<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1998
REGISTRATION NO. 333-44069
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN BANKNOTE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2799 13-0460520
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
AMERICAN BANK NOTE COMPANY NEW YORK 13-2735924
ABN SECURITIES SYSTEMS, INC. NEW YORK 13-2791166
HORSHAM HOLDING COMPANY, INC. PENNSYLVANIA 23-2204722
AMERICAN BANK NOTE HOLOGRAPHICS, INC. DELAWARE 13-3317668
AMERICAN BANKNOTE CARD SERVICES, INC. DELAWARE 13-3690286
AMERICAN BANKNOTE MERCHANT SERVICES, INC. DELAWARE 13-3962422
ABN INVESTMENTS, INC. DELAWARE 13-3753757
ABN EQUITIES INC. DELAWARE 13-3753756
AMERICAN BANKNOTE AUSTRALASIA HOLDINGS, INC. DELAWARE 13-3893332
ABN GOVERNMENT SERVICES, INC. DELAWARE 13-3869963
USBC CAPITAL CORP. DELAWARE 13-3778099
ABN CBA, INC. DELAWARE 13-3979794
(Exact Name of Registrant (State or Other Jurisdiction (I.R.S. Employer
as Specified in its Charter) of Identification No.)
Incorporation or Organization)
</TABLE>
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200 PARK AVENUE
NEW YORK, NY 10166
(212) 557-9100
(Address, including zip code, and telephone number, including area code of
Registrants' principal executive offices)
JOHN T. GORMAN
EXECUTIVE VICE PRESIDENT
AMERICAN BANKNOTE CORPORATION
200 PARK AVENUE
NEW YORK, NY 10166
(212) 557-9100
(Name, address, including zip code, and telephone number, including area code
of agent for service)
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Copies to:
<TABLE>
<S> <C>
HARVEY J. KESNER, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL DENNIS J. BLOCK, ESQ.
AMERICAN BANKNOTE CORPORATION WEIL, GOTSHAL & MANGES LLP
200 PARK AVENUE 767 FIFTH AVENUE
NEW YORK, NY 10166 NEW YORK, NY 10153-0119
(212) 557-9100 (212) 310-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 30, 1998
PROSPECTUS
AMERICAN BANKNOTE CORPORATION
OFFER TO EXCHANGE ITS 11 1/4% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES B, FOR ANY AND ALL OF ITS OUTSTANDING
11 1/4% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
[AMERICAN BANK NOTE LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
American Banknote Corporation, a Delaware corporation (the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 11 1/4%
Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"), registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 11 1/4% Senior Subordinated Notes due 2007
(the "Old Notes"), of which $95,000,000 principal amount is outstanding. The Old
Notes were originally issued as part of units (the "Units") consisting of
$95,000,000 aggregate principal amount of Old Notes and 95,000 warrants (the
"Warrants") to purchase an aggregate of 1,185,790 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of the Company. The form and terms
of the Exchange Notes are the same as the form and terms of the Old Notes except
that (i) the Exchange Notes will bear a Series B designation, (ii) the Exchange
Notes will have been registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof and (iii) holders of the
Exchange Notes will not be entitled to certain rights of holders of Old Notes
under the Registration Rights Agreement (as defined). The Old Notes and the
Exchange Notes are referred to herein collectively as the "Notes." The Exchange
Notes will evidence the same debt as the Old Notes (which they replace) and will
be issued under and be entitled to the benefits of the Indenture dated as of
December 12, 1997 (the "Indenture") by and among the Company, the Guarantors (as
defined) and The Bank of New York, as trustee, governing the Notes. See "The
Exchange Offer" and "Description of the Notes."
The Company will accept for exchange any and all Old Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time on , 1998, unless
extended by the Company in its sole discretion (the "Expiration Date"). Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration
Date. The Exchange Offer is subject to certain customary conditions. See "The
Exchange Offer."
The Old Notes were sold by the Company on December 12, 1997 to Chase Securities
Inc., Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities, Inc. and
Societe Generale Securities Corporation (the "Initial Purchasers") in a
transaction not registered under the Securities Act in reliance upon an
exemption under the Securities Act (the "Initial Offering"). The Initial
Purchasers subsequently placed the Old Notes with qualified institutional buyers
in reliance on Rule 144A under the Securities Act and in offshore transactions
to Non-U.S. persons in reliance on Regulation S under the Securities Act.
Accordingly, the Old Notes may not be reoffered, resold or otherwise transferred
in the United States unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered hereunder in order to satisfy
the obligations of the Company and the Guarantors under the Registration Rights
Agreement entered into by the Company, the Guarantors and the Initial Purchaser
in connection with the Initial Offering (the "Registration Rights Agreement").
See "The Exchange Offer."
Interest on the Notes will accrue from their date of original issuance and will
be payable semi-annually in arrears on June 1 and December 1 of each year,
commencing June 1, 1998, at the rate of 11 1/4% per annum. The Notes will be
redeemable, in whole or in part, at the option of the Company on or after June
1, 2002, at the redemption prices set forth herein plus accrued and unpaid
interest to the date of redemption. In addition, at any time and from time to
time prior to December 1, 2000, the Company may, at its option, redeem up to 35%
of the aggregate principal amount of the Notes with the net cash proceeds of one
or more Public Equity Offerings (as defined) by the Company, at a redemption
price equal to 111.25% of the principal amount thereof plus accrued and unpaid
interest to the date of redemption; provided, however, that after giving effect
to any such redemption, at least 65% of the aggregate principal amount of the
Notes originally issued remains outstanding. In addition, the Company will be
obligated to offer to repurchase the Notes at 100% of the principal amount
thereof plus accrued and unpaid interest to the date of repurchase in the event
of certain Asset Sales (as defined). See "Description of the Notes."
The Notes will be general unsecured senior subordinated obligations of the
Company and will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company. The Notes will rank pari passu
in right of payment with any future senior subordinated Indebtedness (as
defined) of the Company and will rank senior to all other Subordinated
Indebtedness (as defined) of the Company. The Notes will be fully and
unconditionally guaranteed (the "Guarantees"), jointly and severally, on a
senior subordinated basis by all of the Company's direct and indirect domestic
operating Subsidiaries (as defined) on the issue day of the Notes (the "Issue
Date"), and by each direct and indirect domestic operating Subsidiary of the
Company (excluding Unrestricted Subsidiaries (as defined)) formed or acquired
thereafter (the "Guarantors"). The Notes will not, however, be guaranteed by the
Company's foreign subsidiaries, which accounted for 69% of the Company's net
sales in 1997. As of the Issue Date, the Guarantors under the Indenture were
American Bank Note Company, ABN Securities Systems, Inc., Horsham Holding
Company, Inc., American Bank Note Holographics, Inc., American Banknote Card
Services, Inc., American Banknote Merchant Services, Inc., ABN Investments,
Inc., ABN Equities Inc., American Banknote Australasia Holdings, Inc., ABN
Government Services, Inc., USBC Capital Corp. and ABN CBA, Inc. The Guarantees
will be general unsecured senior subordinated obligations of the Guarantors and
will be subordinated in right of payment to all existing and future Guarantor
Senior Indebtedness (as defined). The Guarantees will rank pari passu with any
and all future senior subordinated Indebtedness of the Guarantors and will rank
senior to all other subordinated Indebtedness of the Guarantors. As of December
31, 1997, the aggregate principal amount of the Company's outstanding Senior
Indebtedness was approximately $224.8 million (excluding unused commitments),
including $85.5 million of Indebtedness of the Company's subsidiaries which was
effectively senior to the Notes, and the Company would have had no senior
subordinated Indebtedness outstanding other than the Notes. See "Description of
the Notes -- Ranking," "-- Subordination of the Notes" and "-- Guarantees of the
Notes."
(continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
(cover page continued)
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer -- Resale of the Exchange
Notes." Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration Rights Agreement, that such
conditions have been met. Each broker-dealer (a "Participating Broker-Dealer")
that receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer. Holders of Old Notes not
tendered and accepted in the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture and with respect to transfer
under the Securities Act. See "The Exchange Offer."
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
ii
<PAGE> 4
(cover page continued)
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE GUARANTORS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR ON
BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR IN
THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE
REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN
THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. NEITHER THE
COMPANY NOR ANY OF THE GUARANTORS IS MAKING ANY REPRESENTATION TO ANY
PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR
LAWS.
iii
<PAGE> 5
(cover page continued)
FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS HEREIN UNDER THE CAPTION "SUMMARY" AND IN CERTAIN
DOCUMENTS INCORPORATED BY REFERENCE HEREIN CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE UNKNOWN AND UNCERTAIN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT
FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE
FOLLOWING: GENERAL ECONOMIC, POLITICAL, MARKET AND BUSINESS CONDITIONS, WHICH
MAY, AMONG OTHER THINGS, AFFECT DEMAND FOR THE COMPANY'S PRODUCTS; ECONOMIC
CONDITIONS, INFLATION AND CURRENCY EXCHANGE RATES IN THOSE FOREIGN COUNTRIES IN
WHICH THE COMPANY GENERATES A LARGE PORTION OF ITS SALES AND EARNINGS (INCLUDING
BRAZIL, AUSTRALIA AND FRANCE, WHICH ACCOUNTED FOR APPROXIMATELY 42%, 24% AND 3%,
RESPECTIVELY, OF SALES AND APPROXIMATELY 41%, 26% AND 1%, RESPECTIVELY, OF
OPERATING EARNINGS, RESPECTIVELY, IN 1997 BEFORE ALLOCATION OF CORPORATE
OVERHEAD) WHICH MAY, AMONG OTHER THINGS, AFFECT THE COMPANY'S ABILITY TO SERVICE
ITS DEBT; NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL ADVANCES WHICH MAY, AMONG
OTHER THINGS, AFFECT THE COMPANY'S PRINTING BUSINESS AND CERTAIN GOVERNMENT
CONTRACT PERFORMANCE; NEW PLANT AND CONTRACT START-UP CONDITIONS WHICH MAY,
AMONG OTHER THINGS, AFFECT THE PROFITABILITY OF THE COMPANY'S OPERATIONS;
SEASONALITY; COMPETITION; CHANGES IN BUSINESS STRATEGY OR EXPANSION PLANS; RAW
MATERIAL COSTS AND AVAILABILITY; CUSTOMER INVENTORY LEVELS; THE LOSS OF ANY OF
THE COMPANY'S SIGNIFICANT CUSTOMERS; THE ABILITY TO ACHIEVE ANTICIPATED COST
REDUCTIONS AND SYNERGIES; THE POSSIBILITY OF UNSUCCESSFUL BIDS FOR GOVERNMENT
CONTRACTS; CHANGES IN, OR THE FAILURE OF THE COMPANY TO COMPLY WITH, GOVERNMENT
REGULATIONS, BID REQUIREMENTS OR PRODUCT SPECIFICATIONS; AND OTHER FACTORS
REFERENCED IN THIS PROSPECTUS. THE COMPANY'S STOCK AND BOND BUSINESS IS ALSO
SUBJECT TO CERTAIN RISKS, SUCH AS THE TREND TOWARDS SHORTER SETTLEMENT CYCLES
AND BOOK OWNERSHIP WHICH MAY IMPACT FUTURE RESULTS. THE COMPLETE ELIMINATION OF
OR SUBSTANTIAL REDUCTION IN THE DOMESTIC USE OF CERTIFICATES OR CHANGES IN NEW
YORK STOCK EXCHANGE REQUIREMENTS WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE
SALES AND EARNINGS OF THE COMPANY.
THE FUTURE RESULTS OF THE COMPANY'S FOOD COUPON PRINTING IS SUBJECT TO THE
ACCEPTANCE AND IMPLEMENTATION OF ELECTRONIC CARD-BASED SYSTEMS. BENEFIT REFORMS
AND HIGH LEVELS OF FOOD COUPON INVENTORY WILL CONTINUE TO IMPACT THE COMPANY'S
RESULTS. THE UNITED STATES DEPARTMENT OF AGRICULTURE IS PROMOTING THE NATIONWIDE
ISSUANCE OF ELECTRONIC CARD-BASED FOOD COUPON BENEFITS AND BY 1998,
APPROXIMATELY ONE-HALF OF THE STATES HAD BEGUN IMPLEMENTATION OR HAD AWARDED
CONTRACTS FOR THESE TYPE OF SYSTEMS.
TRANSACTION CARDS & SYSTEMS IS SUBJECT TO CERTAIN RISKS WHICH MAY IMPACT
FUTURE RESULTS INCLUDING CONTINUED CONSUMER ACCEPTANCE AND RATE OF CONVERSION OF
COIN BASED TELEPHONES AND OTHER DEVICES TO CARD SYSTEMS. IN BRAZIL, STORED-VALUE
TELEPHONE CARD SALES VOLUME IS EXPECTED TO BE LOWER IN 1998 DUE TO THESE FACTORS
AND CUSTOMER INVENTORY LEVELS. OTHER FORWARD LOOKING RISKS AFFECTING THE
COMPANY'S BUSINESS ARE AS DESCRIBED IN THIS PROSPECTUS, ESPECIALLY UNDER "RISK
FACTORS" BELOW, AND IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934. GIVEN THESE UNCERTAINTIES,
PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS.
iv
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the Commission"). The reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60601-2511. Copies of such material also can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov. In addition, material filed by the Company can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005
on which the Company's Common Stock is listed.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the holders of the Notes and, to the
extent permitted by applicable law or regulation, file with the Commission all
quarterly and annual financial information that would be required to be filed
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or
any successor provision thereto.
2
<PAGE> 7
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-3410) pursuant to the Exchange Act are incorporated herein by reference and
shall be deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997; and
(2) The Company's Current Report on Form 8-K/A dated August 14, 1996.
All documents and reports filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Exchange Offer shall be deemed
incorporated herein by reference and shall be deemed to be a part hereof from
the date of filing of such documents and reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequent filed document or
report that also is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written request of such person, a copy of
any or all of the documents which are incorporated by reference herein other
than exhibits to such documents which are not specifically incorporated by
reference herein. Requests should be directed to the Company at 200 Park Avenue,
New York, New York 10166 (telephone number (212) 557-9100), Attention:
Director -- Investor Relations.
3
<PAGE> 8
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, all
references herein to the "Company" include American Banknote Corporation, its
subsidiaries and predecessors. The Company's principal subsidiaries are: in the
United States, American Bank Note Company ("ABN") and American Bank Note
Holographics, Inc. ("ABNH"); in Brazil, American Bank Note Company Graphica e
Servicos Ltda. ("ABNB"), which is 77.5% owned by the Company; in Australia and
New Zealand, ABN Australasia Limited, operating as Leigh-Mardon ("LM"); and in
Europe, Sati S.A., Satel S.A. and Cidel S.A. (collectively, the "Sati Group").
Unless otherwise stated, references to "dollars" and "$" are to United States
dollars. The results of the foreign operations included in the Company's
financial statements have been translated into dollars at specified rates at the
dates of such financial statements as required by Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation."
THE COMPANY
OVERVIEW
The Company is a leading global provider of secure transaction solutions,
documents and systems. The Company designs solutions and manufactures products
that incorporate anti-fraud and counterfeit resistant technologies, including
stored-value telephone, magnetic-stripe, memory and microprocessor-based
("smart-cards") transaction cards, holograms, currencies, travelers' and other
checks, stock and bond certificates and a wide variety of electronically or
digitally produced personalized documents. The Company sells these products and
services worldwide to financial institutions, governments and corporations
through its operations in the United States, Brazil, Australia, New Zealand and
France. Through selective acquisitions and strategic realignment, the Company
has positioned itself as a full service provider of technology-based solutions
for its customers' secure transaction needs. The Company's products and services
are divided into three principal groups: Transaction Cards & Systems, Printing
Services & Document Management and Security Printing Solutions.
The Company is capitalizing on the following trends: (i) the increasing
demand for secure transactions and documents as technological advances have
elevated concerns about counterfeiting; (ii) the increasing demand for secure
products, services and systems used in the rapidly expanding field of electronic
commerce; and (iii) the increasing outsourcing by financial institutions,
governments and major corporations of their secure document needs. The Company's
200-year heritage and its reputation for security, high quality and
accountability have enabled it to obtain additional contracts in its markets and
effectively market an expanded array of value-added products and services to its
customers. The Company continually works with customers to develop new products
and applications, blending its experience and traditional base of secure
handling and distribution expertise with its advanced technologies. Management
believes its reputation and its ability to provide a diverse mix of products and
services will allow it to obtain contracts with new customers and expand into
new geographic markets.
In 1993, the Company began positioning itself to capitalize on
international growth opportunities and began diversifying its product mix to
include technology-based products, services and solutions. The Company's
international expansion began with the acquisition of its Brazilian subsidiary,
the largest private-sector security printer and manufacturer of transaction
cards in Latin America and a leading stored-value telephone card manufacturer in
Brazil. This expansion continued in 1996 with the acquisition of Australia and
New Zealand's oldest, largest and only fully integrated provider of secure
document and transaction card solutions. Most recently, the Company expanded its
international presence in August 1997 through the acquisition of one of France's
leading providers
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<PAGE> 9
of check personalization and electronic printing applications. The Company also
initiated, in 1994, a program to realign and upgrade its domestic manufacturing
operations, realize process efficiencies and reduce costs. These steps, together
with its international expansion, resulted in improved financial performance and
have allowed the Company to rapidly broaden its international presence,
technological base and product lines. From 1993 to 1997 the Company's sales and
income before extraordinary item have increased from $200.1 million and $1.6
million to $336.4 million and $3.8 million, respectively.
As illustrated by the charts below, the Company has successfully
diversified its product mix and expanded into higher growth markets, thereby
reducing its dependence on traditional security printing.
SALES BY PRODUCT GROUP
[PIE CHART]
The Company serves its customers through three principal groups:
Transaction Cards & Systems. The Company's Transaction Cards & Systems
products include credit, debit and automated teller machine ("ATM") cards,
stored-value telephone cards, transit and transportation cards and
identification systems manufactured at its facilities in Brazil, Australia and
New Zealand. Additionally, in certain markets, the Company supplies the
hardware, software and related services used in transaction processing. As the
use of magnetic-stripe cards and electronic transactions continues to increase,
the Company is expanding its capabilities and presence to service these highly
specialized markets. The Company is also developing its smart-card capabilities.
The Company was recently awarded a contract to produce smart-cards for Telstra,
the Australian national telephone company, and expects to begin manufacturing in
1998. Smart-card applications include financial transactions, secure access and
identification systems, prepaid telephone services, transportation systems, GSM
cellular phone systems, direct pay TV access, health cards and customer loyalty
programs for airlines, hotels and car rental services. The Company is also the
world's leading supplier of advanced holographic security devices used on such
branded transaction cards as MasterCard(TM), VISA(TM), Discover(TM), Europay(TM)
and Diners Club International(TM), as well as on a broad range of identification
cards and other products.
Printing Services & Document Management. The Company's Printing Services &
Document Management products and services provide customers with a full range of
document printing, personalization, inventory and distribution services. The
Company has leveraged its reputation as a leading security printer to expand its
business as public and private sector institutions increasingly outsource their
secure document needs. Utilizing advanced, computerized printing and
personalization technology as well as inventory control systems and
"just-in-time" distribution capabilities, the Company provides comprehensive
solutions for its clients. For example, over the last two years, the Company has
assumed the in-house check and document printing, processing and distribution
operations of Banco Bradesco, S.A. ("Bradesco") and Unibanco, S.A. ("Unibanco"),
two of the
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largest private banks in Brazil. In addition to its financial institution
clients, the Company also provides complete printing, personalization and
document management services for a number of other large enterprises including
utilities, insurance companies, telephone companies and government entities.
Security Printing Solutions. The Company is a leading global supplier of a
broad range of Security Printing Solutions, including travelers' cheques,
financial checks, food coupons, currency, stamps, stock and bond certificates,
transit tickets, gift certificates, passports and a wide range of other
commercial documents of value. The Company believes that it is one of the
largest printers of travelers' cheques in the world, serving such customers as
American Express, Citicorp, MasterCard(TM) and Visa(TM). The Company is the
leading private sector supplier of personalized checks in Brazil, Australia and
New Zealand and the second largest in France. The Company supplies many of the
largest private banks in its markets with checks, check personalization and
distribution of a wide array of additional printed products, in many cases under
multi-year contracts. Recent advances in color copying, desktop publishing and
laser printing have provided a unique growth opportunity as an increasing number
of customers demand enhanced security to prevent copying, counterfeiting and
fraud.
BUSINESS STRATEGY
The Company's strategy is to leverage its market leadership, superior
reputation and strong customer relationships to capitalize on the increasing
demand for high quality and cost effective secure transaction solutions. In
order to accomplish its goal, the Company intends to: (i) enhance its leadership
positions in diverse geographic markets; (ii) provide solutions-oriented
products and services; (iii) pursue strategic acquisitions and alliance
opportunities; and (iv) increase manufacturing efficiencies and reduce costs.
Enhance Leadership Positions in Diverse Geographic Markets. The Company
seeks to enhance its leadership position by developing new products and services
and expanding its geographic presence to provide customers with a full range of
secure transaction solutions. The Company targets new industries and geographic
markets in which it believes it can capture a large share of the market by
providing high quality, cost effective products and services and by offering its
advanced technological capabilities. Management believes that the growth
potential of products such as stored-value cards and electronic printing
applications as well as an increase in the demand for printing, storage and
document services will allow the Company to enhance its strong leadership
position in Brazil, Australia, New Zealand and France and to continue its
expansion into new geographic markets.
Provide Solutions-Oriented Products and Services. The Company focuses on
providing products and services designed to address all of a customer's secure
transaction and document needs. For example, in addition to printing documents
for Bradesco, Latin America's largest private bank, the Company personalizes
these documents and manages Bradesco's inventory by distributing on a
"just-in-time" basis to each of Bradesco's approximately 2,000 branches.
Additionally, Bradesco's branches are linked electronically with the Company's
310,000 square foot Sao Paulo, Brazil facility and place their orders directly
with the Company, eliminating the need for central inventory management at
Bradesco. Management believes that the ability to provide a full array of
products and services for all of its customers' secure transaction and document
needs will increase revenues from existing clients and allow the Company to
obtain contracts with new clients.
Pursue Strategic Acquisitions and Alliances. The Company continuously
evaluates domestic and international opportunities for strategic acquisitions,
joint ventures and alliances which complement and expand its core businesses.
The Company believes that significant opportunities exist that will enable the
Company to: (i) provide additional products and services to its existing
customer base; (ii) cross-sell products and services to an expanded customer
base; and (iii) expand its geographic presence. Examples of this strategy
include the acquisition of LM in June 1996 and the
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<PAGE> 11
Sati Group in August 1997. Based upon management's internal review of the check
and transaction card personalization market in Australia and New Zealand, the
Company believes LM is the leading personalizer of checks and transaction cards
in Australia and New Zealand. Based upon management's internal review of the
check personalization market in France, the Company believes the Sati Group is
the largest personalizer of checks in France. The Sati Group also personalizes
transaction and plastic cards for the French market. The Company intends to
explore additional acquisition opportunities to: (i) increase market share; (ii)
broaden its product and service offerings to existing customers; and (iii)
expand its geographic presence.
Increase Manufacturing Efficiencies and Reduce Costs. The Company is
committed to continuous improvements throughout its business to increase product
value and lower the Company's manufacturing costs. The Company has made
significant investments, both domestically and internationally, in modern
manufacturing and distribution equipment, systems and technologies to allow the
Company to further increase operating efficiencies and provide advanced
solutions for its customers.
RECENT DEVELOPMENTS
The Company has executed contracts for the continued supply of phone cards
for Telebras, Brazil's national telephone company. The Company anticipates that
revenues from these contracts will total approximately $18 million for the one
year period beginning December 1997. In accordance with the Brazil privatization
program for Telebras, the Company has entered into six separate agreements with
local phone operators Telerj, Teleron, Telems, Telaima, Telest and Telasa for
Rio de Janeiro and five other states. Each of the six local phone operators has
the option to extend its contract for a second year.
The Company has acquired the printing assets of Commonwealth Bank of
Australia Limited ("Commonwealth") for a purchase price of AUS$6.5 million
(approximately US$4.6 million). In connection with the purchase, the Company has
entered into a three year supply agreement for the supply of printed products to
Commonwealth with two-three year extension periods exercisable by Commonwealth.
The Company has acquired the printing assets of Bank Itau ("Itau") in
Brazil for Reals 6 million (approximately US$5.5 million). In connection with
the purchase, Itau has agreed to a two year supply agreement for the supply of
printed products to Itau with two one-year extensions exercisable by Itau.
THE REFINANCING
The Initial Offering was part of a refinancing of certain of the Company's
outstanding indebtedness (the "Refinancing"). Pursuant to the Refinancing, the
Company: (i) consummated the Initial Offering; (ii) consummated the Tender Offer
and the related Consent Solicitation (each as defined) with respect to the
Company's 11 5/8% Senior Notes due 2002 (the "11 5/8% Notes"); and (iii) repaid
outstanding amounts under the Existing Credit Facility (as defined). See
"Description of Certain Indebtedness.".
Pursuant to the Tender Offer and Consent Solicitation, on December 12,
1997, the Company purchased approximately $57 million principal amount of the
11 5/8% Notes (constituting approximately 87.7% of the outstanding 11 5/8%
Notes) for an amount in cash equal to $1,094.47 per $1,000 principal amount of
11 5/8% Notes. Each tendering holder also received accrued and unpaid interest
up to, but not including, the payment date. Pursuant to the Consent
Solicitation, the Company also
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<PAGE> 12
solicited consents from tendering holders of 11 5/8% Notes to modify certain
terms of the 11 5/8% Notes Indenture (as defined). In connection with the
Consent Solicitation, the 11 5/8% Notes Indenture was amended, which, among
other things, eliminated substantially all of the restrictive covenants
contained in the 11 5/8% Notes Indenture, and the Company paid a consent fee
(which is included in the tender price referred to above) to all tendering
holders.
------------------------
The Company is a Delaware corporation incorporated in 1993 as the successor
to United States Banknote Corporation, a New York corporation organized in 1925,
and changed its name to American Banknote Corporation in 1995. The Company's
common stock is traded on the New York Stock Exchange, Inc. under the symbol
"ABN." 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.
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<PAGE> 13
THE INITIAL OFFERING
The Initial Offering....... The Old Notes were sold by the Company on December
12, 1997 (the "Initial Offering") to Chase
Securities, Inc., Bear, Stearns & Co. Inc.,
NationsBanc Montgomery Securities, Inc. and Societe
Generale Securities Corporation (the "Initial
Purchasers") pursuant to a Purchase Agreement dated
December 5, 1997 (the "Purchase Agreement") as part
of Units consisting of $95,000,000 aggregate
principal amount of Old Notes and 95,000 Warrants
to purchase an aggregate of 1,185,790 shares of
Common Stock. The Initial Purchasers subsequently
resold all of the Old Notes to qualified
institutional buyers in reliance on Rule 144A under
the Securities Act and in offshore transactions to
Non-U.S. persons in reliance on Regulation S under
the Securities Act.
Registration Rights
Agreement................ Pursuant to the Purchase Agreement, the Company,
the Guarantors and the Initial Purchasers entered
into a Registration Rights Agreement dated as of
December 12, 1997 (the "Registration Rights
Agreement"), which grants the holders of the Old
Notes certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
and registration rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... $95,000,000 aggregate principal amount of 11 1/4%
Senior Subordinated Notes due 2007, Series B, of
the Company (the "Exchange Notes").
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Old Notes that are properly
tendered and accepted. As of the date hereof,
$95,000,000 aggregate principal amount of Old Notes
are outstanding. The Company will issue the
Exchange Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act;
provided, that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate and
has no arrangement or understanding with any person
to participate in the distribution of such Exchange
Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives Exchange
Notes for its own
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<PAGE> 14
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old
Notes were acquired by such Participating Broker-
Dealer as a result of market-making activities or
other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration
Date, they will make this Prospectus available to
any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on ,
1998 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Notes and the
Old Notes................ Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of
the Exchange Notes.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof (or, in the case of a book-entry transfer,
transmit an Agent's Message (as defined) in lieu
thereof), in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile (or Agent's message), together with the
Old Notes
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<PAGE> 15
and any other required documentation to the
Exchange Agent (as defined) at the address set
forth herein. By executing the Letter of
Transmittal (or transmitting an Agent's Message),
each holder will represent to the Company that,
among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such
person is the holder, that neither the holder nor
any such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes and that
neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer"
and "-- Procedures for Tendering."
Untendered Old Notes....... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange or registration rights and such
Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes could be
adversely affected. See "Risk Factors -- Lack of
Public Market; Volatility; Restrictions on Resale."
Consequences of Failure to
Exchange................. The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Shelf Registration
Statement.................. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company or a
Guarantor within the meaning of Rule 405 under the
Securities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has satisfied certain
conditions relating to the provision of information
to the Company for use therein, the Company and the
Guarantors have agreed to register the Old Notes on
a shelf registration statement (the "Shelf
Registration Statement") and to use their best
efforts to cause it to be declared effective by the
Commission as promptly as practical on or after the
consummation of the Exchange Offer. The Company and
Guarantors have agreed to maintain the
effectiveness of the Shelf Registration Statement
for, under certain circumstances, a maximum of two
years, to cover resales of the Old Notes held by
any such holders.
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to
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<PAGE> 16
tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either
make appropriate arrangements to register ownership
of the Old Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time.
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
comply with the procedures for book-entry
transfer), the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent (or transmit an Agent's message
in lieu thereof) prior to the Expiration Date must
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Certain U.S. Federal Income
Tax Considerations....... For a discussion of material U.S. federal income
tax considerations relating to the exchange of the
Exchange Notes for the Old Notes, see "Certain U.S.
Federal Income Tax Considerations."
Use of Proceeds............ There will be no cash proceeds to the Company from
the issuance of the Exchange Notes pursuant to the
Exchange Offer. See "Use of Proceeds."
Exchange Agent............. The Exchange Agent is The Bank of New York. The
address and telephone and facsimile numbers of the
Exchange Agent are set forth under "The Exchange
Offer -- Exchange Agent" and in the Letter of
Transmittal.
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<PAGE> 17
SUMMARY OF THE TERMS OF THE NOTES
The Exchange Offer applies to the Old Notes. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Old Notes, except that (i) the Exchange Notes will bear a Series B
designation, (ii) the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Old Notes under the Registration Rights Agreement, which
rights will terminate upon consummation of the Exchange Offer. The Exchange
Notes will evidence the same debt as the Old Notes (which they replace) and will
be issued under and be entitled to the benefits of the Indenture. For further
information and for definitions of certain capitalized terms used below, see
"Description of the Notes."
Notes Offered.............. $95.0 million aggregate principal amount of 11 1/4%
Senior Subordinated Notes due 2007, Series B.
Maturity................... December 1, 2007.
Interest Payment Dates..... June 1 and December 1 of each year, commencing on
June 1, 1998.
Sinking Fund............... None.
Optional Redemption........ Except as described below, the Company may not
redeem the Notes prior to December 1, 2002. On or
after such date, the Company may redeem the Notes,
in whole or in part, at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In
addition, at any time and from time to time on or
prior to December 1, 2000, the Company may redeem
up to 35% of the aggregate principal amount of the
Notes with the net cash proceeds from one or more
Public Equity Offerings (as defined) by the
Company, at a redemption price equal to 111.25% of
the principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption, provided that at least 65% of the
originally issued aggregate principal amount of the
Notes remains outstanding after each such
redemption. See "Description of the Notes --
Optional Redemption."
Change of Control.......... Upon a Change of Control, the Company will be
required to make an offer to purchase the Notes at
a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest,
if any, to the date of purchase. See "Description
of the Notes -- Change of Control."
Subsidiary Guarantees...... The Notes will be fully and unconditionally
guaranteed (the "Guarantees"), jointly and
severally on a senior subordinated basis, by all of
the Company's direct and indirect domestic
operating subsidiaries on the issue date of the
Notes (the "Issue Date") and by each direct and
indirect domestic operating subsidiary of the
Company (excluding Unrestricted Subsidiaries (as
defined)) formed or acquired thereafter. The
Company is a holding company that has no
significant assets other than its direct and
indirect investments in its operating subsidiaries.
The Guarantees will be general unsecured senior
subordinated obligations of the Guarantors. The
obligations of each Guarantor under its Guarantee
will be subordinated in right of payment to the
prior payment in full of all Guarantor Senior
Indebtedness (as defined) of such
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<PAGE> 18
Guarantor to substantially the same extent as the
Notes are subordinated to all existing and future
Senior Indebtedness of the Company. The Notes will
not, however, be guaranteed by the Company's
foreign subsidiaries, which accounted for 69% of
the Company's net sales in 1997. See "Description
of the Notes -- Guarantees of the Notes."
Ranking.................... The Notes will be unsecured and will be
subordinated in right of payment to all existing
and future Senior Indebtedness (as defined) of the
Company. The Notes will rank pari passu in right of
payment with any future senior subordinated
Indebtedness of the Company and will rank senior to
all Subordinated Indebtedness (as defined) of the
Company. As of September 30, 1997, after giving pro
forma effect to the Refinancing, including the
issuance of the Old Notes and the application of
the net proceeds therefrom, the aggregate principal
amount of the Company's outstanding Senior
Indebtedness would have been approximately $222.5
million (excluding unused commitments), including
$80.9 million of Indebtedness of the Company's
subsidiaries which would have been effectively
senior to the Notes, and the Company would have had
no senior subordinated Indebtedness outstanding
other than the Notes. See "Description of the
Notes -- Ranking" and "-- Subordination of the
Notes."
Restrictive Covenants...... The indenture under which the Notes will be issued
(the "Indenture") limits, among other things: (i)
the incurrence of additional indebtedness by the
Company and its Restricted Subsidiaries (as
defined); (ii) the payment of dividends on, and
redemption of, capital stock of the Company and its
Restricted Subsidiaries and the redemption of
certain subordinated obligations of the Company and
its Restricted Subsidiaries; (iii) investments;
(iv) sales of assets and Restricted Subsidiary
stock, (v) transactions with affiliates; and (vi)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. The
Indenture also prohibits certain restrictions on
distributions from Restricted Subsidiaries.
However, all of these limitations and prohibitions
are subject to a number of important qualifications
and exceptions. See "Description of the
Notes -- Certain Covenants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for Exchange Notes. The risk
factors are generally applicable to the Old Notes as well as the Exchange Notes.
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<PAGE> 19
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully before tendering Old Notes in
exchange for Exchange Notes. The risk factors set forth below are generally
applicable to the Old Notes as well as the Exchange Notes.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is, and upon consummation of the Refinancing will be, highly
leveraged. At December 31, 1997, the Company had: (i) total consolidated
long-term debt, including the current portion, of $311.1 million; (ii) total
stockholders' equity of $55.0 million; and (iii) a ratio of earnings to fixed
charges for the year ended December 31, 1997 of 1.1 to 1.
The degree to which the Company is leveraged could have important
consequences to the holders of the Units, including: (i) the Company's ability
to obtain additional financing for working capital, capital expenditures or
acquisitions in the future may be limited; (ii) a substantial portion of the
Company's cash flow from operations may be dedicated to the payment of the
principal of and interest on its indebtedness, thereby reducing funds available
for future operation; (iii) certain of the Company's borrowings, including all
borrowings under the Existing Credit Facility, will be at variable rates of
interest, which exposes the Company to the risk of increased interest rates; and
(iv) the Company may be more vulnerable to economic downturns and be limited in
its ability to withstand competitive pressures. Certain of the Company's
competitors may currently operate on a less leveraged basis and therefore the
Company could be placed at a disadvantage relative to its competitors which have
significantly greater operating and financing flexibility than the Company. The
Company's ability to make scheduled payments of the principal of or interest on,
or to refinance, its indebtedness will depend on its future operating
performance and cash flow, which are subject to prevailing economic conditions,
prevailing interest rate levels, and financial, competitive, business and other
factors, many of which are beyond its control.
The Company believes that, based upon current levels of operations, it
should be able to meet its debt service obligations, including principal and
interest payments on the Notes when due. However, if the Company cannot generate
sufficient cash flow from operations to meet its debt service obligations, then
the Company might be required to refinance its indebtedness and may be forced to
adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There is no assurance that
refinancings would be permitted by the terms of the Existing Credit Facility,
the 10 3/8% Notes Indenture (as defined), the Indenture or any other lending
arrangements then in effect or, along with the alternative strategies, could be
effected on satisfactory terms.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Existing Credit Facility, the 10 3/8% Notes Indenture, the Indenture
and the terms of the Company's other indebtedness contain numerous restrictive
covenants that limit the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of the Company to incur additional indebtedness,
to create liens or other encumbrances, to pay dividends or make certain other
payments, investments, loans and guarantees and to sell or otherwise dispose of
assets and merge or consolidate with another entity. The Existing Credit
Facility, the 10 3/8% Notes Indenture and the terms of the Company's other
indebtedness also contain a number of financial covenants that require the
Company to meet certain financial ratios and financial condition tests. See
"Description of Certain Indebtedness -- Existing Credit Facility," "Description
of Certain Indebtedness -- Senior Notes -- 10 3/8% Notes" and "Description of
the Notes -- Certain Covenants." The Company's ability to meet these financial
ratios and financial condition tests can be affected by events beyond its
control, and there can be no assurance that the Company will meet such ratios or
such tests. A
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<PAGE> 20
failure to comply with the obligations in the Existing Credit Facility, the
10 3/8% Notes Indenture, the Indenture or other indebtedness could result in an
event of default under the Existing Credit Facility or the 10 3/8% Notes
Indenture or an Event of Default (as defined) under the Indenture or a default
under other agreements to which the Company (including its Subsidiaries) is a
party that, if not cured or waived, could permit acceleration of the relevant
indebtedness and acceleration of indebtedness under other instruments that may
contain cross-acceleration or cross-default provisions. In the event of an event
of default under the Existing Credit Facility or the 10 3/8% Notes Indenture or
an Event of Default under the Indenture or such other indebtedness the lenders
thereunder could elect to declare all amounts outstanding thereunder, together
with accrued and unpaid interest, to be immediately due and payable. If the
indebtedness under the Existing Credit Facility, the 10 3/8% Notes Indenture the
Indenture or other indebtedness were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
that indebtedness and the other indebtedness of the Company, including the
Notes. Other indebtedness of the Company and its subsidiaries that may be
incurred in the future may contain financial or other covenants more restrictive
than those applicable to the Notes.
SUBORDINATION; HOLDING COMPANY STRUCTURE
The Notes will be general unsecured obligations of American Banknote
Corporation (exclusive of its subsidiaries, the "Parent") and will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Parent, including the Parent's obligations under the Existing Credit
Facility and the 10 3/8% Notes Indenture. By reason of the subordination
provisions of the Indenture, in the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding-up of the Parent, the assets of the
Parent will be available to pay obligations on the Notes only after all Senior
Indebtedness (including amounts incurred under the Existing Credit Facility and
the 10 3/8% Notes Indenture) has been so paid in full; accordingly, there may
not be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. In addition, under certain circumstances, the Parent may not
pay principal of, premium, if any, or interest on, or pay other amounts owing in
respect of the Notes, or purchase, redeem or otherwise retire the Notes, in the
event of certain defaults with respect to certain classes of Senior
Indebtedness, including Senior Indebtedness incurred under the Existing Credit
Facility and the 10 3/8% Notes Indenture. As of December 31, 1997, there was
approximately $224.8 million of Senior Indebtedness outstanding (excluding
unused commitments), including $85.5 million of Indebtedness of the Company's
subsidiaries which was effectively senior to the Notes. Additional Senior
Indebtedness may be incurred by the Parent from time to time, subject to certain
restrictions. See "Description of Certain Indebtedness -- Existing Credit
Facility," "Description of Certain Indebtedness -- Senior Notes -- 10 3/8%
Notes" and "Description of the Notes -- Certain Covenants -- Limitation on
Indebtedness."
The Existing Credit Facility and the 10 3/8% Notes are secured by
substantially all of the assets of the Company and its domestic operating
subsidiaries and the existing indebtedness of LM and the Sati Group is secured
by certain assets of such foreign subsidiaries and, therefore, claims of holders
of the Notes will be subordinated to the extent of the value of the assets
securing such indebtedness.
The Parent is a holding company that has no significant assets other than
its direct and indirect investments in its operating subsidiaries. Accordingly,
the Parent must rely on its subsidiaries to generate the funds necessary to meet
its obligations, including the payment of principal of and interest on the
Notes. The ability of the subsidiaries to pay dividends or make other payments
or advances will depend upon their operating results and will be subject to
applicable laws and contractual restrictions contained in the instruments
governing any indebtedness of such subsidiaries (including the Existing Credit
Facility and indebtedness of LM and the Sati Group). Certain of the Parent's
subsidiaries have incurred, and in the future may incur, indebtedness. As a
result, cash flow from the operations of such subsidiaries may be dedicated to
the payment of principal of and interest on the indebtedness of such
subsidiaries, thereby limiting the ability of such subsidiaries to
16
<PAGE> 21
pay dividends. In addition, any dividends declared by a less than wholly owned
subsidiary will be paid on a pro rata basis to the owners of such subsidiary. In
1997, ABNB distributed an aggregate of $11.5 million to its owners (of which the
Parent received $8.9 million, or 77.5%). Although the Indenture limits the
ability of Restricted Subsidiaries to enter into consensual restrictions on
their ability to pay dividends and make other payments, such limitations are
subject to a number of significant qualifications and do not apply to
Unrestricted Subsidiaries. See "Description of the Notes -- Certain
Covenants -- Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries."
The Notes will be fully and unconditionally guaranteed, jointly and
severally, by each of the Company's direct and indirect domestic operating
subsidiaries in existence on the Issue Date and each direct and indirect
domestic operating subsidiary acquired thereafter (other than Unrestricted
Subsidiaries). In addition, the Guarantees will be subordinated in right of
payment to all existing and future Guarantor Senior Indebtedness, including the
Existing Credit Facility. The Notes will not, however, be guaranteed by the
Company's foreign subsidiaries. Holders of the Notes will not have a direct
claim on the Company's interest in or assets of such foreign subsidiaries and
the Notes and the Guarantees will be structurally subordinated to any
indebtedness or other liabilities existing or in the future incurred by such
foreign subsidiaries. In 1997, approximately 69% of the Company's net sales (or
$232.4 million) were derived from the operations of its foreign subsidiaries.
FOREIGN OPERATIONS
The Company's financial performance on a dollar-denominated basis can be
significantly affected by changes in currency exchange rates. The Company's
foreign exchange exposure policy generally calls for selling its domestic
manufactured product in US dollars and, in the case of ABNB, LM and the Sati
Group, selling in the national currencies of the countries in which such
subsidiaries operate, in order to minimize transactions occurring in currencies
other than those of the originating country. The Company may, from time to time,
enter into foreign currency option contracts to limit the effect of currency
fluctuations on future expected cash receipts to be used for parent company
purposes, including debt service. Such activities may be discontinued at any
time depending on, among other things, management's views concerning future
exchange rates and the cost of such contracts. The Company has not engaged in
material hedging activities in connection with foreign operations. 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 debt, including the Notes,
the Existing Credit Facility, the 10 3/8% Notes and other indebtedness of the
Company.
Earnings on foreign investments, including operations and earnings of
foreign companies in which the Company may invest or upon which it may rely for
sales, are subject to a number of general 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 in selected markets included
in the Company's growth strategy. Dividends or distributions from the Company's
foreign operations could be subject to government restrictions in the future.
Currently, repatriation of earnings from the Company's foreign operations is
permitted.
The Company operates in Brazil, which in past years suffered
hyperinflationary conditions; however, the inflation rate in Brazil has
decreased substantially to approximately 4.5% for 1997, 10% for 1996 and 23% for
1995 as compared to 941% for 1994. Inflation and currency exchange rate
fluctuation in countries in which the Company generates a large portion of its
sales and earnings (including Brazil, Australia and France, which accounted for
approximately 42%, 24% and 3%, respectively, of sales and approximately 41%, 26%
and 1%, respectively, of operating earnings, respectively, in 1997, before
allocation of corporate overhead) could in the future adversely affect the
Company.
17
<PAGE> 22
Actions taken by foreign governments could have an important effect on the
Company's foreign operations, including ABNB, LM and the Sati Group. Political,
economic or social instability or other developments could adversely affect
these companies' financial conditions or results of operations and thereby
adversely affect the Company's ability to repay the Notes or other indebtedness
of the Company and its subsidiaries. As a result of market conditions, the
Brazilian government has recently adopted various economic austerity measures
which may impact the Brazilian economy. There can be no assurance that
substantially greater governmental restrictions will not be imposed in the
future, including restrictions or prohibitions on the repatriation of funds.
Furthermore, remittances of dividends from any foreign subsidiaries acquired or
formed by the Company in the future may be subject to certain withholding taxes
and other governmental restrictions.
FOREIGN TAXES
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 Company presently cannot utilize foreign tax credits in the
United States until its domestic net operating loss carry forwards are
exhausted.
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 Notes and its other
indebtedness.
MAJOR CUSTOMERS; GOVERNMENT SALES
The Company has several key customers. Sales under contracts of
stored-value phone cards to Telebras, the Brazilian national telephone company,
accounted for approximately 13%, 24% and 11% of the Company's consolidated sales
for the years ended December 31, 1995, 1996 and 1997, respectively. The
Company's contracts with Telebras extend through December 1998 and may be
further extended through December 1999 at the option of each of the six Telebras
affiliated companies which have executed contracts with ABNB. Sales and services
in connection with the Company's assumption of the in-house check and document
printing, processing and distribution operations of Bradesco accounted for 12%,
14% and 12% of the Company's consolidated sales for the years ended December 31,
1995, 1996 and 1997, respectively. Sales of food coupons to the United States
Department of Agriculture ("USDA") accounted for approximately 11%, 5% and 5% of
the Company's consolidated sales for the years ended December 31, 1995, 1996 and
1997, respectively. In September 1996, the USDA awarded ABN a contract for the
production of food coupons through September 30, 1997 with a one-year option,
which option has been exercised by USDA. The contract is expected to represent
sales of approximately $10 million in 1998.
There can be no assurance as to whether, or when, or on what terms, the
Company will be awarded any additional contracts from these customers in the
future, especially those that are subject to competitive bids. There also can be
no assurance that any options for continued production under any of the
Company's contracts will be exercised. In addition, the Brazilian government has
implemented a plan for the privatization of Telebras, which resulted in a split
up of certain operations of Telebras into numerous smaller companies. This split
up could result in multiple competitive bids in future years. The loss of all or
a significant portion of the Company's business with these entities would have a
material adverse effect on the sales and earnings of the Company.
18
<PAGE> 23
Each of the agencies of the United States government for which the Company
provides products or services acts independently of the others in soliciting
bids. Government contracts are generally awarded on the basis of a competitive
bidding process and a variety of other factors, which may include price, plant
security, manufacturing controls, a preference for domestic contractors and past
performance. In addition, contracts with governmental agencies generally contain
provisions permitting termination at any time at the convenience of the agency
and give the agency the right to audit contract compliance and adjust the
contract amount for noncompliance.
ABILITY TO INTEGRATE ACQUISITIONS
A core part of the Company's business strategy is to grow through strategic
acquisitions, joint ventures and alliances. The Company's financial condition
could be adversely affected if the Company cannot successfully integrate
acquired businesses into its existing operations or if the Company is required
to materially increase the amount of its financial commitment to such
acquisitions, joint ventures or alliances. In addition, the Company may seek
strategic acquisitions, joint ventures or alliances in countries or markets in
which it does not currently operate. There can be no assurance that the Company
will be able to successfully integrate or manage such operations.
COMPETITION
The Company's principal subsidiaries conduct their businesses in highly
competitive markets. Competition in the Company's product markets is based upon
service, quality, reliability and price. In certain markets in which the Company
competes, some of the Company's competitors have greater financial and other
resources than the Company.
The future of the Company's food coupon printing is subject to competition
from electronic card-based Electronic Benefits Transaction (EBT) systems. In
addition, benefit reforms and levels of food coupon inventory continue to impact
the USDA's food coupon orders. The elimination or a substantial reduction in the
use of paper food coupons would have a material adverse effect on the sales and
earnings of the Company.
SALES OF STOCK AND BOND CERTIFICATES
Stock and bond printing accounted for approximately 11%, 8% and 7% of the
Company's consolidated sales for the years ended December 31, 1995, 1996 and
1997, respectively. The Company's overall volume of sales of stock and bond
certificates increased in 1997, but declined as a percent of sales as a result
of increases in consolidated sales. Sales of stock and bond certificates,
primarily a domestic product, are a function of trading activity, the number of
public offerings, the mix of debt and equity security issuances and regulatory
considerations. The elimination of certificates has been advocated by various
organizations in favor of the use of book-entry systems for recording security
ownership. Security sales to institutions, which have been growing, have reduced
demand for printed certificates, particularly for debt issues. Domestic stock
and bond printing has historically accounted for a sizeable portion of the
security printing sales of the Company. No assurance can be given, however, that
the high level of activity in the domestic securities markets will continue. The
elimination or a substantial reduction in the use of certificates would have a
material adverse effect on the sales and earnings of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of its senior management,
including Morris Weissman, Chairman of the Board and Chief Executive Officer,
and the loss of their services could have an adverse effect on the Company. The
Company has entered into employment agreements with several members of its
senior management, including Mr. Weissman.
19
<PAGE> 24
FRAUDULENT CONVEYANCE CONSIDERATIONS
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the Guarantors' issuance of the Guarantees. To the extent that a
court were to find that (x) a Guarantee was incurred by a Guarantor with intent
to hinder, delay or defraud any present or future creditor or the Guarantor
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (y) a Guarantor did not receive fair
consideration or reasonably equivalent value for issuing its Guarantee and such
Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of the
issuance of such Guarantee, (iii) was engaged or about to engage in a business
or transaction for which the remaining assets of such Guarantor constituted
unreasonably small capital to carry on its business or (iv) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, the court could avoid or subordinate such Guarantee in favor of
the Guarantor's creditors. Among other things, a legal challenge of a Guarantee
on fraudulent conveyance grounds may focus on the benefits, if any, realized by
the Guarantor as a result of the issuance by the Company of the Notes. The
Indenture will contain a savings clause, which generally will limit the
obligations of each Guarantor under its Guarantee to the maximum amount as will,
after giving effect to all of the liabilities of such Guarantor, result in such
obligations not constituting a fraudulent conveyance. To the extent a Guarantee
of any Guarantor was voided as a fraudulent conveyance or held unenforceable for
any other reason, holders of the Notes would cease to have any claim against
such Guarantor and would be creditors solely of the Company and any Guarantor
whose Guarantee was not voided or held unenforceable. In such event, the claims
of the holders of the Notes against the issuer of an invalid Guarantee would be
subject to the prior payment of all liabilities of such Guarantor. There can be
no assurance that, after providing for all prior claims, there would be
sufficient assets to satisfy the claims of the holders of the Notes relating to
any avoided portions of any of the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, however,
a Guarantor may be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than the fair marketable value of all of its
assets at a fair valuation or if the present fair marketable value of its assets
was less than the amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they become absolute
and mature.
Based upon financial and other information, the Company and the Guarantors
believe that the Guarantees are being incurred for proper purposes and in good
faith and that the Company and each Guarantor is solvent and will continue to be
solvent after issuing its Guarantee, will have sufficient capital for carrying
on its business after such issuance and will be able to pay its debts as they
mature. However, the Company has not sought a legal opinion to this effect and
there can be no assurance that a court passing on such standards would agree
with the Company.
CHANGE OF CONTROL PROVISIONS
In the event of a Change of Control, each holder of Notes will be entitled
to require the Company to purchase any or all of the Notes held by such holder
at an offer price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Additional Interest if any thereon
to the date of purchase. See "Description of the Notes -- Offer to Purchase Upon
Change of Control." The Company expects that prepayment of the Notes following a
Change of Control would constitute a default under the Existing Credit Facility
and the 10 3/8% Notes Indenture. In the event that a Change of Control occurs,
the Company would likely be required to refinance the indebtedness outstanding
under the Existing Credit Facility, the 10 3/8% Notes (as defined) and the
Notes. There can be no assurance that the Company would be able to refinance
such indebtedness or, if such refinancing were to occur, that such refinancing
would be on terms favorable to the Company.
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<PAGE> 25
The holders of Notes have limited rights to require the Company to purchase
or redeem the Notes in the event of a takeover, recapitalization or similar
restructuring, including an issuer recapitalization or similar transaction with
management. Consequently, the Change of Control provisions will not afford any
protection in a highly leveraged transaction, including such a transaction
initiated by the Company, management of the Company or an affiliate of the
Company, if such transaction does not result in a Change of Control or otherwise
result in an event of default under the Notes. In addition, because the
obligations of the Company with respect to the Notes are subordinated to Senior
Indebtedness of the Company, existing or future Senior Indebtedness of the
Company may prohibit the Company from repurchasing or redeeming any of the Notes
upon a Change of Control. Moreover, the ability of the Company to repurchase or
redeem the Notes following a Change of Control will be limited by the Company's
then-available resources. Accordingly, the Change of Control provision is likely
to be of limited usefulness in such situations. See "Description of the
Notes--Subordination."
The Change of Control provisions may not be waived by the Board of
Directors of the Company or the Trustee of the Notes without the consent of the
holders of at least a majority in principal amount of the Notes. As a result,
the Change of Control provisions of the Notes may in certain circumstances
discourage or make more difficult a sale or takeover of the Company and, thus,
the removal of incumbent management.
ABSENCE OF PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for Exchange Notes by
holders who are entitled to participate in the Exchange Offer. The market for
Old Notes not tendered for exchange in the Exchange Offer is likely to be more
limited than the existing market for such Notes. The holders of Old Notes (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who are not eligible to participate in the
Exchange Offer are entitled to certain registration rights, and the Company is
required to filed a Shelf Registration Statement (as defined) with respect to
such Old Notes. The Exchange Notes will constitute a new issue of securities
with no established trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or seek the admission thereof
to trading in the National Association of Securities Dealers Automated Quotation
System. The Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes, but they are not obligated to do
so and may discontinue such market making at any time. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act and may be limited during the Exchange Offer and the pendency
of the Shelf Registration Statement. Accordingly, no assurance can be given that
an active public or other market will develop for the Exchange Notes or as to
the liquidity of the trading market for the Exchange Notes. If a trading market
does not develop or is not maintained, holders of Exchange Notes may experience
difficulty in reselling the Exchange Notes or may be unable to sell them at all.
If a market for the Exchange Notes develops, any such market making may be
discontinued at any time.
FAILURE TO EXCHANGE OLD NOTES
Exchange Notes will be issued in exchange for Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal (or Agent's Message) and all other required
documentation. Therefore, holders of Old Notes desiring to tender such Old Notes
in exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange. Old Notes
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<PAGE> 26
that are not tendered or are tendered but not accepted will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
certain registration rights under the Registration Rights Agreement will
terminate. In addition, any holder of Old Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may be deemed to have received restricted securities, and if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
22
<PAGE> 27
THE REFINANCING
The Initial Offering was part of the Refinancing of certain of the
Company's outstanding indebtedness. Pursuant to the Refinancing, the Company:
(i) consummated the Initial Offering; (ii) consummated the Tender Offer and the
related Consent Solicitation with respect to the Company's 11 5/8% Notes; and
(iii) repaid outstanding amounts under the Existing Credit Facility.
The closing of each of the transactions that constituted the Refinancing
occurred concurrently with the closing of the sale of the Units in the Initial
Offering.
TENDER OFFER AND CONSENT SOLICITATION
Pursuant to a separate Offer to Purchase and Consent Solicitation Statement
dated September 25, 1997, the Company offered to repurchase all, but not less
than a majority, of its outstanding 11 5/8% Notes (the "Tender Offer") for an
amount in cash equal to $1,094.47 per $1,000 principal amount of 11 5/8% Notes.
Each tendering holder also received accrued and unpaid interest up to, but not
including, the payment date. In connection with the Tender Offer, the Company
also solicited consents (the "Consent Solicitation") from tendering holders of
11 5/8% Notes to certain proposed amendments (the "Indenture Amendments") to the
11 5/8% Notes Indenture (as defined), which amendments would, among other
things, eliminate substantially all of the restrictive covenants contained in
the 11 5/8% Notes Indenture. Holders of 11 5/8% Notes who timely tendered
received a consent payment equal to 2% of the principal amount of the related
11 5/8% Notes ($20.00 per $1,000 principal amount) (which consent payment is
included in the tender price referred to above). Following the tender of 11 5/8%
Notes and receipt of consents of holders of a majority of the 11 5/8% Notes (in
excess of $32.5 million aggregate principal amount) on October 8, 1997, the
Company and the Trustee executed a supplemental indenture containing the
Indenture Amendments, which became effective upon acceptance for purchase of the
tendered 11 5/8% Notes. In connection with the Tender Offer and Consent
Solicitation, the Company purchased, and received consents relating to,
approximately 87.7% of the outstanding 11 5/8% Notes.
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<PAGE> 28
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the forms and
terms of the Exchange Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company. As such, no effect has been given to the Exchange Offer in the
pro forma statements or capitalization tables.
The net proceeds from the sale of the Units in the Initial Offering was
approximately $90.9 million. Approximately $60.5 million of such proceeds was
used to purchase 11 5/8% Notes tendered pursuant to the Tender Offer and to pay
the consent fees pursuant to the related Consent Solicitation and approximately
$13.7 million was used to repay existing indebtedness under the Existing Credit
Facility, with the remaining proceeds used for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- --------------------------------
1997 1996 1995 1994 1993
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.1x 1.3x -- -- 1.4x
</TABLE>
For purposes of determining the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and fixed charges and fixed
charges consist of interest (including capitalized interest) on all
indebtedness, amortization of deferred financing costs and that portion of
rental expense that management believes to be representative of interest. The
deficiency in earnings to fixed charges for the years 1995 and 1994 amounted to
$32.2 million and $8.1 million, respectively.
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<PAGE> 29
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of December 31, 1997. This information should be read in
conjunction with the unaudited condensed consolidated financial statements of
the Company, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" incorporated by
reference in this Prospectus. (Dollars are in thousands).
<TABLE>
<S> <C>
Long-term debt (including current portion)
10 3/8% Notes............................................. $126,500
11 5/8% Notes (less unamortized discount of $105)......... 7,897
Leigh-Mardon Debt (a)..................................... 50,417
11 1/4% Notes (b)......................................... 93,812
Other long-term debt (c).................................. 32,475
--------
Total long-term debt...................................... 311,101
Total stockholders' equity.................................. 55,041
--------
Total capitalization.............................. $366,142
========
</TABLE>
- ---------------
(a) Consists of Non-Recourse Senior Debt of LM, which matures June 2001 (the
"Leigh-Mardon Senior Debt"), and Non-Recourse Subordinated Debt of LM, which
matures September 2001 (the "Leigh-Mardon Subordinated Debt" and together
with the Leigh-Mardon Senior Debt, the "Leigh-Mardon Debt"). The
Leigh-Mardon Senior Debt is a term loan of approximately US$41.3 million and
a US$4.0 million working capital facility, of which US$700,000 of
availability was used for letters of credit. The Leigh-Mardon Subordinated
Debt is a term loan of which approximately US$16.5 million was outstanding.
As of September 30, 1997, interest accrued at the rate of 7.15% per annum on
the Leigh-Mardon Senior Debt and at the rate of 8.07% per annum plus 4% upon
amounts outstanding in excess of US$15.2 million on the Leigh-Mardon
Subordinated Debt. In March 1998, LM entered into a new credit facility, the
proceeds of which were used to repay the Leigh-Mardon Debt. See "Description
of Certain Indebtedness -- Leigh-Mardon Debt."
(b) Net of discount to the face amount of the Old Notes attributable to the
value of the Warrants issued as part of the Units.
(c) Amounts include debt incurred in Brazil, debt incurred in connection with
the acquisition of the Sati Group and mortgages and other financings in the
United States with varying maturities.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SATI GROUP DEBT
In connection with the acquisition of the Sati Group, the Company's French
holding company incurred FF56 million (approximately US$9.4 million) under term
loans which mature in 2003 and 2004. In addition, the Sati Group has a FF10
million (approximately US$1.7 million) working capital facility. As of December
31, 1997, approximately $400,000 was outstanding under the working capital
facility. As of such date, interest accrued at the rate of 5.3% per annum on the
term loans. The Sati Group debt is secured by the stock and certain assets of
the Sati Group.
BRAZIL DEBT
As of December 31, 1997, ABNB had outstanding approximately R$8.1 million
(approximately US$6.8 million) under term loans incurred to acquire equipment,
which mature in 2001. In addition, ABNB had approximately R$4.7 million
(approximately US$9.1 million) outstanding of debt, which matures in 1998. As of
such date, interest accrued at the average rate of 16.3% per annum on the term
loan and an average of 20.2% on the other debt.
EXISTING CREDIT FACILITY
General. In January 1996, ABN and ABNH entered into a $20.0 million
revolving credit facility (the "Existing Credit Facility") with the Chase
Manhattan Bank (as successor to Chemical Bank). At December 31, 1997,
approximately $18.5 million was available under the Existing Credit Facility
before reduction for outstanding letters of credit ($3.6 million) and borrowings
($3.2 million). At December 31, 1997, interest under the Existing Credit
Facility was 9.00%. During November 1997,
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<PAGE> 30
the Existing Credit Facility was increased to $25.0 million and an additional
$10.0 million of current availability was provided. Upon consummation of the
Initial Offering, the Existing Credit Facility was reduced to $20.0 million and
the availability reduced in accordance with the original terms.
Guarantees. The Company acts as guarantor in respect of all monies
borrowed under the Existing Credit Facility.
Security. The Existing Credit Facility is secured by certain accounts
receivable and inventory (total carrying value of approximately $24.0 million at
December 31, 1997).
Maturity. The Existing Credit Facility will expire on October 30, 1998.
Mandatory Prepayment. The borrowing entities may be required to make
partial prepayments where their respective Availabilities (as defined in the
Existing Credit Facility) fail to equal or exceed zero.
Optional Prepayment. Any and all loans may be prepaid in specified minimum
amounts.
Interest Rates. The interest rate applicable to borrowings under the
Existing Credit Facility will vary depending on whether the funds are borrowed
as a Eurodollar Loan (as defined in the Existing Credit Facility) basis or as an
Alternate Base Loan (as defined in the Existing Credit Facility). In the case of
a Eurodollar Loan interest will be charged at specified margins over LIBO Rate
(as defined in the Existing Credit Facility). In the case of Alternate Base
Loan, interest will be charged at specified margins over the Alternate Base Rate
(as defined in the Existing Credit Facility).
Covenants; Events of Default. The Existing Credit Facility contains
covenants and events of default customary for financings of this type.
LEIGH-MARDON DEBT
In connection with the acquisition of LM, the Company incurred the
Leigh-Mardon Debt. The Leigh-Mardon Debt was financed in March 1998 with the
proceeds of new revolving credit and letter of credit facilities. The new
facilities consist of a five-year amortizing revolving credit facility with a
maximum commitment of approximately $55.3 million with semi-annual step downs
and a $3.3 million letter of credit facility. As of the date of this Prospectus,
approximately $56.6 million was outstanding under such facilities and interest
accrued at the rate of 6.6% per annum. The facilities are secured by a fixed and
floating charge on LM's assets and undertakings.
SENIOR NOTES
10 3/8% Notes
In May 1992, the Company issued and sold $126.5 million aggregate principal
amount of 10 3/8% Senior Notes due 2002 (the "10 3/8% Notes"). The Notes were
issued pursuant to an indenture dated as of May 18, 1992 between the Company and
The Chase Manhattan Bank (as successor to Chemical Bank), as trustee (the
"10 3/8% Notes Indenture"), as amended. The 10 3/8% Notes were sold pursuant to
the Company's Registration Statement on Form S-1 (Reg. No. 33-46806) declared
effective by the Commission on May 18, 1992 (the "10 3/8% Notes Registration
Statement").
The 10 3/8% Notes will mature on June 1, 2002, are limited to $126.5
million in aggregate principal amount, and are senior obligations of the
Company. The 10 3/8% Notes are secured by a pledge of the capital stock of
certain of the Company's subsidiaries, as well as certain intercompany
obligations. As of the date of this Prospectus, $126.5 million principal amount
of the 10 3/8% Notes were outstanding. Reference is made to the 10 3/8% Notes
Indenture, which was filed as an exhibit to the 10 3/8% Notes Registration
Statement.
11 5/8% Notes
In April 1994, the Company issued and sold (the "1994 Notes Offering")
$65.0 million aggregate principal amount of 11 5/8% Senior Notes due 2002 (the
"1994 Notes"). The 1994 Notes were issued pursuant to the indenture dated as of
May 1, 1994 between the Company and State
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<PAGE> 31
Street Bank & Trust Company (as successor to First National Bank of Boston), as
trustee (the "11 5/8% Notes Indenture"), to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. In September 1994, the Company
consummated an exchange offer pursuant to which the Company, in exchange for the
$65.0 million principal amount of the 1994 Notes outstanding, issued an equal
amount of 11 5/8% Notes, which are identical to the 1994 Notes, with the
exception that the 11 5/8% Notes have been registered under the Securities Act.
The 11 5/8% Notes will mature on August 1, 2002, are limited to $65 million
in aggregate principal amount, and are unsecured senior obligations of the
Company. As of the date of this Prospectus approximately $8.0 million principal
amount of the 11 5/8% Notes are outstanding. Reference is made to the 11 5/8%
Notes Indenture, which was filed as an exhibit to the 11 5/8% Notes Registration
Statement.
Pursuant to the Tender Offer and related Consent Solicitation, on December
12, 1997, the Company purchased approximately $57 million in aggregate principal
amount of the 11 5/8% Notes and the supplemental indenture containing the
Indenture Amendment eliminating substantially all of the restrictive covenants
contained in the 11 5/8% Notes Indenture became effective. See "The
Refinancing."
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<PAGE> 32
DESCRIPTION OF THE NOTES
The Exchange Notes offered hereby will be issued as a separate series under
the Indenture (the "Indenture") dated as of December 12, 1997 among the Company,
the Guarantors and The Bank of New York, as trustee (the "Trustee"). The form
and terms of the Exchange Notes are the same and the form and terms of the Old
Notes (which they replace) except that (i) the Exchange Notes will bear a Series
B designation, (ii) the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof and (iii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Old Notes under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange Offer is consummated. The Old
Notes issued in the Initial Offering and the Exchange Notes offered hereby are
referred to collectively as the "Notes."
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." References in this "Description of
the Notes" section to "the Company" mean only American Banknote Corporation and
not any of its Subsidiaries.
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Company will
appoint the Trustee to serve as registrar and paying agent under the Indenture
at its offices at 101 Barclay Street, New York, New York. No service charge will
be made for any registration of transfer or exchange of the Notes, except for
any tax or other governmental charge that may be imposed in connection
therewith.
RANKING
The Notes will rank junior to, and be subordinated in right of payment to,
all existing and future Senior Indebtedness of the Company, pari passu in right
of payment with all senior subordinated Indebtedness of the Company and senior
in right of payment to all Subordinated Indebtedness of the Company. At December
31, 1997, the Company had approximately $224.8 million of Senior Indebtedness
outstanding (exclusive of unused commitments), including $85.5 million of
Indebtedness of the Company's subsidiaries which was effectively senior to the
Notes.
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The Notes will be limited to $95.0 million aggregate principal amount and
will mature on December 1, 2007. Interest on the Notes will accrue at a rate of
11 1/4% per annum and will be payable semi-annually in arrears on each June 1
and December 1, commencing June 1, 1998, to the holders of record of Notes at
the close of business on May 15 and November 15, respectively, immediately
preceding such interest payment date. Interest will accrue from the most recent
interest payment date to which interest has been paid or, if no interest has
been paid, from December 12, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after December 1, 2002, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the
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<PAGE> 33
relevant interest payment date), if redeemed during the 12-month period
beginning on December of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................ 105.625%
2003........................................................ 103.750%
2004........................................................ 101.875%
2005 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time and from time to time on or
prior to December 1, 2000, the Company may redeem in the aggregate up to 35% of
the originally issued aggregate principal amount of the Notes with the net cash
proceeds of one or more Public Equity Offerings by the Company at a redemption
price in cash equal to 111.25% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the date of redemption (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
originally issued aggregate principal amount of the Notes must remain
outstanding immediately after giving effect to each such redemption. Notice of
any such redemption must be given within 60 days after the date of the closing
of the relevant Public Equity Offering of the Company.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part; provided, further, however, that if a partial redemption is
made with the net cash proceeds of a Public Equity Offering by the Company,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of The Depository Trust Company), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the paying agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash of all Senior Indebtedness.
Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any payment
from the trust described under "Satisfaction and Discharge of Indenture;
Defeasance" (a "Defeasance Trust Payment")), upon any dissolution or winding-up
or total liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness shall first
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<PAGE> 34
be paid in full in cash before the Holders of the Notes or the Trustee on behalf
of such Holders shall be entitled to receive any payment by the Company of the
principal of, premium, if any, or interest on the Notes, or any payment by the
Company to acquire any of the Notes for cash, property or securities, or any
distribution by the Company with respect to the Notes of any cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment). Before any payment may be made by,
or on behalf of, the Company of the principal of, premium, if any, or interest
on the Notes upon any such dissolution or winding-up or total liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), to which the Holders of the Notes or
the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment) by or on
behalf of the Company of principal of, premium, if any, or interest on the
Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant
to an Offer to Purchase or otherwise, will be made if, at the time of such
payment, there exists a default in the payment of all or any portion of the
obligations on any Designated Senior Indebtedness, whether at maturity, on
account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness. In addition, during the continuance of any non-payment event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be immediately accelerated, and upon receipt by the Trustee
of written notice (a "Payment Blockage Notice") from the holder or holders of
such Designated Senior Indebtedness or the trustee or agent acting on behalf of
the holders of such Designated Senior Indebtedness, then, unless and until such
event of default has been cured or waived or has ceased to exist or such
Designated Senior Indebtedness has been discharged or repaid in full in cash or
the benefits of these provisions have been waived by the holders of such
Designated Senior Indebtedness, no direct or indirect payment (excluding any
payment or distribution of Permitted Junior Securities and excluding any
Defeasance Trust Payment) will be made by or on behalf of the Company of
principal of, premium, if any, or interest on the Notes, to such Holders, during
a period (a "Payment Blockage Period") commencing on the date of receipt of such
notice by the Trustee and ending 179 days thereafter. Notwithstanding anything
in the subordination provisions of the Indenture or the Notes to the contrary,
(x) in no event will a Payment Blockage Period extend beyond 179 days from the
date the Payment Blockage Notice in respect thereof was given, (y) there shall
be a period of at least 181 consecutive days in each 360-day period when no
Payment Blockage Period is in effect and (z) not more than one Payment Blockage
Period may be commenced with respect to the Notes during any period of 360
consecutive days. No event of default that existed or was continuing on the date
of commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period (to the extent the
holder of Designated Senior Indebtedness, or trustee or agent, giving notice
commencing such Payment blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of such Designated
Senior Indebtedness, whether or not within a
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period of 360 consecutive days, unless such event of default has been cured or
waived for a period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes" heading will not be construed as preventing the
occurrence of any Event of Default in respect of the Notes. See "Events of
Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of the Company, funds which would otherwise be payable to Holders of
the Notes will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full in cash, and the Company may be
unable to meet fully its obligations with respect to the Notes.
Subject to the restrictions set forth in the Indenture, in the future the
Company may issue additional Senior Indebtedness to refinance existing
Indebtedness or for other corporate purposes. In addition, the Notes will be
structurally subordinate to all Indebtedness of the Company's Subsidiaries that
are not Guarantors.
GUARANTEES OF THE NOTES
The Indenture provides that each of the Guarantors will unconditionally
guarantee on a joint and several basis (the "Guarantees") all of the Company's
obligations under the Notes, including its obligations to pay principal,
premium, if any, and interest with respect to the Notes. The obligations of each
Guarantor are limited to the maximum amount that, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under Federal or state law. Each Guarantor
that makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount, based on the net
assets of each Guarantor determined in accordance with GAAP.
The Company shall cause each Restricted Subsidiary issuing a Guarantee
after the Issue Date to (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall become a party to the Indenture and thereby
unconditionally guarantee all of the Company's Obligations under the Notes and
the Indenture on the terms set forth therein and (ii) deliver to the Trustee an
Opinion of Counsel that such supplemental indenture has been duly authorized,
executed and delivered by such Restricted Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Restricted Subsidiary (which
opinion may be subject to customary assumptions and qualifications). Thereafter,
such Restricted Subsidiary shall (unless released in accordance with the terms
of this Indenture) be a Guarantor for all purposes of the Indenture.
The Indenture provides that if the Notes are defeased in accordance with
the terms of the Indenture or if, subject to the requirements of the first
paragraph under "-- Merger, Sale of Assets, Etc.," all or substantially all of
the assets of any Guarantor or the Equity Interests of any Guarantor are sold
(including by issuance or otherwise) by the Company in a transaction
constituting an Asset Sale, and if (x) the Net Cash Proceeds from such Asset
Sale are used in accordance with the covenant described under "Certain
Covenants-Disposition of Proceeds of Asset Sales" or (y) the Company delivers to
the Trustee an Officers' Certificate to the effect that the Net Cash Proceeds
from such Asset Sale shall be used in accordance with the covenant described
under "Certain Covenants -- Disposition of Proceeds of Asset Sales" and within
the time limits specified by such covenant, then such Guarantor (in the event of
a sale or other disposition of all of the Equity Interests of such Guarantor) or
the corporation acquiring such assets (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and
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<PAGE> 36
discharged of its Guarantee obligations in respect of the Indenture and the
Notes effective upon consummation of such transactions.
The Guarantees will be general unsecured obligations of the Guarantors. The
obligations of each Guarantor under its Guarantee will be subordinated and
junior in right of payment to the prior payment in full of all existing and
future Guarantor Senior Indebtedness of such Guarantor (which will include such
Guarantor's guarantee of the obligations of the Company under the New Credit
Facility) to substantially the same extent as the Notes are subordinated to all
existing and future Senior Indebtedness of the Company. The Notes will not,
however, be guaranteed by the Company's foreign subsidiaries, which accounted
for 69% of the Company's net sales in 1997.
Any Guarantor (i) that is designated an Unrestricted Subsidiary pursuant to
and in accordance with the covenant described under "Designation of Unrestricted
Subsidiaries" or (ii) that is designated an Investment in accordance with the
definition of "Investment" shall upon such designation be released and
discharged of its Guarantee obligations in respect of the Indenture and the
Notes and any domestic Unrestricted Subsidiary whose Designation is revoked
pursuant to "Designation of Unrestricted Subsidiaries" below will be required to
become a Guarantor in accordance with the procedure described in the third
preceding paragraph.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of the Notes of such occurrence in the manner prescribed by the
Indenture and shall, within 20 days after the Change of Control Date, make an
Offer to Purchase all Notes then outstanding at a purchase price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date).
If an Offer to Purchase is made, there can be no assurance that the Company
will have available funds sufficient to pay for all of the Notes that might be
tendered by Holders of Notes seeking to accept the Offer to Purchase. If the
Company fails to purchase all of the Notes tendered for purchase, such failure
will constitute an Event of Default under the Indenture. See "Events of Default"
below.
If the Company makes an Offer to Purchase, the Company will comply with all
applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed, and any
violation of the provisions of the Indenture relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed an Event of Default
or an event that, with the passing of time or giving of notice, or both, would
constitute an Event of Default.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not cause or permit any Restricted Subsidiary to, directly or
indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
the Company or any Restricted Subsidiary and dividends or distributions
payable to any Person
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solely in Qualified Equity Interests of the Company or in options, warrants
or other rights to purchase Qualified Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness; or
(iv) make any Investment in any Person (other than Permitted
Investments)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of "-- Limitation on Indebtedness" below; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to the sum of (1) 50% of
cumulative Consolidated Net Income determined for the period (taken as one
period) from the beginning of the first fiscal quarter commencing after the
Issue Date and ending on the last day of the most recent fiscal quarter
immediately preceding the date of such Restricted Payment for which
consolidated financial information of the Company is available (or if such
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss), plus (2) 100% of the aggregate net cash proceeds received by the
Company either (x) as capital contributions to the Company after the Issue
Date or (y) from the issue and sale (other than to a Restricted Subsidiary)
of its Qualified Equity Interests after the Issue Date (excluding the net
proceeds from any issuance and sale of Qualified Equity Interests financed,
directly or indirectly, using funds borrowed from the Company or any
Restricted Subsidiary until and to the extent such borrowing is repaid),
plus (3) the principal amount (or accreted amount (determined in accordance
with GAAP), if less) of any Indebtedness of the Company or any Restricted
Subsidiary Incurred after the Issue Date that has been converted into or
exchanged for Qualified Equity Interests of the Company, plus (4) so long
as the Designation thereof was treated as a Restricted Payment made after
the Issue Date, with respect to any Unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the Issue Date in accordance
with "Designation of Unrestricted Subsidiaries" below, the Company's
proportionate interest in an amount equal to the excess of (x) the total
assets of such Subsidiary, valued on an aggregate basis at Fair Market
Value, over (y) the total liabilities of such Subsidiary, determined in
accordance with GAAP (and provided that such amount shall not in any case
exceed the Designation Amount with respect to such Restricted Subsidiary
upon its Designation), minus (5) the Designation Amount (measured as of the
date of Designation) with respect to any Subsidiary of the Company that has
been designated as an Unrestricted Subsidiary after the Issue Date in
accordance with "Designation of Unrestricted Subsidiaries" below; plus (6)
$10 million.
The foregoing provisions will not prevent (i) the payment of any dividend
or distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of such
formal notice such payment or redemption would comply with the provisions of the
Indenture; (ii) the purchase, redemption, retirement or other acquisition of any
Equity Interests of
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the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of, Qualified Equity Interests of the Company; provided, however, that any such
net cash proceeds and the value of any Qualified Equity Interests issued in
exchange for such retired Equity Interests are excluded from clause (c)(2) of
the preceding paragraph (and were not included therein at any time) and are not
used to redeem the Notes pursuant to "-- Optional Redemption" above; (iii) the
purchase, redemption, retirement, defeasance or other acquisition of
Subordinated Indebtedness, or any other payment thereon, made in exchange for,
or out of the net cash proceeds of, a substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of (x) Qualified Equity Interests of the
Company; provided, however, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for Subordinated Indebtedness are
excluded from clauses (c)(2) and (c)(3) of the preceding paragraph (and were not
included therein at any time) and are not used to redeem the Notes pursuant to
"-- Optional Redemption" above or (y) Subordinated Indebtedness permitted to be
Incurred pursuant to clause (g) of the second paragraph under "-- Limitation on
Indebtedness;" (iv) the purchase of Equity Interests from officers and directors
of the Company or any Restricted Subsidiary in an amount not to exceed $1.0
million; (v) the redemption of the Company's zero coupon convertible
subordinated debenture due 2002; and (vi) the declaration and payment of pro
rata dividends or pro rata redemptions with respect to holders of minority
interests in the common stock of a Restricted Subsidiary of the Company;
provided, however, that in the case of each of clauses (ii), (iii), (iv), (v)
and (vi), no Default or Event of Default shall have occurred and be continuing
or would arise therefrom.
In determining the amount of Restricted Payments permissible under the
immediately preceding paragraph of this covenant, amounts expended pursuant to
clauses (i), (iv) and, to the extent the redemption contemplated by clause (v)
is in cash, (v) of the immediately preceding paragraph shall be included as
Restricted Payments. The amount of any non-cash Restricted Payment shall be
deemed to be equal to the Fair Market Value thereof at the date of the making of
such Restricted Payment.
Limitation on Indebtedness. The Indenture provides that the Company will
not, and will not cause or permit any Restricted Subsidiary to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness), except for
Permitted Indebtedness; provided, however, that the Company may Incur
Indebtedness (including Acquired Indebtedness), and any Restricted Subsidiary
may Incur Indebtedness (including Acquired Indebtedness), if, at the time of and
immediately after giving pro forma effect to such Incurrence of Indebtedness and
the application of the proceeds therefrom, the Consolidated Coverage Ratio would
be greater than 2.00 to 1.0.
The foregoing limitations will not apply to the Incurrence by the Company
or any Restricted Subsidiary of any of the following (collectively, "Permitted
Indebtedness"), each of which shall be given independent effect:
(a) Indebtedness under the Notes, the Indenture and the Guarantees;
(b) Indebtedness incurred under a credit facility (including the
Existing Credit Facility) or credit facilities in an aggregate principal
amount at any one time outstanding not to exceed $80.0 million or the
non-U.S. denominated equivalent thereof;
(c) Indebtedness under the 10 3/8% Notes;
(d) intercompany Indebtedness permitted by the covenant "Limitation on
Restricted Payments;"
(e) Interest Rate Agreements and Currency Agreements of the Company
relating to Indebtedness of the Company (which Indebtedness is otherwise
permitted to be Incurred under this covenant);
(f) Existing Indebtedness (other than Indebtedness under the Existing
Credit Facility);
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(g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness Incurred in compliance with the Consolidated Coverage Ratio of
the first paragraph of this covenant or clauses (a), (c) and (f) of this
paragraph of this covenant; provided, however, that (i) any such
refinancing shall not exceed the sum of the principal amount (or accreted
amount (determined in accordance with GAAP), if less) of the Indebtedness
being refinanced, plus the amount of accrued interest thereon, plus the
amount of any reasonably determined prepayment premium necessary to
accomplish such refinancing and such reasonable fees and expenses incurred
in connection therewith; (ii) Indebtedness representing a refinancing of
Indebtedness other than Senior Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being refinanced; (iii) Indebtedness that is
pari passu with the Notes may only be refinanced with Indebtedness that is
made pari passu with or subordinate in right of payment to the Notes and
Subordinated Indebtedness may only be refinanced with Subordinated
Indebtedness and (iv) Indebtedness of a Restricted Subsidiary may only be
refinanced by Indebtedness of such Restricted Subsidiary or the Company;
(h) the Guarantees and guarantees by any Guarantor of any Indebtedness
of the Company;
(i) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any Restricted Subsidiary
pursuant to such agreements, incurred or assumed in connection with the
acquisition or disposition of any business, assets or Restricted Subsidiary
of the Company, other than guarantees or similar credit support by the
Company of Indebtedness incurred by any person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition;
(j) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness
referred to in this clause (i) is extinguished within three Business Days
of its incurrence; and
(k) In addition to the items referred to in clauses (a) through (j)
above, Indebtedness of the Company and the Restricted Subsidiaries
(including any Indebtedness under the Existing Credit Facility, any
Purchase Money Indebtedness and/or any Capital Lease Obligations that
utilizes this subparagraph (k)) having an aggregate principal amount and/or
attributable indebtedness not to exceed $25.0 million at any one time
outstanding.
Limitation on Senior Subordinated Indebtedness. The Indenture provides
that the Company will not, directly or indirectly, Incur any Indebtedness that
by its terms would expressly rank senior in right of payment to the Notes and
subordinate in right of payment to any other Indebtedness of the Company.
The Company will not permit any Guarantor to, and no Guarantor shall,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Guarantee of such Guarantor and
subordinate in right of payment to any other Indebtedness of such Guarantor.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions to the Company or any other Restricted Subsidiary
on its Equity Interests or with respect to any other interest or participation
in, or measured by, its profits, or pay any
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Indebtedness owed to the Company or any other Restricted Subsidiary, (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, or
make any Investment in, the Company or any other Restricted Subsidiary or (c)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (i) the Existing Credit Facility, or any other agreement of the
Company or the Restricted Subsidiaries outstanding on the Issue Date, in each
case as in effect on the Issue Date, and any amendments, restatements, renewals,
replacements or refinancings thereof; provided, however, that any such
amendment, restatement, renewal, replacement or refinancing is not materially
more restrictive in the aggregate with respect to such encumbrances or
restrictions than those contained in the agreement being amended, restated,
reviewed, replaced or refinanced; (ii) applicable law; (iii) any instrument
governing Indebtedness or Equity Interests of an Acquired Person acquired by the
Company or any Restricted Subsidiary as in effect at the time of such
acquisition (except to the extent such Indebtedness was Incurred by such
Acquired Person in connection with, as a result of or in contemplation of such
acquisition); provided, however, that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary, or the properties or
assets of the Company or any Restricted Subsidiary, other than the Acquired
Person; (iv) customary non-assignment provisions in leases, licenses or other
agreements entered into in the ordinary course of business and consistent with
past practices; (v) any agreement for the sale or disposition of the Equity
Interests or assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (v) are only applicable
to such Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with "Disposition of Proceeds of Asset Sales"
below to the extent applicable thereto; (vi) refinancing indebtedness permitted
under clause (g) of the second paragraph of "Limitation on Indebtedness" above;
provided, however, that such encumbrances and restrictions contained in the
agreements governing such Indebtedness are not materially more restrictive in
the aggregate than those contained in the agreements governing the Indebtedness
being refinanced immediately prior to such refinancing; (vii) the Indenture, the
Notes and the Guarantees; and (viii) Purchase Money Indebtedness that impose
restrictions of the nature described in clause (c) above on the property
acquired.
Designation of Unrestricted Subsidiaries. The Company may (A) organize one
or more Unrestricted Subsidiaries or (B) designate after the Issue Date any
Subsidiary of the Company as an "Unrestricted Subsidiary" under the Indenture (a
"Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(ii) in the case of (B) only, at the time of and after giving effect
to the Designation of a Restricted Subsidiary as an Unrestricted
Subsidiary, the Company could Incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the Consolidated Coverage Ratio of the
first paragraph of "Limitation on Indebtedness" above; and
(iii) the Company would be permitted to make an Investment (including
a Permitted Investment) in the case of (B) only, at the time of Designation
(assuming the effectiveness of such Designation) or, in the case of (A)
only, at the time of an Investment in such Subsidiary, pursuant to the
first paragraph of "Limitation on Restricted Payments" above in an amount
(the "Designation Amount") equal to the Fair Market Value of the Company's
proportionate interest in the net worth of such Subsidiary on such date
calculated in accordance with GAAP.
Neither the Company nor any Restricted Subsidiary shall at any time (x)
provide credit support for, subject any of its property or assets (other than
the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary, except for (i) any non-recourse guarantee given solely to support
the pledge by the Company or any Restricted
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<PAGE> 41
Subsidiary of the capital stock of any Unrestricted Subsidiary and (ii) any such
guarantee that is otherwise a Permitted Investment or would be permitted under
the first paragraph of "Limitation on Restricted Payments" above. For purposes
of the foregoing, the Designation of a Subsidiary of the Company as an
Unrestricted Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Limitation on Liens. The Indenture provides that the Company will not, and
will not cause or permit any Restricted Subsidiary to, directly or indirectly,
Incur any Liens of any kind against or upon any of their respective properties
or assets now owned or hereafter acquired, or any proceeds therefrom or any
income or profits therefrom, to secure any Indebtedness unless contemporaneously
therewith effective provision is made, in the case of the Company, to secure the
Notes and all other amounts due under the Indenture, and in the case of a
Restricted Subsidiary that is a Guarantor, to secure such Restricted
Subsidiary's Guarantee of the Notes and all other amounts due under the
Indenture, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the Notes or such
Restricted Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on
the same properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien, except for (i) Liens securing Senior
Indebtedness of the Company or Indebtedness of any Restricted Subsidiary
permitted to be incurred under the Indenture by any Restricted Subsidiary and
(ii) Permitted Liens.
Disposition of Proceeds of Asset Sales. The Indenture provides that the
Company will not, and will not cause or permit any Restricted Subsidiary to,
directly or indirectly, make any Asset Sale, unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of and (ii) at least 75% of such consideration consists of
(A) cash or Cash Equivalents, or (B) properties and capital assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and capital assets that will be used in the business of the Company
and its Restricted Subsidiaries as existing on the Issue Date or in businesses
reasonably related thereto (as determined in good faith by the Company's Board
of Directors) ("Replacement Assets"); provided, that, an exchange or sale of
Equity Interests in any Subsidiary of the Company may be made without complying
with clause (ii)(A) above; provided, further, that after giving effect to any
such exchange or sale, the Company has a Consolidated Coverage Ratio of 2.50 to
1.0. The amount of any Indebtedness or other liabilities of the Company or any
Restricted Subsidiary that is actually assumed by the transferee in such Asset
Sale and from which the Company and the Restricted Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof
to repay Senior Indebtedness or (ii) make an Investment in Replacement Assets.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied within 365 days of such Asset Sale as described in clause (i) or
(ii) of the immediately preceding paragraph
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(such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall,
within 20 days after such 365th day, make an Offer to Purchase all outstanding
Notes up to a maximum principal amount (expressed as a multiple of $1,000) of
Notes equal to the Notes Pro Rata Share, at a purchase price in cash equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the Purchase Date; provided, however, that the Offer to Purchase may
be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or
in excess of $10 million, at which time the entire amount of such Unutilized Net
Cash Proceeds, and not just the amount in excess of $10 million, shall be
applied as required pursuant to this paragraph.
With respect to any Offer to Purchase effected pursuant to this covenant,
to the extent the aggregate principal amount of Notes tendered pursuant to such
Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to the
repurchase thereof, such Notes shall be purchased pro rata based on the
aggregate principal amount of such Notes tendered by each Holder. To the extent
the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes tendered
by the Holders of the Notes pursuant to such Offer to Purchase, the Company may
retain and utilize any portion of the Unutilized Net Cash Proceeds not applied
to repurchase the Notes for any purpose consistent with the other terms of the
Indenture.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act, and any violation of the provisions of the Indenture relating
to such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
Holders as described above.
Merger, Sale of Assets, Etc. The Indenture provides that the Company will
not consolidate with or merge with or into (whether or not the Company is the
Surviving Person) any other entity and the Company will not sell, convey,
assign, transfer, lease or otherwise dispose of all or substantially all of the
Company's and the Restricted Subsidiaries' properties and assets (determined on
a consolidated basis for the Company and the Restricted Subsidiaries) to any
entity in a single transaction or series of related transactions, unless: (i)
either (x) the Company shall be the Surviving Person or (y) the Surviving Person
(if other than the Company) shall be a corporation organized and validly
existing under the laws of the United States of America or any State thereof or
the District of Columbia, and shall, in any such case, expressly assume by a
supplemental indenture, the due and punctual payment of the principal of,
premium, if any, and interest on all the Notes and the performance and
observance of every covenant of the Indenture and the Registration Rights
Agreement to be performed or observed on the part of the Company; (ii)
immediately thereafter, no Default or Event of Default shall have occurred and
be continuing; and (iii) immediately after giving effect to any such transaction
involving the Incurrence by the Company or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Surviving Person (A) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction and (B) could Incur, on a pro
forma basis after giving effect to such transaction as if it had occurred at the
beginning of the four quarter period immediately preceding such transaction for
which consolidated financial statements of the Company are available, at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Coverage Ratio of the first paragraph of "Limitation on
Indebtedness" above; provided that the Company will not be subject to the
provisions of this clause (iii)(B) in the case of
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a merger of the Company with a Subsidiary of the Company effected for the sole
purpose of creating a holding company for the Company.
Notwithstanding the foregoing clause (iii) of the immediately preceding
paragraph, any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company or any other
Restricted Subsidiary.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interest of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of its Guarantee and the Indenture as provided in the
third paragraph under "Guarantees of the Notes" above) shall consolidate with or
merge with or into another Person, whether or not such Person is affiliated with
such Guarantor and whether or not such Guarantor is the Surviving Person, unless
(i) the Surviving Person (if other than such Guarantor) is a corporation
organized and validly existing under the laws of the United States, any State
thereof or the District of Columbia; (ii) the Surviving Person (if other than
such Guarantor) expressly assumes by a supplemental indenture all the
obligations of such Guarantor under its Guarantee of the Notes and the
performance and observance of every covenant of the Indenture and the
Registration Rights Agreement to be performed or observed by such Guarantor;
(iii) at the time of and immediately after such Disposition, no Default or Event
of Default shall have occurred and be continuing; and (iv) immediately after
giving effect to any such transaction involving the Incurrence by such
Guarantor, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of such Guarantor in connection with
or as a result of such transaction as having been Incurred at the time of such
transaction), the Company could Incur, on a pro forma basis after giving effect
to such transaction as if it had occurred at the beginning of the latest fiscal
quarter for which consolidated financial statements of the Company are
available, at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph of
"Limitation of Indebtedness" above; provided, however, that clause (iv) of this
paragraph shall not be a condition to a merger or consolidation of a Guarantor
if such merger or consolidation only involves the Company and/or one or more
other Guarantors. Notwithstanding the foregoing, nothing in this covenant shall
prohibit the consolidation or merger with or into or the sale of all or
substantially all of the assets or properties of a Guarantor to any other
Restricted Subsidiary that is a Guarantor.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or a Guarantor, as the case may be, is not the Surviving
Person and the Surviving Person is to assume all the Obligations of the Company
under the Notes, the Indenture and the Registration Rights Agreement or of such
Guarantor under its Guarantee, the Indenture and the Registration Rights
Agreement, as the case may be, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be, and
the Company, as the case may be, shall be discharged from its Obligations under
the Indenture and the Notes or such Guarantor shall be discharged from its
Obligations under the Indenture and its Guarantee.
Transactions with Affiliates. The Indenture provides that the Company will
not, and will not cause or permit any Restricted Subsidiary to, directly or
indirectly, conduct any business or enter into any transaction (or series of
related transactions) with or for the benefit of any of their respective
Affiliates or any officer, director or employee of the Company or any Restricted
Subsidiary (each an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than would
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be available in a comparable transaction with an unaffiliated third party and
(ii) if such Affiliate Transaction (or series of related Affiliate Transactions)
involves aggregate payments or other consideration having a Fair Market Value in
excess of $10 million, such Affiliate Transaction is in writing and a majority
of the disinterested members of the Board of Directors of the Company shall have
approved such Affiliate Transaction and determined that such Affiliate
Transaction complies with the foregoing provisions. In addition, any Affiliate
Transaction involving aggregate payments or other consideration having a Fair
Market Value in excess of $25 million will also require a written opinion from
an Independent Financial Advisor (filed with the Trustee) stating that the terms
of such Affiliate Transaction are fair, from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Affiliate Transaction, as
the case may be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and any Wholly
Owned Restricted Subsidiary or between or among Wholly Owned Restricted
Subsidiaries; (ii) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees, consultants or agents of
the Company or any Restricted Subsidiary of the Company as determined in good
faith by the Company's Board of Directors; (iii) any transactions undertaken
pursuant to any contractual obligations in existence on the Issue Date (as in
effect on the Issue Date); (iv) any Restricted Payments made in compliance with
"Limitation on Restricted Payments" above; (v) loans, loan programs and advances
to officers, directors and employees of the Company or any Restricted
Subsidiary, in each case made in the ordinary course of business and approved by
the Company's Board of Directors or the Compensation Committee of the Board of
Directors; (vi) customary employment arrangements and benefit programs approved
in good faith by the Company's Board of Directors; and (vii) the grant of stock
options, stock grants, equity appreciation rights or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors.
Limitation on the Sale or Issuance of Equity Interests of Restricted
Subsidiaries. The Indenture provides that the Company will not sell any Equity
Interest of a Restricted Subsidiary, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any Equity Interests,
except: (i) to the Company or a Wholly Owned Restricted Subsidiary; or (ii) in
any other issuance or sale, provided such Restricted Subsidiary remains a
Restricted Subsidiary. The foregoing shall not apply to the sale by the Company
of all the Equity Interests of a Restricted Subsidiary as long as the Company is
in compliance with the terms of the covenant described under "Disposition of
Proceeds of Asset Sales" and, if applicable, "Merger, Sale of Assets, Etc."
above.
Limitation on Guarantees by Restricted Subsidiaries. The Indenture
provides that in the event the Company (i) organizes or acquires any Domestic
Restricted Subsidiary after the Issue Date that is not a Guarantor or (ii)
causes or permits any Foreign Restricted Subsidiary that is not a Guarantor to,
directly or indirectly, guarantee the payment of any Indebtedness of the Company
or any Domestic Restricted Subsidiary ("Other Indebtedness") then, in each case
the Company shall cause such Restricted Subsidiary to simultaneously execute and
deliver a supplemental indenture to the Indenture pursuant to which it will
become a Guarantor under the Indenture; provided, however, that in the event a
Domestic Restricted Subsidiary is acquired in a transaction in which a merger
agreement is entered into, such Domestic Restricted Subsidiary shall not be
required to execute and deliver such supplemental indenture until the
consummation of the merger contemplated by any such merger agreement; provided,
further, that if such Other Indebtedness is (i) Indebtedness that is ranked pari
passu in right of payment with the Notes or the Guarantee of such Restricted
Subsidiary, as the case may be, the Guarantee of such Subsidiary shall be pari
passu in right of payment with the guarantee of the Other Indebtedness; or (ii)
Subordinated Indebtedness, the Guarantee of such Subsidiary shall be senior in
right of payment to the guarantee of the Other Indebtedness (which guarantee of
such Subordinated Indebtedness shall provide that such guarantee is subordinated
to the Guarantees of such Subsidiary to the same extent and in the same manner
as the other Indebtedness is subordinated to the Notes or the Guarantee of such
Restricted
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Subsidiary, as the case may be); or (iii) Indebtedness that ranks senior in
right of payment to the Notes or the Guarantee of such Restricted Subsidiary, as
the case may be, the Guarantee of such Subsidiary shall be senior in right of
payment with the guarantee of the Other Indebtedness.
Provision of Financial Information. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents which the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company were so subject, such documents to be filed with the SEC on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(whether or not permitted or required to be filed with the SEC) file with the
Trustee and provide by mail to all Holders copies of all reports and other
documents which the Company generally provides to its stockholders, or, if such
filing is not so permitted, information and data of a similar nature, and (b)
if, notwithstanding the preceding sentence, filing such documents by the Company
with the SEC is not permitted by SEC practice or applicable law or regulations,
promptly upon written request supply copies of such documents to any Holder. In
addition, for so long as any Notes remain outstanding, the Company will furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act, and, to any beneficial holder of Notes, if not
obtainable from the SEC, information of the type that would be filed with the
SEC pursuant to the foregoing provisions, upon the request of any such holder.
EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an "Event of
Default" under the Indenture: (a) failure to pay principal of (or premium, if
any, on) any Note when due (whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes" above); (b) failure to
pay any interest on any Note when due, continued for 30 days or more (whether or
not prohibited by the provisions of the Indenture described under "Subordination
of the Notes" above); (c) default in the payment of principal of or interest on
any Note required to be purchased pursuant to any Offer to Purchase required by
the Indenture when due and payable or failure to pay on the Purchase Date the
Purchase Price for any Note validly tendered pursuant to any Offer to Purchase
(whether or not prohibited by the provisions of the Indenture described under
"Subordination of the Notes" above); (d) failure to perform or comply with any
of the provisions described under "Certain Covenants -- Merger, Sale of Assets,
Etc." above; (e) failure to perform any other covenant, warranty or agreement of
the Company under the Indenture or in the Notes or of the Guarantors under the
Indenture or in the Guarantees continued for 30 days or more after written
notice to the Company by the Trustee or Holders of at least 25% in aggregate
principal amount of the outstanding Notes; (f) default or defaults under the
terms of one or more instruments evidencing or securing Indebtedness of the
Company or any of its Restricted Subsidiaries having an outstanding principal
amount of $10.0 million or more individually or in the aggregate that has
resulted in the acceleration of the payment of such Indebtedness or failure by
the Company or any of its Restricted Subsidiaries to pay principal when due at
the stated maturity of any such Indebtedness and such default or defaults shall
have continued after any applicable grace period and shall not have been cured
or waived; (g) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Restricted Subsidiaries in an amount
of $10.0 million or more (net of any amounts covered by reputable and
creditworthy insurance companies) that remains undischarged or unstayed for a
period of 60 days after the date on which the right to appeal has expired; (h)
certain events of bankruptcy, insolvency or reorganization affecting the Company
or any of its Significant Restricted Subsidiaries; or (i) other than as provided
in or pursuant to any Guarantee or the Indenture, any Guarantee ceases to be in
full force and effect or is declared null and void and unenforceable or found to
be invalid or any Guarantor denies its liability
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under its Guarantee (other than by reason of a release of such Guarantor from
its Guarantee in accordance with the terms of the Indenture and such Guarantee).
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
such Trustee.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (h) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Notes, by notice in writing to
the Company may declare the unpaid principal of (and premium, if any) and
accrued interest to the date of acceleration on all the outstanding Notes to be
due and payable immediately and, upon any such declaration, such principal
amount (and premium, if any) and accrued interest, notwithstanding anything
contained in the Indenture or the Notes to the contrary will become immediately
due and payable. If an Event of Default specified in clause (h) of the preceding
paragraph with respect to the Company occurs under the Indenture, the Notes will
ipso facto become immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder of the Notes.
Any such declaration with respect to the Notes may be annulled by the
Holders of a majority in aggregate principal amount of the outstanding Notes
upon the conditions provided in the Indenture. For information as to waiver of
defaults, see "Modification and Waiver" below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes
outstanding, give the Holders of the Notes thereof notice of all uncured
Defaults or Events of Default thereunder known to it; provided, however, that,
except in the case of a Default or an Event of Default in payment with respect
to the Notes or a Default or Event of Default in complying with "Certain
Covenants -- Merger, Sale of Assets, Etc." above, the Trustee shall be protected
in withholding such notice if and so long as a committee of its trust officers
in good faith determines that the withholding of such notice is in the interest
of the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default thereunder and unless the Holders of at least 25% of the aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as the
Trustee, and the Trustee shall have not have received from the Holders of a
majority in aggregate principal amount of such outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of such a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by it of certain of its obligations under the Indenture
and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall have any liability for any obligations
of the Company or any of its Affiliates
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under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its and the Guarantors' substantive obligations
in respect of the Notes by delivering all outstanding Notes to the Trustee for
cancellation and paying all sums payable by it on account of principal of,
premium, if any, and interest on all Notes or otherwise. In addition to the
foregoing, the Company may, provided that no Default or Event of Default has
occurred and is continuing or would arise therefrom (or, with respect to a
Default or Event of Default specified in clause (h) of "Events of Default"
above, occurs at any time on or prior to the 91st calendar day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until after such 91st day)) under the Indenture and provided that no
default under any Senior Indebtedness would result therefrom, terminate its and
the Guarantors' substantive obligations in respect of the Notes (except for its
obligations to pay the principal of (and premium, if any, on) and the interest
on the Notes and the Guarantors' Guarantee thereof) by (i) depositing with the
Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all
remaining Indebtedness on such Notes; (ii) delivering to the Trustee either an
Opinion of Counsel or a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit and
termination of obligations; and (iii) complying with certain other requirements
set forth in the Indenture. In addition, the Company may, provided that no
Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default or Event of Default specified in clause
(h) of "Events of Default" above, occurs at any time on or prior to the 91st
calendar day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day)) under the
Indenture and provided that no default under any Senior Indebtedness would
result therefrom, terminate all of its and the Guarantors' substantive
obligations in respect of the Notes (including its obligations to pay the
principal of (and premium, if any, on) and interest on the Notes and the
Guarantors' Guarantee thereof) by (i) depositing with the Trustee, under the
terms of an irrevocable trust agreement, money or United States Government
Obligations sufficient (without reinvestment) to pay all remaining Indebtedness
on the Notes; (ii) delivering to the Trustee either a ruling directed to the
Trustee from the Internal Revenue Service to the effect that the Holders of the
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such deposit and termination of obligations or an Opinion of Counsel
addressed to the Trustee based upon such a ruling or based on a change in the
applicable federal tax law since the date of the Indenture, to such effect; and
(iii) complying with certain other requirements set forth in the Indenture.
The Company may make an irrevocable deposit pursuant to this provision only
if at such time it is not prohibited from doing so under the subordination
provisions of the Indenture or certain covenants in the Senior Indebtedness and
the Company has delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect.
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by the laws of
the State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company,
the Guarantors, and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer
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for the Notes); provided, however, that no such modification or amendment to the
Indenture may, without the consent of the Holder of each Note affected thereby,
(a) change the maturity of the principal of or any installment of interest on
any such Note or alter the optional redemption or repurchase provisions of any
such Note or the Indenture in a manner adverse to the Holders of the Notes; (b)
reduce the principal amount of (or the premium) of any such Note; (c) reduce the
rate of or extend the time for payment of interest on any such Note; (d) change
the place or currency of payment of principal of (or premium) or interest on any
such Note; (e) modify any provisions of the Indenture relating to the waiver of
past defaults (other than to add sections of the Indenture or the Notes subject
thereto) or the right of the Holders of Notes to institute suit for the
enforcement of any payment on or with respect to any such Note or any Guarantee
in respect thereof or the modification and amendment provisions of the Indenture
and the Notes (other than to add sections of the Indenture or the Notes which
may not be amended, supplemented or waived without the consent of each Holder
therein affected); (f) reduce the percentage of the principal amount of
outstanding Notes necessary for amendment to or waiver of compliance with any
provision of the Indenture or the Notes or for waiver of any Default in respect
thereof; (g) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the Holders thereof as provided in the Indenture
and a waiver of the payment default that resulted from such acceleration); (h)
modify the ranking or priority of any Note or the Guarantee in respect thereof
of any Guarantor or modify the definition of Senior Indebtedness or Guarantor
Senior Indebtedness or amend or modify the subordination provisions of the
Indenture in any manner adverse to the Holders of the Notes; (i) modify the
provisions of any covenant (or the related definitions) in the Indenture
requiring the Company to make an Offer to Purchase in a manner materially
adverse to the Holders of Notes affected thereby otherwise than in accordance
with the Indenture; or (j) release any Guarantor from any of its obligations
under its Guarantee or the Indenture otherwise than in accordance with the
Indenture.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
and the Guarantors with certain restrictive provisions of the Indenture. Subject
to certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Notes, on behalf of all Holders,
may waive any past default under the Indenture (including any such waiver
obtained in connection with a tender offer or exchange offer for the Notes),
except a default in the payment of principal, premium or interest or a default
arising from failure to purchase any Notes tendered pursuant to an Offer to
Purchase, or a default in respect of a provision that under the Indenture cannot
be modified or amended without the consent of the Holder of each Note that is
affected.
Without the consent of any Holder, the Company, the Guarantors and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add Guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the Holders or to surrender any right or power conferred upon the
Company, to make any change that does not adversely affect the rights of any
Holder or to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA. However, no amendment may be made
to the subordination provisions of the Indenture that adversely affects the
rights of any holder of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or any group or representative thereof authorized
to give a consent) consent to such change.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
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THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indenture. During the existence
of a Default, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, any Guarantor or any other obligor upon the
Notes, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
The Trustee is permitted to engage in other transactions with the Company or an
Affiliate of the Company; provided, however, that if it acquires any conflicting
interest (as defined in the Indenture or in the Trust Indenture Act), it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary; in each case provided that such
Indebtedness is not incurred by such Person in connection with, or in
anticipation of or contemplation of, such Acquisition or such Person becoming a
Restricted Subsidiary of such merger or consolidation.
"Acquired Person" means, with respect to any specified Person, any other
Person that merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any acquisition or purchase of Equity Interests of
any other Person by the Company or any Restricted Subsidiary, in either case
pursuant to which such Person shall become a Restricted Subsidiary or shall be
consolidated with or merged into the Company or any Restricted Subsidiary or
(ii) any acquisition by the Company or any Restricted Subsidiary of the assets
of any Person which constitute substantially all of an operating unit or line of
business of such Person or which is otherwise outside of the ordinary course of
business.
"Affiliate" of any specified person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary (other than directors' qualifying shares, to the
extent mandated by applicable law); (ii) any assets of the Company or any
Restricted Subsidiary (other than Equity Interests) that constitute
substantially all of an operating unit or line of business of the Company or any
Restricted Subsidiary; or (iii) any other property or asset of the Company or
any Restricted Subsidiary (other than Equity Interests) outside of the ordinary
course of business. For the purposes of this definition, the term "Asset Sale"
shall not include (a) any transaction consummated in compliance with
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"Certain Covenants -- Merger, Sale of Assets, Etc." above and the creation of
any Lien not prohibited by "Certain Covenants -- Limitation on Liens" above;
(b)sales of property or equipment that has become worn out, obsolete or damaged
or otherwise unsuitable for use in connection with the business of the Company
or any Restricted Subsidiary, as the case may be; (c) any transaction
consummated in compliance with "Certain Covenants -- Limitation on Restricted
Payments" above; (d) any transfers of properties and assets between Wholly Owned
Restricted Subsidiaries; (e) sales of inventory or accounts receivable in the
ordinary course of business; and (f) sales of Equity Interests of the Company.
In addition, solely for purposes of "Certain Covenants -- Disposition of
Proceeds of Asset Sales" above, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a series of
related transactions, involving assets with a Fair Market Value not in excess of
$1.0 million in any fiscal year shall be deemed not to be an Asset Sale.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1,
A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, and in each case maturing within six months
after the date of acquisition; and (f) in the case of any Foreign Restricted
Subsidiary, Investments: (i) in direct obligations of the sovereign nation (or
any agency thereof) in which such Foreign Restricted Subsidiary is organized and
is conducting business or in obligations fully and unconditionally guaranteed by
such sovereign nation (or any agency thereof) or (ii) of the type and maturity
described in clauses (b) and (c) above of foreign obligors, which Investments or
obligors (or the parents of such obligors) have ratings described in such
clauses or equivalent ratings or are indexed in U.S. dollar denominated
interests from comparable foreign rating agencies.
"Change of Control" means the occurrence of any of the following events:
(i) any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act, including any group acting for the purpose of acquiring, holding or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 40% of the total
voting power of the then outstanding Voting Equity Interests of the Company;
(ii) the Company consolidates with, or merges with or into, another Person
(other than the Company or a Wholly Owned Restricted Subsidiary) or the Company
or any of its Subsidiaries sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of the assets of the Company and
its Subsidiaries (determined on a consolidated basis) to any Person (other than
the Company or any Wholly Owned Restricted Subsidiary), with the effect that the
then existing holders of Voting Equity Interests of the Company or Permitted
Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities
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that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, less
than a majority of the total voting power of the then outstanding Voting Equity
Interests of the surviving or transferee Person; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions described under
"-- Merger, Sale of Assets, etc."
"Change of Control Date" has the meaning set forth under "Offer to Purchase
upon Change of Control" above.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which financial statements are available (the "Four Quarter Period") to (ii)
Consolidated Fixed Charges for such Four Quarter Period; provided, however, that
(1) if the Company or any Restricted Subsidiary has incurred any Indebtedness
since the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such Four Quarter Period
and the discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such Four Quarter Period, (2) if since the
beginning of such Four Quarter Period the Company or any Restricted Subsidiary
shall have made any Asset Sale, the Consolidated EBITDA for such Four Quarter
Period shall be reduced by an amount equal to the Consolidated EBITDA (if
positive) directly attributable to the assets that are the subject of such Asset
Sale for such Four Quarter Period or increased by an amount equal to the
Consolidated EBITDA (if negative) directly attributable thereto for such Four
Quarter Period and Consolidated Fixed Charges for such Four Quarter Period shall
be reduced by an amount equal to the Consolidated Fixed Charges directly
attributable to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased or otherwise discharged with respect to the Company and its
continuing Restricted Subsidiaries in connection with such Asset Sale for such
Four Quarter Period (or, if the Equity Interests of any Restricted Subsidiary
are sold, the Consolidated Fixed Charges for such Four Quarter Period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such Four Quarter
Period the Company or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person that becomes
a Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, Consolidated EBITDA and Consolidated Fixed Charges for such Four
Quarter Period shall be calculated after giving pro forma effect to (x) such
Investment or acquisition of assets (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the first day of
such Four Quarter Period and (y) net cost savings that the Company reasonably
believes in good faith could have been achieved during the Four Quarter Period
as a result of such Investment or acquisition and which cost savings could then
be reflected in pro forma financial statements under GAAP (provided that both
(A) such cost savings were identified and quantified in an Officer's Certificate
delivered to the Trustee at the date of determination and (B) with respect to
each Investment or acquisition completed prior to the 90th day
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preceding such date of determination, actions were commenced or initiated by the
Company within 90 days of such Investment or acquisition to effect such cost
savings identified in such officer's certificate, and (4) if since the beginning
of such Four Quarter Period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such Four Quarter Period) shall have made any Asset Sale
or any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such Four Quarter Period, Consolidated EBITDA and
Consolidated Fixed Charges for such Four Quarter Period shall be calculated
after giving pro forma effect thereto as if such Asset Sale, Investment or
acquisition of assets occurred on, with respect to any Investment or
acquisition, the first day of such Four Quarter Period and, with respect to any
Asset Sale, the day prior to the first day of such Four Quarter Period. Except
as otherwise provided herein, for purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Fixed Charges
associated with any Indebtedness Incurred in connection therewith, the pro forma
calculations shall be determined in accordance with Regulation S-X under the
Securities Act as in effect on the Issue Date. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any agreement under which Interest Rate Protection Obligations are
outstanding applicable to such Indebtedness if such agreement under which such
Interest Rate Protection Obligations are outstanding has a remaining term as at
the date of determination in excess of 12 months); provided, however, that the
Consolidated Fixed Charges of the Company attributable to interest on any
Indebtedness Incurred under a revolving credit facility computed on a pro forma
basis shall be computed based upon the average daily balance of such
Indebtedness during the Four Quarter Period.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated
Non-cash Charges for such period less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in the most recent Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all cash dividend payments on any series
of Preferred Equity Interest and all non-cash dividend payments (other than
dividends paid solely in Qualified Equity Interests) on any series of Preferred
Equity Interest that has a mandatory redemption obligation prior to the Maturity
Date paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Agreements
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and (e) all capitalized interest and all accrued interest
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and excluding (x) amortization of deferred financing fees and (y) interest
recorded as an accretion in the carrying value of liabilities (other than
Indebtedness) recorded at a discounted value and (ii) the interest component of
Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued
by the Company and the Restricted Subsidiaries during such period as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and the Restricted Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any Person if such person is not a Restricted Subsidiary,
except (A) to the extent of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any
Person acquired by the Company or a Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company to the extent of such
restrictions; (iv) any gain or loss realized upon an Asset Sale by the Company
or the Restricted Subsidiaries (including pursuant to any sale/leaseback
transaction); (v) any extraordinary gain or loss; (vi) the cumulative effect of
a change in accounting principles; and (vii) any restoration to income of any
contingency reserve of an extraordinary, non-recurring or unusual nature, except
to the extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Equity
Interests of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period (i) the sum of (A) depreciation, (B) amortization and (C) other non-cash
expenses or charges of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Tangible Assets" means, as of any date of determination, the
total assets, less goodwill and other intangibles (determined in accordance with
Accounting Principles Board Opinion No. 17), shown on the balance sheet of the
Company and its Restricted Subsidiaries as of the most recent date for which
such a balance sheet is available, determined on a consolidated basis in
accordance with GAAP. At September 30, 1997, on a pro forma basis giving effect
to the Refinancing and the private placement of the Convertible Debenture in
November 1997, the Consolidated Tangible Assets of the Company was approximately
$421 million.
"Currency Agreement" means the obligations of any person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the Existing Credit Facility and (b) any other Senior Indebtedness that,
at the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $25.0
million, if the instrument governing such Senior Indebtedness expressly states
that such Indebtedness is "Designated Senior Indebtedness" for purposes of the
Indenture and a Board Resolution setting forth such designation by the Company
has been filed with the Trustee.
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"Designation" has the meaning set forth under "Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "Certain
Covenants -- Designation of Unrestricted Subsidiaries" above.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures (excluding any maturity as a result of optional redemption by the
issuer thereof) or is mandatorily redeemable (excluding, in each case, upon a
change of control; provided that the change of control provisions relating to
such Equity Interests (i) are no more favorable to the holders of the Equity
Interests than the provisions relating to the Notes and (ii) require that in the
event of any Change of Control the Notes are redeemed in accordance with the
terms of the Indenture prior to such Equity Interest), pursuant to a sinking
fund obligation or otherwise, or redeemable, at the option of the holder
thereof, in whole or in part, or exchangeable into Indebtedness on or prior to
the earlier of the maturity date of the Notes or the date on which no Notes
remain outstanding.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary of the
Company organized under the laws of the United States or any political
subdivision thereof.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Existing Credit Facility" means the revolving credit facility dated as of
January 29, 1996 among American Bank Note Company, American Bank Note
Holographics, Inc. and The Chase Manhattan Bank (as successor to Chemical Bank),
including any deferrals, renewals, extension, replacements, refinancings or
refundings thereof, or amendments, modifications or supplements thereto and any
agreement providing therefor, whether or by or with the same or any other
lender, creditor, group of lenders or group of creditors, and including related
guarantee agreements, security agreements and mortgages and other instruments
and agreements executed in connection therewith.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the Issue Date, until such amounts are repaid.
"Existing Investments" means Investments existing on the Issue Date.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
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"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the
Company not organized under the laws of the United States or any political
subdivision thereof.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Coverage Ratio" above.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"Guarantee" means the guarantee of the Notes by each Guarantor under the
Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantor" means (i) each of the direct and indirect domestic operating
Subsidiaries of the Company and their respective successors, and (ii) each other
Restricted Subsidiary, formed, created or acquired before or after the Issue
Date, required to become a Guarantor after the Issue Date pursuant to
"Guarantees of the Notes" above.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, at
any date, (a) all Interest Rate Agreements of such Guarantor; (b) all
Obligations of such Guarantor under stand-by letters of credit; and (c) all
other Indebtedness of such Guarantor for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such
Indebtedness unless the instrument under which such Indebtedness of such
Guarantor for money borrowed is Incurred expressly provides that such
Indebtedness for money borrowed is not senior or superior in right of payment to
such Guarantor's Guarantee of the Notes, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent
that it may constitute Indebtedness, any Obligation for federal, state, local or
other taxes; (b) any Indebtedness among or between such Guarantor and any
Subsidiary of such Guarantor or any Affiliate of such Guarantor or any of such
Affiliate's Subsidiaries; (c) to the extent that it may constitute Indebtedness,
any Obligation in respect of any trade payable Incurred for the purchase of
goods or materials, or for services obtained, in the ordinary course of
business; (d) that portion of any Indebtedness that is Incurred in violation of
the Indenture; (e) Indebtedness evidenced by such Guarantor's Guarantee of the
Notes; (f) Indebtedness of such Guarantor that is expressly subordinate or
junior in right of payment to any other Indebtedness of such Guarantor; (g) to
the extent that it may constitute Indebtedness, any obligation owing under
leases (other than Capital Lease Obligations) or management agreements; and (h)
any obligation that by operation of law is subordinate to any general unsecured
obligations of such Guarantor.
"Holders" means the registered holders of the Notes.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary),
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shall be deemed Incurred at the time any such Acquired Person becomes a
Restricted Subsidiary or merges into or consolidates with the Company or any
Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business or other accrued liabilities arising in the ordinary
course of business); (e) every Capital Lease Obligation of such Person; (f)
every net obligation under interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements of such Person; (g) every
obligation of the type referred to in clauses (a) through (f) of another Person
the payment of which such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor, guarantor or otherwise; and (h) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (a) through (g) above. Indebtedness (a) shall never be calculated taking
into account any cash and Cash Equivalents held by such Person; (b) shall not
include obligations of any Person (x) arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business, provided that such obligations are extinguished within three Business
Days of their incurrence, (y) resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business and consistent
with past business practices and (z) under stand-by letters of credit to the
extent collateralized by cash or Cash Equivalents; (c) which provides that an
amount less than the principal amount thereof shall be due upon any declaration
of acceleration thereof shall be deemed to be incurred or outstanding in an
amount equal to the accreted value thereof at the date of determination; (d)
shall include the liquidation preference and any mandatory redemption payment
obligations in respect of any Disqualified Equity Interests of the Company or
any Restricted Subsidiary; and (e) shall not include obligations under
performance bonds, performance guarantees, surety bonds and appeal bonds,
letters of credit or similar obligations, incurred in the ordinary course of
business.
"Independent Financial Advisor" means a nationally recognized, accounting,
appraisal, investment banking firm or consultant (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest (as defined under "Registration Rights Agreement"
below) on the Notes.
"Interest Rate Agreements" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit (other than any loan,
advance or extension of credit to any officers or directors of the Company or
any Restricted Subsidiary in compliance with the provisions of the covenant
"Transactions With Affiliates") or capital contribution to (by means of
transfers of cash or other property or assets to others or payments for property
or services for the account or use of
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others, or otherwise), or purchase or acquisition of capital stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any other Person. For purposes of the "Limitation on Restricted Payments"
covenant above, the amount of any Investment shall be the original cost of such
Investment, plus the cost of all additions thereto, but without any other
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment; reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided, however, that no such payment
of dividends or distributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. In
determining the amount of any Investment involving a transfer of any property or
asset other than cash, such property shall be valued at its fair market value at
the time of such transfer, as determined in good faith by the Board of Directors
(or comparable body) of the Person making such transfer. If the Company or any
Restricted Subsidiary sells or otherwise disposes of any Voting Equity Interests
of any direct or indirect Restricted Subsidiary such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Voting Equity Interests of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of
Voting Equity Interests of such former Restricted Subsidiary not sold or
disposed of.
"Issue Date" means the original issue date of the Notes.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Maturity Date" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in respect
of any Asset Sale, including all cash or Cash Equivalents received upon any
sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, sales commissions, title transfer fees, title insurance
premium, recording fees and appraiser fees and costs) and any relocation
expenses incurred as a result thereof; (b) taxes (including transfer taxes) paid
or payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements); (c) amounts required to
be applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale; (d) amounts deemed, in good
faith, appropriate by the Board of Directors of the Company to be provided as a
reserve, in accordance with GAAP, against any liabilities associated with such
assets which are the subject of such Asset Sale; including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale (provided that the amount of any such reserves
shall be deemed to constitute Net Cash Proceeds at the time such reserves shall
have been reversed or are not otherwise required to be retained as a reserve);
and (e) with respect to Asset Sales by Restricted Subsidiaries, the portion of
such cash payments attributable to Persons holding a minority interest in such
Restricted Subsidiary.
"Notes Pro Rata Share" means the amount of the applicable Unutilized Net
Cash Proceeds obtained by multiplying the amount of such Unutilized Net Cash
Proceeds by a fraction, (i) the numerator of which is the aggregate principal
amount of Notes outstanding at the time of the applicable Asset Sale with
respect to which the Company is required to use Unutilized Net Cash Proceeds to
repay or make an Offer to Purchase or repay and (ii) the denominator of which is
the
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sum of (a) the aggregate accreted value and/or principal amount, as the case may
be, of all Other Pari Passu Debt outstanding at the time of the applicable Asset
Sale and (b) the aggregate principal amount of all Notes outstanding at the time
of the applicable Offer to Purchase with respect to which the Company is
required to use the applicable Unutilized Net Cash Proceeds to offer to repay or
make an Offer to Purchase or repay.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder at
his address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such Offer
at the purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase, which shall
be not less than 20 Business Days nor more than 60 days after the date of such
Offer, and a settlement date (the "Purchase Date") for purchase of Notes to
occur no later than five Business Days after the Expiration Date. The Company
shall notify the Trustee at least 5 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Other Pari Passu Debt" means Indebtedness of the Company or any Guarantor
that neither constitutes Senior Indebtedness or Guarantor Senior Indebtedness,
as applicable, or Subordinated Indebtedness.
"Permitted Holder" means Mr. Morris Weissman and members of his immediate
family and any trust of which he is the beneficiary and any officers and
directors of the Company.
"Permitted Indebtedness" has the meaning set forth in the second paragraph
of "Certain Covenants -- Limitation on Indebtedness" above.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) Interest
Rate Agreements and Currency Agreements; (d) bonds, notes, debentures, other
securities or non-cash consideration received as a result of (x) Asset Sales
permitted under "Certain Covenants -- Disposition of Proceeds of Asset Sales"
above not to exceed 25% of the total consideration for such Asset Sales or (y) a
disposition of assets that does not constitute an Asset Sale; (e) Investments in
the Company and Investments in a Restricted Subsidiary or a Person that, as a
result of or in connection with such Investment, becomes a Restricted Subsidiary
or is merged with or into or consolidated with the Company or another Restricted
Subsidiary; (f) Investments existing as of the Issue Date; (g) any Investment
consisting of a guarantee by a Restricted Subsidiary of Senior Indebtedness or
any guarantee of Indebtedness otherwise permitted by the Indenture; (h)
Investments acquired in exchange for Equity Interests (other than Disqualified
Equity Interests) of the Company; and (i) Investments that, when taken together
with all other Investments made pursuant to this clause (i), do not exceed the
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greater of $40 million and 10% of Consolidated Tangible Assets of the Company
determined in accordance with GAAP.
"Permitted Junior Securities" means (a) debt securities of the Company as
reorganized or readjusted, or debt securities of the Company (or any other
company, trust or organization provided for by a plan of reorganization or
readjustment succeeding to the assets and liabilities of the Company) that, in
each case, are subordinated, to at least the same extent as the Notes, to the
payment of all Senior Indebtedness that will be outstanding after giving effect
to such plan of reorganization or readjustment, so long as (i) the rate of
interest on such debt securities shall not exceed the effective rate of interest
on the Notes on the date hereof, (ii) such debt securities shall not be entitled
to the benefits of covenants or defaults materially more beneficial to the
holders of such debt securities than those in effect with respect to the Notes
on the date hereof (or the Senior Indebtedness, after giving effect to such plan
of reorganization or readjustment) and (iii) such debt securities shall not
provide for amortization (including sinking fund and mandatory prepayment
provisions) commencing prior to the date one year and one day following the
final scheduled maturity date of the Senior Indebtedness (as modified by such
plan of reorganization or readjustment) or (b) shares of stock of the Company as
reorganized or readjusted pursuant to a plan of reorganization or readjustment;
provided that, in each case with respect to clauses (a) and (b) above, (x) if a
new corporation results from any such reorganization or readjustment, such
corporation assumes all Senior Indebtedness that will be outstanding after
giving effect thereto and (y) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered by any such
reorganization or readjustment, including, without limitation, such rights being
impaired within the meaning of Section 1124 of Title 11 of the United States
Code, or any impairment of the right to receive interest accruing during the
pendency of a bankruptcy or insolvency proceeding, including proceedings under
Title 11 of the United States Code.
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's and mechanics' Liens
and other similar Liens arising in the ordinary course of business; (c) Liens
existing on the Issue Date; (d) Liens securing only the Notes or the Guarantees;
(e) Liens in favor of the Company or any Restricted Subsidiary; (f) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, however, that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (g) encroachments, encumbrances, easements, reservation
of rights of way, restrictions and other similar easements, licenses,
restrictions on the use of properties (including zoning or other such
restrictions), or minor imperfections of title that do not materially detract
from the properties subject thereto or interfere with the ordinary conduct of
the business of the Company and the Restricted Subsidiaries; (h) Liens resulting
from the deposit of cash or notes in connection with contracts, tenders or
expropriation proceedings, or to secure workers' compensation, surety or appeal
bonds, costs of litigation when required by law and public and statutory
obligations or obligations under franchise arrangements entered into in the
ordinary course of business; (i) Liens securing Indebtedness consisting of
Capital Lease Obligations, Purchase Money Indebtedness, mortgage financings,
industrial revenue bonds or other monetary obligations, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or the Restricted Subsidiaries, or repairs, additions or improvements to
such assets, provided, however, that (I) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of any
such assets or repair, addition or improvement thereto (plus an amount equal to
the reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or the Restricted
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Subsidiaries (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by "Certain Covenants -- Limitation on Indebtedness"
above and (IV) such Liens attach within 180 days of such purchase, construction,
installation, repair, addition or improvement; (j) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancing") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses above so long as such
Lien does not extend to any other property (other than improvements thereto);
and (k) Liens securing Indebtedness of the Company or any Restricted Subsidiary
permitted to be Incurred under the Indenture in an aggregate amount not to
exceed $10.0 million.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) that is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.
"Public Equity Offering" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8) or any similar provisions
under foreign law.
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the Fair Market Value of such property or such purchase
price or cost, including any refinancing of such Indebtedness that does not
increase the aggregate principal amount (or accreted amount, if less) thereof as
of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Replacement Assets" has the meaning set forth in the first paragraph under
"Certain Covenants -- Disposition of Proceeds of Asset Sales" above.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of the
Board of Directors of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "Certain Covenants -- Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of
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the Board of Directors of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations of the
Company under the Existing Credit Facility; (b) all Interest Rate Protection
Obligations of the Company; (c) all Obligations of the Company under stand-by
letters of credit; and (d) all other Indebtedness of the Company for borrowed
money, including principal, premium, if any, and interest (including Post-
Petition Interest) on such Indebtedness, unless the instrument under which such
Indebtedness of the Company for money borrowed is Incurred expressly provides
that such Indebtedness for money borrowed is not senior or superior in right of
payment to the Notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) to the extent that it may constitute Indebtedness, any
Obligation for Federal, state, local or other taxes; (b) any Indebtedness among
or between the Company and any Subsidiary of the Company or any Affiliate of the
Company or any of such Affiliate's Subsidiaries; (c) to the extent that it may
constitute Indebtedness, any Obligation in respect of any trade payable Incurred
for the purchase of goods or materials, or for services obtained, in the
ordinary course of business; (d) that portion of any Indebtedness that is
Incurred in violation of the Indenture; (e) Indebtedness evidenced by the Notes;
(f) Indebtedness of the Company that is expressly subordinate or junior in right
of payment to any other Indebtedness of the Company; (g) to the extent that it
may constitute Indebtedness, any obligation owing under leases (other than
Capital Lease Obligations) or management agreements; and (h) any obligation that
by operation of law is subordinate to any general unsecured obligations of the
Company.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of the
Company accounted for more than 10.0% of the consolidated revenues of the
Company and the Restricted Subsidiaries or (ii) as of the end of such fiscal
year, owned more than 10.0% of the consolidated assets of the Company and the
Restricted Subsidiaries, all as set forth on the consolidated financial
statements of the Company and the Restricted Subsidiaries for such year prepared
in conformity with GAAP, and (b) any Restricted Subsidiary which, when
aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (h) of "Events of Default" above has occurred, would constitute a
Significant Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable.
"Subordinated Indebtedness" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Notes or such
Guarantor's Guarantee, as the case may be.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"10 3/8% Notes" means the Company's 10 3/8% Senior Notes due 2002.
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"United States Government Obligations" means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "Certain Covenants -- Designation of Unrestricted Subsidiaries"
above. Any such designation may be revoked by a resolution of the Board of
Directors of the Company delivered to the Trustee, subject to the provisions of
such covenant.
"Unutilized Net Cash Proceeds" has the meaning set forth in the third
paragraph under "Certain Covenants -- Disposition of Proceeds of Asset Sales"
above.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The Notes initially will be represented by one or more permanent global
certificates in definitive, duly registered form (the "Global Notes"). The
Global Notes will be deposited on the date of issuance with, or on behalf of,
The Depository Trust Company, New York, New York ("DTC") and registered in the
name of a nominee of DTC.
The Global Notes. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interests represented by such Global Notes to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Qualified institutional buyers ("QIBs") and
institutional Accredited Investors who are not QIB's may hold their interests in
the Global Notes directly through DTC if they are participants in such system,
or indirectly through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records
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relating to or payments made on account of beneficial ownership interests in the
Global Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the Global Notes, will credit
participants' accounts with payments in amount proportionate to their respective
beneficial interests in the principal amount of the Global Notes as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Notes held through
such participants will be governed by standing instructions and customary
practice, as is now the case, with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
certificate in registered form (a "Certificated Security") for any reason,
including to sell Notes to persons in states which require physical delivery of
the Notes, or to pledge such securities, such holder must transfer its interest
in a Global Note in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on December 12, 1997 to
the Initial Purchasers pursuant to the Purchase Agreement as part of Units
consisting of $95,000,000 aggregate principal amount of Old Notes and 95,000
Warrants to purchase an aggregate of 1,185,790 shares of Common Stock. The
Initial Purchasers subsequently resold the Old Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act and in offshore
transactions to Non U.S. persons in reliance on Regulation S under the
Securities Act. As a condition to the Purchase Agreement, the Company and the
Guarantors (collectively, the "Issuers") and the Initial Purchasers entered into
the Registration Rights Agreement on December 12, 1997, the date of the Initial
Offering (the "Issue Date").
Pursuant to the Registration Rights Agreement, the Company and the
Guarantors agreed that, unless the Exchange Offer is not permitted by applicable
law or Commission policy, they would (i) file with the Commission on or prior to
45 days after the Issue Date a registration statement on Form S-1 or Form S-4,
if the use of such form is then available under the Securities Act with respect
to the Exchange Notes, (ii) use its best efforts to cause such registration
statement to become effective under the Securities Act within 120 days after the
Issue Date (the "Effectiveness Date") and (iii) use its best efforts to
consummate the Exchange Offer as promptly as practicable, but in any event prior
to 160 days after the Issue Date. The Exchange Offer is being made to satisfy
certain of the contractual obligations of the Company and the Guarantors under
the Registration Rights Agreement and the Purchase Agreement.
If the Exchange Offer is not consummated on or prior to the fifth day after
the Expiration Date (subject to extension in certain circumstances), additional
interest, as liquidated damages ("Additional Interest"), shall accrue on the Old
Notes over and above the stated interest in an amount equal to $0.192 per week
(or any part thereof) per $1,000 principal amount of the Old Notes commencing on
the sixth day after the Expiration Date; provided, however, that upon the
exchange of Exchange Notes for all Old Notes validly tendered and not withdrawn,
Additional Interest on the Old Notes shall cease to accrue (but any accrued
amount shall be payable).
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior to the
Effectiveness Date, (iii) the Exchange Offer is not, for any reason, consummated
on or prior to the fifth day after the Expiration Date, (iv) any holder of
Private Exchange Notes (as defined in the Registration Rights Agreement) so
requests, or (v) in the case of any holder that participates in the Exchange
Offer, such holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under Federal securities laws, then, in the
case of each of clauses (i) through (v) of this sentence, the Company shall
promptly deliver to the holders and the Trustee notice thereof and thereafter
the Company and each of the Guarantors shall file a Shelf Registration Statement
(as defined in the Registration Rights Agreement) pursuant to the terms of the
Registration Rights Agreement. If so required, the Company and the Guarantors
shall file with the SEC the Shelf Registration Statement on or prior to the
applicable Filing Date (as defined in the Registration Rights Agreement).
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior
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to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Old Notes accepted in the Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer. However,
Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B designation
and a different CUSIP Number from the Old Notes, (ii) the Exchange Notes have
been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange Offer,
all of which rights will terminate when the Exchange Offer is terminated. The
Exchange Notes will evidence the same debt as the Old Notes and will be entitled
to the benefits of the Indenture.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $95,000,000
aggregate principal amount of Old Notes were outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
Any such extension, delay in acceptance, termination or amendment will be
followed promptly by oral (confirmed in writing) or written notice thereof to
the Exchange Agent and by making a public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
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Expiration Date. Without limiting the manner in which the Company may choose to
make any public announcement and subject to applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to an appropriate news
agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on June 1, 1998. Interest on the Old Notes accepted for exchange
will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 1 and
December 1, commencing on June 1, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to validly tender Old Notes pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-entry
transfer) an Agent's Message in lieu of the Letter of Transmittal, and any other
required documents must be received by the Exchange Agent at the address set
forth under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the
Expiration Date, either (a) certificates for tendered Old Notes must be received
by the Exchange Agent at such address or (b) such Old Notes must be transferred
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such tender received by the Exchange Agent, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal). The
term "Agent's Message" means a message, transmitted by the book-entry transfer
facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the tendering participant that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such participant.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, (i) the Exchange Notes to be acquired by such holder of Old
Notes in connection with the Exchange Offer are being acquired by such holder in
the ordinary course of business of such holder, (ii) such holder is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) except as otherwise disclosed in writing, such holder is
not an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company, and (iv) such holder acknowledges and agrees that any person
participating in the Exchange Offer with the intention or for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Commission set forth in the no-action letters that
are discussed under "Resale of the Exchange Notes." In addition, by accepting
the Exchange Offer, such holder will (i) represent and warrant that, if such
holder is a Participating Broker-Dealer, such Participating Broker-Dealer
acquired the Old Notes for its own account as a result of market-making
activities or other trading activities and has not entered into any arrangement
or understanding with the Company or any "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes
to be received in the Exchange Offer, and (ii) acknowledges that, by receiving
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired as a result of market-making activities or other trading
activities, such
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Participating Broker-Dealer will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of such Exchange Notes.
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a recognized participant in the Securities
Transfer Agent Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program (each a "Medallion
Signature Guarantor"), unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of a member firm of a registered national securities exchange, a member
of the NASD or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by a Medallion Signature Guarantor.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing such
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee (or, in the case of book-entry transfer, an Agent's Message in lieu
thereof) and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period
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provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or, in the case of book-entry transfer, an Agent's Message) or any
other required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer (including delivery of an Agent's Message),
prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a letter or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number(s)
and principal amount of such Old Notes, or, in the case of Old Notes transferred
by book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes into the name of the
person withdrawing the tender and (iv) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see
"-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
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EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand Or Overnight Delivery: By Registered Or Certified Mail:
The Bank of New York Facsimile Transmissions: The Bank of New York
101 Barclay Street (Eligible Institutions Only) 101 Barclay Street, 7E
Corporate Trust Services (212) 571-3080 New York, New York 10286
Window Attention: Reorganization
Ground Level To Confirm by Telephone Section
Attention: Reorganization or for Information Call:
Section (212) 815-6333
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is the original principal amount, less the original issue discount
representing the value of the Warrants, plus accretion thereon, as reflected in
the Company's accounting records on the date of exchange. Accordingly, no gain
or loss for accounting purposes will be recognized by the Company. Certain
expenses of the Exchange Offer will be amortized over the term of the Exchange
Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
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upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. For a description of
the procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax
consequences expected to result to holders whose Old Notes are exchanged for
Exchange Notes in the Exchange Offer. This discussion is based on the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conditions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as a taxable transaction for
federal income tax purposes. As a result, there should be no federal income tax
consequences to holders exchanging Old Notes for Exchange Notes pursuant to the
Exchange Offer.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, TREASURY REGULATIONS, RULING AND JUDICIAL DECISIONS NOW IN EFFECT,
ALL OF WHICH ARE SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED
RETROACTIVELY IN A MANNER THAT COULD ADVERSELY AFFECT HOLDERS EXCHANGING NOTES.
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EACH HOLDER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS, OF EXCHANGING OLD NOTES FOR EXCHANGE NOTES PURSUANT
TO THE EXCHANGE OFFER.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 180 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1998 (90 days after the commencement of the Exchange Offer),
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Exchange Notes offered hereby will be passed upon for the Company by Weil,
Gotshal & Manges LLP, New York, New York. Certain United States federal income
tax matters in connection with the Exchange Offer will be passed upon for the
Company by Weil, Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 of American
Banknote Corporation incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated by reference herein, and has been so incorporated
in
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reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The special purpose financial statements of Leigh Mardon Security Division
incorporated in this Prospectus by reference from the Company's Current Report
on Form 8-K/A Amendment No. 1 dated August 14, 1996 have been audited by KPMG,
chartered accountants, as stated in their report, which is incorporated herein
by reference, and has been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company and each of American Bank Note Holographics, Inc., American
Banknote Card Services, Inc., American Banknote Merchant Services, Inc., ABN
Investments, Inc., ABN Equities, Inc., American Banknote Australasia Holdings,
Inc., ABN Government Services, Inc., USBC Capital Corp. and ABN CBA, Inc. (the
"Delaware Corporate Guarantors") are incorporated under the laws of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware
("Section 145") provides that a Delaware corporation may indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorney' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
or are threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorney's fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director has actually and reasonably incurred.
The respective certificates of incorporation, as amended, of the Company
and each Delaware Corporate Guarantor, other than American Banknote Card
Services Inc., provide that no director of the corporation shall be liable to
such corporation or its stockholders for monetary damages arising from a breach
of fiduciary duty owed to the corporation or its stockholders. The certificate
of incorporation, as amended, of each such Delaware Corporate Guarantor excludes
from such provision liabilities arising (i) from breach of the director's duty
of loyalty to each such company, or its stockholders, (ii) from acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) from any transaction from which the director derived an
improper personal benefit.
The Certificate of Incorporation of each of American Banknote Card Services
Inc., ABN Equities Inc. and ABN Investments Inc. provide that each of these
companies will indemnify its directors, officers and agents to the full extent
permitted by law.
The respective by-laws of the Company and each Delaware Corporate
Guarantor, other than American Banknote Card Services, Inc., provide that the
Company shall indemnify, to the fullest extent permitted by the General
Corporation Law of the State of Delaware, any person who was or is a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by
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reason of the fact that he or she is or was a director or officer of such
corporation or other entity, or is or was serving at the request of such
corporation as a director, officer or member of another corporation, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding and that such indemnification shall continue as to an
indemnitee who has ceased to be a director or officer and shall inure to the
benefit of the indemnitee's heirs, executors and administrators. The by-laws of
the Company and each Delaware Corporate Guarantor, except American Banknote Card
Services Inc., further provide that any employee or agent of such corporation,
or any person serving at the request of the Company or such respective Delaware
Corporate Guarantor as an employee or agent of another corporation, partnership,
joint venture or other enterprise shall be indemnified in the same manner as a
director or officer of such entity.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
The respective by-laws of the Company and American Banknote Holographics,
Inc. Guarantor provide that each such corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of such corporation or was
serving at the request of that corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the corporation would have the power
to indemnify such person against such liability under its by-laws.
All of the directors and officers of the Company and each Delaware
Corporate Guarantor are covered by insurance policies maintained and held in
effect by either the Company or such corporation against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
American Bank Note Company and ABN Securities Systems, Inc. are
incorporated under the laws of the State of New York. Sections 722 through 725
of the New York Business Corporation Law (the "Business Corporation Law")
provide that a corporation may indemnify, with certain limitations and
exceptions, a director or officer as follows: (1) in a derivative action,
against his reasonable expenses, including attorneys' fees but excluding certain
settlement costs, actually and necessarily incurred by him in connection with
the defense thereof, or an appeal therein, if such director or officer acted, in
good faith, for a purpose which he reasonably believed to be in (or in the case
of service for another corporation, not opposed to) the best interests of the
corporation; and (2) in a civil or criminal non-derivative action or proceeding
including a derivative action by another corporation, partnership or other
enterprise in which any director or officer of the indemnifying corporation
served in any capacity at the indemnifying corporation's request, against
judgments, fines, settlement payments and reasonable expenses, including
attorneys' fees, incurred as a result thereof, or any appeal therein, if such
director or officer acted in good faith, for a purpose which he reasonably
believed to be in (or, in the case of service for any other corporation, not
opposed to) the best interests of the corporation and, in criminal actions and
proceedings, in addition, had no reasonable cause to believe that his conduct
was unlawful. Such indemnification is a matter of right where the director or
officer has been successful on the merits or otherwise, and otherwise may be
granted upon corporate authorization or court award as provided in the statute.
Section 721 of the Business Corporation Law provides that indemnification
arrangements can be established for directors and officers, by contract, by-law,
charter provision, action of shareholders or board of directors, on terms other
than those specifically provided by Article 7 of the Business Corporation Law,
provided that no indemnification may be made to or on behalf of any director or
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officer if a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. Article 6 of American Bank Note
Company's By-Laws provides for the indemnification, to the full extent
authorized by law, of any person made or threatened to be made a party in any
civil or criminal action or proceeding by reason of the fact that he is or was a
director or officer of American Bank Note Company. In addition, Article 10 of
American Banknote Company's Certificate of Incorporation provides that there
shall be no limit on the company's right to indemnify other than as set forth in
applicable law. Article VI of ABN Securities Systems, Inc.'s By-laws contains
extensive provisions pertaining to indemnification. In essence, subject to a
number of qualifications, ABN Securities Systems, Inc. may indemnify, to the
full extent authorized by law, of any person made or threatened to be made a
party in any civil or criminal action or proceeding by reason of the fact that
he is or was a director or officer of ABN Securities Systems, Inc.
Horsham Holding Company, Inc. is incorporated under the laws of the
Commonwealth of Pennsylvania. Sections 1741 and 1742 of the Pennsylvania
Business Corporation Law ("PBCL") provide that a business corporation shall have
the power to indemnify any person who was or is a party, or is threatened to be
made a party, to any proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such proceeding, if such person acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. In the case of an
action by or in the right of the corporation, such indemnification is limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection with the defense or settlement of such action, except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to the corporation unless, and
only to the extent that, a court determines upon application that, despite the
adjudication of liability but in view of all the circumstances, such person is
fairly and reasonably entitled to indemnity for the expenses that the court
deems proper.
PBCL Section 1744 provides that, unless ordered by a court, any
indemnification referred to above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, PBCL Section 1743 provides that to the extent
that a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
PBCL Section 1745 provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business corporation in
defending any proceeding may be paid by the corporation in advance of the final
disposition of the proceeding upon receipt of an undertaking
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to repay the amount advanced if it is ultimately determined that the indemnitee
is not entitled to be indemnified by the corporation.
PBCL Section 1746 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the foregoing provisions is not
exclusive of any other rights to which a person seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise, and that indemnification may be granted under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise for any action
taken or any failure to take any action whether or not the corporation would
have the power to indemnify the person under any other provision of law and
whether or not the indemnified liability arises or arose from any action by or
in the right of the corporation; provided, however, that no indemnification may
be made in any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
PBCL Section 1747 permits a Pennsylvania business corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against any liability asserted against such
person and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify the
person against such liability under the provisions described above.
Article XVII of Horsham Holding Company Inc.'s By-Laws, as amended provide
that, to the fullest extent that the laws of Pennsylvania permit elimination or
limitation of the liability of directors, no director of the Corporation shall
be personally liable for monetary damages as such for any action taken, or any
failure to take any action, as a director. The PBCL provides that whenever the
by-laws of a corporation by a vote of the shareholders so provide, a director
shall not be personally liable for monetary damages as such for any action
taken, or failure to take any action, unless (i) the director has breached or
failed to perform the duties of his office under the standard of care and
justifiable reliance specified in the PBCL and (ii) the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. These
provisions do not apply to (i) responsibility or liability of a director
pursuant to any criminal statute or (ii) the liability of a director for payment
of taxes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<S> <C> <C> <C>
3.1 (a)(i) -- Certificate of Incorporation of American Banknote
Corporation (the "Company"), including Amendment No. 1
thereto (filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995)
(the "June 1995 10-Q").*
(a)(ii) -- Certificate of Designation of the Company authorizing
Preferred Stock as Series A (filed as Exhibit 4 to the
Company's Report on Form 8-A filed April 6, 1994).*
(b) -- Certificate of Incorporation of American Bank Note Company,
as amended.
(c) -- Certificate of Incorporation of ABN Securities Systems,
Inc.**
(d) -- Articles of Incorporation of Horsham Holding Company, Inc.**
(e) -- Certificate of Incorporation of American Bank Note
Holographics, Inc., as amended.**
(f) -- Certificate of Incorporation of American Banknote Card
Services, Inc., as amended.**
(g) -- Certificate of Incorporation of American Banknote Merchant
Services, Inc.**
(h) -- Certificate of Incorporation of ABN Investments, Inc.**
(i) -- Certificate of Incorporation of ABN Equities Inc.**
</TABLE>
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<TABLE>
<S> <C> <C> <C>
(j) -- Certificate of Incorporation of American Banknote
Australasia Holdings, Inc.**
(k) -- Certificate of Incorporation of ABN Government Services,
Inc.**
(l) -- Certificate of Incorporation of USBC Capital Corp.**
(m) -- Certificate of Incorporation of ABN CBA, Inc.**
3.2 (a) -- By-laws of the Company (filed as Exhibit 3.2 to the June
1995 10-Q).*
(b) -- By-laws of American Bank Note Company.**
(c) -- By-laws of ABN Securities Systems, Inc.**
(d) -- By-laws of Horsham Holding Company, Inc.**
(e) -- By-laws of American Bank Note Holographics, Inc.**
(f) -- By-laws of American Banknote Card Services, Inc.**
(g) -- By-laws of American Banknote Merchant Services, Inc.**
(h) -- By-laws of ABN Investments, Inc.**
(i) -- By-laws of ABN Equities Inc.**
(j) -- By-laws of American Banknote Australasia Holdings, Inc.**
(k) -- By-laws of ABN Government Services, Inc.**
(l) -- By-laws of USBC Capital Corp.**
(m) -- By-laws of ABN CBA, Inc.**
4.1 -- Indenture for the 11 1/4% Senior Subordinated Notes due
2007, Series A (the "Old Notes") and 11 1/4% Senior
Subordinated Notes due 2007, Series B (the "Exchange
Notes"), dated as of December 12, 1997 among the Company,
the Guarantors and The Bank of New York, as trustee.**
4.2 -- Form of Old Note (included in Exhibit 4.1).
4.3 -- Form of Exchange Note (included in Exhibit 4.1).
4.4 -- Forms of Guarantee (included in Exhibits 4.2 and 4.3).
4.5 -- First Supplement dated as of October 8, 1997 to the
Indenture dated as of May 1, 1994 between the Company and
State Street Bank & Trust Company (as successor to First
National Bank of Boston), as Trustee, relating to the
11 5/8% Senior Notes due August 1, 2002, Series B.**
4.6 -- Registration Rights Agreement dated as of December 12, 1997
among the Company, the Guarantors and Chase Securities Inc.,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities,
Inc. and Societe Generale Securities Corporation.**
4.7 -- The Company undertakes to furnish the Securities and
Exchange Commission, upon request, a copy of all instruments
with respect to long-term debt not filed herewith.
5 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of
the Exchange Notes to be issued by the Company.
8 -- Opinion of Weil, Gotshal & Manges LLP as to certain federal
income tax matters.
11 -- Computation of per share income (loss) (filed as Exhibit 11
to the 1996 10-K).*
12 -- Statement of Computation of Ratios of Earnings to Fixed
Charges.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of KPMG.
23.3 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5 to this Registration Statement).
23.4 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 8 to this Registration Statement).
24 -- Power of Attorney.**
25 -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee on Form T-1 with respect to the 11 1/4%
Senior Subordinated Notes due 2007.**
99.1 -- Form of Letter of Transmittal.**
99.2 -- Form of Notice of Guaranteed Delivery.**
</TABLE>
II-5
<PAGE> 79
<TABLE>
<S> <C> <C> <C>
99.3 -- Form of Instructions to Registered Holders and/or Book-Entry
Facility Participant from Beneficial Owner.**
99.4 -- Form of Exchange Agent Agreement.**
</TABLE>
- ---------------
* Incorporated herein by reference.
** Previously filed.
ITEM 22. UNDERTAKINGS.
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of a registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the provisions, or otherwise, each of the
registrants has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has
II-6
<PAGE> 80
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
(d) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) Each of the undersigned registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
named below have duly caused this Registration Statement to be signed on their
behalf by the undersigned, thereunto duly authorized, in the City and State of
New York, on this 30th day of March, 1998.
AMERICAN BANKNOTE CORPORATION
AMERICAN BANK NOTE COMPANY
ABN SECURITIES SYSTEMS, INC.
HORSHAM HOLDING COMPANY INC.
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
AMERICAN BANKNOTE CARD SERVICES, INC.
AMERICAN BANKNOTE MERCHANT
SERVICES, INC.
ABN INVESTMENTS, INC.
ABN EQUITIES INC.
AMERICAN BANKNOTE AUSTRALASIA
HOLDINGS, INC.
ABN GOVERNMENT SERVICES, INC.
USBC CAPITAL CORP.
ABN CBA, INC.
By: /s/ JOHN T. GORMAN
------------------------------------
JOHN T. GORMAN
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
II-8
<PAGE> 82
AMERICAN BANKNOTE CORPORATION
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and Chief March 30, 1998
- --------------------------------------------- Executive Officer (Principal
(MORRIS WEISSMAN) Executive Officer)
/s/ JOHN T. GORMAN Executive Vice President and March 30, 1998
- --------------------------------------------- Chief Financial Officer
(JOHN T. GORMAN) (Principal Financial and
Accounting Officer)
* Director March 30, 1998
- ---------------------------------------------
(BETTE B. ANDERSON)
* Director March 30, 1998
- ---------------------------------------------
(DR. OSCAR ARIAS S.)
* Director March 30, 1998
- ---------------------------------------------
(C. GERALD GOLDSMITH)
* Director March 30, 1998
- ---------------------------------------------
(IRA J. HECHLER)
* Director March 30, 1998
- ---------------------------------------------
(DAVID S. ROWE-BEDDOE)
* Director March 30, 1998
- ---------------------------------------------
(ALFRED TEO)
</TABLE>
II-9
<PAGE> 83
AMERICAN BANK NOTE COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
HORSHAM HOLDING COMPANY, INC.
AMERICAN BANK NOTE AUSTRALASIA HOLDINGS, INC.
USBC CAPITAL CORP.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and Chief March 30, 1998
- --------------------------------------------- Executive Officer (Principal
(MORRIS WEISSMAN) Executive Officer)
/s/ JOHN T. GORMAN Executive Vice President and March 30, 1998
- --------------------------------------------- Chief Financial Officer
(JOHN T. GORMAN) (Principal Financial and
Accounting Officer) and Director
</TABLE>
ABN INVESTMENTS, INC.
ABN EQUITIES INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and Chief March 30, 1998
- --------------------------------------------- Executive Officer (Principal
(MORRIS WEISSMAN) Executive Officer)
</TABLE>
II-10
<PAGE> 84
ABN SECURITIES SYSTEMS, INC.
AMERICAN BANKNOTE CARD SERVICES, INC.
AMERICAN BANKNOTE MERCHANT SERVICES, INC.
ABN GOVERNMENT SERVICES, INC.
ABN CBA, INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and Chief March 30, 1998
- --------------------------------------------- Executive Officer (Principal
(MORRIS WEISSMAN) Executive Officer)
/s/ JOHN T. GORMAN Executive Vice President and March 30, 1998
- --------------------------------------------- Chief Financial Officer
(JOHN T. GORMAN) (Principal Financial and
Accounting Officer) and Director
* Director March 30, 1998
- ---------------------------------------------
(HARVEY J. KESNER)
*By /s/ JOHN T. GORMAN
----------------------------------------
JOHN T. GORMAN
(ATTORNEY-IN-FACT)
</TABLE>
II-11
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT EXEMPTION
NUMBER DESCRIPTION INDICATION
------- ----------- ----------
<C> <S> <C> <C>
3.1(a)(i) -- Certificate of Incorporation of American Banknote
Corporation (the "Company"), including Amendment No. 1
thereto (filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995)
(the "June 1995 10-Q")*.....................................
(a)(ii) -- Certificate of Designation of the Company authorizing
Preferred Stock as Series A (filed as Exhibit 4 to the
Company's Report on Form 8-A filed April 6, 1994)*..........
(b) -- Certificate of Incorporation of American Bank Note Company,
as amended**................................................
(c) -- Certificate of Incorporation of ABN Securities Systems,
Inc.**......................................................
(d) -- Articles of Incorporation of Horsham Holding Company,
Inc.**......................................................
(e) -- Certificate of Incorporation of American Bank Note
Holographics, Inc., as amended**............................
(f) -- Certificate of Incorporation of American Banknote Card
Services, Inc., as amended**................................
(g) -- Certificate of Incorporation of American Banknote Merchant
Services, Inc.**............................................
(h) -- Certificate of Incorporation of ABN Investments, Inc.**.....
(i) -- Certificate of Incorporation of ABN Equities Inc.**.........
(j) -- Certificate of Incorporation of American Banknote
Australasia Holdings, Inc.**................................
(k) -- Certificate of Incorporation of ABN Government Services,
Inc.**......................................................
(l) -- Certificate of Incorporation of USBC Capital Corp.**........
(m) -- Certificate of Incorporation of ABN CBA, Inc.**.............
3.2(a) -- By-laws of the Company (filed as Exhibit 3.2 to the June
1995 10-Q)*.................................................
(b) -- By-laws of American Bank Note Company**.....................
(c) -- By-laws of ABN Securities Systems, Inc.**...................
(d) -- By-laws of Horsham Holding Company, Inc.**..................
(e) -- By-laws of American Bank Note Holographics, Inc.**..........
(f) -- By-laws of American Banknote Card Services, Inc.**..........
(g) -- By-laws of American Banknote Merchant Services, Inc.** .....
(h) -- By-laws of ABN Investments, Inc.**..........................
(i) -- By-laws of ABN Equities Inc.**..............................
(j) -- By-laws of American Banknote Australasia Holdings, Inc.**...
(k) -- By-laws of ABN Government Services, Inc.**..................
(l) -- By-laws of USBC Capital Corp.**.............................
(m) -- By-laws of ABN CBA, Inc.**..................................
4.1 -- Indenture for the 11 1/4% Senior Subordinated Notes due
2007, Series A (the "Old Notes") and 11 1/4% Senior
Subordinated Notes due 2007, Series B (the "Exchange
Notes"), dated as of December 12, 1997 among the Company,
the Guarantors and The Bank of New York, as trustee**.......
4.2 -- Form of Old Note (included in Exhibit 4.1)..................
4.3 -- Form of Exchange Note (included in Exhibit 4.1).............
4.4 -- Forms of Guarantee (included in Exhibits 4.2 and 4.3).......
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT EXEMPTION
NUMBER DESCRIPTION INDICATION
------- ----------- ----------
<C> <S> <C> <C>
4.5 -- First Supplement dated as of October 8, 1997 to the
Indenture dated as of May 1, 1994 between the Company and
State Street Bank & Trust Company (as successor to First
National Bank of Boston), as Trustee, relating to the
11 5/8% Senior Notes due August 1, 2002, Series B**.........
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT EXEMPTION
NUMBER DESCRIPTION INDICATION
------- ----------- ----------
<C> <S> <C> <C>
4.6 -- Registration Rights Agreement dated as of December 12, 1997
among the Company, the Guarantors and Chase Securities Inc.,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities,
Inc. and Societe Generale Securities Corporation**..........
4.7 -- The Company undertakes to furnish the Securities and
Exchange Commission, upon request, a copy of all instruments
with respect to long-term debt not filed herewith...........
5 -- Opinion of Weil, Gotshal & Manges LLP as to the validity of
the Exchange Notes to be issued by the Company..............
8 -- Opinion of Weil, Gotshal & Manges LLP as to certain federal
income tax matters..........................................
11 -- Computation of per share income (loss) (filed as Exhibit 11
to the 1996 10-K)*..........................................
12 -- Statement of Computation of Ratios of Earnings to Fixed
Charges.....................................................
23.1 -- Consent of Deloitte & Touche LLP............................
23.2 -- Consent of KPMG.............................................
23.3 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5 to this Registration
Statement)..................................................
23.4 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 8 to this Registration
Statement)..................................................
24 -- Power of Attorney**.........................................
25 -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee on Form T-1 with respect to the 11 1/4%
Senior Subordinated Notes due 2007**........................
99.1 -- Form of Letter of Transmittal**.............................
99.2 -- Form of Notice of Guaranteed Delivery**.....................
99.3 -- Form of Instructions to Registered Holders and/or Book-Entry
Facility Participant from Beneficial Owner**................
99.4 -- Form of Exchange Agent Agreement**..........................
</TABLE>
- ---------------
* Incorporated herein by reference.
** Previously filed.
<PAGE> 1
EXHIBIT 5
March 25, 1998
American Banknote Corporation
200 Park Avenue
New York, New York 10166
Ladies and Gentlemen:
We have acted as counsel to American Banknote Corporation, a
Delaware corporation (the "Company"), and certain of its subsidiaries (the
"Subsidiary Guarantors"), in connection with the preparation and filing of a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to
$95,000,000 aggregate principal amount of 11 1/4% Senior Subordinated Notes due
2007, Series B (the "New Notes") of the Company and the Subsidiary Guarantors'
guarantees thereof.
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Prospectus that is a part of the Registration Statement (the "Prospectus"), the
Indenture, dated as of December 12, 1997 by and among the Company, the
Subsidiary Guarantors and The Bank of New York, as trustee (the "Trustee"),
pursuant to which the New Notes and the Subsidiary Guarantors' guarantees
thereof will be issued (the "Indenture"), the form of New Note and the
Subsidiary Guarantors' guarantees thereof included as Exhibits 4.3 and 4.4 to
the Registration Statement, and such corporate records, agreements, documents
and other instruments, and such certificates or comparable documents of public
officials and of officers and representatives of the Company, and have made such
inquiries of such officers and representatives of the Company as we have deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to
<PAGE> 2
American Banknote Corporation
March 25, 1998
Page 2
all questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents of
officers and representatives of the Company. With respect to paragraph 2, we
have also assumed as to Horsham Holding Company, Inc. ("Horsham"), a
Pennsylvania corporation and a Subsidiary Guarantor, (i) its due incorporation
and valid existence, (ii) that Horsham has the requisite corporate power and
authority to execute the Indenture and its guarantee of the New Notes and (iii)
the due authorization, execution and delivery by Horsham of the Indenture and
its guarantee of the New Notes. The opinions set forth below are also based on
the assumption that the Registration Statement, as finally amended (including
any necessary post-effective amendments), has become effective under the
Securities Act and that the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, and has been duly executed and delivered by
the Trustee.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:
1. The New Notes are duly authorized, and when duly executed
on behalf of the Company, authenticated by the Trustee under the Indenture and
issued and delivered in accordance with the terms of the Indenture and as
contemplated by the Registration Statement, will be validly issued and will
constitute legal and binding obligations of the Company, enforceable against it
in accordance with their terms and the terms of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding in equity or at law) and
subject to the qualification that (i) the waiver of rights under any usury laws
contained in the Indenture may be unenforceable and (ii) we express no opinion
as to the effect on the New Notes of the laws of any jurisdiction other than the
State of New York and the federal laws of the United States, including laws
which limit the rates of interest legally chargeable or collectible.
2. The guarantee of the New Notes by each of the Subsidiary
Guarantors (other than Horsham, as to which we express no opinion) are duly
authorized, and when duly executed on behalf of each of the Subsidiary
Guarantors, and, when the New Notes have been duly executed on behalf of the
Company, authenticated
<PAGE> 3
American Banknote Corporation
March 25, 1998
Page 3
by the Trustee under the Indenture and issued and delivered in accordance with
the terms of the Indenture and as contemplated by the Registration Statement,
will be validly issued and will constitute legal and binding obligations of each
of the Subsidiary Guarantors, enforceable against it in accordance with their
terms and the terms of the Indenture, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding in equity or at law) and subject to the
qualification that (i) the waiver of rights under any usury laws contained in
the Indenture may be unenforceable and (ii) we express no opinion as to the
effect on the Subsidiary Guarantors' guarantees of the New Notes of the laws of
any jurisdiction other than the State of New York and the federal laws of the
United States, including laws which limit the rates of interest legally
chargeable or collectible.
The opinions herein are limited to the laws of the State of
New York, the corporate laws of the State of Delaware and the federal laws of
the United States, and we express no opinion as to the effect on the matters
covered by this opinion of the laws of any other jurisdiction.
The opinions expressed herein are rendered solely for your
benefit in connection with the transactions described herein. Those opinions may
not be used or relied upon by any other person, nor may this letter or any
copies thereof be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without our prior written consent.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement. We also consent to any and all references to our
firm under the caption "Legal Matters" in the Prospectus.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE> 1
EXHIBIT 8
March 18, 1998
American Banknote Corporation
200 Park Avenue
New York, New York 10166
Ladies and Gentlemen:
We have acted as counsel to American Banknote Corporation, a
Delaware corporation (the "Company"), in connection with the preparation and
filing of a Registration Statement on Form S-4 with the Securities and Exchange
Commission on January 12, 1998, as amended to the date hereof (the "Registration
Statement"). All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Registration Statement.
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Registration Statement, the
Prospectus that is a part of the Registration Statement (the "Prospectus") and
such corporate records, agreements, documents and other instruments (the
aforementioned documents together, the "Documents"), and have made such
inquiries of such officers and representatives of the Company and such other
persons, as we have deemed relevant and necessary as a basis for the opinion
hereinafter set forth. In such examination, we have assumed the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies, the
authenticity of the originals of such latter documents, the genuineness of all
signatures, and the correctness of all representations made therein. We have
further assumed that the final executed Documents are substantially the same as
those which we have reviewed and that there are no agreements or understandings
between or among the parties to the Documents with respect to the transactions
contemplated therein other than those contained in the Documents.
Based on the foregoing, subject to the next succeeding
paragraph, and assuming full compliance with all the terms of the Documents, we
are of the opinion that the discussion included in the Prospectus under the
caption "Certain U.S. Federal Income Tax
<PAGE> 2
American Banknote Corporation
March 18, 1998
Page 2
Considerations" is correct, insofar as such statements constitute matters of law
or legal conclusions, and, except to the extent qualified therein, are correct
in all material respects.
The foregoing opinion is based on current provisions of the
Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. Further,
you should be aware that opinions of counsel are not binding on the Internal
Revenue Service or the courts. We express no opinion either as to any matters
not specifically covered by the foregoing opinion or as to the effect on the
matters covered by this opinion of the laws of any other jurisdiction.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, in the facts, or in the
Documents on which this opinion is based.
This opinion may not be used for any other purpose.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 12
STATEMENT OF COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
(Dollars in thousands)
Year ended December 31
-----------------------------------------------------------
Pro
Forma
1997 1997 1996 1995 1994 1993
------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes $ 4,726 $ 5,398 $ 9,733 ($32,211) ($8,102) $ 6,144
Zero coupon debenture (263) (263)
Interest expense 33,434 32,762 28,864 23,147 21,057 14,605
Other - capitalized interest
included in other income (320) (320) (400)
Interest portion of rental expense 5,261 5,261 2,567 2,667 2,700 2,333
------- ------- ------- ------- ------- -------
$42,838 $42,838 $40,764 ($6,397) $15,655 $23,082
======= ======= ======= ======= ======= =======
Fixed Charges
Interest expense $33,434 $32,762 $28,864 $23,147 $21,057 $14,605
Interest portion of rental 5,261 5,261 2,567 2,667 2,700 2,333
------- ------- ------- ------- ------- -------
$38,695 $38,023 $31,431 $25,814 $23,757 $16,938
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 1.1 x 1.1 x 1.3 x -- -- 1.4 x
======= ======= ======= ======= ======= =======
Deficiency of earnings $32,211 $8,102
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to Registration
Statement No. 333-44069 of American Banknote Corporation on Form S-4 of our
report dated March 17, 1998, included in the Annual Report on Form 10-K of
American Banknote Corporation for the year ended December 31, 1997 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
March 30, 1998
New York, NY
<PAGE> 1
EXHIBIT 23.2
[KPMG LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference, in this Registration Statement of
American Banknote Corporation on Amendment No. 1 to Form S-4, of our report
dated 14 August 1996 on the special purpose financial statements of Leigh
Mardon Security Division (the "Economic Entity") as defined in Note 1 thereto,
as included in Form 8-K/A Amendment No. 1 dated August 14, 1996, of American
Banknote Corporation, and to the reference to us under the heading "Experts"
which is part of this Registration Statement.
KPMG
Melbourne, Australia
March 27, 1998
