligence or willful misconduct of the Agent or such
Lender. It is understood and agreed that the appointment of the
Agent as the agent of the Grantors for the purposes set forth
above in this Section 14 is coupled with an interest and is
irrevocable. The provisions of this Section 14 shall in no event
relieve any Grantor of any of its obligations hereunder or under
the Credit Agreement with respect to the Collateral or any part
thereof or impose any obligation on the Agent or any Lender to
proceed in any particular manner with respect to the Collateral
or any part thereof, or in any way limit the exercise by the
Agent or any Lender of any other or further right which it may
have on the date of this Agreement or hereafter, whether
hereunder or by law or otherwise.
15. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, each Grantor
agrees to deliver each item of Collateral to the Agent on demand,
and it is agreed that the Agent shall have the right to take any
or all of the following actions at the same or different times:
with or without legal process and with or without previous notice
or demand for performance, to take possession of the Collateral
and without liability for trespass (except for actual damage
caused by the Agent's gross negligence or willful misconduct) to
enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and,
generally, to exercise any and all rights afforded to a secured
party under, and subject to its obligations contained in, the
Uniform Commercial Code as in effect in any state or other appli-
cable law. Without limiting the generality of the foregoing,
each Grantor agrees that the Agent shall have the right, subject
to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral, at public
or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the
Agent shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely free from any claim
or right on the part of the applicable Grantor, and such Grantor
hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may
at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
The Agent shall give the applicable Grantor 10 days'
written notice (which each Grantor agrees is reasonable notice
within the meaning of Section 9-504(3) of the NYUCC) of the
Agent's intention to make any sale of Collateral. Such notice,
in the case of a public sale, shall state the time and place for
such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places
as the Agent may fix and state in the notice (if any) of such
sale. At any such sale, the Collateral, or portion thereof, to
be sold may be sold in one lot as an entirety or in separate
parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of
any Collateral if it shall determine not to do so, regardless of
the fact that notice of sale of such Collateral shall have been
given. The Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by
the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability
in case any such purchaser or purchasers shall fail to take up
and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice. At
any public sale made pursuant to this Section 15, Chemical Bank
or any Lender may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay or appraisal
on the part of any Grantor (all said rights being also hereby
waived and released to the extent permitted by law), with respect
to the Collateral or any part thereof offered for sale and
Chemical Bank or any such Lender may make payment on account
thereof by using any claim then due and payable to Chemical Bank
or any such Lender from such Grantor as a credit against the
purchase price, and Chemical Bank or any such Lender may, upon
compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale
thereof; the Agent shall be free to carry out such sale and
purchase pursuant to such agreement, and no Grantor shall be
entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Agent
shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full and/or
the Total Commitment shall have been terminated. As an
alternative to exercising the power of sale herein conferred upon
it, the Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding
by a court-appointed receiver.
16. Application of Proceeds. The proceeds of any
collection or sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Agent as follows:
FIRST, to the Agent to reimburse the Agent for
that portion of the payments, if any, made by it with respect to
Letters of Credit for which a Lender, as a participant in such
Letter of Credit pursuant to Section 2.18 of the Credit
Agreement, failed to pay its pro rata share thereof as required
pursuant to such Section 2.18;
SECOND, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection
or sale or otherwise in connection with this Agreement or any of
the Obligations, including, but not limited to, all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Agent
hereunder on behalf of the Grantors and any other reasonable
costs or expenses incurred in connection with the exercise of any
right or remedy hereunder;
THIRD, to the Agent to be held as cash collateral
to the extent of the undrawn amounts, if any, of outstanding
Letters of Credit;
FOURTH, pro rata to the payment in full of
principal and interest in respect of any Loans outstanding (pro
rata as among the Lenders in accordance with the amounts of the
Loans made by them pursuant to the Credit Agreement);
FIFTH, pro rata to the payment in full of all
Obligations (other than those referred to above) owed to the
Lenders (pro rata as among the Lenders in accordance with their
respective Revolving Credit Commitments); and
SIXTH, to the Grantors, their successors and
assigns, or as a court of competent jurisdiction may otherwise
direct.
Upon any sale of the Collateral by the Agent (including, without
limitation, pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the Agent or of the
officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the
Agent or such officer or be answerable in any way for the
misapplication thereof.
17. Locations of Collateral; Place of Business. (a)
Each Grantor hereby represents and warrants that all the
Collateral is located at the locations listed on Schedule I
hereto. The Grantors agree not to establish, or permit to be
established, any other location for Collateral unless all filings
under the Uniform Commercial Code as in effect in any state or
otherwise which are required by this Agreement or the Credit
Agreement to be made with respect to the Collateral have been
made and the Agent has a valid, legal and perfected first
priority security interest in the Collateral.
(b) Each Grantor confirms that its chief
executive office is located as indicated on Schedule I hereto.
Each Grantor agrees not to change, or permit to be changed, the
location of its chief executive office unless all filings under
the Uniform Commercial Code as in effect in any state or
otherwise which are required by this Agreement or the Credit
Agreement to be made have been made with respect to the
Collateral and the Agent has a valid, legal and perfected first
priority security interest in the Collateral.
18. Security Interest Absolute. (a) All rights of
the Agent hereunder, the Security Interest, and all obligations
of the Grantors hereunder, shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any other agreement
with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (ii) any change in
the time, manner or place of payment of, or in any other term of,
all or any of the Obligations, or any other amendment or waiver
of or consent to any departure from the Credit Agreement, any
other Loan Document or any other agreement or instrument, (iii)
any exchange, release or nonperfection of any other Collateral,
or any release or amendment or waiver of or consent to or
departure from any guarantee, for all or any of the Obligations,
or (iv) any other circumstance which might otherwise constitute a
defense available to, or discharge of, the Grantors, any of the
Guarantors or any other obligor in respect of the Obligations or
in respect of this Agreement.
(b) Nothing contained in this Agreement shall be
deemed to limit in any way any of the Obligations of the Grantors
or the obligations of any other Loan Party under any other Loan
Document.
19. No Waiver. No failure on the part of the Agent to
exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy by the
Agent preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other
remedies provided by law. The Agent and the Lenders shall not be
deemed to have waived any rights hereunder or under any other
agreement or instrument unless such waiver shall be in writing
and signed by such parties.
20. Agent Appointed Attorney-in-Fact. Each Grantor
hereby appoints the Agent the attorney-in-fact of such Grantor
solely for the purpose of carrying out the provisions of this
Agreement and taking any action and executing any instrument
which the Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled
with an interest.
21. Agent's Fees and Expenses. The Grantors shall be
jointly and severally obligated to, upon demand, pay to the Agent
the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or
agents which the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Agent hereunder, or (iv)
the failure of any representation or warranty of a Grantor
hereunder to be true and correct in all material respects or the
failure by any Grantor to perform or observe any of its
obligations hereunder. In addition, the Grantors jointly and
severally indemnify and hold the Agent and the Lenders harmless
from and against any and all liability incurred by the Agent or
the Lenders hereunder or in connection herewith, unless such
liability shall be due to the gross negligence or willful
misconduct of the Agent or the Lenders, as the case may be. Any
such amounts payable as provided hereunder or thereunder shall be
additional Obligations secured hereby and by the other Security
Documents.
22. Binding Agreement; Assignments. This Agreement,
and the terms, covenants and conditions hereof, shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Grantors shall
not be permitted to assign this Agreement or any interest herein
or in the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement,
except as contemplated or permitted by this Agreement or the
Credit Agreement.
23. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF
ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
24. Notices. All communications and notices hereunder
shall be in writing and given as provided in the Credit
Agreement.
25. Severability. In case any one or more of the
provisions contained in this Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
26. Section Headings. Section headings used herein
are for convenience only and are not to affect the construction
of, or to be taken into consideration in interpreting, this
Agreement.
27. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute
but one instrument. This Agreement shall be effective when a
counterpart which bears the signature of the Grantors shall have
been delivered to the Agent.
28. Termination. This Agreement and the Security
Interest shall terminate when (a) all the Obligations have been
fully and indefeasibly paid in cash, (b) the Lenders have no
further commitment to make any Loans under the Credit Agreement,
and (c) the Agent shall have no further obligation to issue any
Letters of Credit, at which time the Agent shall execute and
deliver to the Grantors all Uniform Commercial Code termination
statements and similar documents which the Grantor shall
reasonably request to evidence such termination; provided,
however, that all indemnities of the Grantors contained in this
Agreement shall survive, and remain operative and in full force
and effect regardless of, the termination of this Agreement.
29. Amendments. No provision of this Agreement shall
be amended, modified, altered or limited by a written instrument
expressly referring to this Agreement and executed by the party
to be charged.
30. Submission to Jurisdiction. Any legal action or
proceeding with respect to this Agreement may be brought in the
courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution
and delivery of this Agreement, each of the Grantors hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each
of the Grantors hereby irrevocably waives, in connection with any
such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the
grounds of forum non convenient, which it may not or hereafter
have to the bringing of any such action or proceeding in such
respective jurisdictions. Each of the Grantors hereby
irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail,
postage prepaid, to each such person, as the case may be, at its
address set forth in Section 12.01 of the Credit Agreement.
Nothing herein shall affect the right of the Agent or any Lender
to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any
Grantor or any other Loan Party in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Security Agreement as of the day and year first
above written.
AMERICAN BANK NOTE COMPANY,
as a Grantor
By: s/Ward A.W. Urban
Name: By:Ward A.W. Urban
Title:V.P & Treasurer
AMERICAN BANK NOTE HOLOGRAPHICS,
INC., as a Grantor
By: s/Ward A.W. Urban
Name: By:Ward A.W. Urban
Title:V.P & Treasurer
CHEMICAL BANK, as Agent
By: s/ Robert J. Arth
Name:Robert J. Arth
Title: Vice-President<PAGE>
<PAGE>
Page 1 of 2
Amendments to SERP plan
New Article I - Paragraph A.
A. This instrument states the terms and conditions of the
American Banknote Corporation Supplemental Executive
Retirement Plan, formerly known as the United States Banknote
Corporation Supplemental Executive Retirement Plan, as adopted
by United States Banknote Corporation ("Banknote") effective
as of April 1, 1994.
Old Article I - Paragraph A. Now Paragraph B.
New Article I - Paragraph C.
C. This revision will not reduce any benefits provided in the
predecessor plan. Any and all reference to Banknote will
refer to American Banknote Corporation which includes that
corporation formerly known as United States Banknote
Corporation previous to July ___, 1995.
New Article II - Paragraph L. (1) (e)
(e) in which the Participant received payments under
either a short term disability plan, long term
disability plan, or workers compensation plan,
provided by New York State Law in connection with a
period described in any of items (a) or (b) above;
Old Article II - Paragraph L. (1) (e) Now - Paragraph L. (1) (f)
New Article II - Paragraph L. (1) (g)
(g) such additional periods of service or credit for
additional periods of service as may be determined
by the Board at any time previous to retirement or
termination.
<PAGE>
<PAGE>
Page 1 of 2
Amendments to SERP plan
New Article IV - Paragraph A. (1) and (2) replaces previous
Paragrah A. (1) and (2)
A. American Banknote Corporation will pay to an eligible
Participant whose retirement commences on his or her
Normal Retirement Date or Deferred Retirement Date a
monthly benefit calculated as follows:
(1) For eligible Class A Participants Final Average Annual
Compensation shall be multiplied by a percentage equal to
the sum of:
(a) 3% for each of the first ten (10) years of the
Participant's service, plus
(b) 1 1/2% for each of the next twenty (20) years of the
Participant's Service.
(2) For eligible Class B Participants Final Average Annual
Compensation shall be multiplied by a percentage equal to
the sum of:
(a) 2% for each of the first ten (10) years of the
Participant's Service, plus
(b) 1 1/2% for the next ten (10) years of the
Participant's Service, plus
(c) 1% for the next ten (10) years of the Participant's
Service.
New Article V - Paragraph B. (2) (b)
(b) (in the case of a Participant whose Retirement shall
commence at or after age 62) the Old-age Insurance
Benefit Amount or (ii) (in the case of a Participant
whose Retirement shall commence prior to age 62) for
the period from and after age 62, the Old-age
Insurance Benefit Amount (But no such deduction
shall be made with respect to the period from the
date of such Retirement age 62).
<PAGE>
SUBLEASE
SUBLEASE (this "Sublease") made as of January 31, 1996,
between GROW GROUP, INC. ("Sublessor"), a New York corporation,
having an office at 925 Euclid Avenue, Suite 900, Cleveland,
Ohio 44115-1487, and AMERICAN BANKNOTE CORPORATION ("Sublessee"), a
Delaware corporation, having an office at 51 West 52nd Street, 14th
Floor, New York, New York 10019.
W I T N E S S E T H :
WHEREAS, Sublessor is the current tenant under a lease, dated
April 17, 1978, from Pan American World Airways, Inc., predecessor-
in-interest to Metropolitan Life Insurance Company (the
"Landlord"), to Grow Chemical Corp., predecessor-in-interest to
Sublessor, as amended (which lease, as amended by that certain
Modification of Lease dated February 1, 1994, is referred to in
this Sublease as the "Underlying Lease"), which Underlying Lease
demises to Sublessor a portion of the 49th floor (the "Underlying
Premises") in the building known as 200 Park Avenue, New York, New
York (the "Building"), for a term ending on July 31, 1998;
WHEREAS, Sublessee wishes to sublease from Sublessor a portion
of the 49th floor (shown on the floor plan attached to this
Sublease as Exhibit A and referred to as the "Demised Premises");
and
WHEREAS, Sublessor is willing to sublease the Demised Premises
to Sublessee on the terms and conditions set forth in this
Sublease.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual obligations hereinafter set forth, and for other
valuable consideration, the receipt and legal sufficiency of which
are hereby acknowledged, Sublessor and Sublessee agree as follows:
1. Term. Sublessor hereby subleases the Demised Premises to
Sublessee, and Sublessee hereby sublets the Demised Premises from
Sublessor, for a term (the "Term"), commencing on the date (the
"Sublease Commencement Date") upon which the consent of the Land-
lord to this Sublease is obtained, and ending on July 30, 1998 (the
"Sublease Expiration Date").
<PAGE>
2. Demised Premises Sublet "As Is". Sublessee has inspected
the Demised Premises and is fully familiar and satisfied with the
condition thereof. Sublessee shall take the Demised Premises "as
is" and acknowledges that Sublessor has made no representation or
warranty concerning the condition of the Demised Premises.
3. Condition Precedent to Effectiveness of this Sublease.
This Sublease shall not be effective unless and until the Landlord
shall have delivered to Sublessor Landlord's written consent to
this Sublease, in accordance with the provisions of the Underlying
Lease, it being the intention of the parties hereto that this
Sublease shall be expressly conditioned upon such consent of the
Landlord first being obtained.
Sublessee shall have the right to terminate this Sublease if
Landlord's written consent is not obtained on or before February
20, 1996. Sublessee shall exercise its right to terminate by
giving Sublessor written notice of its election to do so by
February 23, 1996. If Sublessee does not notify Sublessor of such
election to terminate by the close of business on February 23,
1996, than Sublessee shall be deemed to have waived its right to
terminate.
4. Use of Demised Premises. Sublessee covenants that it
shall use the Demised Premises for the purposes permitted under the
Underlying Lease and for no other purpose.
5. Fixed Rent; Escalation Rent. (a) The amount of fixed
rent (the "Sublease Fixed Rent") Sublessee shall pay Sublessor for
the Demised Premises commencing on the Sublease Commencement Date
shall be $339,093 per annum.
Provided Sublessee is not in default under this Sublease,
$25,641 of the Sublease Fixed Rent payable for the thirty days
immediately following the Sublease Commencement Date shall be
abated by Sublessor. Such abatement shall not apply to any
additional rent payable hereunder or to amounts payable for
electricity as provided in Article 6 of this Sublease.
<PAGE>
All installments of the Sublease Fixed Rent (and any addi-
tional rent payable by Sublessee to Sublessor hereunder) shall be
paid by check, drawn on a member bank of the New York Clearinghouse
Association, to the order of Sublessor and shall be delivered or
mailed to Sublessor at its address first above set forth, or at
such other address as Sublessor may from time to time in writing
designate. If the date on which Sublessee's obligation to pay the
Sublease Fixed Rent or additional rent shall commence on a date
other than the first day of a calendar month or shall end on a date
other than the last day of a calendar month, then the Sublease
Fixed Rent and additional rent payable by Sublessee shall be
apportioned based upon the portion of such calendar month included
within the Term. On the date of this Sublease, Sublessee has paid
Sublessor the first monthly installment of the Sublease Fixed Rent
payable under this Sublease after the period referred to in the
immediately preceding paragraph, the receipt of which is hereby
acknowledged.
(b) Sublessee shall pay its proportionate share of all
escalation rent payable by Sublessor pursuant to the Underlying
Lease, except that the "Base Tax Year" as defined in the Underlying
Lease shall be the tax year 1996/1997 and the "Base Operating
Period" as defined in the Underlying Lease shall be the calendar
year 1996.
6. Electricity. Sublessee covenants to purchase electric
current for the Demised Premises in accordance with the Underlying
Lease and by whatever method electric current may be furnished to
Sublessor thereunder. The amount payable for electricity (the
"Electric Inclusion Amount") is included in the Sublease Fixed Rent
and is equal to $31,397.50. The Electric Inclusion Amount is
subject to increase as provided in the Underlying Lease.
Sublessor shall not be liable in any way to Sublessee for any
interruption or failure of or defect in the supply or character of
electric energy furnished to the Demised Premises or for any loss,
damage or expense Sublessee may sustain if either the quantity or
character of electric service is changed or is no longer suitable
for Sublessee's requirements, whether by reason of any requirement,
act or omission of the public utility serving the Building with
electricity or for any other reason.
<PAGE>
7. Sublease Subordinate to the Underlying Lease; Sublessee's
Covenant Respecting the Underlying Lease. A true and complete copy
of the Underlying Lease is annexed hereto as Exhibit B, and
Sublessee acknowledges that it has read the Underlying Lease and is
fully familiar with the terms and conditions thereof. This
Sublease is subject and subordinate to the Underlying Lease (and to
all matters to which the Underlying Lease is subject and
subordinate), and Sublessee covenants that it shall so conduct
itself and its operations in and about the Demised Premises as not
to cause Sublessor to be in default under the Underlying Lease.
Sublessor represents and warrants to Sublessee that it has not
received any written notice of default relating to the Underlying
Lease.
8. Incorporation by Reference, with Certain Exceptions,
of the Terms and Conditions of the Underlying Lease. The terms,
covenants, provisions and conditions of the Underlying Lease are
hereby incorporated in this Sublease, and to the extent applicable
to the Demised Premises and not inconsistent with any express
provisions of this Sublease, shall be binding upon, and inure to
the benefit of, both parties in this Sublease, those applying to
the Landlord in the Underlying Lease, applying, in this Sublease,
to Sublessor, and those applying to Sublessor, as tenant under the
Underlying Lease, applying, in this Sublease, to Sublessee, with
the following exceptions, modifications and supplements:
(a) For the purposes of this Sublease, the following
provisions of the Underlying Lease shall not be deemed incorporated
in or made a part hereof: Articles 28, 34, 39, 40, 41, 47, 50 and
51; Sections 36.07, 36.08, 46.02 and 48.03; the second paragraph of
Section 49.02 (which adds a Section 28.08) and the amounts stated
in Sections 38.01 and 48.02; and Schedules D and E.
(b) The benefit of all repairs, restorations, materials
and services to be provided to the Demised Premises by the Landlord
under the Underlying Lease shall accrue to Sublessee; but,
notwithstanding anything to the contrary in this Sublease or in the
Underlying Lease, Sublessor shall under no circumstances be
obligated to make any repairs or restorations or to supply
any materials or services to the Demised Premises; and Sublessor
shall under no circumstances be liable to Sublessee for the failure
of the Landlord or others so to do unless such failure results from
default by Sublessor under the Underlying Lease. Upon
<PAGE>
Sublessee's written request, Sublessor shall present to the
Landlord, in the name of Sublessor, any demand requested by
Sublessee for any such repairs, restorations, materials or services
required to be furnished to the Demised Premises by the Landlord.
Sublessee shall have the right to exercise, in Sublessor's name,
but at Sublessee's sole cost and expense, all of the rights
available to Sublessor to enforce performance of the obligations of
the Landlord to make any such repairs and restorations and to
supply any such materials and services to the Demised Premises. No
failure by the Landlord to make any such repairs or restorations or
to supply any such materials and services to the Demised Premises,
and no cessation, interruption or suspension of any service
provided by the Landlord, shall entitle Sublessee to any diminution
or abatement of fixed or additional rent or other compensation
under this Sublease, nor shall this Sublease be affected by reason
of any such failure, cessation, interruption or suspension, unless
the same results from a default by Sublessor under the Underlying
Lease.
(c) The concept of "Landlord's Work" set forth in the
Underlying Lease (and all references in the Underlying Lease and
Exhibit E thereto to Landlord's Work) shall have no application to
this Sublease, it being agreed that except as otherwise provided in
Article 2 of this Sublease, neither Sublessor nor the Landlord
shall have any obligation to alter, improve, decorate or otherwise
prepare the Demised Premises for Sublessee's occupancy.
(d) The fixed rent amounts set forth in the Underlying
Lease shall have no application to this Sublease, it being agreed
that Sublessee shall pay fixed rent under this Sublease equal to
the Sublease Fixed Rent in accordance with Article 5 of this
Sublease.
<PAGE>
(e) Notwithstanding any provisions contained in the
Underlying Lease to the contrary, Sublessee shall not, without the
prior written consents of both the Landlord and Sublessor in each
instance, by operation of law or otherwise, assign, mortgage or
encumber this Sublease, nor the estate and/or Term hereby granted,
nor sublet or permit the Demised Premises or any part thereof to be
used by others. In the event that Sublessee subleases or assigns
the Demised Premises in accordance with this Section 8(e), all
amounts paid by such subtenant or assignee in connection with such
sublease or assignment in excess of the amount due to Sublessor
pursuant to this Sublease, shall accrue to the benefit of
Sublessor.
(f) In the event of the termination or cancellation of
the Underlying Lease for any reason whatsoever, or of the surrender
of the Underlying Lease, whether voluntary, involuntary or by
operation of law, prior to the Sublease Expiration Date, Sublessee,
at the option of the Landlord, which may be exercised at any time
during Sublessee's occupancy of the Demised Premises, shall make
full and complete attornment to the Landlord for the balance of the
Term of this Sublease, on the same terms as are contained in this
Sublease. Such attornment shall be evidenced by an agreement in
form and substance satisfactory to the Landlord, which Sublessee
shall execute and deliver within ten (10) days after the request of
the Landlord, its successors or assigns.
(g) Any covenants, representations and other under-
takings of the Landlord under the Underlying Lease shall not be
deemed to be made by, or otherwise constitute obligations of,
Sublessor under this Sublease.
9. Indemnity. Sublessee shall indemnify and hold harmless
Sublessor from and against any and all liabilities, losses,
damages, suits, penalties, claims, demands and judgments of every
kind and nature, including, without limitation, attorneys' fees and
disbursements and attorneys' fees and disbursements incurred in
establishing liability and in collecting amounts payable hereunder
(collectively "Liabilities"), arising from the use or occupancy of
the Demised Premises or of any business conducted therein, or from
any work or thing whatsoever done or any condition created by or
any other act or omission of Sublessee, its assignees or
subtenants, or its or their respective employees, agents,
contractors, visitors or licensees, in or about the Demised
<PAGE>
Premises or any other part of the Building (including, without
limitation, any Liabilities which Sublessor or the Landlord may
incur by reason of any injuries to persons occurring in, on or
about the Demised Premises), unless such Liabilities result from or
in connection with any default by Sublessor under the terms hereof
or of the Underlying Lease or the negligence or willful misconduct
of Sublessor or the Landlord (as the case may be).
10. Notices. All notices to Sublessee shall be sent to
Sublessee's address first above set forth, Attention: General
Counsel, or to such other place(s) or to the attention of such
other individual(s) as Sublessee may hereafter by written notice to
Sublessor designate. All notices to Sublessor shall be sent to
Sublessor at c/o ICI-Paints, 925 Euclid Avenue, Suite 900,
Cleveland, Ohio 44115-1487, Attention: Legal Affairs Department, or
to such other place(s) or to the attention of such other indi-
vidual(s) as Sublessor may hereafter by written notice to Sublessee
designate. Notices from either party to the other shall be in
writing and shall be deemed to have been properly given, rendered
or made if mailed, postage prepaid, by registered or certified
mail, return receipt requested, and shall be deemed given on the
second business day after mailing.
11. Repairs, Alterations, Improvements and Other Work.
Sublessee shall at no time make any alterations or improvements to
the Demised Premises or install any signs in the lobby or in any of
the common areas of the Building (i) without the prior written
consents of both the Landlord and Sublessor, and (ii) unless
Sublessee complies with the requirements of the Underlying Lease.
If Sublessee elects to make improvements or alterations, Sublessor
covenants not to unreasonably withhold or delay its consent to the
same, provided that Sublessee has obtained from the Landlord any
consent which, under the terms of the Underlying Lease or this
Sublease, is required of the Landlord as a condition precedent to
the making of such alterations or improvements. If any such
improvements are consented to as aforesaid, the same shall be
performed by Sublessee at its sole cost and expense in accordance
with the terms and provisions of the Underlying Lease. If the
Landlord shall require Sublessor to remove, after the expiration of
the term of the Underlying Lease, any walls, entrances or other
leasehold improvements made to the Demised Premises by Sublessee,
Sublessor shall so notify Sublessee and Sublessee, prior to the
expiration of the Term of this Sublease, shall remove the same and
<PAGE>
restore the Demised Premises and the Building to their condition
existing immediately prior to the installation of such walls,
entrances or other leasehold improvements by Sublessee.
12. Sublessee's Rights. Sublessee shall not have any rights
in respect of the Demised Premises which are greater than the
rights of Sublessor under the Underlying Lease.
13. Time Periods. The time limits provided in the Underlying
Lease for the giving of notices, the making of demands, the
performance of any act, condition or covenant, or the exercise of
any right, remedy or option are changed for the purposes of this
Sublease by shortening the same by six (6) days in each instance,
unless such time limit is ten (10) days or less, in which event it
shall be shortened by two (2) days (but in no event less than
twenty-four (24) hours), so that notices may be given, demands
made, any act, condition or covenant performed, or any right,
remedy or option hereunder exercised within the time limit relating
thereto contained in the Underlying Lease.
14. Broker. Sublessee represents that the only brokers
with which it has dealt in connection with this Sublease are The
Galbreath Company, L.P. and Edward S. Gordon Company, Inc. (collec-
tively, the "Broker"). Sublessor shall pay the Broker pursuant to
separate written agreements. Sublessee shall indemnify and hold
harmless Sublessor from and against all loss, cost, damage and
expense (including, but not limited to, reasonable legal fees and
disbursements and any legal fees and disbursements incurred either
in) incurred by Sublessor by reason of a breach of the foregoing
representation. The provisions of this Article 15 shall survive
the expiration or earlier termination of this Sublease.
15. Successors and Assigns. Subject to the restrictions on
assignment and subletting in this Sublease and in the Underlying
Lease, this Sublease and the covenants and agreements herein con-
tained and incorporated herein by reference shall bind and inure to
the benefit of the respective successors and assigns of the
parties.
16. Entire Agreement; Amendments; Waiver. This Sublease and
Exhibits A and B hereto set forth the entire agreement of the
parties, and shall not be modified or amended except by a writing
signed by the party against whom enforcement is sought. Neither
<PAGE>
the waiver of any breach by either party of any provisions of this
Sublease, nor any indulgence by either party in respect of any
payment due it hereunder shall be construed as a waiver of any
subsequent breach or imply any future indulgence.
17. Costs and Expenses. Sublessee shall reimburse Sublessor,
on demand, for all costs and expenses (including reasonable
attorneys' fees and disbursements and court costs) incurred by
Sublessor in connection with enforcing Sublessee's obligations
under this Sublease. All such amounts shall be deemed to be
additional rent, and shall be collectible whether incurred before
or after the expiration or termination of this Sublease.
18. Governing Law. The laws of the State of New York appli-
cable to contracts made and to be performed wholly within the State
of New York shall govern and control the validity, interpretation,
performance and enforcement of this Sublease.
19. Corporate Sublessee. Each person executing this Sublease
on behalf of Sublessee hereby covenants, represents and warrants
that Sublessee is a duly incorporated or duly qualified (if
foreign) corporation and is authorized to do business in the State
of New York (a copy of evidence thereof to be supplied to Sublessor
upon request); and that each person executing this Sublease on
behalf of Sublessee is an officer of Sublessee and that he or she
is duly authorized to execute, acknowledge and deliver this
Sublease to Sublessor (a copy of a resolution to that effect to be
supplied to Sublessor upon request).
20. Asbestos. Sublessee acknowledges its awareness that the
Demised Premises contain asbestos-containing materials and that
Sublessor has no obligation with respect to the same.
21. Personal Property. Sublessee shall be permitted to
use certain furniture (the "Personal Property") located in the
Demised Premises at no additional charge. The Personal Property is
identified in the inventory attached hereto as Exhibit C and, to
the best of Sublessor's knowledge, is in working order. Sublessor
may, in its sole discretion, require Sublessee either to remove the
Personal Property or leave it in the Demised Premises upon the
termination or expiration of this Sublease.
<PAGE>
22. Security Deposit. Sublessee shall have deposited
with Sublessor, simultaneous with the delivery of this Sublease,
the amount of $56,516 (the "Security Deposit") in cash, as security
for the faithful performance and observance by Sublessee of the
terms, provisions and conditions of this Sublease. Sublessor shall
pay Sublessee interest on the amount of the Security Deposit at a
rate of 3.5% per annum. Such interest shall be credited to the
Security Deposit and paid to Sublessor at the end of the term as
provided below in this Article 22.
Sublessee agrees that in the event of the occurrence of any
default, Sublessor may use, apply or retain the whole or any part
of any cash Security Deposit and use, apply, or retain the whole or
any part of such proceeds, as the case may be, to the extent
required for the payment of any Sublease Fixed Rent, or any other
sum as to which Sublessee is in default, or for any sum that Sub-
lessor may expend or may be required to expend by reason of the
default (including any damages or deficiency accrued before or
after summary proceedings or other re-entry by Sublessor).
If Sublessor applies or retains any portion or all of any cash
Security Deposit, Sublessee shall forthwith restore the amount
so applied or retained so that, at all times, the amount of the
Security Deposit shall be the amount set forth in this Article 23.
Provided there is no uncured default, any balance of the cash
Security Deposit held by Sublessor and not used, applied
or retained by Sublessor as above provided, shall be returned to
Sublessee after the Sublease Expiration Date and after delivery of
possession of the entire Demised Premises to Sublessor in
accordance with the terms of this Sublease.
23. Captions. The captions are inserted only as a matter of
convenience and for reference and in no way define, limit or
describe the scope of this Sublease nor the intent of any provision
hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Sublease the day and year first above written.
SUBLESSOR
GROW GROUP, INC.
By: s/ W. J. Thornton
Name: W. J. Thornton
Title: Vice President Controller
SUBLESSEE
AMERICAN BANKNOTE CORPORATION
By: s/ Harvey J. Kesner
Name: Harvey J. Kesner
Title: Sr. Vice President
Translated from the Portguese
REAL ESTATE RENTAL AGREEMENT UNDER SUSPENSIVE CONDITIONS
ADMINISTRACAO E PARTICIPACOES WALTER TORRE JUNIOR LTDA., with its
place of business at Av. Magalh es de Castro, 286, Sao Paulo,
enrolled at CGC/MF under number 58.338.427/0001-84, hereinafter
referred to as LOCADORA, represented by its partner Mr. Walter
Torre Junior, Brazilian, married, Civil Engineer, ID number
7.581.240-SST/SP, enrolled at CPA/MF under number 769.228.638-87
with his office located at Rue George Eastman, 64 and
AMERICAN BANK NOTE COMPANY GRAPHICA E SERVICOS LTDA with its site
at
R. Peter Lund, 146, Caju, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47, hereinafter referred to as LOCATARIA
with
its statutory decree registered at Junta Comercial of the State of
Rio de Janeiro under number 746.787 on August 10, 1995 by its
authorized representative, Sidney Levy, Brazilian, married,
Engineer, I.D. number 3.343.401, enrolled at CPF/MF under number
441.607.557-04, resident in the City of Rio de Janeiro,
WHEREAS:
(a) LOCADORA is the legal and legitimate owner of the real estate
properties, which are free of any debts, delayed taxes of any
nature, including those referred to in Clause 3;
(b) LOCADORA as agreed with LOCATARIA on its own behalf shall
build in one of the properties identified hereunder, an
industrial plant with its main characteristics mentioned and
described hereunder;
(c) The parties hereto agree to set an Agreement of real estate
rental (land and future building) which shall be used by
LOCATARIA to exercise its industrial activities.
For the mutual undertakings contained herein, the parties agree
as follows:
1. CONTRACT
The parties agree to enter into REAL ESTATE RENTAL AGREEMENT
(REAL ESTATE as used herein shall be the land described in
Clauses 3.1 or 3.4. and the future building) irrevocably and
unconditionally guarantees the due and punctual performance of all
obligations pursuant to this Agreement.
2. SUSPENSIVE CONDITION
As this urban rental is conditioned to the edification, the
parties, in the terms of Article 118 of Brazilian Civil Code, set
forth this Agreement under suspensive condition, and it shall only
be
effective after the completion of the mentioned construction.
3. PROPERTY
3.1. - LAND with approximately 36,000 m2, facing the continuation
of Avenida Ceci, in Tambore, Barueri, SP., to be detached from larger
area, constituted of a property located in "Sitio Mutinga", County of
Barueri, SP., with approximately 1,200,000 m2 (one million and two
hundred thousand square meters) registered at the Real Estate Notary
Office of Barueri, SP., under number 79711 and enrolled in the City
Hall of Barueri under numbers 24204-40-59-0001-00-000;
24204-40-60-0001-00-000; 24204-4059-0100-00-000.
3.2 - BUILDING - Industrial Building with of 26,000 m2 of
constructed area distributed as follows: (I) 19,100m2 of industrial
area; (ii) 5,000 m2 of warehouse; and (iii) 1,900 m2 of offices and
services facilities, in accordance with plants and drawings which
shall be signed by the parties by November 30, 1995.
The measurements of the mentioned areas are approximated and are
subject to changes.
3.2.1 - Liability and Charges of Construction
(a) LOCADORA undertakes the elaboration of the architecture
project accordingly to the needs of LOCATARIA and shall
submit it to LOCATARIA as it may require. As soon as the
project is defined and agreed upon by both parties,
LOCADORA shall submit it for approval at City Hall.
(b) Upon acceptance of the project by the City, and as soon
as the License for construction is granted, LOCADORA
shall undertake the building project in accordance with
the drawings and technical specifications which shall be
signed by both parties and will become part of this
Agreement. The execution of the construction shall
fulfill the technical rules, as stated by Brazilian
Association of Technical Regulations (ABNT).
(c) The term of the execution is of 6 (six) months counted
from this date, only respecting alterations that may
occur on LOCAT RIA's behalf or to overcome proved
technical difficulties or from authorities imposition or
resulting from the occurrence of any event of Force
Majeure as disposed in Article 1058 of the Brazilian
Civil Code. The term shall be extended in the event of
one of the circumstances occurred in the period being .
(d) If LOCADORA is unable to finish the construction in the
stipulated period, considering that it is caused by
reasons other than those mentioned in the preceeding
item, a penalty of R$ 10,000.00 (Ten Thousand Reais) for
each delayed day shall be applied until the end of
construction.
(e) Once the construction is concluded, LOCADORA shall
obtain the Conclusion Certificate and the Certificate of
Non-Indebtedness, and within 60 (sixty ) days after the
last document has been issued, LOCADORA must register the
building at the Real Estate Notary Office.
3.3. - LOCADORA shall procure that the Environmental Department
(SMA) approves the industrial activities which LOCATARIA shall develop
in the property belonging to LOCADORA. LOCATARIA, on its own behalf,
may arrange to obtain the mentioned approval.
3.4. - If, within 30 (thirty) days of the signature of this
Agreement, the Environmental Department (SMA) disapprove the
execution of the building construction by LOCADORA on the proposed
site, the parties agree that the building to be constructed
by LOCADORA according with this Agreement shall be built on the
property with the following characteristics: Land with
50.000 m2, part of a larger area designated as share "D",
located in Itaqui, County of Barueri, Sao Paulo, on Castelo
Branco Highway, near km 30, (larger area) registered
at the Real Estate Notary Office of Barueri under number 5.333 and
at the City Hall Data Bank under number 23151-30-35-0001-00-000-1.
3.5. - The parties hereby agree that as soon as a definition
concerning the land (3.1 or 3.4.) to be improved is set out, an
Agreement Amend shall be executed to include irrevocably and
unconditionally the REAL ESTATE subject to this Agreement.
4. - RENTAL AND TERMS
4.1. - The rent shall be effective from the date of
celebration of the BUILDING ACCEPTANCE TERM, as stipulated hereunder,
after which the suspensive condition shall be fulfilled and therefore
validate the Agreement.
4.2. - The term of this Agreement is of 60 (sixty) months from
the date of the signature, by both parties, of the BUILDING
ACCEPTANCE TERM, observed the following: (i) LOCADORA shall request
the acceptance term to LOCATARIA, who, shall provide it within 10 (ten)
days; (ii) if LOCATARIA does not reply within the period, it shall
be considered as acceptance of the undertaking, allowing LOCADORA to
start the effectiveness of the rent from the date of the requisition.
4.2.1 - LOCADORA shall provide LOCATARIA the mentioned
construction in perfect conditions and with all the accessories and
devices working properly in order to allow its use. Any breach or
default regarding the construction shall be informed by LOCATARIA
in written notice allowing LOCADORA to make the appropriate repairs.
4.3. - On the due date of this Agreement LOCATARIA shall,
independently of any warning or notice, leave the building, totally
unoccupied and in the same conditions as it was received,
considering the normal wear and tear due to use.
4.4. - Considering that LOCATARIA has fulfilled its
contractual requirements pursuant to this Agreement, it shall be
eligible, on its own behalf to extend the term of the Agreement for
another 60 (sixty) months. In this case it shall notify LOCADORA, in
written form, 180 (One Hundred and Eighty) days in advance, from the
end of the period referred to in Clause 4.2. The same adjustment
criteria stipulated in this instrument shall be applied for the
renewed period.
4.5 - During the term of the Agreement as for Article 4 of Law
8.245/91 LOCADORA shall not be entitled to recover the rented
property.
5. - FEES
5.1. - Monthly rate starts at the beginning of rental and
shall be of R$ 6,00 (six Reais) per square meter of constructed area,
as of October, 1995, plus monetary correction, accordingly to the
variation of IGP-M/FGV (General Market Prices Index, as published by
Getulio Vargas Foundation).
5.2. - The rent calculated on the "caput" form shall be
adjusted in an annual basis, in accordance with the variation of the
before mentioned index (IGP-M/FGV) or, in the event of its extinction,
the following will be adopted: (i) General Prices Index provided by
Getulio Vargas Foundation (IGP/FGV); or (ii) Consumer Prices Index
provided by the Economical Research Institute Foundation of the
University of S o Paulo (IPC/FIPE).
5.3. - Adjustments shall be automatic, with no prior
notice to LOCATARIA,
5.4 - Monthly rent shall be paid at LOCADORA's office or
at any place previously designated, in any event always in the City of
Sao Paulo, up to the fifth day of the subsequent month. If as of the
date of payment the applicable index has not been furnished, rent
shall be adjusted by means of applying the same Rate of the preceding
month and the necessary corrections shall be made within 5 (five) days
after they are made available.
5.5. - If LOCATARIA fails to make any payment by the due date
as specified in this Clause, then a penalty of 10% (ten percent) plus
a 1% (one percent) monthly Rate shall accrue over the delayed payment,
and the debt shall suffer monetary correction on the same basis of the
index variation elected for this agreement. The adjustment shall be
applied on "pro rata die" from the day after the due date until
payment is received. Notwithstanding any of the LOCADORA's rights to
this Agreement.
5.6. - In the event of new legislation, considering the
contractual adjustment in which the periodicity is shorter than the
actual, the parties agree in applying the minimum periodicity legally
permitted independent of prior notice or warning.
6. - PROPERTY DESTINATION
6.1. - The property shall be destined to the development and
exercise of LOCATARIA's activities considering its constitution.
6.2. - If LOCATARIA wishes to use the property for other
activities it shall notify LOCADORA in advance for its approval, in
written form. The property shall not in any way be used for activities
that are not allowed on its location or incompatible with the
characteristics and category of the property.
6.3. - The failure of the terms contained hereinafter shall
result in the termination of the Agreement and penalties referred to
in Clause 14.
7. - MAINTENANCE OF THE PROPERTY
7.1. - Considering that the property will be occupied for
the first time, LOCATARIA undertakes to keep it in perfect condition
of cleanness and conservation, newly painted, with its electrical
and hydraulic components fully operating, so as to return it in the
same condition as it was received, exemption made to the wear and tear
due to regular use.
7.2. LOCATARIA shall permit LOCADORA or an authorized party to
inspect the property at any moment, provided the previous arrangements.
7.3. - LOCATARIA shall, on its own behalf, display logos
and signs onto the building as allowed by current legislation.
7.4. - If LOCATARIA needs to increase the electrical
capacity of the property, it shall request authorisation from
LOCADORA, who, based on technical groundwork, will decide for its
approval or disapproval.
7.5. - LOCATARIA shall repair, at its own expenses, all
damages eventually caused to the property. At the end of the term the
parties shall inspect the property in order to proceed its return and
fulfillment of the obligations. Should any repairs or constructions
be necessary the parties shall set out a Schedule to be followed by
LOCATARIA or, on its own behalf, indemnify LOCADORA of the same
value.
7.6. - LOCATARIA may request the inspection of the
property in time to have it properly repaired by the end of the
Term. If so, its responsibilities regarding rents and taxes will
cease on that date. Otherwise, LOCATARIA shall be responsible for
the rents and taxes to be paid until the repairs have been completed,
and made directly by LOCATARIA or by contracting LOCADORA.
8. - TAXES, FEES AND DUTIES
8.1. - LOCATARIA shall hold the entire responsibility for the
payment of Urban Buildings Tax (IPTU) and all taxes, expenses, fees
and duties incurred to the property, throughout the term of the
Agreement.
8.2. - LOCATARIA is obliged to pay all energy and water supply
bills by their due dates directly to the concessionaires and shall
produce such evidence thereof as LOCADORA shall require.
8.3. - If LOCATARIA is unable to perform such obligations
LOCADORA shall be entitled to charge or carry forward eviction
procedures against LOCATARIA.
8.4. - LOCATARIA undertakes to pay all taxes, duties and fees
necessary to operate its own activities.
9. - IMPROVEMENTS
9.1. - LOCATARIA is entitled, on its own expenses and risks and
provided that shall not affect the structure of the building, to make
any necessary improvements to meet its activities needs upon written
instrument submitted to LOCADORA.
9.2. - LOCATARIA shall not be entitled to indemnification or
retention of the property on the basis of improvements made.
9.3. - Improvements, as used herein, shall include all
construction made in the property which cannot be removed from it
without damage, however minimum.
9.4. - LOCADORA is entitled to, at the end or termination of the
Term, to stipulate which improvements must remain and which must be
removed from the property, which shall occur at LOCATARIA's own
expenses. If LOCATARIA fails to do so, forcing LOCADORA to do the
work, LOCADORA may charge LOCATARIA for the expenses as well as the
rents and taxes until the removal is made.
10. - FIRE INSURANCE
10.1 - LOCATARIA shall make, during the term of this Agreement
at its own expenses, the insurance of the building, including its
assets and accessories, against fire, lightning, explosions, etc.,
for the corresponding value of 70 (seventy) times the value of the
monthly rent, also including the LOSS OF RENT Clause, for a
period of 12 (twelve) months, with idoneous Insurance Company,
nominating LOCADORA as the beneficiary.
10.2. - The insurance bill shall be delivered to LOCADORA within
30 (thirty) days from its signature or renovations.
10.3. - In the event of damage, and insurance has not been
made or renewed, LOCATARIA shall replace the building in the
original conditions, as well as pay the corresponding rent values.
LOCADORA is entitled the right of preference in the reconstruction
of the building on equal condition basis.
11. - YIELD OF RENTAL, SUB LEASE AND LENDING
11.1 - LOCADORA shall not under any circumstances be liable
to yield the rental, sub lease or lend the property without prior
written consent from LOCADORA.
11.2. - Companies related to LOCAT RIA are exempted from the
prohibition mentioned in the caput , provided the following
conditions: (i) deliver a written notice to LOCADORA identifying
such
company; and (ii) prove its condition as colligated, controlled or
controller.
11.2.1. - In this case LOCATARIA shall undertake to fulfill all
conditions and obligations of this Agreement.
11.3. - If the provided in Clause 11.2. occurs , at the end of
the term or by its termination, LOCATARIA shall return the property
to LOCADORA totally unoccupied in accordance with this Agreement.
12. - PUBLIC REQUIREMENTS
12.1. - LOCATARIA undertakes, from the effective date of the
rental, to satisfy all Public requirements, any of which shall, under
any circumstances, be considered a reason for termination of this
Agreement.
12.2. - LOCADORA shall ensure the construction of the building,
including all its legal, fiscal, laboring and insurance obligations
incurred from it.
12.3. - LOCATARIA shall be responsible for obtaining all the
relevant licenses and permits required to the use and functions of
its activities.
13. - EXPROPRIATION
13.1. - In the event of expropriation, this Agreement shall
be considered terminated and neither party shall be liable to any
breach of this instrument, given to LOCATARIA, however, the right
to have indemnification granted by the expropriator.
13.2. - Should the expropriation be partial LOCATARIA may decide
for the termination or the maintenance of this Agreement. If
LOCATARIA decides for the maintenance, then the rent shall be deducted in
proportion to the reduced area.
14. - PENALTIES
14.1. - Penalty corresponding to 3 (three) times the value of
the rent at the time of infraction shall be stipulated if any of the
parties is unable to perform any of its obligations subject to
this Agreement. The claiming party shall be liable simultaneously to
consider the Agreement terminated.
14.2. - The herein specified penalty shall not under any
circumstance be considered as compensation for any indemnification
due caused by damages or losses to the property as well as the
provisions of the next Clause.
15. - TERMINATION
15.1. - Considering the peculiarities of such rental Agreement,
based on INTUITO PERSONAE, and provided that LOCADORA shall construct
the building with the sole purpose to meet the needs of LOCATARIA,
in respect to its functions and activities, this rental shall not be
terminated by LOCATARIA or return the property in accordance with
Article 4 of Law 8.245/91 before the end of the term of four years
from the effective date.
15.2. - Should LOCATARIA terminate or return the property before
the end of the term above stipulated, it shall indemnify LOCADORA
for loss and damage, with 48 (forty eight) times the value of rent on
the occasion. Such indemnification is intended to reimburse LOCADORA
for the investments made during the construction with the special
purpose to meet LOCATARIA needs, and shall be paid as provided in
Article 924 of the Brazilian Legislation.
15.3. - In the case termination occurs before the BUILDING
ACCEPTANCE TERM has been signed, LOCATARIA shall pay indemnification
for damages and losses corresponding to 48 (forty eight) times the
rent value, which will be calculated from this date, proportionally
and increasingly in accordance with the established period for the
completion in the schedule of construction.
15.4. - This Clause shall also be applied in the event of
termination by LOCADORA as a result of failure of payment or breach
of the provisions of this Agreement by LOCATARIA notwithstanding any
other penalties provided in this Agreement.
16. - AGREEMENT EXPENSES
16.1. - If LOCATARIA intends to register this Agreement at the
Real Estate Notary Office, or take any other measures regarded as
necessary, or required by the Legislation to its acceptance, it
shall pay for all expenses and undertake to make all the
necessary arrangements.
16.2. - If this Agreement shall be registered, LOCATARIA
undertakes to cancel such registration, on its own expenses at the
end or at the date of this Agreement termination.
17. - REVISION BY REAL VARIATION
17.1. - LOCADORA and LOCATARIA shall, with the sole purpose of
maintaining the economical and financial balance to this Agreement,
should the monthly rent added to the predictable adjustments,
suffers a real variation (for more or for less) of 20%
(twenty percent) of the market value, negotiate a revision of
the rent value after 2 (two) years from the signature of this
Agreement.
17.2. - If the parties agree with the new rent value, an
additament to this Agreement shall be made, or the negotiation may
be carried out by a Legal Arbitrator as provided in Articles 1072 of
the Brazilian Civil Code. In the event the parties do not agree over
the new value, any of the parties may, based on such disposition,
demand judicially the rent revision. This so adjusted revision may be
renewed every 2 (two) years.
18. - RENEWAL
18.1. - If, during the term, LOCADORA allows any rent delay or
late payments favoring LOCATARIA, or for any of other obligations
of this Agreement, such tolerance shall not be deemed as renewal or
modification of the terms of this Agreement.
19. - LEASE - RIGHT OF PREFERENCE AND VALIDITY IN CASE OF
OWNERSHIP
TRANSFER
19.1. - From this date on and at any time, LOCADORA shall be
entitled, on its own behalf, to submit the property pursuant to
this Agreement to lease.
19.2. - In this case LOCADORA shall: (i) notify the terms of
this Agreement to the leasehold who shall accept and respect the
current Agreement allowing LOCADORA to keep its contractual bond to
LOCATARIA; and (ii) make an additament of this Agreement in order to adapt it
in all necessary ways to the new judicial configuration of the real
estate notwithstanding any other provision of the agreement.
LOCADORA undertakes to get approval from the leasehold on the referred
Additament in order to register it at the Real Estate Notary
Office.
19.3. - Notwithstanding this the parties agree that: (i) if
LOCADORA chooses to sell the property, then it shall notify
LOCATARIA, who within 30 (thirty) days shall exercise its right of
preference in the terms of Article 27 and Law 8.245/91;
(ii) should LOCATARIA choose not to exercise its right of
preference, it shall designate 3 (three) days every week, during
the day, to allow the visits of prospective
buyers. The stipulated days shall be informed to LOCADORA at least
10 (ten) days in advance; and (iii) if the real estate pursuant to
this Agreement shall be transferred and/or inspected to a third party
during the contractual term, the rental shall remain in effect and
LOCADORA shall undertake to consider the Agreement to be carried
out and both parties authorize the registration of this new contract in
the relevant cabinets in accordance with Article 8 of Law 8.245/91
and Article 1.197 of the Brazilian Civil Code.
20. - MISCELLANEOUS
20.1. - Any document, notices, related to penalties, fees and
requirements from the Public Authorities, even when directed to
LOCATARIA, shall be delivered to LOCADORA immediately.
20.2. - Based on Clause IV of Article 58 of Law 8.245/91, the
parties agree that any notice given pursuant to this Agreement
shall be in writing and delivered by registered mail, telex or
facsimile.
20.3. - In case of disputes arising out of or related to this
Agreement, the violator party shall be responsible for the Attorney
fees, corresponding to 20% (twenty percent) of the sentence value,
besides other judicial and extra judicial expenses.
20.4. - This Agreement shall be governed in accordance with
Law 8.245/91 of the Brazilian Civil Code.
21. - BUYING OPTION
LOCADORA grants LOCATARIA the buying option of the real estate,
to be exercised at any time, considering the Paragraph of this Clause,
and the price shall be set out, on the occasion, by an specialized
company of recognized reputation.
PARAGRAPH - If LOCADORA enters into lease of the property in
accordance with Clause 19.1, LOCATARIA shall not be eligible to
have its right of buying part of the "caput" during the term of such
leasing.
22. - GOVERNING LAW
22.1. - To settle any disputes, controversies or differences
arising from this Agreement, the parties elect the Courts of Sao
Paulo, Brazil.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed in 3 (three) counterparts in the presence of two
witnesses.
Sao Paulo, November 17, 1995
______________________ ______________________
By LOCADORA By LOCATARIA
Witnesses:
_______________________ ______________________
Name / ID Name/ID
PRIVATE INSTRUMENT OF RATIFICATION AND RECTIFICATION OF THE PRIVATE
INSTRUMENT OF REAL ESTATE RENTAL AGREEMENT UNDER SUSPENSIVE
CONDITIONS
This agreement made by and between ADMINISTRACAO E PARTICIPACOES
WALTER TORRE J NIOR LTDA. as LOCADORA and AMERICAN BANK NOTE
COMPANY GRAFICA E SERVICOS LTDA. as LOCATARIA, qualified in the instrument
which ratifies and rectifies, herein represented by their duly
authorised officers, for the mutual undertakings contained herein,
the parties agree as follow:
FIRST - On November 9, 1995 the parties produced a REAL ESTATE
RENTAL AGREEMENT UNDER SUSPENSIVE CONDITIONS referred to land
enrolled under number 79.711 at the Real Estate Notary Office of
Barueri, Sao Paulo including the edification to be executed in
accordance with Clauses 3.1. and 3.2. of the referred Agreement.
SECOND - In Clause 3.4. of the referred Agreement the parties
agreed that in the event of a disapproval by the Environmental
Department (SMA) making it impossible to build on the land
identified in Clause 3.1., the building would take place in the
property registered under number 5.333 (major area) of the same
Real Estate Notary Office, in Barueri County.
THIRD - However, the parties agree, to accomplish the
obligations of the Agreement, that the industrial building
referred to in Clause 3.2 of the mentioned instrument,
will be constructed on another property, hereunder identified.
FOURTH - The parties hereto agree to enter into an Rectifying
agreement, thus modifying the subject of the Agreement provided in
Clause 3.1. of the Original Instrument under the following terms
and conditions:
"3.1. - LAND - A urban land existing as part of the share
number 1 of the place denominated "Campo do Gupe"in the City,
District, County of Barueri, State of Sao Paulo, designated for
localization purposes as LOT 01 (one) with 50.308,35 m2 (fifty
thousand, three hundred and eight meters and thirty and five square
centimeters), described as follows: "it begins at point "A",
located on Estrada do Ingai where it crosses the limits of the
condominium. From that point on, the distance is 87,27m (eighty seven
meters and twenty e seven centimeters), following the Estrada do Ingai
margin toward Barueri until point "B". From that point on, the
distance is 72,51m (seventy e two meters and fifty one centimeters),
limiting with the remaining area belonging to Milton Pil o and his wife
(designated for localization purposes as "LOT 02"), until reach
the point "C". From that point on, it deflects to the left in
a 90o0'00" angle for a 249,32m (two hundred and forty and
nine meters and thirty and two centimeters) distance, limiting
with the remaining area belonging to
Milton Pil o and his wife (designated for localization purposes as
"LOT 02"), until reach the point"D". From that point on, it deflects
to the left in a 90o0'00" angle for a 76,10m (seventy six meters
and ten centimeters) distance, limiting with the remaining area
belonging to Milton Pil o and his wife (designated for
localization purposes as "LOT 02"), until reach the
point "E". From that point on, it deflects
to the left in a 22o52'44" angle for a 187,55m (one hundred eighty
seven meters and fifty five centimeters) distance, limiting with
the remaining area belonging to Milton Pil o and his wife (designated
for localization purposes as "LOT 02"), until reach the
point "F". From that point on, it deflects to the left in
a 89o03'34" angle for a 38,17m (thirty eight meters
and seventeen centimeters) distance,
limiting with the remaining area belonging to Milton Pil o and his
wife (designated for localization purposes as "LOT 02"), until
reach the point "G". From that point on, it deflects to the
left in a 03o57'38" angle for a 59,27m (fifty nine
meters and twenty seven centimeters) distance, limiting
with the remaining area belonging to
Milton Pil o and his wife (designated for localization purposes as
"LOT 02"), until reach the point "H". From that point on, it
deflects to the left in a 02o36'03" angle for a 53,09m
(fifty three meters and nine centimeters) distance, limiting
with the remaining area belonging
to Milton Pil o and his wife (designated for localization purposes
as "LOT 02"), until reach the point "I". From that point on, it
deflects to the left in a 01o53'29" angle for a 49,11m (forty nine
meters and eleven centimeters) distance, limiting with the remaining
area belonging to Milton Pil o and his wife (designated for
localization purposes as "LOT 02"), until reach the point "J".
From that point on, it deflects to the left in a 03o44'56" angle
for a 37,52m (thirty seven meters and fifty two centimeters)
distance, limiting with the remaining area belonging to
Milton Pil o and his wife (designated for localization purposes
as "LOT 02"), until reach the point "A", when it
begins until the present description, enclosing an area of 50.308,35
m2 (fifty thousand, three hundred and eight meters and thirty and five
square centimeters).
Paragraph - The referred property was acquired by ADMINISTRACAO E
PARTICIPACOES WALTER TORRE JUNIOR LTDA. from MILTON PILAO and his
wife, accordingly with its deed registered on February 27, 1996 at
the Notary Office of Barueri county, book 292, page 063-068.
FIFTH - The present instrument makes ineffective and invalid
Clauses 3.4. and 3.5. of the instrument executed.
SIXTH - All the remaining terms and conditions of the Contractual
Instrument executed on November 9, 1995 shall not be affected by
this instrument.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed in 3 (three) counterparts in the presence of two
witnesses.
Sao Paulo, February 29, 1996
_______________________
BY LOCADORA
_______________________
BY LOCATARIA
Witnesses:
___________________________
_____________________________
Translated from the Portugese
n. 4300/037-1/95-TB
1st. ADDITAMENT TO CONTRACT NUMBER
4300/037/95-TB BY AND BETWEEN
TELECOMUNICACOES BRASILEIRAS S/A -
TELEBRAS AND AMERICAN BANK NOTE COMPANY
GRAFICA E SERVICOS LTDA. FOR THE SUPPLY
OF INDUCTIVE CARDS
TELECOMUNICACOES BRASILEIRAS S/A - TELEBRAS, bounded to the
Communication Ministry, with its main office in Brasilia,
Distrito Federal, Setor de Autarquias Sul, Quadra 06, Bloco
E, Brasilia - DF, enrolled at CGC under number
00.336.701/0001-04, hereinafter referred as TELEBRAS, and
AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS LTDA., whose
registered office is at Rua Peter Lund, 146, Sao Cristovao,
Rio de Janeiro, enrolled at CGC/MF under number
33.113.309/0001-47, hereinafter referred as CONTRATADA,
WITNESSETH
WHEREAS the administrative rules of TELEBRAS, in accordance
with Clause 7.2.1 of the Agreement 4300/037/95-TB
NOW, THEREFORE, the parties hereto agree to enter this Amend
to the Agreement 4300/037/95-TB, hereinafter referred as the
Original Agreement, on the terms and conditions as follows:
FIRST CLAUSE
1.1. The Delivery Schedules as provided
in Timetable 2 attached to the
Original Agreement shall be
modified and prevail the
Attachment to this Amend.
SECOND CLAUSE
2.1. CONTRATADA shall supply, solely for
Marketing Promotion purposes, with
no additional costs or expenses to
TELEBRAS or any third authorised
party, 290,000 telephone cards.
This amount had not been included
in the initially agreed number.
THIRD CLAUSE
3.1. The remaining provisions and
clauses of the Original Agreement
shall not be affected by this
instrument.
IN WITNESS WHEREOF, the parties execute 03 (three)
counterparts of this Amend in the presence of 02 (two)
witnesses.
Brasilia,
September 4, 1995
_________________________
__________________________
BY TELEBRAS BY TELEBRAS
________________________ __________________________
BY CONTRATADA BY CONTRATADA
_______________________ __________________________
WITNESS WITNESS
CONTRACT 4300/037/95
CONTRACT FOR THE MANUFACTURING AND
SUPPLY OF INDUCTIVE CARDS -
TELEBRAS' TECHNOLOGY - BETWEEN
TELECOMUNICACOES BRASILEIRAS S/A -
TELEBRAS AND AMERICAN BANK NOTE
COMPANY GRAFICA E SERVICOS LTDA.
TELECOMUNICACOES BRASILEIRAS S/A - TELEBRAS, bounded to the
Communication Ministry with its main office in Brasilia,
Distrito Federal, at Setor de Autarquias Sul, Quadra 06,
Bloco E, Brasilia - DF, enrolled at CGC under number
00.336.701/0001-04, hereinafter referred as TELEBRAS, and
AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS LTDA., whose
registered office is at Rua Peter Lund, 146, Sao Cristovao,
Rio de Janeiro, enrolled at CGC/MF under number
33.113.309/0001-47, hereinafter referred as CONTRATADA,
WHEREAS the parties are submitted to the Law 8.666/93,
WHEREAS Bidding Number 02/95,
WHEREAS Project Number 110.00.04.2.0 and Account Number
112.39.213.0,
NOW, THEREFORE, the parties hereto agree to enter this
Agreement under the following terms and conditions:
FIRST - SUBJECT
1.1. The subject of this Agreement is manufacturing and
supply by CONTRATADA of 229.904.000 inductive cards
each of 20, 35, 50, 75 and 90 units, with technology
transferred by TELEBRAS, including subtract
preparation, image transfer, chemical processing,
sealing, graphic printing on both sides, individual
final cut, security system against frauds and misuse,
packing in 100 card boxes for storage, shipment and
distribution as well as the making of matrix required
in the manufacturing process.
SECOND - APPLICABLE DOCUMENTS
2.1. The following documents shall be attached to this
Agreement in order to constitute the entire agreement
between the parties :
2.1.1. Bidding Edictal n. 02/95 TELEBRAS as of July
11, 1995 and its Attachments;
2.1.2. CONTRATADA's Proposal as of August 11, 1995;
2.1.3. Technical Specification of the Manufacturing
Process provided in the Contract of Industrial
Technology Supply signed on March 18, 1992
between TELEBRAS and CONTRATADA.
2.2. The following documents shall be attached to this
Agreement as part of it:
2.2.1. Price Table (Attachment 1);
2.2.2. Schedules (Attachment 2).
2.3. Neither party shall be bound by any variations to this
Agreement unless agreed by both parties in writing on
their behalf by authorised officer of each party.
THIRD - PRICES
3.1. The estimated total price for the supply of 229.904.000
cards, in accordance with the First Clause will be of
R$ 101.421.198,40 ( One Hundred and One Million, Four
Hundred and Twenty One Thousand, One Hundred and Ninety
Eight Reais and Forty Cents), as of August, 1995,
including payment for the Contract of Transfer of
Technology - FTI and cards storage costs and excluding
added value taxes such as IPI, ICMS, COFINS and
PIS/PASEP, freights and transportation insurance.
FOURTH - PAYMENT CONDITIONS
4.1. Payment of the cards shall be made directly by
TELEBRAS or whoever TELEBRAS indicates upon invoice
presentation and under the following conditions:
4.1.1. 10% (ten percent) of the Agreement's total
value for each period, 30 (thirty) days after the
date of first delivery specified in Attachment 2
for the corresponding period or upon invoice
presentation, whichever happens last;
4.1.2. 90% (ninety percent) of each remittance,
including the one referred to in Clause 4.1.1.,
30 (thirty) days after its delivery or upon
invoice presentation whichever happens last
4.2. TELEBRAS or whoever it indicates shall pay all taxes
such as ICMS, IPI, PIS/PASEP and COFINS, freights and
transportation insurance as well as any adjustment
installments in the same amount of days TELEBRAS is
legible to pay the basic installments, that is, 30 days
after the delivery of each lot or upon the
corresponding invoices, whichever happens last;
4.3. Resources from Operating Companies associated with the
Indicator "Inductive Cards Commercialization - Total",
under code 108.781010420-6 of the Code Plan STB, will
be employed in accordance with the Entrepreneurial
Action Plans 95/97, agreed with TELEBRAS, for the sole
purpose of payments of the cards subject to this
Agreement.
4.4. Invoices shall be presented in two copies and bear the
following:
a) number and date of the Agreement's signature;
b) contractual item of payment conditions referred to
in the invoice
c) subject of charge: basic, adjustment, taxes,
duties, fees, freights and transportation
insurance;
d) corresponding installment value;
e) application site, local, lot, identification,
etc.,
f) number of the invoices in case of taxes or
delays, or if they are
part of the charging process.
4.5. Attached to the invoices, CONTRATADA shall inform its
preference regarding form of payment, whether cash or
credit. In this case, it shall provide the name of the
Bank, code and Agency, address and Account Number,
undertaking responsibility for eventual costs or
expenses related to this decision.
4.5.1. The failure to fulfill such conditions will
imply on the acceptance of the form of payment used by
TELEBRAS or whoever it indicates, and no additional
cost or fee shall be claimed in the event CONTRATADA
requests credit from factoring/credit entities. The
corresponding operations shall be previously informed
to TELEBRAS, and CONTRATADA shall advise such entities
as to submit the referred papers to TELEBRAS or
whoever it indicates at its main office where they
shall be accepted.
4.6. As a direct result of failure of such conditions the
invoice shall be sent back to CONTRATADA within 20
(twenty) days of the delivery date in order to take the
necessary arrangements. Payment shall be due on the
30th (thirtieth) day after the resubmission of the
amended document.
4.7. In the occurrence of credits favoring one of the
parties, the corresponding payment shall be based on
the original value plus monetary correction, pro rata
tempore, until its liquidation, 30 (thirty) days after
the invoice has been presented.
4.7.1. If the parties are unable to make the payment
within the specified period such credits shall
be under the same rules as those applied to
delayed payments stipulated in Clause 6.6. of
this Agreement.
4.7.2. In case TELEBRAS has any credits to its
favour, it shall be entitled to deduct such value
from future payments pursuant to this or any other
Agreement made with CONTRATADA.
4.7.3. The referred credits shall be a direct result
of payments or refund for more or for less with
the other party acknowledging that they shall not
be, under any circumstance, considered delayed
payment.
4.8. In case of incurred penalty by CONTRATADA in accordance
with the provisions, TELEBRAS shall deduct its value
from the invoice's payment.
4.9. CONTRATADA shall produce evidences of non existence of
debts or liabilities related to taxes or any other
fiscal obligation pursuant to this Agreement as
TELEBRAS may request in order to make any payment.
4.10. If CONTRATADA fails to present the invoices by
the due dates as specified, it shall not be entitled
to claim any additional payment for such period.
4.11. Adjustment invoices shall be attached to the basic
invoices along with the demonstratives in the occasion
of delivery. If only one invoice is issued, basic
values shall be distinguished.
4.12. In the case of a previous payment of supply
already occurred, the adjustment shall be calculated
considering the anticipated period. In the occurrence
of delay in fulfilling the physical aspects related to
the payment which is solely TELEBRAS responsibility,
the amount of the delayed installment shall be
adjusted as provided, proportionally to the number of
days overdue by TELEBRAS.
FIFTH - ADJUSTMENT
5.1. The prices related to contract events to which the
installments are associated with shall be adjusted
from each period of one year, for more or for less,
being valid for the subsequent period upon the use of
the following formula:
I-I0
R= V _________
I0
where:
R = adjustment value
V = basic value of the installment or basic unitary
price
I0 = economic index corresponding to the month of the
proposal presentation (August/95)
I = economic index corresponding to the 12th or 24th
month after the first month of contract validity and
so forth, accordingly to its term.
5.2. The adjustment periodicity is annual from the date of the
Agreement signature and may be reduced in the case of
changes introduced by Federal Government.
5.2.1. If Federal Government maintains the adjustment
periodicity, after its application, the price of
installment, the unitary price or the remainder of
the contract shall be considered as the new
adjusted price to be used for the 12 (twelve)
months to come, that is, from the 13th or 25th
month counted from the contract's initial month of
validity and so forth remaining fixed during each
period of twelve months.
5.2.2. If Federal Government reduces the adjustment
periodicity, then the value of installment, the
unitary price or the remainder of the contract will
have its adjustment resumed proportionally to the
number of months between the prices reference date
and the month defined by the Federal Government.
The so adjusted prices shall be valid for the
subsequent period specified by Law or governmental
measures.
5.3. The economic index to be used in this Agreement shall be
settled by Federal Government in accordance with Article
3 of MP 1.053 as of June 30, 1995.
5.4. The parties may elect patterns of remuneration for the
payment period provided that is permitted by Brazilian
Legislation and from the date of such permission.
5.5. If CONTRATADA fails to supply the goods and/or services
in time, it shall prevail for payment the lowest adjusted
price in accordance with this Agreement, between the
specified date for the fulfillment of such obligation
and the date of the effective payment.
5.6. The factors defined from the adjustment formula shall be
calculated up to the third digit. The others shall not be
considered.
5.7. As a direct result of a delay in the invoice presentation
by CONTRATADA, it shall not be entitled to the
corresponding adjustment due to such delay.
SIXTH - PENALTIES
6.1. If CONTRATADA is in serious breach of its material
obligations part of this Agreement, allowed its previous
defense, TELEBRAS shall be entitled to apply the
following sanctions:
6.1.1. Warning notice;
6.1.2. Penalty according with Clause 6.4 ;
6.1.3. Temporary suspension in participating and
impediment to contract with TELEBRAS for a
period
no longer than 2 (two) years;
6.1.4. Declaration of unfitness to participate in
bidding or to make contracts with Enterprises
of
the TELEBRAS System while the reasons for
punishment remain.
6.2. The sanctions specified on Clauses 6.1.1, 6.1.3 and 6.1.4
shall be applied together with the ones specified on
Clause 6.1.2 , allowed previous defense of CONTRATADA in
such process for a period of 05 (five) weekdays.
6.3. The sanction specified in Clause 6.1.4 shall be
exercised solely by the Minister of State of
Communications, allowed the defense of CONTRATADA in the
respective process within 10 (ten) days from the opening
of the procedures allowing the rehabilitation to be
requested after 2 (two) years from its application.
6.4. A penalty shall be applied upon CONTRATADA in case of
partial or total breach of its obligations, calculated on
the total price of the delayed lot including all taxes
and adjustments according to this instrument, limited to
30% (thirty percent) of the total value of this Agreement
by using the following formula:
M = 0,1 X A X F
where:
M = representative percentage of penalty
A = delay in number of days
F = criticality factor and importance of supplying
terms to TELEBRAS which in this case is equal
to 3
(three).
6.5. TELEBRAS on its own behalf may consider subtracted from
the total value of this Agreement, with no reposition,
as in quantity as in value, the cards proposed and not
delivered in the due month, specified in Schedule -
Attached to this instrument, considering the limit of 25%
(twenty five percent) of the initial updated value of the
Agreement.
6.6. If TELEBRAS fails to make any payments, interest at a
monthly Rate of 0.5% (zero point five percent) pro-rata
die shall accrue on such delayed payment. For delays over
30 (thirty) days a monthly Rate of 1% (one percent)
pro-rata tempore shall be accrued.
SEVENTH - TERMS, AMOUNTS AND DELIVERY SITES
7.1. This Agreement is valid for 16 (sixteen) months from the
date of its signature.
7.1.1. For each type of card, the first remittances
of each period shall be delivered within 15
(fifteen) days after the beginning of such
Period.
7.2. The terms for execution of this Agreement are specified
on the Schedule - Attachment 2 considering as Month 1 the
first month after the signature of the Agreement.
7.2.1. The specified dates may be altered to meet
the convenience of TELEBRAS provided that is
agreed by both parties.
7.3. Cards shall be delivered in places indicated by TELEBRAS
packed in accordance with Clause 4.4 of the Edictal.
7.3.1. Deliveries to any Company part of the TELEBRAS
System shall only be made upon proper written
authorization granted by TELEBRAS.
7.4. Should the cards be rejected the Schedule specified on
Attachment 2 shall not be altered.
EIGHTH - OBLIGATIONS OF CONTRATADA
8.1. In order to fulfill its obligations under the Agreement
CONTRATADA shall:
8.1.1. Provide all materials and services
which have not been explicitly surveyed in the
Proposals to ensure that it can complete its
contractual requirements pursuant to this
Agreement
as well as incorporate technological and
manufacturing process alterations that may have
resulted from the technological development of
the
process or the product;
8.1.2. Undertake all duties and
responsibilities that may arise out of the
subject of this Agreement.
8.1.3. Employ the best engineering
techniques, on the behalf of TELEBRAS, should the
Parties prove their inability to agree on
specifications;
8.1.4. Allow TELEBRAS to follow and inspect all
phases of the Project, building of the
Industrial
Line, manufacturing and plant tests of all
equipment and cards subject to this Agreement and
whenever requested by TELEBRAS as well as, upon
notice in advance, grant access to the production
process.
8.1.5. Guarantee all measures required in order
to import equipment, components and all the
necessary to carry out its obligations under this
Agreement.
8.1.6. Not modify the lay-out of the
card unless upon authorization granted by
TELEBRAS.
8.1.7. Not modify the productive process
presented in the approved project by TELEBRAS
without prior negotiation with TELEBRAS.
8.1.8. Accept, under the same contractual
conditions, the necessary increments or
suppressions up to 25% (twenty and five percent)
of
the initial value of the Agreement.
8.1.9. Conduct tests in 100% (one hundred percent) of
the delivered cards by means of testing devices.
8.1.10. Keep an authorised representative, during the
term of this Agreement, entitled to hold
responsibility for solving any problems that may
arise during the Project with no costs to
TELEBRAS.
8.1.11. Undertake entire responsibility with respect to
all manufacturing and supplying aspects, being the
sole accountable before TELEBRAS for fulfilling
the
contract dispositions, arise from sub-contracting
as well as justification of delay from the
proponent..
8.1.12. Manufacture the product in Brazil.
NINTH - TERMINATION
9.1. The parties shall be entitled to terminate the Agreement
as a result of:
9.1.1. Failure or omission to carry out or observe any
of the terms of the Agreement;
9.1.2. Any breach of the obligations pursuant to the
Agreement;
9.1.3. Improper use of any of the conditions;
9.1.4. Delay in the performance of any of the
obligations leading to the conclusion of the
impossibility of supplying within the specified
dates;
9.1.5. Unreasonable delay in the beginning of supply;
9.1.6. Unreasonable suspension of supply without
previous notice to TELEBRAS;
9.1.7. Subcontracting the whole or any part of
the subject, assignment or transfer the whole or
any part of the subject as well as merge,
dissolution or acquisition;
9.1.8. Resolution for winding-up or filing for Chapter
11 or Chapter 7 or of similar effect;
9.1.9. Dissolution of the party;
9.1.10. Alteration or modification of the objectives or
structure of CONTRATADA which may affect the
obligations of this Agreement;
9.1.11. Failure in observing orders given by the
authorised representative designed to follow and
inspect the execution;
9.1.12. Reasons of public interest, of high significance
and wide knowledge, justified and determined by
the
highest rank authority of the Administration to
which TELEBRAS is subordinated and registered in
the administrative process in accordance with the
Agreement;
9.1.13. Suppression by TELEBRAS of the supplying process
resulting in changes of the initial value of the
Agreement besides the limit permitted in
Paragraph
1 of Article 65 of Law 8.666/93;
9.1.14. Suspension of its execution upon written order
from TELEBRAS for a period longer than 120 (one
hundred and twenty) days unless arising from
catastrophe, grave internal public disturbance or
war, or else for repeated suspensions that may
total the same period independently of
indemnification, payable as a result of
succeeding
and unpredictable demobilization and
mobilizations
as well as predictable events, grants CONTRATADA
the right to decide, in such cases, for the
suspension of its obligations until the situation
returns to normal;
9.1.15. Delays over 90 (ninety) days in the payments due
by TELEBRAS, referred to constructions, services
or
supply or corresponding installments already
received or executed, unless in case of
catastrophe, grave public disturbance or war,
grants CONTRATADA the right to discontinue its
obligations until the situation returns to
normal;
9.1.16. Failure or omission arising from Force Majeure.
9.2. In case of termination of this Agreement as a result of
default by CONTRATADA, TELEBRAS shall not be liable for
any obligation pursuant to this Agreement and
CONTRATADA shall , besides other penalties deriving from
the causes of the termination, notwithstanding any
accrued rights, reimburse TELEBRAS within 30 (thirty)
days from the date of termination, the value paid without
the corresponding counterpart in cards, adjusted in
accordance with the adjustment conditions (FIFTH) until
the date of payment of the corresponding credits.
9.2.1. On its own behalf, TELEBRAS shall be
entitled to choose to keep the goods delivered
until the termination and the difference between
the payments made and the supply shall be paid,
from debtor to creditor within 30 (thirty) days
from the date of assessment of quantities and
associated values, adjusted in accordance with
its
correspondent adjustment conditions (FIFTH) until
the date of the payment of the corresponding
credits.
9.3. In case of termination of this Agreement as a result of
default by TELEBRAS, CONTRATADA shall not be liable for
any obligations pursuant to this Agreement and TELEBRAS
shall, besides other penalties derived from the causes of
the termination, pay for the cards already delivered, the
cards manufactured but not delivered, the cards in
production process as well as costs and expenses incurred
in the productive process resulting from the
accomplishment of this Agreement with adjustments
calculated in accordance with CLAUSE FIFTH of this
instrument.
9.4. The termination of this Agreement shall be:
a) Determined by written and unilateral act by
TELEBRAS in the cases referred to from Clause
9.1.1 to Clause 9.1.12. and 9.1.16.;
b) Amiable by arrangement between the parties, reduced
to term during
the bidding process as long as it becomes
convenient to TELEBRAS;
c) Judicial, as provided by Law.
9.4.1. Administrative or judicial termination
shall be preceded by written authorization and
based on invested authority.
9.4.2. In the case termination occurs as
referred in Clauses 9.1.12 to 9.1.16., not
resulting from CONTRATADA default or breach,
CONTRATADA shall be reimbursed for proved losses
whichever suffered and also be eligible to:
a) Payments owed by the execution of the Agreement
until the
termination date;
b) Payment of costs of demobilization.
9.4.3. In case of impediment, paralysation or
suspension of the Agreement, the time frame shall
be extended as agreed between the parties for the
same period.
TENTH - GENERAL CONDITIONS
10.1. Any notice given pursuant to the technical
Management of this Agreement shall be in writing and
delivered to TELEBRAS, Att. Department of Commercial
Coordination of the Directorate of Operation and Services
Coordination of TELEBRAS, responsible for the Technical
management of this agreement.
10.2. If CONTRATADA fails to fulfill any of its
obligations, TELEBRAS shall terminate supply and payments
notwithstanding any previously mentioned penalties.
10.3. CONTRATADA shall indemnify TELEBRAS or a third party
within 30 (thirty) days for any loss, claim or damage
arising out of any breach of its obligations.
10.4. The party who intends to penalize shall give the
other party a notice in order to, within 30 (thirty)
days, the latter presents its reasons, and failure to do
so will imply in acceptance of the reasons presented by
the other party.
10.5. TELEBRAS shall provide final drawing of each type of
card to be printed and shall adequate such drawing to the
agreed items in periods to be undertaken by both parties.
10.6. TELEBRAS shall officially accept the printing press
and machine tests of each type of card.
ELEVENTH - GOVERNING LAW
11.1. This Agreement shall be governed by the laws of
Brasilia - DF, Brazil.
WITNESS WHEREOF the parties execute 3 (three) counterparts of
this Agreement in the presence of 2 (two) witnesses.
Brasilia, September 1, 1995
_________________________ ________________________
BY TELEBRAS BY TELEBRAS
__________________________ ________________________
BY CONTRATADA BY CONTRATADA
__________________________ ________________________
WITNESS WITNESS
<PAGE>
EXHIBIT 11
ITEM 14 (c)
COMPUTATION OF PER SHARE INCOME (LOSS)
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
Dollars in thousands, except per share data
Year Ended December 31
1995 1994 1993
Operations $(22,415) $ (5,701) $ 1,593
Extraordinary item - (114) -
Net income (loss) (22,415) (5,815) 1,593
Dividend requirements - - (20)
Net income (loss)
for computation $ 22,415) $ (5,815) $ 1,573
Weighted average number of common and\
equivalent shares outstanding:
Common shares 19,095 19,000 18,574
Warrants - - 219
Options - - 407
Total shares
for computation 19,095 19,000 19,200
Income (loss) per share:
Operations $(1.17) $ (.30) $ .08
Extraordinary item . (.01) .
Net income (loss) $(1.17) $ (.31) $ .08
Primary and fully-diluted earnings per share are the same.
<PAGE>
EXHIBIT 21
ITEM 14 ( c)
SUBSIDIARIES OF THE REGISTRANT
As of December 31, 1995, Registrant had the following active, direct or
indirect subsidiaries, all of which were wholly owned.
State of Incorporation
American Bank Note Company. . . . . . . . . . New York
American Bank Note Commemorative, Inc.. . . Delaware
Horsham Holding Company, Inc. . . . . . . . Pennsylvania
American Banknote SSI, Inc. . . . . . . . . Delaware
American Bank Note Holographics, Inc. . . . . Delaware
ABN Holographics Research Company, Inc. . . Delaware
USBC Capital Corp. . . . . . . . . . . . . . Delaware
ABN Investments Inc. . . . . . . . . . . . . Delaware
ABN Equities Inc.. . . . . . . . . . . . . . Delaware
ABNH Equities Inc. . . . . . . . . . . . . . Delaware
American Bank Note Company
Grafica e Servicos Ltda. . . . . . . . . . Brazil
<PAGE>
EXHIBIT 23
Independent Auditors' Consent
We consent to the incorporation by reference in Post-Effective
Amendment No. 2 to Registration Statement No. 33-52674 of
American Banknote Corporation on Form S-8; and Post-Effective
Amendment No. 2 to Registration Statement No. 33-67560 of American
Banknote Corporation on Form S-8; and Registration Statement No.
333-223 of American Banknote Corporation of our report dated
February 21, 1996 appearing in this Annual Report on Form 10-K of
American Banknote Corporation for the year ended December 31, 1995.
s/ Deloitte & Touche LLP
New York, New York
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financials contained in the body of the accompanying Form 10-K and is qualified
in its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000051124
<NAME> AMERICAN BANKNOTE CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 23525
<SECURITIES> 2952
<RECEIVABLES> 32874
<ALLOWANCES> 816
<INVENTORY> 23243
<CURRENT-ASSETS> 100288
<PP&E> 272889
<DEPRECIATION> 46915
<TOTAL-ASSETS> 379402
<CURRENT-LIABILITIES> 45315
<BONDS> 194156
0
0
<COMMON> 194
<OTHER-SE> 40159
<TOTAL-LIABILITY-AND-EQUITY> 379402
<SALES> 206164
<TOTAL-REVENUES> 206164
<CGS> 149035
<TOTAL-COSTS> 218014
<OTHER-EXPENSES> (2786)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23147
<INCOME-PRETAX> (32211)
<INCOME-TAX> (11359)
<INCOME-CONTINUING> (22415)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22415)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
