UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-3410
AMERICAN BANKNOTE CORPORATION
A Delaware Corporation I.R.S. Employee ID No. 13-0460520
200 Park Avenue, New York, New York 10166-4999
Telephone number: (212) 557-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange
Preferred Stock Purchase Rights N/A
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
At March 17, 1998, the aggregate market value of the voting stock held
by non-affiliates was $86,095,000.
At March 17, 1998, 20,871,604 shares of Common Stock were outstanding.
Documents incorporated by reference: Portions of the Company's
definitive proxy statement for the 1998 Annual Meeting of Shareholders
are incorporated by reference into Part III.
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ITEM 1. Business
GENERAL
American Banknote Corporation is a holding company (the "Company")
which through its subsidiaries in the United States, Brazil, Australia and
New Zealand, and France operates in a single industry, secured products and
systems, with three principal product lines: Transaction Cards & Systems;
Printing Services & Document Management; and Security Printing Solutions.
The Company's principal subsidiaries are: American Bank Note Company
("ABN"), American Bank Note Holographics, Inc. ("ABNH"), American Bank Note
Company Grafica e Servicos Ltda. ("ABNB"), a 77.5% owned Brazilian company,
Leigh-Mardon Pty. Ltd. ("LM"), an Australian company, and Sati Holdings S.A.
("Sati"), a French company. The Company was incorporated in 1993 in
Delaware as United States Banknote Corporation and changed its name on July
1, 1995 to American Banknote Corporation. 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.
COMPANY DEVELOPMENTS
Brazil
ABNB was acquired on June 23, 1993. On July 1, 1995, ABNB acquired the
security printing operations of Grafica Bradesco Ltda. ("Grafica Bradesco"),
from Banco Bradesco, S.A., in exchange for a 22.5% interest in ABNB. As of
May 1, 1997, the Company acquired the plastic cards division of a company in
Brazil, Menno Equipamentos para Escritorio Ltda. ("Menno"). In the private
sector, ABNB produces products in all three of the Company's product lines.
Australia and New Zealand
LM was acquired by the Company during 1996 for approximately $79.2
million. On June 3, 1996, a 55% equity interest in LM was acquired and the
remaining 45% interest was acquired on October 1, 1996. LM is both
Australia's oldest and largest provider of security documents and products
and the leading security printer in New Zealand, and produces products in
all three of the Company's product lines.
United States
ABNH, a wholly-owned subsidiary, produces holograms for debit and
credit cards as well as a variety of other secure documents and operates
within the Transaction Cards & Systems and Printing Services & Document
Management product lines.
ABN, a wholly-owned subsidiary, functions primarily in Security
Printing Solutions. ABN and its predecessors have printed security
documents for over 200 years.
France
Sati was acquired by the Company during August 1997 for approximately
$11.6 million. Sati's operating companies, Sati S.A., Satel S.A. and Cidel
S.A., personalize and checks for bank and commercial customers. In March
1998, the Company, through a subsidiary of Sati, completed the acquisitions
of MCE S.A. (Monetique Cheque Edit) and CPS S.A. (CPS Technologies). These
companies operate within the Company's Transaction Cards & Systems and
Printing Services & Document Management product lines.
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FOREIGN OPERATIONS AND EXPORT SALES
Information about the Company's foreign operations and export sales is
disclosed in Notes A and M of "Notes to Consolidated Financial Statements."
The Company continues to focus its efforts on international expansion
through joint ventures, acquisitions and foreign agent representations and
on expanding product lines. In 1997, 1996 and 1995, the Company's sales in
foreign markets accounted for approximately 73%, 74% and 55%, respectively,
of consolidated sales.
PRODUCT LINES
The Company serves its customers through three principal groups:
Transaction Cards & Systems; Printing Services & Document Management; and
Security Printing Solutions.
The following table presents the components of these sales for each of the
three years ended December 31:
1995(1) 1996(2) 1997(3)
(in millions)
$ % $ % $ %
Transaction Cards & Systems 51.0 24.8 120.6 39.0 114.0 33.9
Printing Services
& Document Management 21.3 10.3 49.2 15.9 55.7 16.6
Security Printing Solutions 133.9 64.9 139.7 45.1 166.7 49.5
206.2 100.0 309.5 100.0 336.4 100.0
(1) Includes sales of Grafica Bradesco from July 1, 1995.
(2) Includes sales of LM from June 1, 1996.
(3) Includes sales of Menno from May 1, 1997 and Sati from August 1, 1997.
TRANSACTION CARDS & SYSTEMS
The Company is a leading supplier of a wide range of transaction cards
and products and systems in Brazil, Australia, New Zealand and the United
States. The Company is rapidly expanding its production and services
capabilities to capitalize on the increasingly cashless nature of financial
transactions, which primarily include: (i) stored-value cards, of which the
Company is the largest producer in Brazil and Australia; (ii) transaction
cards and personalization services; (iii) holograms, of which the Company is
the world's leading supplier; and (iv) equipment sales and services.
Stored-Value Cards. The Company entered the stored-value card market
in Brazil with the acquisition of ABNB and in Australia with the acquisition
of LM. These acquisitions have allowed the Company to rapidly expand its
capabilities and presence in regions where cashless transactions are
expected to have significant future growth. The Company is the largest
supplier of stored-value telephone cards in Brazil and Australia through its
contracts with Telebras, Brazil's national telephone company, and its
affiliated regional phone service providers, and Telstra, Australia's
national telephone company. The Company also supplies stored-value cards to
firms in the financial and transportation industries.
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The Company is investing in smart-card development, which management
believes will complement much of the traditional magnetic-stripe card
market. During 1997, the Company secured its first major smart-card contract
with Telstra to supply Telstra Eurochip telephone cards and is the only
accredited third party supplier and initializer of Visa Cash smart-cards in
the world. The Company has also identified a number of opportunities to
produce smart-cards in Brazil, Australia and New Zealand and has made
significant investments in the equipment and technology necessary to make
and manufacture smart-cards. The Company believes that its significant
investments in smart-card technology will allow it entry into new markets,
including the United States, with processes for GSM telephone, medical,
health, identity and loyalty card systems, as well as contact and
contactless cards.
Transaction Cards and Personalization Services. The Company is a
leading producer and personalizer of magnetic-stripe transaction cards,
including credit, debit, ATM, transportation, access and identification
cards, supplying customers in Brazil, Australia, New Zealand and other
countries. The Company supplies cards to financial institutions, including
those issued for American Express, VISA(TM) and MasterCard(TM), as well as
cards for major corporations and other institutions. The Company has the
ability to incorporate a number of security features, including holograms,
in substantially all of the cards it produces.
In Australia, New Zealand and Brazil, the Company is a leader in the
manufacture and personalization of plastic transaction cards, including
credit, debit and loyalty (frequent buyer) cards. The Company handles large
scale license contracts for many Brazilian, Australian and New Zealand
states, including the production and personalization of drivers' and
shooters' licenses. In addition, the Company issues licenses and acts as
administrative agent for the motor vehicle departments of a number of
Brazilian states.
Transaction Processing. In 1997, the Company added capabilities in
transaction processing to its domestic operations and has begun the
acquisition of merchant processing portfolios. The Company services credit,
debit, ATM and Electric Benefit Transfers ("EBT") transactions and loyalty
and university card programs through proprietary computer and telephone
switching hardware and software which process financial transactions and
provide customized client reporting, customer service and support.
The Company is a 25% owner in a card manufacturing and service bureau
venture in Israel, OrdaCard Hitec Industries (1995) Ltd. OrdaCard also
pursues smart-card system sales and development of smart card technologies
primarily for markets in the Middle-East and Africa.
Holograms. The Company is the world's leading supplier of visual
security devices known as holograms which are principally used as
counterfeit deterrents on transaction cards and other products. Holograms
are two or three dimensional laser generated optical variable devices. The
Company is the sole provider of transaction card holograms to
MasterCard(TM), Discover(TM), Europay(TM) and Diners Club International, and
is the majority provider of transaction card holograms to Visa(TM). To date,
the Company has produced and sold over six billion holograms for use on
financial transaction cards.
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Equipment Sales and Service. The Company is a direct and third party
supplier of point of sale ("POS") and electronic funds transfer point of
sale terminals ("EFTPOS") suitable for magnetic-stripe and smart-card
applications, PIN pads, customer service equipment and specialized software
in Australia and New Zealand. In addition, the Company has recently entered
into a memorandum of understanding with a major foreign manufacturer of
terminals to develop POS and EFTPOS terminals in Brazil. The Company
believes demand for new and upgraded terminals exists in those markets where
transaction terminals and other devices are being converted for
magnetic-stripe and smart-cards.
PRINTING SERVICES & DOCUMENT MANAGEMENT
The Company is continuing to expand its Printing Services & Document
Management business, as public and private sector institutions increasingly
outsource their in-house printing, personalization and document processing
operations around the world. Utilizing advanced inventory control systems
and "just-in-time" distribution capabilities, the Company helps businesses
and governmental institutions effectively lower costs by supplying all of
their printing, storage, processing and distribution needs.
Electronic Printing Applications. The Company is a full service
provider of electronic printing applications to a number of its corporate
and government customers. Electronic printing applications encompass the
secure data handling, electronic printing, personalization and mailing of
documents for large-scale billing cycles. This process consists of
computer-driven, variable data electronic printing, normally onto
pre-printed base stock. Primary applications are billing and fund collection
systems, check and credit card statements, letter checks and invoices.
In Australia, New Zealand, Brazil and France, the Company provides
electronic printing application services for institutions in the banking,
insurance, utilities and telecommunication industries, as well as for a
number of state and federal government agencies. In Australia and New
Zealand, for example, LM has been awarded contracts by Commonwealth Bank,
Victoria Workcover, Department of Social Security, and Gas & Fuel. In
Brazil, the Company is a leading provider to the banking industry with
multi-year contracts with, among others, Banco Bradesco, Banco Itau and
Unibanco.
Printing, Storage & Distribution. The Company prints products such as
business forms and checks, and provides storage and distribution services to
the end user on behalf of its customers. For example, the Company prints and
distributes medical forms for the Australian Health Insurance Commission, a
government agency which previously had performed this function in-house. In
connection with this contract, the Company prints, stores and distributes
more than 500 million Medicare Direct Bill Payment Program forms annually,
to more than 45,000 doctors throughout Australia. The Company also prints,
stores and distributes many other products for its customers, such as
travelers' cheques, which it distributes worldwide, and food coupons for the
United States Department of Agriculture ("USDA"), which it distributes
throughout the United States.
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SECURITY PRINTING SOLUTIONS
The Company believes it is one of the world's leading printers of
counterfeit-resistant documents of value, including checks, money orders,
passports, foreign currency, stock and bond certificates and other
commercial documents of value such as gift certificates. Special materials,
elaborate steel-engraved designs and distinctive lithographic and intaglio
printing techniques enable the Company to manufacture products containing
state-of-the-art security features. The Company also offers anti-counterfeit
features such as hidden, invisible and holographic images used to verify
authenticity on packaging. The Company's holograms are used for
accountability programs and product authentication with licensing
organizations to prevent the sale of counterfeit goods. To ensure the
protection of its customers' orders, the Company's manufacturing, storage
and distribution facilities employ high levels of plant security, including
guards, alarms, video monitoring and extensive accountability controls. The
Company recently opened a security printing facility in Columbia, Tennessee,
which utilizes modern multi-color presses. The Company was recently awarded
a $14 million contract and is printing currency for the Reserve Bank of
India at its new Tennessee facility.
Checks. The Company is the leading private sector supplier of
personalized checks for major banks in Brazil, Australia and New Zealand and
one of the leading private sector suppliers in France. Under multi-year
contracts, the Company supplies banks and other financial institutions with
checks, same-day check personalization, and a wide array of security
printing products such as money orders and deposit books. Management of the
Company believes that additional Brazilian, Australian, New Zealand and
French banks will seek to outsource check printing and personalization, thus
providing opportunities for the Company to expand its leadership in this
product area.
The Company believes that it is one of the world's largest printers and
distributors of travelers' cheques. Customers include American Express,
Citicorp, MasterCard(TM), VISA(TM) and their issuing banks. Management
believes a large number of its contracts are the result of the Company's
success in cross-selling to existing transaction card customers.
Stocks and Bonds. The Company believes it is the largest producer of
listed companies' intaglio stock and bond certificates. The Company produces
intaglio printed certificates with the unique border designs and vignettes
that are required by the New York Stock Exchange. The Company maintains a
library of engraving plates for a large percentage of publicly traded
securities.
Government Products. Government products include a variety of security
documents printed for federal, state and local governments throughout the
world. The Company manufactures food coupons, currency, passports, visas,
tax revenue stamps, postal panels, social security cards and similar
products for federal governments. The Company also supplies secure
documents, such as motor vehicle registrations, title certificates and
licenses, birth certificates, identity cards, and transportation passes for
its government customers. For example, the Company prints American
Commemorative Postage Stamp Panels for the United States Postal Service,
money orders for the Australian Post, U.S. Social Security cards, and
passports for such countries as Australia, Venezuela and Lebanon.<PAGE>
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The USDA is the Company's largest domestic customer for which it has
printed food coupon requirements for more than 20 years. Food coupons are
intaglio printed documents accepted by grocery stores in lieu of currency
used by millions of Americans every year.
SALES AND MARKETING
The Company sells its products and services through a combination of
direct sales personnel, commissioned sales personnel, independent sales
representatives and alliances. The Company markets and sells secure products
and services to a number of financial institutions, corporations,
governments and government agencies worldwide. The sales force is supported
by marketing professionals who provide research and product development
assistance. The sales and marketing activity is focused on the three main
product groups with markets defined by geographic territories.
COMPETITION
Competition in the Company's markets is based upon price, service,
quality, reliability and the ability to offer a broad range of secure
transaction products and services. Each of the Company's domestic and
foreign operations conducts its business in highly competitive markets.
Internationally, the Company has competitors in currencies and passports in
the United Kingdom, Germany, France and Canada, while domestically there are
several different competitors depending on the product line. In Brazil and
Australia, there is competition across different products and services, but
the Company believes there is no other company which offers the full range
of secure products and services on a national basis. In France, the Company
has one of the leading market share positions, with many smaller competitors
in a highly fragmented market. Certain of the Company's competitors also
have greater financial resources than the Company. The Company also competes
with other printers in various product lines as well as card manufacturers
and other companies engaged in businesses unrelated to printing. Alternative
goods or services, such as those involving electronic commerce, that can
replace printed products or holograms could also affect demand for the
Company's products.
PATENTS
The Company presently holds, or is licensed under, many United States
and foreign patents, trademarks and copyrights and continues to pursue
protection when available in strategic markets.
BACKLOG
At December 31, 1997 and December 31, 1996, the Company had an overall
backlog of approximately $55 million and $77 million, respectively. The 1997
and 1996 backlog principally consisted of orders relating to stored-value
telephone cards, currency, food coupons, travelers' cheques, passports,
personal checks and financial payment cards. Generally, a substantial
portion of the Company's backlog is produced and shipped within twelve
months.
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RAW MATERIALS
The Company is not materially dependent upon any one supplier for raw
materials used in its business. Certain raw materials used are available
from a limited number or only a single source supplier and certain other
products, particularly for national governments, require domestic content
which limits the number of potential suppliers. The Company's relationships
with its primary suppliers are generally reliable.
ENVIRONMENT
The Company engages in the use or disposal of substances that may be
considered to be toxic or hazardous substances under applicable
environmental laws. The Company believes that its compliance with such laws
has not had, and will not have, a material effect on its capital
expenditures, earnings, financial position or competitive position.
EMPLOYEES
At December 31, 1997, the Company had approximately 3,390 employees
consisting of 3,080 employees engaged in manufacturing, 288 engaged in plant
administration and sales and 22 in executive, corporate and administrative
functions. Approximately 52% of the Company's domestic employees, 44% of
LM's employees, all of ABNB's employees are represented by labor unions.
None of Sati's employees are represented by labor unions. The Company has
multi-year contracts with labor unions covering a substantial number of
employees of ABN and ABNH, several of which were renegotiated or entered
into during 1997. The Company's future profitability will be dependent, in
part, on its ability to maintain satisfactory relationships with labor
unions and employees and in avoiding strikes and work stoppages. The Company
considers its employee relations to be very good.
ITEM 2. Properties
Size (in Owned or
Location sq. feet) Leased Operations
UNITED STATES
200 Park Avenue 12,500 Leased Executive,
New York, New York administration and
sales offices
Horsham, 111,000 Owned Administration and
Pennsylvania sales offices; printing
Caroline Road, 104,000 Owned Food coupon distribution
Horsham, Pennsylvania and storage
Philadelphia, 95,000 Owned Ink manufacturing and
Pennsylvania storage
Elmsford, 59,000 Leased Administration, sales
New York offices, research and
development and hologram
production
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Size (in Owned or
Location sq. feet) Leased Operations
Columbia, 50,000 Owned Printing
Tennessee
Huntingdon Valley, 30,000 Leased Hologram production
Pennsylvania
Hamilton Place, 23,000 Leased Finishing and storage
Tennessee
AUSTRALIA and
NEW ZEALAND
Highett, 139,000 Leased LM head office,
Victoria administration, sales
imaging, plastic cards,
manufacturing and
personalization,
smart-card manufacturing
and personalization
Dry Creek, 32,000 Leased Sales, check personalization
South Australia and other printing
applications
Cheltenham, 24,000 Leased Sales, manufacturing and
Victoria service of point-of-sale
devices
Wellington, 23,000 Leased Sales, card manufacturing
New Zealand and check and card
personalization;
executive offices
Kedron, 18,000 Leased Sales, check personalization
Queensland and printing
Rosebery, 16,000 Leased Card printing and
New South Wales personalization
Regents Park, 16,000 Leased Sales and check
New South Wales personalization
Auckland, 15,000 Leased Check and card
New Zealand manufacturing and
personalization
Perth, 13,000 Leased Sales, check personalization
Western Australia and printing
Canberra,
ACT 5,000 Leased Passport production
Auckland, 4,000 Leased Card manufacturing
New Zealand and personalization <PAGE>
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Size (in Owned or
Location sq. feet) Leased Operations
BRAZIL
Jandira, 310,000 Leased Printing, storage and
Sao Paulo distribution, electronic
printing and smart-card
manufacturing and
personalization
Rio de Janeiro, 140,000 Owned Checks, financial and
Rio de Janeiro telephone cards, intaglio
documents and printing
Erechim, 51,000 Leased Production and
Rio Grande do Sul personalization of
transaction cards
FRANCE
Chambray les Tours, 43,000 Owned Headquarters, sales check
Tours personalization and other
printing operations
Carquefou, 18,000 Owned Sales and check
Nantes personalization
Dijon, 18,000 Owned Sales and check
Dijon personalization
Meyzieu, 11,000 Owned Sales and check
Lyon personalization
In addition, the Company leases a 148,000 square foot facility in Los
Angeles, California. In 1994, the Company decided to completely vacate such
facility and has subleased it for the remaining term.
ITEM 3. Legal Proceedings
In January 1994, Vladimir v. United States Banknote Corporation, et
al., and in February 1994, Sinay v. United States Banknote Corporation, et
al., were filed in the United States District Court for the Southern
District of New York (the "Class Action"). On June 16, 1995, the Court
approved certification of a class in Vladimir consisting of all persons who
purchased stock in the open market from April 1, 1993 through January 6,
1994. On February 26, 1996, the Court dismissed the Sinay action, without
prejudice. The parties reached a settlement in Vladimir prior to entry of a
judgment and ruling on the Company's and Mr. Weissman's pending Motions for
Summary Judgment, Judgment as a Matter of Law and for a new trial. On
September 30, 1997, the Court approved the settlement dismissing the action,
with prejudice, which became final on March 11, 1998. Under the terms of the
settlement, the Company's full contribution of $0.5 million was paid in
December 1997 and the balance paid by the Company's insurers.
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In January 1994, Atencio v. Morris Weissman, et al. was filed in the
Court of Chancery for the State of Delaware, New Castle County, against
various directors and/or officers of the Company, on behalf of a purported
class and derivatively on behalf of the Company. In February 1994, Rosenberg
v. Morris Weissman, et al. was filed in the same court. The Atencio and
Rosenberg actions assert claims for breach of fiduciary duty and allege the
sale of Common Stock while in possession of material non-public information.
These cases have not been actively pursued. As derivative actions, the
Company's insurers have been responsible for the costs of defending against
such actions.
On November 1, 1994, the Company filed an action against Thomas De La
Rue, AG ("DLR") and its parent, De La Rue Plc which is pending in the United
States District Court for the Southern District of New York. The complaint
alleges breach of contract in connection with the 1993 purchase of the
Company's Brazilian subsidiary from DLR and seeks approximately $1.5 million
in damages. DLR has asserted approximately $400,000 in counterclaims. On
September 17, 1997, the Court denied DLR's motions for summary judgment,
ruling the contract language ambiguous, and directed as an issue for the
jury whether the Company may pierce the corporate veil and proceed with its
claims against DLR and DLR's parent, De La Rue, Plc.
On November 2, 1994, Thomas De La Rue AG v. United States Banknote
Corporation, et al. was commenced in the United States District Court for
the Southern District of New York. DLR alleges, among other things, breach
of contract in connection with the Brazil purchase agreement and the alleged
failure to expeditiously register 944,538 shares of Company Common Stock
issued to DLR. DLR seeks approximately $4.0 million in connection with its
claims. A trial has been scheduled for June 1998.
During the year ended December 31, 1996, the Company recorded a $2.4
million provision relating to pending litigation. The Company's cost of
settlement of the Vladimir litigation and certain legal fees have been
charged against the provision during 1997.
The Company and its subsidiaries are also parties to various additional
lawsuits (as both plaintiff and defendant) related to various matters in the
normal course of business, including patent infringement, contract, labor
and environmental, which in the opinion of management, are not anticipated
to have a material impact on its consolidated financial position or results
of operations.
During 1997, ABNB received assessments form the Brazilian tax
authorities for approximately $25 million relating to taxes other than
income. The Company is appealing the assessments, believes it has grounds
for appeal, and has not recorded a provision for these assessments.
Management of the Company believes that the ultimate resolution of these
assessments will not have a material impact on its consolidated financial
position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders in the
fourth quarter of 1997.
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ITEM 10. Directors and Executive Officers of the Company
The following table sets forth certain information regarding the
current executive officers of the Company.
<TABLE>
<CAPTION>
Positions and Offices Office Held
Name Age With the Company Since
<S> <C> <C> <C>
Morris Weissman* . . . . . 56 Chairman of the Board and (1)
Chief Executive Officer
Bette B. Anderson. . . . . 69 Director June 1994
Dr. Oscar Arias S. . . . 57 Director July 1995
C. Gerald Goldsmith. . . . 69 Director July 1990
Ira J. Hechler . . . . . . 79 Director February 1990
David S. Rowe-Beddoe . . . 60 Director July 1990
Alfred Teo . . . . . . . . 51 Director June 1996
John T. Gorman*. . . . . . 53 Executive Vice President (1)
and Chief Financial Officer
Harvey J. Kesner* . . . . 40 Executive Vice President, (1)
General Counsel and Secretary
Patrick J. Gentile*. . . . 38 Vice President and Corporate (1)
Comptroller
Ward A.W. Urban* . . . . . 38 Vice President, Treasurer and
Assistant Secretary (1)
Phillip Gray. . . . . . . 49 Managing Director of LM June 1996
Francis Lavelle. . . . . . 48 Managing Director of Sati August 1997
Sidney Levy. . . . . . . . 41 Managing Director of ABNB February 1994
Robert K. Wilcox . . . . 51 Senior Vice President (1)
Manufacturing, General
Manager ABN
Joshua C. Cantor . . . . . 38 President ABNH (1)
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* "Executive Officer" under the Securities Exchange Act of 1934, as amended.
(1) See below.
Morris Weissman. Mr. Weissman has served as Chairman of the Board and
Chief Executive Officer and as a Director of the Company since 1990. Mr.
Weissman assumed the additional duties of Chief Operating Officer in July
1995. Mr. Weissman was Chairman and Chief Executive Officer of United
States Banknote Company, L.P. ("USBC") a predecessor of the Company, from
1986 to 1990 and Vice Chairman and Director of USBC's predecessor from 1976
to 1986. Mr. Weissman is a Director of the Convenience and Safety
Corporation and a Trustee of the Jackie Robinson Foundation and the Business
Council for the United Nations.
Bette B. Anderson. Mrs. Anderson has served as a Director of the
Company since June 1994. She has served as President of Kelly, Anderson,
Pethick & Associates, Inc., a Washington based management firm, since 1991
until January 1996 when she became Vice Chairperson. Mrs. Anderson served
as Undersecretary of the Treasury from 1977 to 1981. Mrs. Anderson is a
Director of ITT Corporation, ITT Educational Services, Inc, United Payors &
United Providers, Inc. and ITT Hartford Group, Inc, and serves on various
Board Committees of such companies. Mrs. Anderson also is a member of the
Treasury Historical Association, a Director of the Miller Foundation at the
University of Virginia and a member of the Advisory Council of the Girl
Scouts of America.<PAGE>
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Dr. Oscar Arias S. Dr. Arias has served as a Director of the Company
since September 1995. He is the former President of Costa Rica and the 1987
Nobel Peace Prize recipient. He is President of International Press
Service, a Director of the Arias Foundation for Peace and Human Progress,
Stockholm International Peace Research Institute and International Center
for Human Rights and Democratic Development Institute for International
Studies at Stanford University. In addition, Dr. Arias serves on the Board
for the InterAction Council, the International Negotiation Network of the
Carter Center and Transparency International and is an active member of The
Commission on Global Governance, the International Dialogue and the Society
for International Development.
C. Gerald Goldsmith. Mr. Goldsmith is a private investor. He has
served as a Director of the Company since 1990. He is a Director of Palm
Beach National Bank and Trust, a Director of Nine West Group, Inc. and a
Director of Innkeepers, USA.
Ira J. Hechler. Mr. Hechler is a private investor. He has served as a
Director of the Company since 1990. He is a Director of Leslie Fay
Companies, Inc. and Concord Camera Corp.
David S. Rowe-Beddoe. Mr. Rowe-Beddoe has served as a Director of the
Company since 1990. He has been Chairman of the Board of Welsh Development
Agency since 1993 and Chairman of the Development Board of Rural Wales since
1994. Mr. Rowe-Beddoe is also a Director of Cavendish Services Ltd. and
Development Securities plc. Mr. Rowe-Beddoe previously held various senior
management positions, including at Revlon Inc. and De La Rue plc, where he
was an Executive Director.
Alfred Teo. Mr Teo has served as a Director of the Company since 1996.
He has been Chairman and Chief Executive Officer of Alpha Industries, Inc.
of the Sigma Plastics Group since 1979, Chairman and Chief Executive Officer
of Red Line Express since 1984, Hillman Eyes since 1992 and Alpha
Technologies since 1990. Mr. Teo is a Director of Fleet Bank N.A. and a
Trustee of St. Joseph's Hospital and Stevens Institute of Technology.
John T. Gorman. Mr. Gorman has served as Executive Vice President and
Chief Financial Officer of the Company since 1990. Mr. Gorman was Executive
Vice President and Chief Financial Officer of USBC from 1983 to 1990 and
Senior Vice President of Finance of USBC's predecessor from 1978 to 1983.
Harvey J. Kesner, Esq. Mr. Kesner has served as Executive Vice
President of the Company since June 1996 and as General Counsel and
Secretary of the Company since 1991. Mr. Kesner was an attorney in private
practice for more than five years prior to joining the Company.
Patrick J. Gentile. Mr. Gentile has served as a Vice President of the
Company since June 1995, as Comptroller since 1989 and has been an employee
of the Company's predecessors since 1986.
Ward A. W. Urban. Mr. Urban has served as Treasurer of the Company
since August 1993 and as Vice President and Assistant Secretary since June
1995. Mr. Urban was employed as an Assistant Vice President in the
leveraged finance department of Citibank, N.A. from August 1988 to August
1993.
<PAGE>
<PAGE>
Phillip Gray. Mr. Gray has served as General Manager of LM since 1990
and was General Manager of its Data Card Division prior thereto since 1987.
Francis Lavelle. Mr. Lavelle has served as Managing Director of Sati
since its acquisition by the Company in August 1997. Mr. Lavelle had served
as President of Solaic, S.A. since 1991, where he headed check
personalization and card operations, including smart-card manufacturing and
development, with facilities in France and Spain. Mr. Lavelle joined
Sligos, S.A., the prior owners of Sati, in 1973.
Sidney Levy. Mr. Levy has served as Managing Director of ABNB since
February 1994. Prior to joining ABNB, Mr. Levy was employed as Managing
Director of De La Rue Lerchundi in Spain since 1991 and prior thereto was
employed by Thomas De La Rue Grafica e Servicos Ltda. in Brazil, serving in
various management capacities.
Robert K. Wilcox. Mr. Wilcox has served as Senior Vice President --
Manufacturing of the Company since August 1995 and as Executive Vice
President -- Operations and General Manager of ABN since November 1995. Mr.
Wilcox was Vice President of US Operations for Transcontinental Printing and
previously held senior positions at the Bureau of Engraving and Printing as
well as Gowe Printing, Arcata Graphics and C.P.Y. Jeffries Banknote Co.
Joshua C. Cantor. Mr. Cantor has served as President of ABNH since
November 1995 and Executive Vice President of ABN since September 1994. Mr.
Cantor was Vice President -- Sales of ABN and employed by ABN and its
predecessor since 1986.
PART II
ITEM 5. Market Price for the Company's Common Stock and Related Matters
The Company's Common Stock is listed on the New York Stock Exchange and
trades under the symbol ABN. As of March 17, 1998, the Company had
approximately 2,707 shareholders of record. The reported high and low sales
prices per share of Common Stock, as reported by the Dow Jones Historical
Stock Quote Report Service, were as follows:
1997 1996
High Low High Low
-------------- --------------
1st Quarter $4.75 $3.25 $2.00 $1.25
2nd Quarter 5.00 3.25 5.38 1.50
3rd Quarter 6.75 4.31 5.00 2.63
4th Quarter 6.63 4.50 5.00 3.88
During the first quarter of 1998 through March 17, 1998 the high and
low sales prices per share of the Common Stock was $5.25 and $3.56,
respectively.
The Company is restricted from paying cash dividends on the Common
Stock by the terms of its financing agreements. No cash dividends have been
paid on the Common Stock and the Company does not expect to pay cash
dividends on the Common Stock in the foreseeable future.
<PAGE>
<PAGE>
ITEM 6. Selected Financial Data
The selected financial data presented below is derived from the
Company's consolidated financial statements, and should be read in
conjunction with the Company's consolidated financial statements, including
the notes thereto, appearing elsewhere herein. The historical financial
data presented below reflects the results of operations of acquired entities
from their respective dates of acquisition (ABNB, June 23, 1993; Grafica
Bradesco, July 1, 1995; LM, June 3, 1996; Menno, May 1, 1997 and Sati,
August 1, 1997).
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995 1994 1993
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales. . . . . . . . . . . . . $336,359 $309,450 $206,164 $208,133 $200,079
Restructuring and
idle equipment (1) . . . . . 14,304 7,000 12,000
Depreciation and amortization 22,937 20,042 14,824 13,094 11,180
Operating income (loss). . . . 37,948 38,987 (11,850) 18,176 25,688
Interest expense . . . . . . . (32,762) (28,864) (23,147) (21,057) (14,605)
Foreign translation losses,
net (2). . . . . . . . . . . (130) (255) (38) (7,037) (5,161)
Other income, net. . . . . . . 342 (135) 2,824 1,816 222
Income (loss) before
minority interest. . . . . . 6,833 9,333 (20,852) (5,701) 1,855
Income (loss) before
extraordinary item (3)(4). . 3,840 4,099 (22,415) (5,701) 1,593
Net income (loss). . . . . . . (1,749) (4,099) (22,415) (5,815) 1,573
Imputed interest and
dividend requirements of
other equity security (5) . . (171) (20)
Net income (loss) per
common share - Basic:
Before extraordinary item . $ .18 $ .21 $(1.17) $( .30) $ .08
Extraordinary item (4). . . (.28)
Net income (loss) . . . . . $ (.10) $ .21 $(1.17) $( .30) $ .08
Net income (loss) per
common share - Diluted:
Before extraordinary item . $ .18 $ .20 $(1.17) $( .30) $ .08
Extraordinary item (4). . . $ (.27)
Net income (loss) . . . . . $ (.09) $ .20 $(1.17) $( .30) $ .08
Shares used in computing
per share amounts
Basic . . . . . . . . . . . 20,140 19,650 19,200 19,180 18,760
Diluted . . . . . . . . . . 20,800 20,170 19,200 19,180 19,130
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995 1994 1993
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents. . . $ 17,323 $ 14,256 $ 23,525 $ 31,658 $ 15,437
Working capital. . . . . . . . 56,120 35,533 54,973 65,887 50,351
Total assets . . . . . . . . . 503,536 480,378 379,402 382,950 357,212
Long-term debt, excluding
current portion. . . . . . . 293,215 263,548 194,156 191,192 167,782
Stockholders' equity . . . . . 55,041 46,277 40,353 62,777 68,330
</TABLE>
Notes to Selected Financial Data
(1) Restructuring and idle equipment represents provisions principally for
the consolidation of ABN's plants in 1995, 1994 and 1993, and in 1994 -
$2.0 million for leases and equipment that will not be utilized in the
Company's business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Results from the Company's translation of Brazilian local currency into
dollars. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(3) 1997 includes approximately $4.0 million of reversals of tax liabilities
no longer required, 1995 includes a $2.8 million benefit and 1993
includes a $1.5 million charge for adjustment of deferred taxes for
changes in enacted tax rates. The 1995 amount pertained to decreases in
ABNB's tax rates and the 1993 amount pertained to increases in the US
federal corporate tax rate.
(4) Represents charges in connection with the early extinguishment of
indebtedness in 1997 and 1994, of approximately $5.6 million and $0.1
million, respectively, net of associated tax benefits of approximately
$3.0 million in 1997.
(5) 1997 relates to accretion of zero coupon subordinated convertible
debentures issued in 1997. 1993 relates to dividend requirements of a
preferred stock, subsequently redeemed.
<PAGE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The Company's growth during the past three years has been generated
principally by acquisitions and increases in ABNB's sales. Notes A and M of
"Notes to Consolidated Financial Statements," include geographic information
for the Company's businesses.
Results of Operations
Overview
The Company is a leading global provider of secure transaction
solutions, documents and systems for financial institutions, governments and
corporations through its operations in the United States, Brazil, Australia,
New Zealand and France. 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-card") transaction cards, holograms, currencies,
travelers' and other checks, stock and bond certificates and a wide variety
of electronically or digitally produced personalized documents. Through
selective acquisitions in international markets and a program to realign and
refine its domestic manufacturing operations, the Company has improved its
financial performance since 1995 and expanded its global presence,
technological base and product lines.
In 1993, in order to address the high cost structure in its domestic
manufacturing facilities, diversify its product offerings and reduce its
dependence on traditional security printing, the Company began to expand
internationally and realign, consolidate and upgrade its domestic
manufacturing operations. The Company closed its Los Angeles and Chicago
manufacturing facilities and opened a manufacturing facility in Columbia,
Tennessee. In connection with this program, the Company incurred
restructuring charges of $12.0 million, $7.0 million and $14.3 million in
1993, 1994 and 1995, respectively. Although the Company's realignment in
1996 resulted in increased operating efficiencies and a reduction in
manufacturing and overhead costs from prior levels, domestic security
printing continues to face challenges from the increasing acceptance of
electronic commerce. For example, volumes have declined for food coupons,
stocks and bonds, gift certificates and Travelers cheques as a result of
electronic commerce. Management believes that additional refinement and cost
reductions of the domestic printing operations must continue to be pursued
including the addition of new product lines. New product lines might result
in lower operating margins due to substantial personnel training costs as was
the case with a currency contract in 1997.
The Company's international expansion began in 1993 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 LM, Australia and New Zealand's oldest, largest and only
fully integrated provider of secure document and transaction card solutions.
In August 1997, the Company expanded its international presence through the
acquisition of Sati, one of France's leading providers of check
personalization and electronic printing applications. The Company's
international expansion has allowed it to capitalize on high growth markets
and diversify into new geographic markets. <PAGE>
<PAGE>
The Company's international expansion has allowed it to successfully
diversify its product mix and customer base and to expand into higher growth
markets. Over the last three years, the Company has made significant
investments in modern manufacturing and distribution equipment, systems and
technologies across its geographic markets to allow it to further increase
operating efficiencies and provide advanced solutions for its customers. The
following table illustrates the shift in the composition of the Company's
sales by product group for each of the three years ended December 31:
1995 1996 1997
(in millions)
$ % $ % $ %
Transaction Cards & Systems 51.0 24.8 120.6 39.0 114.0 33.9
Printing Services
& Document Management 21.3 10.3 49.2 15.9 55.7 16.6
Security Printing Solutions 133.9 64.9 139.7 45.1 166.7 49.5
206.2 100.0 309.5 100.0 336.4 100.0
COMPARISON OF RESULTS OF OPERATIONS - 1997 WITH 1996
The Company operates in both Brazil and Australia which had significant
foreign exchange rate fluctuations in 1997. The comparison below reflects
the effect of changes in foreign exchange rates. The impact of foreign
exchange on the comparison between 1996 and 1995 was not material.
Sales
Sales increased by $26.9 million or 8.7% from 1996 after giving effect
to a $14.9 million reduction in sales resulting from changes in foreign
exchange rates. Transaction Cards & Systems ("TCS") sales decreased $6.6
million or 5.5%. Printing Services & Document Management ("PSDM") sales
increased $6.5 million or 13.2% and Security Printing Solutions ("SPS") sales
increased $27.0 million or 19.3%.
The decrease in TCS sales was principally due to lower volume
requirements for stored-value telephone cards ($32.5 million) in Brazil.
This decrease was partially offset by a stronger demand in Brazil for
transaction cards and the acquisition of the Menno card business ($9.9
million) in May 1997. In addition, optical variable devices increased ($4.8
million) and LM's TCS sales are included for the entire year ($11.2 million).
The increase in PSDM sales is primarily due to the acquisition of Sati
in France ($8.7 million) and the inclusion of LM's sales for the entire year
($6.6 million). These increases were partially offset by lower sales at ABNB
and ABNH ($8.8 million).
The increase in SPS sales is principally due to the inclusion of LM's
sales for the entire year ($16.1 million), higher sales of secure products at
ABNB ($8.7 million), and an increase in domestic secure products ($2.2
million).
Sales by foreign subsidiaries represented 69% and 68% of the Company's
consolidated sales in 1997 and 1996, respectively.
<PAGE>
<PAGE>
Cost of goods sold increased $27.7 million or 13.7% partially due to
increased sales, after giving effect to an $11.5 million reduction in costs
resulting from changes in foreign exchange rates. As a percentage of sales,
cost of goods sold was 68.3% in 1997 as compared to 65.3% in 1996. This
increase is primarily attributable to $6.2 million of additional fixed costs
associated with the new PSDM manufacturing facility in Brazil and a
redeployment of its work force which resulted in a $3.4 million increase in
fixed overhead with a corresponding decrease in selling and administrative
expenses. In addition, initial startup and training costs related to the
currency contract resulted in higher costs. A favorable product mix
partially offset these increases in the cost of sales percentage.
Selling and administrative expenses decreased $2.6 million (5.4%) from
1996 after giving effect to a $1.4 million reduction resulting from changes
in foreign exchange rates. The decrease was principally due to lower
administrative costs in Brazil ($2.4 million). In addition, administrative
costs decreased in Brazil as a result of the redeployment of the work force
discussed above. These decreases were partially offset by the inclusion of
LM's operations for an entire year in 1997, ($3.2 million). As a percentage
of sales, selling and administrative expenses declined to 13.6% in 1997 from
15.6% in 1996.
Depreciation expense increased $2.9 million after giving effect to a
$1.0 million reduction resulting from changes in foreign exchange rates.
This increase was primarily due to the inclusion of LM for the full year
($1.5 million), the expansion of ABNB's manufacturing capacity in its new
PSDM manufacturing facility ($0.7 million) and the acquisition of Sati ($0.7
million).
Interest expense increased $3.9 million in 1997, primarily due to a full
year of LM acquisition debt ($2.0 million), interest on the Sati acquisition
indebtedness ($0.2 million), increased debt to fund the expansion of the
Brazilian PSDM manufacturing facility ($.9 million) and higher revolving and
other credit borrowings ($.8 million).
Foreign translation losses, net, are a result of the translation of
Brazilian local currency financial statements into US dollars.
Other income, net increased by $0.5 million. The amounts are net of a
loss on an interest rate lock in 1997 of $2.3 million and a litigation
provision of $2.4 million in 1996. The amounts in 1997 include interest
income on the refund in the fourth quarter of certain prior year tax
deposits($1.1 million).
Taxes on income (benefit) are calculated using effective tax rates for
each tax jurisdiction and various assumptions such as state and local taxes
and utilization of foreign tax credits. In 1997, a $4.0 million reversal of
tax liabilities no longer required decreased the consolidated tax expense and
resulted in a significant difference from the statutory rate. See Note G of
"Notes To Consolidated Financial Statements."
Minority interest in 1997 and 1996 represents the 22.5% minority
interest in ABNB, and in 1996 included a 45% minority interest in LM.
The 1997 extraordinary item of approximately $5.6 million represents the
write off of deferred debt expenses and the premiums paid to retire
approximately 87.7% of the 11-5/8% Notes, and is net of tax benefits of
approximately $3.0 million.<PAGE>
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS - 1996 WITH 1995
Sales increased by $103.3 million or 50.1% from 1995. Sales of
Transaction Cards & Systems increased $69.6 million or 136.5%, principally
due to increases in sales of stored-value telephone cards ($48.7 million) and
LM's sales since June 1, 1996 ($20.6 million). Sales of Printing Services &
Document Management increased $27.9 million or 131.0%, principally due to
including Grafica Bradesco Ltda.'s ("Grafica Bradesco") sales for the full
1996 year and LM's sales since June 1, 1996. Sales of Security Printing
Solutions increased $5.8 million or 4.3%, principally due to LM's sales since
June 1, 1996 ($25.6 million), offset partially by decreased sales of food
coupons ($9.0 million), personalized checks ($5.5 million, excluding LM's
sales), currency ($3.0 million) and other products.
Cost of goods sold increased $53.1 million or 35.6%, including LM's cost
of sales ($30.1 million), from 1995, as a result of increased sales. As a
percentage of sales, cost of goods sold declined to 65.3% in 1996 from 72.3%
in 1995. Sales of Security Printing Solutions margins improved in 1996 due
to product mix and the non-recurrence of certain charges that are included in
the 1995 cost of sales. In addition, the percentage of cost of goods sold
was also favorably impacted due to the cost reductions realized from the 1995
plant closure and downsizing plan, which was offset in part by the start-up
of the Tennessee facility. The 1995 plant closure and downsizing plan was
substantially completed in the second quarter of 1996. Margins were
favorably impacted by increased sales of Transaction Cards & Systems as
discussed above. The product mix in any given period is not indicative of
the expected product mix in future periods.
Selling and administrative expenses increased $8.4 million (21.1%) from
1995 principally due to the above acquisitions ($13.4 million), partially
offset by reduced corporate overhead ($4.0 million) and sales of Security
Printing Solutions selling expenses ($1.0 million) as a result of the 1995
restructuring. As a percentage of sales, selling and administrative expenses
declined to 15.6% in 1996 from 19.3% in 1995.
Depreciation expense increased $5.2 million in 1996 from 1995 primarily
due to the LM acquisition ($3.3 million) and ABNB acquisition of Grafica
Bradesco and the expansion of the Transaction Cards & Systems's manufacturing
capacity ($2.8 million) partially offset by lower domestic depreciation
expense ($0.9 million).
Interest expenses increased $5.7 million in 1996 primarily due to debt
incurred to acquire LM ($3.7 million) and to fund the ABNB's expansion of the
Transaction Cards & Systems manufacturing capacity ($1.9 million).
Foreign translation losses, net is a result of the translation of
Brazilian local currency financial statements into US dollars.
Other income, net, decreased $3.0 million principally due to the $2.4
million provision related to shareholder litigation (See Note N of "Notes to
Consolidated Financial Statements," and an unrealized loss in marketable
securities ($1.0 million) partially offset by increased interest and other
income.
Taxes on income (benefit) are calculated using effective tax rates for
each tax jurisdiction and various assumptions such as state and local taxes
and utilization of foreign tax credits. See Note G of "Notes To Consolidated
Financial Statements."<PAGE>
<PAGE>
Minority interest principally represents the ABNB minority interest.
Restructuring
In 1995, the Company recorded a pre-tax restructuring charge of
approximately $14.3 million pursuant to a restructuring plan developed by
management for the domestic security printing operations and the downsizing
of its corporate offices. The plan was substantially completed in the second
quarter of 1996.
The 1995 restructuring charge provided for those reasonably estimable
costs resulting from the plan, including costs that are: (i) associated with
and will not benefit activities that will continue or generate future revenue
and are incremental as a result of the plan; (ii) incurred under contractual
agreements (i.e. leases and employment agreements) that existed prior to the
commitment date that provide no future economic benefit; or (iii) related to
asset impairments and writedowns resulting directly from the plan. The
Company had estimated the pre-tax annual cost savings would be approximately
$6.5 million, of which approximately $5.3 million were manufacturing related
fixed costs. The Company began to realize the cost savings in the second
quarter of 1996. The Company reduced its domestic workforce by about 27% and
provided a $2.9 million reserve for severance and related costs.
Asset re-valuations and writedowns accounted for $5.0 million of the
1995 charge which reduced certain assets to their net realizable value and
primarily related to leasehold improvements.
Lease and other facility obligations accounted for $6.4 million of the
1995 charge for facilities closed in 1996.
The future cash outlays for the remaining restructuring reserve of $2.8
million at December 31, 1997 are anticipated to be $1.3 million in 1998, $1.3
million in 1999 and $0.2 million in 2000.
Liquidity and Capital Resources
At December 31, 1997, the Company had approximately $17.3 million in
cash and cash equivalents. In January 1996, ABN and ABNH entered into a
$20.0 million revolving credit facility (the "Credit Facility") for general
working capital and letters of credit purposes. At December 31, 1997, the
Company had approximately $18.5 million of availability under the Credit
Facility before reductions for $3.6 million of outstanding letters of credit
and $3.2 million of borrowings. In addition, Sati had available an unused
working capital revolving credit facility of approximately $1.3 million. The
Company's long-term debt included $126.5 million of 10-3/8% Senior Notes due
2002 (the "10-3/8% Notes"), $95.0 million of 11-1/4% Senior Subordinated
Notes due 2007 (the "11-1/4% Notes"), $8.0 million of 11-5/8% Senior Notes
due 2002 (the "11-5/8% Notes"), $50.4 million of LM senior and subordinated
non-recourse debt (the "LM debt"), $15.9 million of borrowings in Brazil,
$9.4 million of Sati debt and $7.2 million of other debt. In March 1998, the
$50.4 million of LM debt was refinanced.
For the year ended December 31, 1997, the Company used cash of $0.7
million from operating activities compared to $7.6 million of cash flow
generated from operating activities in 1996, and a use of cash of $4.5
million in 1995.
<PAGE>
<PAGE>
Operating cash flows (before changes in operating assets and
liabilities) decreased $1.4 million for 1997 as compared to 1996 principally
as a result of decreased minority interest ($2.2 million) and a decreased
non-cash provision for litigation expense ($2.4 million) partially offset by
increased depreciation and amortization ($1.6 million). Operating cash flows
(before changes in operating assets and liabilities) increased $33.0 million,
in 1996 as compared to 1995, principally as a result of increased earnings
($26.5 million), depreciation and amortization ($6.6 million), and minority
interest charges ($3.7 million), partially offset by decreased non-cash
provisions for restructuring ($14.2 million). The increase in certain
non-cash charges, such as depreciation and amortization, is due mainly to the
LM and Sati acquisitions and increased capital expenditures in the prior
year.
Changes in operating assets and liabilities also affected cash flows.
The net decrease in operating cash flows from such changes was $7.0 million
higher in 1997 as compared to 1996 and was primarily due to the increase of
inventories related to the startup of new contracts at LM and at the domestic
subsidiaries, timing differences in the payment of accounts payable and
prepaid expenses, and costs in excess of billings on uncompleted contracts.
The net decrease in operating cash flows from such changes of $20.9 million,
in 1996 as compared to 1995, was principally due to the LM acquisition, as
certain operating assets, principally receivables ($8.5 million), were not
acquired, and to increased levels of receivables and inventory in 1996 ($31.9
million), partially offset by changes in other assets and liabilities. The
changes in assets and liabilities are due in part to acquisitions and levels
required to support sales and production requirements.
Investing activities for the years ended December 31, 1997, 1996 and
1995 used net cash flows of $21.8 million, $24.5 million and $6.1 million,
respectively, primarily for capital expenditures of $18.1 million, $22.3
million and $10.4 million, respectively. In 1995, proceeds from the sale of a
joint venture provided $4.7 million of cash. Investing activities for 1997
included $3.8 million for the acquisition of Sati, one of the leading check
and document personalization companies in France, and the acquisition in
Brazil of the leading manufacturer of personalized financial transaction
cards. The reduced level of capital expenditures in the 1997 period reflected
the substantial completion of the expansion of manufacturing capacity in
Brazil. Capital expenditures in 1997 included $7.2 million for the purchase
of assets related to new contracts for personalized financial documents in
Brazil and Australia and government passports in Australia.
The significant increase in capital expenditures in 1996 was due to
several programs, including the completion of a three-year program at the
Company's Rio de Janeiro facility, which added significant stored-value card
production capabilities, and the establishment of advanced document printing,
storage and distribution capabilities in its new Sao Paulo facility. The
Company anticipates that capital expenditures in 1998 and 1999 will be
approximately $11 million and $13 million, respectively. These amounts
include approximately $5.0 million in each of 1998 and 1999 that management
estimates will be required for maintenance in addition to capital
expenditures required for new business. Such capital commitments include
amounts that will be financed through operating leases, capital leases and
other financing arrangements. The portion of capital commitments not
financed through such leases and arrangements will be financed with working
capital and cash flow.
<PAGE>
<PAGE>
Financing activities for the years ended December 31, 1997, 1996 and
1995 provided net cash flows of $26.0 million, $7.5 million and $3.0 million,
respectively. The activity in 1997, 1996 and 1995 was principally from
borrowings in connection with capital expenditures, as well as refinancing
and repayment of debt. In 1997 and 1996, $2.6 million and $2.9 million
respectively of dividend payments were made to the ABNB minority shareholder.
Financing activities for 1997 included the net proceeds from the
issuance of $95.0 million of 11-1/4% Notes and related warrants to purchase
shares of Common Stock which were used to redeem $57.0 million of principal
amount of the 11-5/8% Notes. Financing activities also included the net
proceeds from the issuance of $10.0 million of Convertible Debentures,
increased long-term debt repayments, increased revolving credit borrowings
and a decreased dividend payment to ABNB's minority shareholder. Financing
activities included the $4.4 million payment of fees and expenses related to
the issuance of the 11-1/4% Notes and $0.5 million of fees and expenses for
the issuance of the Convertible Debentures. The cash portion of the early
extinguishment of debt charges representing the premium to redeem the 11-5/8%
Notes ($5.4 million) is included in financing activities.
In the third quarter of 1997, the Company completed the acquisition of
Sati for $11.6 million which was financed with $9.4 million of bank term
loans and $2.2 million of the Company's Common Stock. In addition, the bank
financing included a $1.7 million working capital revolver facility. The term
loans have a term of six to seven years with the working capital revolver
renewable on an annual basis. The loans are priced at PIBOR (Paris Interbank
Offered Rate) plus 2% or approximately 5.3% as of year end. The bank loan
facilities are secured by a pledge of Sati's subsidiaries' stock and an
assignment of receivables. In addition, the facility permits the distribution
of dividends of up to 25% of excess cash flow, as defined.
In the fourth quarter of 1997, the sale of $95 million of 11-1/4% Notes
and warrants in a private placement was completed, the proceeds of which were
used to refinance approximately $57.0 million of the principal amount of the
Company's 11-5/8% Notes due 2002, provide funds for several acquisitions and
for general corporate purposes. The 11-1/4% Notes mature on December 1,
2007, have no sinking fund requirements and are not callable until December
2002. The 11-1/4% Notes are unsecured obligations of the Company and are
subordinated in right of payment to all existing and future senior
indebtedness of the Company (as defined). In connection with the sale of the
11-1/4% Notes, warrants to purchase 1,185,790 shares of the Company's Common
Stock at $5.50 per share were issued.
<PAGE>
<PAGE>
Recent Developments
In March 1998, the refinancing of the LM debt was completed. The new
bank facilities include a five-year $55.3 million amortizing revolving credit
facility and a five-year $3.3 million letter of credit facility. The
revolving credit facility expires in March 2003 with semi-annual commitment
step downs and is initially priced at the bank bill rate plus 1.75%, or
approximately 6.6% at December 31, 1997. The bank facilities are secured by
substantially all of LM's assets and the capital stock of the subsidiaries.
The bank facility permits the distribution of dividends of up to 50% of free
cash flow (as defined) which would have been approximately $1.6 million on a
proforma basis under the terms of the facility in 1997. The facility
agreement requires that 75% of the borrowings be hedged for interest rate
risk. In addition, the new facility will extend the current bank maturities
from 2001 to 2003 and will reduce amortization requirements in 1998 and 1999
when compared to the prior bank facility's amortization schedule.
In March 1998, the Company, through a subsidiary of Sati, completed the
acquisition of MCE S.A. (Monetique Cheque Edit) and CPS S.A. (CPS
Technologies) for $3.3 million plus the refinancing of $1.8 million of
outstanding bank debt. MCE personalizes bank checks and documents and CPS
personalizes transaction and plastic cards for the French market. The
acquisition and refinancing of outstanding bank debt was financed with $3.5
million of bank term loans and $1.6 million from the Company in the form of
$1 million in cash and $0.6 million in Common Stock of the Company. In
addition, the bank financing included a $0.8 million working capital
revolving credit facility. The term loans have a term of six to seven years
with the working capital revolver renewable on an annual basis. The loans
are priced at PIBOR plus 2% with the pledge of MCE and CPS stock and a
guarantee of the subsidiary that acquired MCE and CPS securing the bank
facilities.
In October 1998, the current three-year $20 million Credit Facility will
mature. The Company intends to refinance this revolving credit facility with
a new three to five year facility. Management believes that it will be able
to accomplish the refinancing of the Credit Facility prior to its maturity.
For the year ended December 31, 1997, the Company had made all required
interest payments and was in compliance with its financing agreements.
Certain financing agreements contain covenants which restrict the Company
from incurring additional indebtedness without consent; however, borrowings
under certain bank borrowing agreements, lease financings in the normal
course of business, intercompany indebtedness and other obligations entered
into in the ordinary course of business are permitted. Additionally, the
Company and its subsidiaries are restricted from declaring or paying a cash
dividend or making any distributions on its capital stock, purchasing or
redeeming any equity interests or making investments, with certain
exceptions.
The Company and its subsidiaries are highly leveraged. At December 31,
1997, total consolidated long-term debt, excluding the current portion ($17.9
million), was approximately $293.2 million (representing approximately 84% of
total capitalization).
<PAGE>
<PAGE>
The high level of the Company's indebtedness poses certain risks,
including the risk that the Company might not generate sufficient cash flow
to service its obligations and the risk that the Company's capacity to
respond to market conditions, extraordinary capital needs and other factors
could be adversely affected. The Company's ability to service its debt
depends upon the future performance of the Company's subsidiaries, which will
be subject to prevailing economic and competitive conditions and to other
factors, including the ability to generate cash at the Company's operating
subsidiaries, to distribute that cash to the Company for debt service and to
repatriate funds from foreign subsidiaries, particularly ABNB. Other future
acquisitions and joint ventures in which the Company does not maintain 100%
ownership, foreign legal and tax requirements, the terms of acquisition debt
incurred or incurred in the future may further restrict the ability of newly
acquired subsidiaries and joint venture investments to declare and pay
dividends or make distributions.
The Company expects to refinance the 11-1/4% Notes, 10-3/8% Notes and the
remaining 11-5/8% Notes at or before their respective maturities; however, no
assurance can be given as to the Company's ability to refinance such
obligations, that the Company's revolving credit facility will be available
when required or that prevailing interest rates will be advantageous to the
Company. In the event that the Company is unable to refinance its
indebtedness as it matures or raise funds through asset sales, sales of
equity or otherwise, its ability to pay principal of or the interest on the
10-3/8% Notes, the 11-1/4% Notes, and the remaining 11-5/8% Notes and other
long-term indebtedness of the Company would be adversely affected.
Management of the Company believes that cash flows from operations
together with cash balances, availability of funds under its and its
subsidiaries' credit facilities and proceeds from asset sales will be
sufficient to service debt and fund capital expenditures for the next twelve
months. The Company also believes that it and its subsidiaries possess
sufficient unused debt capacity and access to debt and equity markets to
pursue additional acquisition opportunities and meet extraordinary working
capital needs as they arise.
Tax Law Changes
As a result of Brazilian tax legislation, effective for 1996, the 15%
dividend withholding tax on earnings after 1995 was eliminated. Additionally,
in 1996, tax legislation which permitted Brazilian companies to elect to
deduct dividends in computing taxable income, subject to certain limitations,
also provided for a 15% withholding tax on dividends distributed in this
manner. The statutory tax rate in Brazil is approximately 33%.
Accounting Pronouncements
The Company anticipates that the 1998 adoption of recently issued
accounting standards, as discussed in Note A, will not have a material impact
on the Company's financial statements.
During 1997, the Securities and Exchange Commission issued new
disclosure rules related to derivatives and exposures to market risk from
derivative financial instruments, other financial instruments, and certain
derivative commodity instruments. The Company is currently evaluating these
disclosure requirements which are required to be presented in annual reports
for years ending after June 15, 1998.
<PAGE>
<PAGE>
Impact of Inflation
In 1994, the Brazilian government introduced a new currency as part of
the government's economic stabilization program designed to reduce the
country's hyper-inflation. As a result of this program, the inflation rate
has decreased substantially to approximately 4.5% for 1997, 10% for 1996 and
23% for 1995 as compared to 941% for 1994. The Company translates ABNB's
financial statements as if ABNB were operating in a hyperinflationary
economy. Currently, gains and losses resulting from translation and
transactions are determined using a combination of current and historical
rates and are reflected in earnings. Effective January 1, 1998, the method
of translating ABNB's financial statements will be changed to reflect gains
and losses as a separate component of equity. The effect of the change will
reduce stockholders' equity by approximately $1.7 million with a
corresponding credit to deferred taxes. The Company's domestic, Australian,
New Zealand and French operations are not significantly affected by
inflation. ABNB's sales represented 42% and 53% of consolidated sales in 1997
and 1996, respectively.
Foreign Operations
The Company's foreign exchange exposure policy generally calls for
selling its domestic manufactured product in US dollars and, in the case of
LM, ABNB and Sati, selling in their national currencies, in order to minimize
transactions occurring in currencies other than those of the originating
country. The Company has, from time to time, entered into foreign currency
option contracts to limit the effect of currency fluctuations on future
expected cash receipts from Brazil which are used for general parent company
purposes, including debt service. The options generally have covered periods
from two to four months from the date of purchase. In addition, the Company
has established restricted investment accounts which are controlled by the
parent, and in the case of ABNB, have funds which are from time to time
invested in US$-indexed money market investments. 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. Currently, repatriation of
earnings from ABNB is permitted, subject to certain approvals. Dividends or
distributions from Brazil could be subject to government restrictions in the
future. In 1997 and 1996, the Company received $8.9 million and $9.9
million, respectively, in dividends from ABNB.
Earnings on foreign investments, including operations and earnings of
foreign companies in which the Company may invest or rely upon for sales, are
generally subject to a number of risks, including high rates of inflation,
currency exchange rate fluctuations, trade barriers, exchange controls,
government expropriation and political instability and other risks. These
factors may affect the results of operations in selected markets included in
the Company's growth strategy, such as in Latin America and Asia. The
Company's financial performance on a dollar-denominated basis can be
significantly affected by changes in currency exchange rates and inflation.
The Company's cash balances and borrowings in foreign currency can mitigate
the effects of fluctuating currency exchange rates; however, borrowings and
investments in foreign currency and markets may not be available or practical
and may face local interest rate and principal risks. In addition, adverse
changes in foreign interest and exchange rates could adversely affect the
Company's ability to meet its interest and principal obligations as well as
applicable financial covenants with respect to its dollar-denominated debt,
including the 11-1/4% Notes, the 10-3/8% Notes, the remaining 11-5/8% Notes
and other indebtedness of the Company.<PAGE>
<PAGE>
See Notes A and M of "Notes to Consolidated Financial Statements" for
the disclosure of certain financial information relating to foreign
operations.
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 11-1/4% Notes, 10-3/8% Notes, the remaining 11-5/8% Notes
and other indebtedness of the Company.
YEAR 2000 ISSUE
The Year 2000 issue involves the risk that computer systems using
two-digit date fields will fail to properly recognize the Year 2000,
resulting in computer system failures for businesses, government agencies,
service providers, vendors and customers. The Company has formed a
cross-functional task force for assessing the Company's Year 2000 readiness.
The task force has developed a plan to assess the Company's Year 2000 risk
and is in the process of performing its review. The Company has initiated
discussions with its key suppliers and customers to determine whether they
have any Year 2000 issues which could impact the Company.
The Company anticipates that certain software will require replacement
or modification. However, based on its review to date, the Company does not
expect the cost of software replacement or modification to be material to its
financial position or results of operations. Estimates of the related costs
are based on assumptions, including the continued availability of certain
resources, the ability to correct all relevant applications and third party
modification plans. There is no guarantee that the estimates will be
achieved and actual costs could differ materially from those anticipated.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, under the captions, "The
Company," "Business," and "Management Discussion and Analysis of
Financial Condition and Results of Operations" and in certain documents
incorporated by reference herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 (the "Reform Act"). 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, <PAGE>
<PAGE>
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 Report. The Company's stock and bond
business is also subject to certain risks, such as the trend towards
shorter settlement cycles and book entry ownership, which may impact
future results. The complete elimination of or substantial reduction
in the domestic use of certificates or changes in NYSE 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 USDA 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 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.
<PAGE>
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the Company and its
subsidiaries are set forth herein:
Independent Auditors' Report
Consolidated Statements of Operations - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
SCHEDULE
Schedule I - Condensed Financial Information of Registrant
For the Year Ended December 31, 1997<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Banknote Corporation
New York, New York
We have audited the accompanying consolidated balance sheets of American
Banknote Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
Our audit also included the consolidated financial statement schedule listed
in Item 14. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of American Banknote
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statement taken as a whole, present fairly in all material aspects, the
information set forth therein.
DELOITTE & TOUCHE LLP
March 17, 1998
New York, New York<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . $ 336,359 $ 309,450 $ 206,164
Costs and expenses:
Cost of goods sold. . . . . . . . . . . 229,812 202,158 149,035
Selling and administrative. . . . . . . 45,662 48,263 39,851
Restructuring and idle equipment. . . . 14,304
Depreciation and amortization . . . . . 22,937 20,042 14,824
298,411 270,463 218,014
37,948 38,987 (11,850)
Other (expense) income:
Interest expense. . . . . . . . . . . . (32,762) (28,864) (23,147)
Foreign translation losses, net . . . . (130) (255) (38)
Other, net. . . . . . . . . . . . . . . 342 (135) 2,824
(32,550) (29,254) (20,361)
Income (loss) before taxes on income
(benefit) and minority interest . . 5,398 9,733 (32,211)
Taxes on income (benefit). . . . . . . . (1,435) 400 (11,359)
Income (loss) before
minority interest . . . . . . . . . 6,833 9,333 (20,852)
Minority interest . . . . . . . . . . . . 2,993 5,234 1,563
Income (loss) before
extraordinary item. . . . . . . . . 3,840 4,099 (22,415)
Extraordinary item - early
extinguishment of debt. . . . . . . . (5,589)
Net income (loss). . . . . . . . . . $ (1,749) $ 4,099 $ (22,415)
Net income (loss) per common share - Basic:
Before extraordinary item . . . . . . $ 0.18 $ 0.21 $ (1.17)
Extraordinary item. . . . . . . . . . (0.28)
$ (0.10) $ 0.21 $ (1.17)
Net income (loss) per common share - Diluted:
Before extraordinary item . . . . . . $ 0.18 $ 0.20 $ (1.17)
Extraordinary item. . . . . . . . . . (0.27)
$ (0.09) $ 0.20 $ (1.17)
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1997 1996
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . $ 17,323 $ 14,256
Marketable securities -at market (cost $1,746). . . . 2,133
Accounts receivable, net of allowance for
doubtful accounts of $986 and $981. . . . . . . . . 57,422 46,611
Costs in excess of billings, of $2,848 in 1997,
on uncompleted contracts. . . . . . . . . . . . . . 5,442 890
Inventories . . . . . . . . . . . . . . . . . . . . . 41,686 35,622
Deferred income taxes . . . . . . . . . . . . . . . . 3,046 4,261
Prepaid expenses and other . . . . . . . . . . . . . 11,371 9,362
Total current assets . . . . . . . . 136,290 113,135
Property, plant and equipment, at cost, net of
accumulated depreciation and amortization . . . . . . 258,724 253,987
Other assets. . . . . . . . . . . . . . . . . . . . . . 25,918 27,974
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $8,863 and $5,662 . . . . . . . . . . 82,604 85,282
$503,536 $480,378
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving credit facilities . . . . . . . . . . . . . $ 7,523 $ 3,103
Current portion of long-term debt . . . . . . . . . . 17,886 14,450
Accounts payable and accrued expenses . . . . . . . . 54,761 60,049
Total current liabilities. . . . . . 80,170 77,602
Long-term debt . . . . . . . . . . . . . . . . . . . . 293,215 263,548
Other liabilities . . . . . . . . . . . . . . . . . . . 21,466 24,706
Deferred income taxes . . . . . . . . . . . . . . . . . 32,808 47,456
Minority interest . . . . . . . . . . . . . . . . . . . 20,836 20,789
448,495 434,101
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding
Zero Coupon Convertible Subordinated Debentures . . . 8,326
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued 21,134,769
shares and 20,137,880 shares. . . . . . . . . . . . 211 202
Capital surplus . . . . . . . . . . . . . . . . . . . 74,713 68,609
Retained-earnings (deficit) . . . . . . . . . . . . . (23,282) (21,362)
Treasury stock, at cost (281,000 shares). . . . . . . (1,253) (1,253)
Cumulative currency translation adjustment. . . . . . (3,674) 81
Total stockholders' equity . . . . . 55,041 46,277
$503,536 $480,378
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Zero
Coupon Cumulative
Subordinate Retained Pension Currency
Convertible Common Stock Capital Earnings Treas. Liabil. Translation
Debentures Shares Amount Surplus (Deficit) Stock Adjust. Adjust. Total
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1995. . . 19,290 $ 193 $66,883 $ (3,046) $(1,253) $62,777
Issuance in
connection with
option plans. . . . 102 1 208 209
Pension liability
adjustment. . . . . $(218) (218)
Net loss. . . . . . . (22,415) (22,415)
Balance -
December 31, 1995. . 19,392 194 67,091 (25,461) (1,253) (218) 40,353
Issuance of common
shares in
connection with
acquisitions. . . . 427 5 825 830
Issuance in
connection with
option and
compensation plans. 319 3 693 696
Foreign currency
translation
adjustment . . . . $ 81 81
Pension liability
adjustment. . . . . 218 218
Net income. . . . . . ______ ______ 4,099 ______ _____ 4,099
Balance -
December 31, 1996. . 20,138 202 68,609 (21,362) (1,253) 81 46,277
Issuance in
connection with
an acquisition. . . 423 4 2,130 2,134
Issuance in
connection with
option and
compensation plans . 349 3 1,381 1,384
Issuance of zero
coupon
subordinated
convertible
debentures. . . . . $9,055 495 9,550
Imputed interest on
zero coupon
debentures. . . . . 171 (171)
Conversion of
zero coupon
debentures. . . . . (900) 225 2 898
Issuance of 1997
Warrant . . . . . . 1,200 1,200
Foreign currency
translation
adjustment (3,755) (3,755)
Net (loss). . . . . . (1,749) (1,749)
Balance -
December 31, 1997 $8,326 21,135 $ 211 $74,713 $(23,282) $(1,253) $ - $(3,674) $55,041
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands)
1997 1996 1995
<S> <C> <C> <C>
Operating Activities:
Income (loss) before extraordinary item. . . . $ 3,840 $ 4,099 $(22,415)
Adjustments to reconcile income (loss) to
net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . 25,909 24,326 17,742
Unrealized loss (gain) on
marketable securities. . . . . . . . . . . . (45) 819 (1,061)
Deferred taxes . . . . . . . . . . . . . . . . (7,776) (10,667) (16,650)
Minority interest. . . . . . . . . . . . . . . 2,993 5,234 1,563
Provision for litigation . . . . . . . . . . . 2,400
Restructuring and idle equipment . . . . . . . 14,223
Foreign translation losses, net. . . . . . . . 111 255 38
Changes in operating assets and liabilities,
net of effects from acquisitions:
Marketable securities . . . . . . . . . . . 2,144 (1,253)
Accounts receivable . . . . . . . . . . . . (6,152) (15,203) 10,501
Inventories . . . . . . . . . . . . . . . . (8,171) (3,534) 1,734
Costs in excess of billing on
uncompleted contracts . . . . . . . . . . (4,552) (890)
Prepaid expenses and other. . . . . . . . . (2,563) 1,250 (7,466)
Accounts payable and accrued expenses . . . (5,591) (788) (3,839)
Other . . . . . . . . . . . . . . . . . . . (894) 337 2,432
Net cash (used in) provided by
operating activities . . . . . . . . . . . . . (747) 7,638 (4,451)
Investing Activities:
Acquisitions of subsidiaries . . . . . . . . . (3,841) (2,491)
Capital expenditures . . . . . . . . . . . . . (18,063) (22,283) (10,378)
Proceeds from sale of joint venture. . . . . . 4,718
Proceeds from sale of assets . . . . . . . . . 820 699 211
Other . . . . . . . . . . . . . . . . . . . . (717) (385) (650)
Net cash used in investing activities. . . . . . (21,801) (24,460) (6,099)
Financing Activities:
Other long-term borrowings . . . . . . . . . . 8,342 3,415
Revolving credit facilities, net . . . . . . . 4,420 3,103
Payment of long-term debt. . . . . . . . . . . (14,310) (1,076) (451)
Proceeds from zero coupon subordinated
convertible debentures (net of related
expenses of $450). . . . . . . . . . . . . 9,550
Proceeds from financing:
11-1/4% Senior Subordinated Notes, (net
of related expenses $4,389). . . . . . . . 89,411
Warrants . . . . . . . . . . . . . . . . . . 1,200
Redemption of 11 5/8% Notes . . . . . . . . . (62,417)
Dividend to minority shareholder . . . . . . . (2,587) (2,867)
Other. . . . . . . . . . . . . . . . . . . . . 718 20
Net cash provided by financing activities. . . . 25,985 7,502 2,984
Effect of foreign currency exchange rate
changes on cash and cash equivalents. . . . . (370) 51 (567)
Increase (Decrease) in cash and cash equivalents 3,067 (9,269) (8,133)
Cash and cash equivalents - beginning of year. . 14,256 23,525 31,658
Cash and cash equivalents - end of year . . . . $ 17,323 $ 14,256 $ 23,525
Supplemental cash payments:
Taxes. . . . . . . . . . . . . . . . . . . . . $ 6,472 $ 9,490 $ 3,680
Interest . . . . . . . . . . . . . . . . . . . $ 32,588 $ 27,130 $ 21,857
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation and Summary of Significant Accounting Policies
American Banknote Corporation is a holding company (the "Company") and through
its subsidiaries in the United States, Brazil, Australia, New Zealand and
France, operates in a single industry, secured products and systems, with
three principal product lines: Transaction Cards & Systems; Printing Services
& Document Management; and Security Printing Solutions. The Company's
principal subsidiaries are: American Bank Note Company ("ABN"), American Bank
Note Holographics, Inc. ("ABNH"), American Bank Note Company Grafica e
Servicos Ltda. ("ABNB"), a 77.5% owned Brazilian company, American Banknote
Australasia Holdings, Inc. ("ABAH"), its Australian subsidiary, ABN
Australasia Limited ("LM") and Sati Holdings SA ("Sati"), its French
subsidiary.
1. Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany items have been eliminated. Certain
reclassifications have been made to the 1996 and 1995 balances to conform to
the 1997 presentation.
2. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Translation of Financial Statements: The results of the ABN's foreign
operations other than ABNB are translated into US dollars using average
exchange rates during the period, while assets and liabilities are translated
using current rates. Resulting translation adjustments are accumulated as a
separate component of stockholders' equity. Foreign currency transaction
gains and losses are included in earnings. Through December 31, 1997, ABNB
operated in a hyper-inflationary economy, and gains and losses for ABNB
resulting from translation and transactions were determined using a
combination of current and historical rates. Effective January 1, 1998, as a
result of continued decreased inflation rates in Brazil, the method of
translating ABNB's financial statements will be changed to reflect gains and
losses as a separate component of stockholders' equity. The effect of this
change will be to reduce stockholders' equity by approximately $1.7 million,
with a corresponding credit to deferred income taxes.
4. Cash and Cash Equivalents: All highly liquid investments with a maturity
of three months or less, when purchased, are considered to be cash
equivalents.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Marketable Securities: Such investments are held for trading purposes and
changes in the market value are reflected in earnings.
6. Inventories and Revenue Recognition: Inventories are stated at the lower
of cost or market, cost being determined on the first-in, first-out (FIFO)
method. Revenue is generally recognized when goods are shipped. However,
pursuant to terms with certain customers, completed items are sometimes stored
at the Company's premises and, in those instances, revenue is recognized when
the goods are transferred to the on-site secured facility. At December 31,
1997 and 1996, accounts receivable from these customers totaled $7.8 million
and $1.1 million, respectively. Additionally, certain contracts are accounted
for by the percentage of completion method.
7. Depreciation and Amortization: Depreciation and amortization of property,
plant and equipment is computed principally by the straight-line method over
the estimated useful life of the asset as follows: buildings - 25 to 40 years;
rolls and dies - 40 years; and machinery, equipment and fixtures - 5 to 22
years.
Amortization of leasehold improvements is computed by the straight-line method
based upon the remaining term of the applicable lease or the estimated useful
life of the asset, whichever is shorter.
8. Intangible Assets: Patents and other intangibles are amortized over their
useful lives. The excess of cost of investment in subsidiaries over net
assets acquired is amortized over periods ranging from 20 to 30 years using
the straight-line method.
9. Long-Lived Assets: The Company reviews its long-lived assets for
impairment when changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Assets to be disposed of and assets not
expected to provide any future service potential to the Company are recorded
at the lower of carrying amount of fair value less cost to sell.
10. Research and Development: Research and development costs are expensed as
incurred (1997 - $0.7 million, 1996 - $0.9 million and 1995 - $0.4 million).
11. Net Income (Loss) Per Share: In the fourth quarter of 1997, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." All prior period earnings per share data have been
restated to conform to the provisions of this statement.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The computation of basic and diluted income (loss) per share follows:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Income (loss)before extraordinary items. . . . $ 3,840 $ 4,099 $(22,415)
Accretion of zero coupon subordinated
convertible debentures . . . . . . . . . . . (171) - -
Numerator for basic and diluted income per common share
Income (loss) attributable to common
stockholders before extraordinary item . . . $ 3,669 $ 4,099 $(22,415)
Denominator for basic income (loss) per common share:
Weighted-average shares. . . . . . . . . . . 20,140 19,650 19,200
Effect of dilutive employee stock
options and non-vested share issuances . . . 660 520 -
Denominator for diluted income (loss) per share-
weighted-average shares and assumed conversions 20,800 20,170 19,200
</TABLE>
The 1997 denominator for computing diluted income per share excludes
approximately 3.8 million shares of Common Stock that are reserved for the
exercise of warrants to purchase approximately 1.6 million shares of Common
Stock, conversion of zero coupon subordinated convertible debentures into
approximately 1.9 million shares of Common Stock and the exercise of
approximately 0.3 million stock options. The 1996 and 1995 denominator for
computing diluted income per share excludes approximately 0.1 million shares
and 1.9 million shares of Common Stock, respectively, that are reserved for
the exercise of stock options and warrants. The exercise or conversion prices
of these securities is greater than the average market price of the common
shares and their inclusion would be antidilutive to diluted income per share.
12. Business Information: Sales to the United States government (principally
food coupons) were 7%, 7% and 15% of consolidated sales for the years ended
December 31, 1997, 1996 and 1995, respectively. Sales to a customer in Brazil
(national telephone company) were 11%, 24% and 13% of consolidated sales for
the years ended December 31, 1997, 1996 and 1995, respectively. Sales to the
ABNB minority owner were 12%, 14% and 12% of consolidated sales in 1997, 1996
and 1995, respectively.
Stock and bond printing accounted for approximately 7%, 8% and 11% of
consolidated sales for the years ended December 31, 1997, 1996 and 1995,
respectively. The elimination of printed certificates continues to be
advocated by various organizations in favor of the use of book-entry systems
for recording security ownership. The complete elimination of or substantial
reduction in the domestic use of certificates or NYSE requirements would have
a material adverse effect on the sales and earnings of the Company.
Government sales, particularly to the United States government and state and
local governments, is principally dependent on successful competitive bids
which are generally awarded on the basis of price but may also include other
factors. Many of the Company's contracts are re-bid annually or on a multiple
year basis. Government sales are generally subject to provisions allowing
termination for the convenience of the government.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 USDA is promoting the nationwide issuance of
electronic card-based food coupon benefits and by 1997, approximately one-half
of the states had begun implementation or had awarded contracts for these type
of systems.
13. Supplemental Cash Flow Information: In 1997, shares of Common Stock were
issued or reserved as follows: 423,098 shares were issued in connection with
the Sati acquisition (valued at approximately $2.1 million); 224,688 shares
were issued upon conversion of $1.0 million principal amount of zero coupon
subordinate convertible debentures; and 164,000 shares were issued and
reserved in connection with compensation plans for employees and directors
(valued at approximately $0.7 million). In addition, in 1997 in connection
with the acquisition of property, plant and equipment, approximately $2.5
million of seller financing was assumed. In 1996, 426,617 shares Common
Stock were issued in connection with acquisitions (valued at approximately
$0.8 million and 483,500 shares of Common Stock were issued and reserved in
connection with compensation plans for employees and directors (valued at
approximately $0.7 million). In addition, in 1996, the Company entered into a
contract payable in connection with the LM acquisition in the face amount of
$4.8 million. In 1995, 97,725 shares of Common Stock were issued and reserved
in connection with compensation plans for employees and directors (valued at
approximately $0.2 million). In addition, in 1995 ABNB acquired the security
printing operations of Grafica Bradesco Ltda. ("Grafica Bradesco"), from Banco
Bradesco, S.A., in exchange for 22.5% interest in ABNB.
14. Export Sales: US export sales were 5%,6% and 7% of consolidated sales
for the years ended December 31, 1997, 1996 and 1995, respectively.
15. Foreign Currency Options The Company periodically enters into foreign
currency options in order to hedge dividends denominated in foreign currency.
The purpose of the foreign currency hedging activities is to protect the
Company from the risk of devaluation of expected dollar cash flows of
dividends from ABNB. Generally, gains or losses on an option are deferred
until the option expires or is exercised, at which time it is included in the
amount of the underlying transaction.
16. Impact of Accounting Pronouncements: SFAS No. 129, "Disclosure of
Information about Capital Structure," issued in February 1997 is effective for
periods ending after December 15, 1997 and establishes standards for
disclosing information about an entity's capital structure by superseding and
consolidating previously issued accounting standards. The financial
statements of the Company are prepared in accordance with the requirements of
SFAS No. 129.
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, is
effective for fiscal years beginning after December 15, 1997 and requires
presentation of total nonowner changes in equity for all periods displayed.
The Company plans to adopt this statement for the year ending December 31,
1998, and is evaluating alternative disclosure formats suggested by the
standard.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997 is required to be adopted effective December
31, 1998. SFAS No. 131 requires, among other things, that financial and
descriptive information be provided about its reportable operating segments.
Under this statement operating segments are components of an enterprise about
which separate financial information is available that is regularly evaluated
by the enterprise's chief operating decision-maker in deciding how to allocate
resources and in assessing performance. The Company continues to evaluate the
effects, if any, of the adoption of the new standard.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," issued in February 1998, is effective for periods beginning after
December 15, 1997. The Company is currently evaluating the required
disclosures under this new standard.
The AICPA Accounting Standards Executive Committee issued in October 1996,
Statement of Position 96-1, "Environmental Remediation Liabilities.," The
adoption of this pronouncement in 1997 did not have a material effect on the
Company's financial condition and results of operations.
Note B - Acquisitions
In 1996, in a two step transaction, the Company acquired a 100% equity
interest in LM. As of May 1, 1997, the Company acquired the plastic cards
division of a company in Brazil, Menno Equipamentos para Escritorio Ltda.
("Menno"), and on August 26, 1997 acquired a 100% equity interest in Sati.
The total purchase price and the net assets acquired in these acquisitions in
1997 and 1996 follow (in thousands):
1997 1996
Net working capital (deficiency) . . . . . . . $ 1,393 $ (2,124)
Property, plant and equipment. . . . . . . . . 8,743 23,488
Excess of cost of investment over
net assets acquired. . . . . . . . . . . . . 8,669 52,885
Other long-term assets . . . . . . . . . . . . 2,425 3,914
Deferred debt expense. . . . . . . . . . . . . 477 3,273
Long-term liabilities. . . . . . . . . . . . . (419) (2,239)
Net purchase prices . . . . . . . . . . . . 21,288 79,197
Common Stock issued. . . . . . . . . . . . . . (2,134)
Acquisition financings . . . . . . . . . . . . (15,313) (76,706)
Net cash cost of acquisitions . . . . . . . $ 3,841 $ 2,491
On an unaudited pro-forma basis, assuming the above acquisitions had been made
as of January 1, 1996, consolidated sales for the years ended December 31,
1997 and 1996 would have increased by approximately $16.0 million and $69.3
million, respectively, and net income would have increased by approximately
$0.2 million ($.01 per basic and diluted share) and $1.1 million ($.05 per
basic and diluted share), respectively.
The above transactions were accounted under the purchase method. The Company
believes the unaudited pro-forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions
been made as of January 1, 1996 or of the results which will occur in the
future. The results of operations of the acquired entities are consolidated
in the Company's financial statements from the respective acquisition dates,
except for Sati, which is as of August 1, 1997.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note C - Inventories
December 31
1997 1996
(in thousands)
Finished goods. . . . . . . . . . . . . $ 6,454 $ 6,288
Work-in-process . . . . . . . . . . . . 17,356 14,905
Raw material and supplies . . . . . . . 17,876 14,429
$ 41,686 $ 35,622
Note D - Property, Plant and Equipment
December 31
1997 1996
(in thousands)
Land. . . . . . . . . . . . . . . . . . $ 3,612 $ 2,852
Buildings and improvements. . . . . . . 28,408 25,861
Rolls and dies. . . . . . . . . . . . . 173,557 174,037
Machinery, equipment and fixtures . . . 157,354 136,309
Leasehold improvements. . . . . . . . . 5,119 4,905
Construction in progress. . . . . . . . 4,613 6,408
372,663 350,372
Accumulated depreciation
and amortization. . . . . . . . . . . 113,939 96,385
$258,724 $253,987
Note E - Accounts Payable and Accrued Expenses
December 31
1997 1996
(in thousands)
Accounts payable - trade. . . . . . . . $ 25,387 $ 23,967
Accrued expenses. . . . . . . . . . . . 9,405 6,658
Customers' advances . . . . . . . . . . 1,454 2,120
Salaries and wages. . . . . . . . . . . 6,279 9,431
Restructuring and acquisition
related accruals. . . . . . . . . . . 2,849 3,898
Interest payable. . . . . . . . . . . . 3,311 5,679
Other . . . . . . . . . . . . . . . . . 6,076 8,296
$ 54,761 $ 60,049
Note F - Other (Expense) Income
Other (expense) income for the years ended December 31, follows:
1997 1996 1995
(in thousands)
Interest income and other. . . . . . $ 2,483 $ 2,841 $ 1,658
Gain (loss) on securities. . . . . . 130 (576) 1,166
Loss on interest rate lock . . . . . (2,271)
Litigation provision . . . . . . . . (2,400)
$ 342 $ (135) $ 2,824
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note G - Taxes on Income
Deferred income taxes arise from temporary differences between the tax basis
of assets and liabilities, and their reported amounts in the consolidated
financial statements.
Taxes on income (benefit) for the years ended December 31, follows:
1997 1996 1995
(in thousands)
Current
Foreign. . . . . . . . . . . . . $ 5,632 $ 10,624 $ 4,755
State and local. . . . . . . . . 709 443 536
6,341 11,067 5,291
Deferred
Federal. . . . . . . . . . . . . (8,097) (8,598) (14,209)
Foreign. . . . . . . . . . . . . 1,620 (914) (1,993)
State and local. . . . . . . . . (1,299) (1,155) (448)
(7,776) (10,667) (16,650)
$ (1,435) $ 400 $(11,359)
A reconciliation of the taxes on income (benefit) and the amount computed by
applying the federal income tax statutory rate follows:
1997 1996 1995
(in thousands)
Statutory tax (benefit). . . . . . . $ 1,889 $ 3,406 $(10,952)
Adjustments due to rate changes. . . (2,837)
Difference between federal and
foreign statutory rates. . . . . . (270) (1,311) 1,390
Non-deductible goodwill. . . . . . . 1,229 866
Brazil dividend deduction. . . . . . (2,090) (1,428) 601
US tax on Brazil dividend. . . . . . 1,643
Reversal of liabilities no longer
required . . . . . . . . . . . . . (4,035)
State and local income taxes, net
of federal benefit . . . . . . . . (179) (867) 58
Other. . . . . . . . . . . . . . . . 378 (266) 381
$ (1,435) $ 400 $(11,359)
In 1995, the Company adjusted its deferred tax assets and liabilities for the
estimated effect of a decrease in Brazil's tax rates enacted in the fourth
quarter of 1995. The effect of this non-cash item was to decrease deferred
income taxes in 1995 by $2.8 million.
The Company files a US corporate consolidated federal income tax return which
includes its domestic subsidiaries. The Company has an alternative minimum
tax credit carryforward of approximately $0.8 million, which is available to
offset future US federal income tax. At December 31, 1997, the Company's US
net operating loss carryforwards were approximately $71.0 million, which are
scheduled to expire as follows: $2.7 million, $20.9 million, $24.5 million and
$22.9 million in 2009, 2010, 2011 and 2012, respectively.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective for 1996, as a result of Brazilian tax legislation, the 15% dividend
withholding tax on earnings generated after 1995 was eliminated. Additionally,
in 1996, tax legislation was enacted which permits Brazilian companies to
elect, subject to certain limitations, to deduct dividends in computing
taxable income. However, there is a 15% withholding tax on dividends
distributed in this manner.
At December 31, 1997, the unrepatriated earnings of ABNB, LM and Sati are
approximately $23.8 million, $5.0 million and $0.1, respectively, and are
considered permanently invested overseas.
The tax effects of the items comprising the Company's deferred income tax
assets and liabilities are as follows:
December 31
1997 1996
(in thousands)
Current deferred tax assets:
Accrued expenses. . . . . . . . . . . . . . $ 869 $ 1,544
Other . . . . . . . . . . . . . . . . . . . 2,177 2,717
$ 3,046 $ 4,261
Long-term deferred tax assets
included in other assets. . . . . . . . . . $ - $ 1,108
Deferred tax liabilities:
Difference between book and tax basis of assets
acquired in acquisitions and mergers. . . $ 61,084 $65,952
Excess tax over book depreciation . . . . . 6,256 6,524
Other . . . . . . . . . . . . . . . . . . . 1,548 2,780
68,888 75,256
Non-current deferred tax assets:
Operating loss carryforwards
and tax credits . . . . . . . . . . . . . (28,480) (17,979)
Restructuring expenses. . . . . . . . . . . (1,199) (4,114)
Litigation. . . . . . . . . . . . . . . . . (451) (984)
Other . . . . . . . . . . . . . . . . . . . (5,950) (4,723)
(36,080) (27,800)
Net deferred tax liabilities. . . . . $ 32,808 $ 47,456
Note H - Revolving Credit and Long-Term Debt
In 1996, the Company entered into a $20 million revolving credit facility (the
"Credit Facility") which matures on October 30, 1998. At maturity, the Company
intends to refinance this Credit Facility with a new facility. At December
31, 1997, interest under the Credit Facility, as defined, was 9.0%. The
weighted average interest rate in 1997 and 1996 was approximately 9.0% and
9.25%, respectively. The Credit Facility is an asset-based facility secured
by certain accounts receivable and inventory (total carrying value of
approximately $24.0 million at December 31, 1997). At December 31, 1997, the
Company had approximately $18.5 million of availability under the Credit
Facility before reductions for $3.6 million of outstanding letters of credit
and $3.2 million of borrowings. At December 31, 1997, LM had outstanding
approximately $3.3 million under a working capital facility which was<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
refinanced as discussed below. Additionally, a subsidiary of the Company had
an outstanding bank borrowing of approximately $0.6 million, which is
amortized monthly and bears interest at 9.0%. Sati had outstanding
approximately $0.4 million in connection with a working capital facility
discussed below. The unused availability in connection with the Sati facility
was approximately $1.3 million.
Long-Term Debt consists of the following (in thousands):
December 31
1997 1996
10-3/8% Senior Notes, due June 1, 2002 (a). . . . . $126,500 $126,500
11-1/4% Senior Subordinated Notes, due December 1,
2007, net of unamortized discount of $1,188 (b) . 93,812
11-5/8% Senior Notes, due August 1, 2002, net of
unamortized discount of $105 and $1,005 (c) . . . 7,897 63,995
LM non-recourse debt (d). . . . . . . . . . . . . . 50,417 70,756
ABNB financing (e). . . . . . . . . . . . . . . . . 15,933 10,277
Sati borrowings (f) . . . . . . . . . . . . . . . . 9,352
Other, ranging from 8% to 9.5%. . . . . . . . . . . 7,190 6,470
311,101 277,998
Less current portion. . . . . . . . . . . . . . . . (17,886) (14,450)
Net long-term debt . . . . . . . . $293,215 $263,548
(a) The 10-3/8% Senior Notes(the "10 3-/8% Notes") are redeemable at the
option of the Company, in whole or in part, on or after June 1, 1997, at
stated redemption prices. Equal mandatory sinking fund payments on June 1,
2000 and June 1, 2001 are required to retire an aggregate of 50% of the
original principal amount.
The 10-3/8% Notes are senior indebtedness of the Company and rank equally in
right of payment, on a pari passu basis, with all existing and future senior
indebtedness of the Company and are secured by a pledge of all the issued and
outstanding shares of capital stock of ABN and ABNH and by 65% of the shares
of ABNB. ABN, ABNH and the 77.5% interest in ABNB constitute a substantial
portion of the assets of the Company.
(b) On December 12, 1997, the Company completed a private placement of 95,000
units consisting of $95 million principal amount of 11-1/4% Senior
Subordinated Notes due December 1, 2007 (the "11-1/4% Notes") and 95,000
warrants to purchase 1,185,790 shares of Common Stock (the "1997 Warrants") at
$5.50 per share. A portion of the proceeds was used to purchase approximately
87.7% of the outstanding 11-5/8% Senior Notes (as defined and discussed below)
and amounts then outstanding under the Credit Agreement. The 11-1/4% Notes
were issued as Series A Notes. In January 1998, a registration statement, as
required pursuant to the private placement offering, was filed to register
Series B Notes under the Securities Act of 1933, as amended, and when declared
effective will be exchanged for the Series A Notes. The form and terms of both
notes will generally be the same. The registration statement must be declared
effective prior to April 11, 1998 and the exchange consummated prior to May
21, 1998, otherwise the interest rate on the 11-1/4% Notes will increase by
100 basis points until the registration statement is declared effective.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 11-1/4% Notes were recorded net of the fair value of $1.2 million ascribed
to the 1997 Warrants issued in connection with the 95,000 units. This
discount and related deferred financing costs will be amortized by the
interest method. At the Company's option, the 11-1/4% Notes are redeemable in
whole or in part, on and after December 1, 2002, at stated redemption prices
with accrued interest. In addition, up to 35% of the original principal
amount issued may be redeemed from the proceeds of equity offerings, as
defined, at stated redemption prices with accrued interest. Furthermore, upon
a change of control, as defined, the Company is required to offer to redeem
the 11- 1/4% Notes for 101% of the principal amount thereof. The 11-1/4%
Notes are unsecured and subordinated in right of payment to all existing and
future senior indebtedness of the Company and 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.
The 11-1/4% Notes have been guaranteed jointly and severally on a senior
subordinated basis on the issue date, by all of the Company's direct and
indirect domestic operating subsidiaries (the "Guarantors"). The guarantees
are general unsecured senior subordinated obligations of the Guarantors.
(c) The 11-5/8% Senior Notes (the "11-5/8% Notes)are redeemable at the option
of the Company, in whole or in part, on and after August 1, 1998, at stated
redemption prices. The 11-5/8% Notes are unsecured senior indebtedness of the
Company and rank equally in right of payment, on a pari passu basis, with all
existing and future senior indebtedness of the Company. The 11-5/8% Notes are
effectively subordinated to the 10-3/8% Notes.
In connection with the financing on December 12, 1997, and pursuant to a
Tender Offer and Consent Solicitation Offer, the Company purchased
approximately $57.0 million principal amount of the 11-5/8% Notes for an
aggregate amount of approximately $62.4 million ($1,094.47 per $1,000
principal amount) which included a consent fee. Pursuant to the Consent
Solicitation, the 11-5/8% Note Indenture was amended, which, among other
things, eliminated substantially all of the restrictive covenants contained
therein. In connection with this early extinguishment, the Company recorded
an extraordinary charge of approximately $5.6 million which is net of
applicable income tax benefits of approximately $3.0 million.
(d) In March 1998, LM entered into a five-year revolving credit and letter of
credit facility (the "LM Credit Facilities"), proceeds of which were used to
repay the outstanding LM senior and subordinated non-recourse debt. The LM
Credit Facilities are non-recourse debt denominated in Australian dollars,
bear interest at the 90-day bank bill benchmark rate (approximately 6.6%
including a 1.75% interest rate margin), permit cash dividends of 50% of free
cash flow, (as defined), and include various default provisions.
The LM Credit Facilities include a five-year amortizing revolving credit
facility with a maximum commitment of approximately $55.3 million with
semi-annual
commitment stepdowns and a $3.3 million letter of credit facility. The
five-year committed letter of credit facility in turn secures a $3.3 million
working capital facility for borrowing and letter of credit purposes. This
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
working capital facility is renewable on an annual basis. The LM Credit
Facilities are secured by substantially all of LM's assets and the capital
stock of its subsidiaries. Approximately $0.5 million of letters of credit
are outstanding under the working capital facility. The maximum amount of
availability under the LM Credit Facilities reduces by approximately $3.3
million in 1998 and 1999, $6.5 million in 2000, 2001 and 2002, with the
balance repayable in 2003.
(e) The ABNB financing includes BNDES financing (Brazilian Federal Government
Development Bank debt) denominated in Brazilian reais and bears interest at
approximately 16.3% (6.4% above the TJLP government-administered, long-term
interest rate). As of December 31, 1997, the TJLP rate was approximately
9.9%. Amounts outstanding under the BNDES borrowings were approximately $6.8
million and $10.3 million at December 31, 1997 and 1996, respectively. At
December 31, 1997, the borrowings were secured by an interest in equipment
(carrying value of approximately $6.6 million). As of December 31, 1997, ABNB
had outstanding approximately $9.1 million of unsecured borrowings incurred in
May and December 1997 in connection with an acquisition and the purchase of
assets. The borrowings are denominated in reais and bears interest at
December 31, 1997, at rates varying from approximately 12.0% to 24.6%, with a
weighted average rate of approximately 20.2%.
(f) In August 1997, in connection with the Sati acquisition, Sati entered into
bank term loans in the aggregate of $9.4 million, comprised of a $6.7 million
seven-year holding company term loan and a $2.7 million six-year operating
company term loan. At the same time, Sati entered into a $1.7 million
operating company working capital revolver facility which is renewable on an
annual basis. At December 31, 1997, approximately $0.4 million was
outstanding under this facility. The borrowings at December 31, 1997 bear
interest at approximately 5.3% (PIBOR plus 2%). The seven-year term loan is
secured by a pledge of Sati's operating subsidiaries stock and the six-year
term loan and working capital revolver by an assignment of receivables
(approximately $6.5 million at December 31, 1997) and cross guarantees by each
of the operating company borrowers. The facility permits the distribution of
dividends of up to 25% of excess cash flow as defined.
The Company's financing agreements contain covenants concerning interest
coverage ratios, EBITDA, sales of assets, sale and leaseback transactions,
liens, transactions with affiliates, distributions from subsidiaries,
indebtedness, capital expenditures, mergers and acquisitions, payment of cash
dividends, redemptions of capital stock and provide for certain limitations on
distributions from subsidiaries among other matters. The Company is a holding
company and has no significant assets or operations, accordingly, the
Company's ability to service its debt depends upon the future performance of
its subsidiaries, which will be subject to prevailing economic and competitive
conditions and to other factors, including the continued ability to generate
cash, to distribute that cash to the Company for debt service and to
repatriate funds from foreign subsidiaries, particularly ABNB. LM and Sati
have limitations on the amount of dividend payments to the Company under the
terms of their respective loan agreements. At December 31, 1997, under the
most restrictive covenants, approximately $16.7 million of net assets of the
Company's subsidiaries were not available for dividends. <PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The high level of the Company's indebtedness poses certain risks, including
the risk that it might not generate sufficient cash flow to service the
Company's obligations and the risk that the Company's capacity to respond to
market conditions, extraordinary capital needs and other factors could be
adversely affected. The Company's ability to service its debt depends upon
the future performance of the Company's subsidiaries, which will be subject to
prevailing economic and competitive conditions and to other factors, including
the ability to generate cash at the Company's operating subsidiaries, to
distribute that cash to the Company for debt service and to repatriate funds
from foreign subsidiaries, particularly ABNB. Other future acquisitions and
joint ventures in which the Company does not maintain 100% ownership, foreign
legal and tax requirements and the terms of any acquisition debt incurred may
further restrict the ability of newly acquired subsidiaries and joint venture
investments to declare and pay dividends or make distributions.
The Company expects to refinance the 10-3/8% Notes, the 11-5/8% Notes and the
11-1/4% Notes, at or before their respective maturities; however, no assurance
can be given as to the Company's ability to refinance such obligations or that
the Credit Facility will be available when required. In the event that the
Company is unable to refinance its indebtedness as it matures or raise the
funds through asset sales, sales of equity or otherwise, its ability to pay
principal of or interest on the 10-3/8% Notes, the 11-5/8% Notes, the 11-1/4%
Notes and other long-term indebtedness of the Company would be adversely
affected.
The fair value of the 10-3/8% Notes, the 11-5/8% Notes and the 11-1/4% Notes
based on market quotes at December 31, 1997 was approximately $125.2 million,
$8.1 million and $94.7 million, respectively. The fair value of the 10-3/8%
Notes and the 11-5/8% Notes based on market quotes at December 31, 1996 was
approximately $124.6 million and $62.4 million, respectively. The fair value
of all other debt approximates their carrying values.
<TABLE>
<CAPTION>
Principal maturities of long-term debt, which gives effect to the maturities
under the LM Credit Facilities, follow:
Domestic ABNB LM Sati
(in millions)
<S> <C> <C> <C> <C>
1998 . . . . . . . . . $ 2.7 $ 9.4 $ .5
1999 . . . . . . . . . 1.8 4.5 $ 1.5 .9
2000 . . . . . . . . . 32.8 1.7 6.5 1.7
2001 . . . . . . . . . 31.9 .3 6.5 1.7
2002 . . . . . . . . . 71.5 6.5 1.7
2003 and thereafter. . 96.0 29.4 2.9
/TABLE
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note I - Capital Stock
The Company is authorized to issue 5,000,000 shares of Preferred Stock, with
such terms as the Board of Directors may determine.
The Board of Directors, in 1994, adopted a Preferred Stock Purchase Rights
Plan pursuant to which it declared a dividend of one Preferred Stock Purchase
Right (the "Rights") for each outstanding share of Common Stock on March 24,
1994. Each Right entitles the registered holder to purchase from the Company
one one-hundredth (1/100) of a share of preferred stock, designated as Series
A Junior Preferred Stock, at a price of $15.50. The Rights will become
exercisable only in the event, with certain exceptions, an acquiring party
accumulates 15 percent or more of the Company's voting stock or if a party
announces an offer to acquire 30 percent or more of the voting stock. The
Rights expire on March 24, 2004. Upon the occurrence of certain events,
holders of the Rights will be entitled to purchase either the Company's stock
or shares in an "acquiring entity" at half of market value. The Company will
generally be entitled to redeem the Rights at $.01 per Right at any time until
the tenth day following the acquisition of 15 percent of its voting stock by
an acquirer. The Rights are not exercisable if redeemed.
At December 31, 1997, 176,500 warrants issued to operating management in 1993
("Warrants"), are outstanding and exercisable at $0.011 per share. The
Warrants expire in 2000.
In July 1997, the Company sold in a private placement $5 million accreted
value (at issuance) of a Zero Coupon Subordinated Convertible Debenture due
August 2, 2002, (the "July Security") and in November 1997 $5 million accreted
value (at issuance) of a Zero Coupon Subordinated Convertible Debenture due
November 25, 2002, (the "November Security") (in the aggregate the
"Securities"), plus warrants. The conversion prices of the Securities at
issuance were in excess of the market value of the Common Stock. At maturity,
the outstanding Securities are automatically converted into Common Stock
resulting in their treatment as a component of stockholders' equity for
financial reporting purposes. The Securities are subordinated to all existing
or future bank, institutional, financial transaction or acquisition
indebtedness. Interest accretes at a nominal rate of 6% per annum on the July
Security and 5% per annum on the November Security.
Holders may convert the Securities into Common Stock at the averages of the
closing prices during 25 trading days prior to conversion yielding the lowest
average price (a two day average for the July Security and a five day average
for the November Security) but not in excess of $6.00 for the July Security
and $6.56 for the November Security. However, during the first 25 trading
days following issuance, the conversion prices were fixed at $4.56 for the
July Security and $5.25 for the November Security. No more than 20% may be
converted during the first 90-day period and each successive 60-day period
until the 210th day, and 20% each 90 days thereafter following closing unless
the closing price exceeds certain amounts, whereupon full conversion is
permitted on that day. The Company has agreed to seek and maintain
registration, under the Securities Act of 1933, as amended, of the underlying
shares of Common Stock into which the Securities and warrants are convertible.
If registration has not become effective by April 30, 1998, the holders of a
majority of the principal amount of the November Security, may elect to<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
declare the debenture immediately due and payable and require the payment of
the greater of 110% of the accreted value of the debenture plus certain
additional amounts or such amount divided by their applicable conversion price
multiplied by the closing price of the common stock on the day of the election
as described in the debenture and registration rights agreement. If the
foregoing amount is unpaid for five business days the Holders may require the
Company to issue the number of shares of Common Stock equal to the foregoing
amount divided by the conversion price then in effect, as its sole and
exclusive remedy. In addition, certain payments are required to be made under
certain circumstances set forth in the November Security registration rights
agreement if the registration is not effective within 120 days. In September
1997, $1.0 million principal amount of the July Security was converted into
224,688 shares of Common Stock. At December 31, 1997, the remaining
Securities were convertible into approximately 1.9 million shares of Common
Stock.
The Securities, at the election of the Company, may be redeemed in cash in
lieu of issuing shares of Common Stock depending on the market price of the
Common Stock. Redemption prices vary depending on the type of redemption
transaction from the closing price on the date of conversion (or an average of
5 days prices) multiplied by the number of shares that would have been issued
upon conversion to 110% of the principal amount called for redemption.
In connection with the July Security, the Company issued 140,000 two-year
warrants exercisable at $5.70 per share and 75,000 three-year warrants
exercisable at $6.4125 per share. In connection with the November Security the
Company issued 150,000 three-year warrants exercisable at $7.09 per share. If
the Company redeems the Securities, additional 5 year warrants for 21 shares
for each $1,000 redeemed are issuable with an exercise price equal to 105% of
the closing price on the redemption date. The fair value of the warrants
issued in 1997 (approximately $0.5 million), together with the notional
interest and related issuance expenses will be accreted over the respective
terms of the Securities, using the interest method.
At December 31, 1997, approximately 7,680,000 shares of Common Stock were
reserved for warrants, stock-based compensation plans and convertible
securities.
Note J - Stock-Based Compensation Plans
The Company has four stock-based compensation plans, as follows: the 1990
Employee Stock Option Plan (the "1990 Plan"), the Long-Term Performance Plan
(the "LTP Plan"), the Executive Incentive Plan, and the Deferred Stock and
Compensation Plan for Non-Employee Directors (the "Directors Plan"). The
terms of option awards are determined on the date of grant, generally have an
exercise life of ten years, are granted at not less than the market price and
become exercisable in equal amounts over a three-year period from the date of
grant.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the option plans is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year. . 1,561,000 $2.22 1,701,783 $4.55 1,771,783 $5.05
Exercised . . . . . . (84,051) 3.07 (2,000) 1.88 (10,000) 1.81
Forfeited . . . . . . (49,133) 2.87 (38,200) 3.59 (345,000) 5.20
Granted . . . . . . . 460,000 4.63 1,083,750 2.06 285,000 2.19
Canceled. . . . . . . (1,184,333) 5.38
Options outstanding,
end of year. . . . . 1,887,816 2.74 1,561,000 2.22 1,701,783 4.55
Option price range $1.38 to $1.38 to $1.81 to
at end of year . . . $6.19 $6.31 $6.63
Option price range for
exercised shares . . $1.38 to $1.88 $1.81
$4.38
Options available for grant
at end of year . . . 2,013,000 2,502,000 2,666,000
</TABLE>
Weighted average exercise price Exercise Price Fair value
of options granted: 1997 1996 1997 1996
At market price. . . $4.63 $1.77 $1.51 $1.08
Above market price . . none 2.14 none .79
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$1.38 to 1.88 333,016 8.1 years $1.50 108,018 $1.51
$2.00 to 2.25 1,054,800 7.5 years $2.18 505,933 $2.20
$3.44 to 4.38 262,500 9.2 years $3.55 10,001 $4.38
$6.00 to 6.19 237,500 9.3 years $6.02 25,000 $6.19
$1.38 to 6.19 1,887,816 8.1 years $2.74 648,952 $2.27
</TABLE>
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1997, 1996 and 1994, 140,000, 317,500 and 90,000 shares of restricted stock
were issued under the LTP Plan that fully vest after three years, four years
and three years, respectively. The market value of the shares on the date of
grant was approximately $3.88, $1.63 and $2.87 per share, respectively, and
the cost of the grant based on the market price is being amortized over the
vesting period. The vesting for the restricted stock awards granted in 1996
may be accelerated if certain performance goals are achieved.
In 1996, as part of a compensation review, 1,184,333 outstanding options were
canceled under the 1990 Plan and the LTP Plan and 705,750 options with a
weighted average exercise price of $2.24 were issued under the same plans.
In 1995, an award under the Executive Incentive Plan for 91,875 restricted
shares was issued in lieu of a cash bonus.
Under the Directors Plan in 1997, 1996 and 1995, directors received rights to
24,000, 66,000 and 5,850 equivalent shares, respectively, that are issuable
only following their service on the Board of Directors. The per share market
value of the Common Stock on the dates of grant was approximately $4.88, $4.00
and $2.19, respectively. The aggregate cost is charged to operations. At
December 31, 1997, an aggregate of 101,050 shares of Common Stock are reserved
for issuance pursuant to this plan, and 82,650 shares may be issued for future
grants.
The Directors Plan further provides that directors may elect to defer
receiving directors' fees until after their service on the Board ceases. At
that time the deferred fees may be paid in cash plus interest, or in shares of
Common Stock issuable by converting the amounts deferred into Common Stock
based on the market price in the year following the year of deferral, 16,300
shares at December 31, 1997.
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant date for awards in 1997, 1996 and 1995,
consistent with the provisions of SFAS 123 "Accounting for Stock-Based
Compensation," net income (loss) and net income (loss) per common share -
basic and diluted share would have been reduced (increased) by approximately
($0.5 million) or ($.02) per share, $0.3 million or $.02 per share and ($0.1
million) or ($.01) per share, respectively. Because SFAS 123 method of
accounting has not been applied to options granted prior to 1995, the
resulting pro-forma compensation cost may not be representative of that
expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: no dividend yield; expected volatility of 50%;
expected lives of 7.5 years, and risk-free interest rates of 6.0% in 1997 and
7.0% in 1996 and 1995.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note K - Employee Benefits Plans
Postretirement Health Care and Life Insurance Plans. The Company provides
certain health care and life insurance benefits for certain eligible retired
employees. The Company's employees, including employees subject to certain
collective bargaining agreements, may become eligible for these benefits if
they reach normal retirement age, with certain service requirements.
The Company accrues the estimated cost of retiree benefit payments other than
pensions during the years an employee provides services. The plan is not
funded.
The following table sets forth the status of this obligation:
December 31
1997 1996
(in thousands)
Accumulated postretirement
benefit obligation:
Retirees. . . . . . . . . . . . . . $ 5,129 $ 7,965
Eligible active plan participants. . 347 361
Other active plan participants. . . 1,254 1,822
Accumulated postretirement
benefit obligation. . . . . . . . . 6,730 10,148
Unrecognized transition obligation. . (2,760) (2,944)
Unrecognized net gain (loss). . . . . 2,583 (876)
Accrued postretirement
benefit obligation. . . . . . . . $ 6,553 $ 6,328
Net postretirement benefit costs consisted of the following components:
1997 1996 1995
(in thousands)
Service cost-benefits earned . . . . $ 104 $ 160 $ 154
Interest cost on accumulated
postretirement benefit obligation. 471 684 715
Partial plan termination (1) . . . . 430
Amortization of transition obligation 184 184 209
Amortization of gain . . . . . . . . (141)
$ 618 $ 1,028 $ 1,508
(1) A portion of the previously unrecognized transition obligation was
charged to the 1995 restructuring reserve (see Note L).
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation, as of January 1, 1997, was 11.5% for 1997
decreasing each successive year until it reaches 5.5%, after which it remains
constant. A one-percentage-point increase in the assumed health care cost
trend rate for each year would increase service cost plus interest on the
accumulated postretirement benefit obligation by approximately 11.8%. The
assumed discount rates used in determining the accumulated postretirement
benefit obligation was 7.0% at December 31, 1997 and 7.5% at December 31, 1996
and December 31, 1995.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Plans. ABN and ABNH are obligated to make regular defined
contributions to several multi-employer plans and contributions to a single
employer defined benefit pension fund, under the terms of various union
contracts. The aggregate contribution to such multi-employer plans for
retirement and welfare benefits was approximately $0.3 million, $0.6 million,
and $1.7 million for the years ended December 31, 1997, 1996 and 1995,
respectively. Retirement benefits are also provided by ABN and ABNH, to
eligible union and nonunion employees, through defined contributions to an
employee's retirement plan; the aggregate contribution to such plan and
charged to operations was $1.1 million, $1.1 million and $1.2 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
ABN and ABNH also have a trusteed noncontributory defined benefit pension
plan. Benefits under the noncontributory defined benefit plan which were
frozen in 1992 were based on years of service and average final compensation.
The funding policy is to pay at least the minimum amounts required by the
Employee Retirement Income Security Act of 1974. The net pension expense
(income) for this defined benefit pension plan was approximately 0.1 million
and $0.2 million in 1996 and 1995, respectively.
The following table sets forth the 1997 and 1996 funded status and amounts
recognized for the Company's defined benefit pension plan in the consolidated
balance sheets (in thousands):
1997 1996
Actuarial present value of accumulated
plan benefits, including vested
benefits of $9,371 and $9,112 . . . . $ 9,379 $ 9,122
Projected benefit obligation for
service rendered to date. . . . . . . $ 9,379 $ 9,122
Unrecognized net gain . . . . . . . . . 1,001 206
Plan assets at fair value, primarily
equity securities . . . . . . . . . . (9,789) (8,698)
Accrued pension liability . . . . . $ 591 $ 630
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% at December 31, 1997 and
1996. The expected long-term rate of return was 8.5% in 1997 and in 1996.
LM, prior to November 30, 1996 participated in defined contribution and
benefit plans operated for employees of the predecessor companies. As of
December 1, 1996, LM established a new plan which includes a defined
contribution section and a defined benefit section. The relevant net assets
of the previous plan were transferred to the new plan. The defined
contribution section is funded on a current basis whereas the defined benefit
section is funded in accordance with actuarial recommendations.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the December 31, 1997 status of the LM defined
benefit section: (in thousands):
Actuarial present value of accumulated
plan benefits, 100% vested . . . . $ 1,994
Projected benefit obligation for
service rendered to date. . . . . . . $ 2,242
Unrecognized net loss . . . . . . . . . (44)
Unrecognized net asset as of the
beginning of year . . . . . . . . . . 139
Plan assets at fair value,
primarily diversified funds . . . . . (2,372)
Accrued pension asset . . . . . . . $ (35)
Net periodic pension cost in 1997 consisted of the following
components (in thousands):
Service cost-benefits earned . . . . . $ 292
Interest cost on projected benefit obligation 186
Expected return on plan assets . . . . (213)
Amortization of unrecognized assets. . (11)
$ 254
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation were 7.0% and 4.5% as of November 30, 1997 and 8% and 5.5%
as of December 1, 1996. The expected long-term rate of return was 8% since
the inception of the new plan.
Retirement benefits provided under the new LM defined contribution section,
and charged to operations was $0.8 million for the year ended December 31,
1997. In 1996, in connection with the previous defined contribution and
benefit plans operated for employees of the predecessor companies, the
subsidiaries expensed and funded approximately $0.9 million, which
approximated the pension expense that would be incurred using US Generally
Accepted Accounting Principles.
The Company has a noncontributory supplemental executive retirement plan
("SERP") for certain senior management employees. Benefits under the
noncontributory plan are based on years of service and average final
compensation. The plan is unfunded and benefits will be paid from the assets
of the Company.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the status of this obligation (in thousands):
December 31
1997 1996
Accumulated benefit, including vested
benefits of $2,279 and $1,935 . . . . $ 2,563 $ 2,153
Projected benefit obligation . . . . . $ 3,172 $ 3,021
Prior service cost. . . . . . . . . . . (1,355) (1,457)
Unrecognized net loss . . . . . . . . . (290) (427)
Preliminary accrued pension costs . . . 1,527 1,137
Additional minimum liability* . . . . . 1,036 1,016
Accrued pension cost
for financial statements. . . . . $ 2,563 $ 2,153
*There is an intangible asset equal to the additional minimum liability.
Net periodic pension cost consisted of the following components:
1997 1996 1995
(in thousands)
Service cost-benefits earned . . . . $ 146 $ 146 $ 185
Interest cost on projected
benefit obligation . . . . . . . . 214 189 191
Amortization of prior service cost . 109 107 103
$ 469 $ 442 $ 479
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% at December 31, 1997 and
1996.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note L - Restructuring and Idle Equipment
In 1995, the Company recorded a pre-tax restructuring charge of approximately
$14.3 million pursuant to a restructuring plan developed by management for the
Company's domestic security printing operations, including the downsizing of
its corporate offices. The plan was substantially completed in the second
quarter of 1996. Remaining obligations under this plan relate to lease
commitments. Restructuring activities prior to 1995 related primarily to the
closing of a plant by ABN.
The following presents the Company's restructuring activities:
Severance Asset Leases
and Related Revaluations and Other
Cost and Writedowns Obligations Total
(in millions)
Balance at
January 1, 1995. . $ 5.7 $ 5.7
Restructuring charge. $ 2.9 $ 5.0 6.4 14.3
Imputed interest. . . 0.3 0.3
Noncash items . . . . (1.8) (5.0) (6.8)
Cash payments (0.1) (1.4) (1.5)
Balance at
December 31, 1995. 1.0 11.0 12.0
Imputed interest. . . .4 .4
Noncash items . . . . (1.6) (1.6)
Cash payments . . . . (1.0) (4.8) (5.8)
Balance at
December 31, 1996. $ - $ - 5.0 5.0
Imputed interest. . . .4 .4
Cash payments . . . . (2.6) (2.6)
Balance at
December 31, 1997. $ 2.8 $ 2.8
Future cash outlays for the remaining restructuring activities are anticipated
to be $1.3 million in 1998, $1.3 million in 1999 and $0.2 million in 2000.
Note M - Condensed Financial Information and Geographic Area Data:
ABNB is domiciled in Brazil, LM is domiciled in Australia and New Zealand,
Sati is domiciled in France and all other subsidiaries of the Company are
predominately domiciled in the United States.
The following condensed consolidating financial information (amounts in
millions) illustrates the composition of the pledged subsidiaries (See Note H
- - Revolving Credit and Long-Term Debt) and provides additional information
which is useful in assessing the financial composition of the pledged
subsidiaries. Investments in subsidiaries are accounted for by the parent on
the equity method. Intercompany investments and transactions are eliminated
in consolidation. Other is composed of LM and Sati (principally LM) in 1997
and LM in 1996.
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheets
Domestic ABNB Other Consol.
<S> <C> <C> <C> <C>
As at December 31, 1997
Cash and cash equivalents. . . . . . $ 11.7 $ 4.8 $ .8 $ 17.3
Accounts receivable, net . . . . . . . . 27.0 14.5 15.9 57.4
Costs in excess of billings
on uncompleted contracts . . . . . . . 5.4 5.4
Inventories. . . . . . . . . . . . . . . 18.0 11.7 12.0 41.7
Deferred income taxes. . . . . . . . . . 2.2 .0 .8 3.0
Prepaid expenses and other . . . . . . . 12.8 .7 (2.2) 11.3*
Property, plant and equipment, net . . . 165.7 63.8 29.3 258.8
Other assets . . . . . . . . . . . . . . 103.9+ 6.7 5.1 26.0*
Excess of cost of investment in subsidiaries
over net assets acquired, net. . . . . 9.7 27.9 45.0 82.6
Total assets . . . . . . . . . . . . . . $356.4 $130.1 $106.7 $503.5
Total current liabilities. . . . . . . . $ 26.8 $ 20.3 $ 33.1 $ 80.2
Long-term debt. . . . . . . .. . . . . . 235.1 3.7 54.4 293.2
Other liabilities . . . . . .. . . . . . 10.5 9.0 1.9 21.4
Deferred income taxes. . . . . . . . . . 29.0 3.3 .6 32.9
Minority interest. . . . . . . . . . . . 20.8 20.8
Total stockholders' equity . . . . . . . 55.0 73.0 16.7 55.0*
Total liabilities and stockholders' equity $356.4 $130.1 $106.7 $503.5
As at December 31, 1996
Cash and cash equivalents. . . . . . $ 2.8 $ 8.7 $ 2.7 $ 14.2
Marketable securities. . . . . . . . . . 2.1 2.1
Accounts receivable, net . . . . . . . . 23.4 14.4 8.8 46.6
Costs in excess of billings
on uncompleted contracts . . . . . . . .9 .9
Inventories. . . . . . . . . . . . . . . 12.9 11.5 11.2 35.6
Deferred income taxes. . . . . . . . . . 2.9 .3 1.0 4.2
Prepaid expenses and other . . . . . . . 5.0 2.5 1.9 9.4
Property, plant and equipment, net . . . 172.1 59.4 22.5 254.0
Other assets . . . . . . . . . . . . . . 98.0+ 8.4 6.1 28.0*
Excess of cost of investment in subsidiaries
over net assets acquired, net. . . . . 9.4 24.4 51.6 85.4
Total assets . . . . . . . . . . . . . . $329.5 $129.6 $105.8 $480.4
Total current liabilities. . . . . . . . $ 38.0 $ 17.6 $ 22.0 $ 77.6
Long-term debt. . . . . . . .. . . . . . 189.6 6.9 67.0 263.5
Other liabilities . . . . . .. . . . . . 14.8 7.4 2.5 24.7
Deferred income taxes. . . . . . . . . . 40.8 6.7 47.5
Minority interest. . . . . . . . . . . . 20.8 20.8
Total stockholders' equity . . . . . . . 46.3 70.2 14.3 46.3*
Total liabilities and stockholders' equity $329.5 $129.6 $105.8 $480.4
/TABLE
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statements of Operations
Domestic ABNB Other Consol.
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Sales . . . . . . . . . . . . . . . . . $103.9 $141.8 $ 90.7 $336.4
Cost of goods sold. . . . . . . . . . . 63.8 104.4 61.6 229.8
Selling and administrative. . . . . . . 17.6 10.1 11.5 39.2
Depreciation and amortization . . . . . 8.3 9.2 5.5 23.0
89.7 123.7 78.6 292.0
14.2 18.1 12.1 44.4
Unallocated corporate overhead. . . . . (6.4) (6.4)
Interest expense. . . . . . . . . . . . (24.0) (2.8) (5.9) (32.7)
Foreign translation losses, net . . . . .0 (.1) (.1)
Other income, net . . . . . . . . . . . 12.1+ 2.1 .3*
Income (loss) before taxes on income
(benefit) and minority interest . . . (4.1) 17.3 6.2 5.5
Taxes on income (benefit) . . . . . . . (8.0) 4.0 2.6 (1.4)
Income before minority interest . . . . 3.9 13.3 3.6 6.9
Minority interest . . . . . . . . . . . 3.0 3.0
Income before extraordinary item. . . . 3.9 10.3 3.6 3.9
Early extinguishment of debt. . . . . . (5.6) (5.6)
Net income (loss). . . . . . . . . . $ (1.7) $ 10.3 $ 3.6 $ (1.7)
Year Ended December 31, 1996
Sales . . . . . . . . . . . . . . . . . $ 98.1 $163.3 $ 48.1 $309.5
Cost of goods sold. . . . . . . . . . . 62.9 109.1 30.1 202.1
Selling and administrative. . . . . . . 16.7 16.0 7.3 40.0
Depreciation and amortization . . . . . 8.3 8.4 3.3 20.0
87.9 133.5 40.7 262.1
10.2 29.8 7.4 47.4
Unallocated corporate overhead. . . . . (8.3) (8.3)
Interest expense. . . . . . . . . . . . (23.3) (1.9) (3.7) (28.9)
Foreign translation losses, net . . . . (.3) (.3)
Other income, net . . . . . . . . . . . 15.7+ 2.3 .2*
Income (loss) before taxes on income
(benefit) and minority interest . . . (5.7) 29.9 3.7 9.7
Taxes on income (benefit) . . . . . . . (9.8) 8.5 1.7 .4
Income before minority interest . . . . 4.1 21.4 2.0 9.3
Minority interest. . . . . . . .. . . . 4.8 .4 5.2
Net income . . . . . . . . . . . . . $ 4.1 $ 16.6 $ 1.6 $ 4.1
Year Ended December 31, 1995
Sales . . . . . . . . . . . . . . . . . $108.1 $ 98.1 $206.2
Cost of goods sold. . . . . . . . . . . 76.5 72.5 149.0
Selling and administrative. . . . . . . 17.7 9.9 27.6
Restructuring and idle equipment. . . . 14.3 14.3
Depreciation and amortization . . . . . 9.3 5.6 14.9
117.8 88.0 205.8
(9.7) 10.1 .4
Unallocated corporate overhead. . . . . (12.3) (12.3)
Interest expense. . . . . . . . . . . . (23.1) (23.1)
Other income, net . . . . . . . . . . . 8.5+ .2 (2.8)*
Income (loss) before taxes on income
(benefit) and minority interest. . . (36.6) 10.3 (32.2)
Taxes on income (benefit) . . . . . . . (14.2) 2.8 (11.4)
Income (loss) before minority interest. (22.4) 7.5 (20.8)
Minority interest . . . . . . . . . . . 1.6 1.6
Net income (loss). . . . . . . . . . $(22.4) $ 5.9 $(22.4)
/TABLE
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
Domestic ABNB Other Consol.
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Net cash - operating activities. . . . $(37.0) $ 21.8 $ 14.5 $ (.7)
Investing activities
Acquisitions of subsidiaries . . . . (.4) (3.4) (3.8)
Capital expenditures . . . . . . . . (2.2) (7.9) (8.0) (18.1)
Other. . . . . . . . . . . . . . . . (.2) .3 .1
Net cash - investing activities. . . . (2.8) (11.3) (7.7) (21.8)
Financing activities
Proceeds from borrowings . . . . . . 90.1 3.7 93.8
Repayments of borrowing. . . . . . . (61.8) (2.9) (12.0) (76.7)
Dividends to minority shareholder. . 8.9 (11.5) (2.6)
Other. . . . . . . . . . . . . . . . . 11.5 11.5
Net cash - financing activities. . . . 48.7 (14.4) (8.3) 26.0
Effect of foreign currency exchange rate
changes on cash and cash equivalents (.4) (.4)
Increase (decrease) in cash and
cash equivalents:. . . . . . . . . . 8.9 (3.9) (1.9) 3.1
Beginning of period . . . . . . . . . 2.8 8.7 2.7 14.2
End of period . . . . . . . . . . . . $ 11.7 $ 4.8 $ .8 $ 17.3
Year Ended December 31, 1996
Net cash - operating activities. . . . $(17.1) $ 25.2 $ (.5) $ 7.6
Investing activities
Acquisition of LM. . . . . . . . . . (7.3) 4.8 (2.5)
Capital expenditures . . . . . . . . (3.6) (17.9) (.8) (22.3)
Other. . . . . . . . . . . . . . . . .2 .1 .3
Net cash - investing activities. . . . (10.7) (17.9) 4.1 (24.5)
Financing activities
Proceeds from borrowings . . . . . . 4.3 7.1 11.4
Repayments of borrowing. . . . . . . (.1) (1.0) (1.1)
Dividends to minority shareholder. . 9.9 (12.7) (2.8)
Net cash - financing activities. . . . 14.1 (5.6) (1.0) 7.5
Effect of foreign currency exchange rate
changes on cash and cash equivalents .1 0.1
Increase in (decrease) cash and
cash equivalents: . . . . . . . . . . (13.7) 1.7 2.7 (9.3)
Beginning of period . . . . . . . . . . 16.5 7.0 23.5
End of period . . . . . . . . . . . . . $ 2.8 $ 8.7 $ 2.7 $ 14.2
</TABLE>
<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
Domestic ABNB Consol.
<S> <C> <C> <C>
Year Ended December 31, 1995
Net cash- operating activities. . . . . $(15.9) $ 11.4 $ (4.5)
Investing activities
Capital expenditures. . . . . . . . . (1.2) (9.2) (10.4)
Proceeds from sales of assets . . . . 4.9 4.9
Other . . . . . . . . . . . . . . . . (.6) (.6)
Net cash - investing activities . . . . 3.1 (9.2) (6.1)
Financing activities
Proceeds from borrowings. . . . . . . 3.4 3.4
Other . . . . . . . . . . . . . . . . (0.4) (0.4)
Net cash - financing activities . . . . (0.4) 3.4 3.0
Effect of foreign currency exchange rate
changes on cash and cash equivalents (0.6) (0.6)
Increase (decrease) cash and
cash equivalents: . . . . . . . . . . (13.2) 5.0 (8.2)
Beginning of period . . . . . . . . . . 29.7 2.0 31.7
End of period . . . . . . . . . . . . . $ 16.5 $ 7.0 $ 23.5
+Includes investment in subsidiaries, which is eliminated in consolidation.
* After elimination of investment in subsidiaries.
</TABLE>
Note N - Commitments and Contingencies
In January 1994, Vladimir v. United States Banknote Corporation, et al.,
and in February 1994, Sinay v. United States Banknote Corporation, et al.,
were filed in the United States District Court for the Southern District of
New York (the "Class Action"). On June 16, 1995, the Court approved
certification of a class in Vladimir consisting of all persons who purchased
stock in the open market from April 1, 1993 through January 6, 1994. On
February 26, 1996, the Court dismissed the Sinay action, without prejudice.
The parties reached a settlement in Vladimir prior to entry of a judgment and
ruling on the Company's and Mr. Weissman's pending Motions for Summary
Judgment, Judgment as a Matter of Law and for a new trial. On September 30,
1997, the Court approved the settlement dismissing the action, with prejudice,
which became final on March 11, 1998. Under the terms of the settlement, the
Company's full contribution of $0.5 million was paid in December 1997 and the
balance paid by the Company's insurers.
In January 1994, Atencio v. Morris Weissman, et al. was filed in the
Court of Chancery for the State of Delaware, New Castle County, against
various directors and/or officers of the Company, on behalf of a purported
class and derivatively on behalf of the Company. In February 1994, Rosenberg
v. Morris Weissman, et al. was filed in the same court. The Atencio and
Rosenberg actions assert claims for breach of fiduciary duty and allege the
sale of Common Stock while in possession of material non-public information.
These cases have not been actively pursued. As derivative actions, the
Company's insurers have been responsible for the costs of defending against
such actions.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On November 1, 1994, the Company filed an action against Thomas De La
Rue, AG ("DLR") and its parent, De La Rue Plc which is pending in the United
States District Court for the Southern District of New York. The complaint
alleges breach of contract in connection with the 1993 purchase of the
Company's Brazilian subsidiary from DLR and seeks approximately $1.5 million
in damages. DLR has asserted approximately $400,000 in counterclaims. On
September 17, 1997, the Court denied DLR's motions for summary judgment,
ruling the contract language ambiguous, and directed as an issue for the jury
whether the Company may pierce the corporate veil and proceed with its claims
against DLR and DLR's parent, De La Rue, Plc.
On November 2, 1994, Thomas De La Rue AG v. United States Banknote
Corporation, et al. was commenced in the United States District Court for the
Southern District of New York. DLR alleges, among other things, breach of
contract in connection with the Brazil purchase agreement and the alleged
failure to expeditiously register 944,538 shares of Company Common Stock
issued to DLR. DLR seeks approximately $4.0 million in connection with its
claims. A trial has been scheduled for June 1998.
During the year ended December 31, 1996, the Company recorded a $2.4
million provision relating to pending litigation. The Company's cost of
settlement of the Vladimir litigation and certain legal fees have been charged
against the provision during 1997.
The Company and its subsidiaries are also parties to various additional
lawsuits (as both plaintiff and defendant) related to various matters in the
normal course of business, including patent infringement, contract, labor and
environmental, which in the opinion of management, are not anticipated to have
a material impact on its consolidated financial position or results of
operations.
During 1997, ABNB received assessments form the Brazilian tax authorities
for approximately $25 million relating to taxes other than income. The
Company is appealing the assessments, believes it has grounds for appeal, and
has not recorded a provision for these assessments. Management of the Company
believes that the ultimate resolution of these assessments will not have a
material impact on its consolidated financial position or results of
operations.
The Company has long-term operating leases for offices, manufacturing
facilities and equipment which expire through 2007. The Company has renewal
options on some locations, which provide for renewal rents based upon
increases tied to the consumer price index.
Net rental expense was $15.8 million, $7.7 million and $8.0 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997, future minimum lease payments under noncancelable
operating leases are as follows: $13.9 million in 1998; $10.3 million in 1999;
$8.3 million in 2000; $6.9 million in 2001; $3.0 million in 2002; and $5.8
million thereafter.<PAGE>
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note O - Quarterly Results of Operations - unaudited
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
<S> <C> <C> <C> <C>
Sales $81,096 $79,168 $88,152 $87,943
Cost of sales 55,371 52,457 58,435 63,549
Extraordinary item (5,589)
Net income (loss)(1) 117 2,139 2,367 (6,437)
Per share income (loss) - Basic:
Before extraordinary item $ .01 $ .11 $ .12 $ (.05)
Extraordinary item (.27)
Net income $ .01 $ .11 $ .12 $ (.32)
Per share income (loss) - Diluted:
Before extraordinary item $ .01 $ .10 $ .11 $ (.05)
Extraordinary item (.27)
Net income $ .01 $ .10 $ .11 $ (.32)
</TABLE>
<TABLE>
<CAPTION>
1996 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
<S> <C> <C> <C> <C>
Sales $59,917 $70,764 $86,879 $91,890
Cost of sales 42,004 46,566 54,223 59,365
Net income (loss)(2) (802) 1,365 2,228 1,308
Per share income (loss)
Basic $ (.04) $ .07 $ .11 $ .07
Diluted $ (.04) $ .07 $ .11 $ .06
(1)In the fourth quarter, pre tax income was charged $2.3 million ($1.5 million
net of tax) for certain treasury interest rate agreements. In addition, the
fourth quarter of 1997 includes $1.1 million of interest income on the refund
of certain prior year tax deposits. These transactions are classified within
other, net in the consolidated statement of operations. Additionally, during
the first, second and fourth quarters approximately $0.7 million, $0.1 million
and $1.0 million of pre-tax liabilities no longer required were reversed.
Furthermore, for the nine months ended September 30, 1997, the effective income
tax rate reflected the reversal of $2.7 million of liabilities no longer
required. For the fourth quarter of 1997, an additional $1.3 million of tax
liabilities no longer required were reversed.
(2) In the fourth quarter, pre-tax income was charged $2.4 million ($1.4
million net of tax) in connection with certain litigation (see Note N). This
charge is classified within other, net in the consolidated statement of
operations.
/TABLE
<PAGE>
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Company
See Item 13
ITEM 11. Executive Compensation
See Item 13
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management
See Item 13
ITEM 13. Certain Relationships and Related Transactions
Information required for Items 10, 11, 12 and 13 will be set forth
either (i) in the Company's definitive Proxy Statement for the 1997 Annual
Meeting of Stockholders, or (ii) in an amendment to this Report on Form 10-K/A,
which in either case will be filed with the Securities and Exchange Commission
not later than 120 days after December 31, 1997, and which information is
incorporated herein by reference. In addition, reference is made to Item 10 in
Part I of this Report.
<PAGE>
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a)(1) List of Financial Statements.
The following consolidated financial statements of
American Banknote Corporation and subsidiaries
are included in Item 8:
Consolidated Statements of Operations - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statement of Stockholders' Equity - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(a)(2) List of Financial Statement Schedules.
The following schedules of American Banknote Corporation
and subsidiaries are included in Item 14(d):
Schedule I -
Condensed Financial Information of Registrant -
Year Ended December 31, 1997......................Page S-1
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have
been omitted.
(a)(3) List of Executive Compensation Plans and Arrangements.
Second Amended and Restated Employment Agreement dated as
of October 1, 1993, between the Company, American Bank
Note Company and Morris Weissman is incorporated herein
by reference to Exhibit 10.1 to the Company's Annual
Report on Form 10-K (as amended) for the year ended
December 31, 1993 (the "1993 10-K").
Employment Agreement dated July 24, 1990 between the
Company and John T. Gorman is incorporated herein by
reference to Exhibit (c)(32) to Amendment No. 3 to the
Company's Rule 13E-3 Transaction Statement on Schedule
13E-3 dated July 31, 1990 (the "Schedule 13E-3").<PAGE>
<PAGE>
Employment Agreement Amendment Number 2 dated September
3, 1996 between the Company and John T. Gorman is
incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996.
Form of Performance Warrants dated July 25, 1990, is
incorporated herein by reference to Exhibit (c)(29) to
the Company's Rule 13E-3 Transaction Statement on
Schedule 13E-3 dated April 18, 1990.
Amended and Restated 1990 Employee Stock Option Plan
dated as of February 19, 1992 is incorporated herein by
reference to Exhibit 10.37 to the Annual Report on Form
10-K for the year ended December 31, 1991 (the "1991
10-K").
Amendment dated September 23, 1993 to Amended and
Restated 1990 Employee Stock Option Plan dated as
of February 19, 1992 is incorporated herein by reference
to Exhibit 10.13 to the 1993 10-K.
Supplemental Executive Retirement Plan ("SERP") of the
Company effective as of April 1, 1994, is incorporated
herein by reference to Exhibit 10.22 to Amendment No. 2
to the Company's Registration Statement on Form S-4
(File No. 33-79726) filed July 18, 1994.
Amendments to SERP effective April 1, 1994 is hereby
incorporated by reference to Exhibit 10.12 to the
Annual Report on Form 10-K for the year ended
December 31, 1995.
Amendment to SERP effective July 1, 1997.
Form of severance agreement for designated officers is
incorporated herein by reference to Exhibit 10.25 to the
Annual Report on Form 10-K for the year ended
December 31, 1994 (the "1994 10-K").
Long-Term Performance Plan for key employees is
incorporated herein by reference to Exhibit 10.26 to
the 1994 10-K.
Executive Incentive Plan for executive officers, as
amended, is incorporated herein by reference to Exhibit
10.27 to the 1994 10-K.
<PAGE>
<PAGE>
Deferred Stock and Compensation Plan for Non-employee
Directors (as amended April 25, 1996) is incorporated
herein by reference to Annex A of the Company's
definitive Proxy Statement for the 1996 Annual Meeting
of Stockholders, as filed with the Commission on
Schedule 14A on May 6, 1996.
Long Term Performance Plan and Executive Incentive
Plan 1996 Challenge 2000 Criteria Schedule of vesting
and unit valuation is incorporated herein by reference to
Exhibit 10.13 to the Annual Report on Form 10-K for the year
ended December 31, 1996 (the "1996 10-K").
Amendment to Long-Term Performance Plan for Key
employees adopted June 11, 1997 is incorporated herein
by reference to Exhibit 10.1 to the September 30, 1997 10-Q.
(b) Reports on Form 8-K.
Form 8-K filed October 9, 1997 - Item 5 - Other Events
Form 8-K filed October 24, 1997 - Item 5 - Other Events
Form 8-K filed October 29, 1997 - Item 5 - Other Events
Form 8-K filed November 4, 1997 - Item 5 - Other Events
Form 8-K filed November 7, 1997 - Item 5 - Other Events
Form 8-K filed November 10, 1997 - Item 5 - Other Events
Form 8-K filed November 10, 1997 - Item 5 - Other Events
Form 8-K filed November 17, 1997 - Item 5 - Other Events
Form 8-K filed November 20, 1997 - Item 7 - Financial Statements,
Pro Forma Financial Information and Exhibits
Form 8-K filed November 24, 1997 - Item 5 - Other Events
Form 8-K filed December 2, 1997 - Item 5 - Other Events
Form 8-K filed December 9, 1997 - Item 5 - Other Events
Form 8-K filed December 10, 1997 - Item 5 - Other Events
Form 8-K filed December 12, 1997 - Item 5 - Other Events
Form 8-K filed January 9, 1998 - Item 5 - Other Events
(c) Exhibits.
2.1 Agreement of Plan of Merger and Certificate of Merger of
United States Banknote Corporation (a New York corporation)
("USBN-NY") and United States Banknote Corporation (a Delaware
corporation) dated as of June 29, 1993 are incorporated herein
by reference to Exhibits 2.1 and 2.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.
2.2 Certificate of Ownership and Merger of USBN-NY into the
Company dated as of July 14, 1994 is incorporated herein
by reference to Exhibit 3.1 to the Company's
Registration of Successor Issuer on Form 8-B filed
September 30, 1993 (the "Form 8-B").<PAGE>
<PAGE>
2.3 Certificate of Merger of USBN-NY into the Company dated
as of July 14, 1994 is incorporated herein by reference
to Exhibit 3.2 to the Form 8-B.
3.1 Certificate of Incorporation of the Company including
Amendment No. 1 thereto is incorporated herein by
reference to Exhibit 3.1 to the Company's Quarterly
Report on From 10-Q for the quarter ended
June 30, 1995 (the "June 30, 1995 10-Q").
3.2 Certificate of Designation of the Company authorizing
Preferred Stock as Series A is incorporated herein by
reference to Exhibit 4 to the Company's Report on Form 8-A
filed April 6, 1994.
3.3 Rights Agreement dated as of March 24, 1994 between
the Company and Chemical Bank, N.A., as Rights Agent,
including the form of Rights Certificate and form
of Certificate of Designation is incorporated herein
by reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated March 24, 1994.
3.4 By-Laws of the Company including amendments thereto are
incorporated herein by reference to Exhibit 3.2 to the
June 30, 1995 10-Q.
3.5 By-Laws of ABNB, as amended, are incorporated herein by
reference to the Company's Current Report on Form
8-K dated July 10, 1995.
3.6 Certificate of Incorporation and By-Laws of subsidiaries is
incorporated herein by to Exhibits 3.1(b) through (m) and
Exhibits 3.2(b) through (m) to the Company's Registration
Statement on Form S-4 (File No. 333-44069) filed
January 12, 1998 (the"January 12, 1998 Form S-4").
4.1 Indenture dated as of May 15, 1992 between the Company
and Chemical Bank, as Trustee, relating to the 10-3/8%
Senior Notes due June 1, 2002 is incorporated herein by
reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated May 26, 1992 (the "May 26,
1992 Form 8-K").
4.2 Pledge Agreement, as amended, dated as of May 26, 1992
between the Company and Chemical Bank, as Trustee,
relating to the Company's 10-3/8% Senior Notes due June
1, 2002 is incorporated herein by reference to Exhibit
4.3 to the May 26, 1992 Form 8-K.<PAGE>
<PAGE>
4.3 First Supplemental Indenture to 10-3/8% Senior
Notes due June 1, 2002 between the Company and Chemical
Bank, N.A., dated as of May 23, 1994 is incorporated
herein by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994 (the "June 30, 1994 10-Q.")
4.4 First Amendment to the Pledge Agreement dated as of May
26, 1992 between the Company and Chemical Bank, N.A.,
dated as of May 23, 1994 is incorporated herein by
reference to Exhibit 4.2 to the June 30, 1994 Form 10-Q.
4.5 Pledged Share Amendment dated as of June 23, 1993
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.6 Pledged Share Amendment dated as of July 19,1993
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.7 Pledged Share Amendment dated as of August 1, 1994
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.8 Pledged Share Amendment dated as of July 31, 1995
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1,
2002 is incorporated herein by reference to Exhibit 4.5
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 (the "1995 10-K").
4.9 Pledged Share Amendment dated as of August 15, 1997
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.10 Pledged Share Amendment dated as of August 27, 1997
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.11 Pledged Share Amendment dated as of December 1, 1997
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.12 Pledged Share Amendment dated as of December 11, 1997
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *
4.13 Pledged Share Amendment dated as of December 23, 1997
between the Company and Chemical Bank, N.A., as Trustee,
relating to the 10-3/8% Senior Notes due June 1, 2002. *<PAGE>
<PAGE>
4.14 Indenture dated as of May 1, 1994 between the Company
and The First National Bank of Boston, as Trustee,
relating to the 11-5/8% Senior Notes Due August 1,
2002, Series B, of the Company and Form of Series B
Note, is incorporated herein by reference to Exhibit
4.1 and 4.3 to the Company's Registration Statement on
Form S-4 (File No. 33-79726) dated August 5, 1994.
4.15 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. is incorporated herein by
reference to Exhibit 4.5 to the January 12, 1998 Form S-4.
4.16 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 (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.) and The Bank
of New York, as trustee is incorporated herein by reference
to Exhibit 4.1 of the January 12, 1998 Form S-4.
4.17 Forms of Guarantee (included in Exhibit 4.16) are
incorporated herein by reference to Exhibit 4.4 to the
January 12, 1998 Form S-4.
4.18 Credit Agreement dated as of January 29, 1996 among
American Bank Note Company and American Bank Note
Holographics, Inc.,the Company and Chemical Bank, N.A.
as Agent and Lender, is incorporated herein by reference to
Exhibit 4.8 to the 1995 10-K.
4.19 Waiver and Amendment to Credit Agreement dated as of
September 30, 1996 among American Bank Note Company
and American Bank Note Holographics, Inc., the Company,
and The Chase Manhattan Bank (formerly Chemical Bank
N.A.), as Agent and Lender, is incorporated herein by reference
to Exhibit 4.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996
(the "September 30, 1996 10-Q").
4.20 Security Agreement dated as of January 29, 1996, among
American Bank Note Company and American Bank Note
Holographics, Inc. and Chemical Bank, N.A., as Agent,
is incorporated herein by reference to Exhibit 4.9 to
the 1995 10-K.<PAGE>
<PAGE>
4.21 Waiver and Amendment to Credit Agreement dated as of
March 25, 1997, among American Bank Note Company and
American Bank Note Holographics, Inc., American Banknote
Corporation and The Chase Manhattan Bank), as Agent and
Lender is incorporated herein by reference to Exhibit 4.11
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "1996 10-K").
4.22 Amendment to Credit Agreement dated as of April 14, 1997
among American Bank Note Company and American Bank Note
Holographics, Inc., the Company and The Chase Manhattan
Bank as Agent and Lender is incorporated herein by reference
to Exhibit 4.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997.
4.23 Amendment to Credit Agreement dated as of July 1, 1997
among American Bank Note Company and American Bank Note
Holographics, Inc., the Company and The Chase Manhattan
Bank as Agent and Lender is incorporated herein by reference
to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (the "June 30, 1997 10-Q").
4.24 Amendment to Credit Agreement dated as of November 14, 1997
among American Bank Note Company and American Bank Note
Holographics, Inc., the Company and The Chase Manhattan Bank
as Agent and Lender is incorporated herein by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 (the "September 30, 1997 10-Q").
4.25 Amendment to Credit Agreement, dated December 3, 1997,
among American Bank Note Company and American Bank Note
Holographics, Inc., the Company, and The Chase Manhattan Bank,
as Agent and Lenders is incorporated herein by reference to
Exhibit 10.5 to the Company's Current Report on Form 8-K dated
December 10, 1997 (the "December 10, 1997 Form 8-K").
4.26 Zero Coupon Convertible Subordinated Debenture dated
July 24, 1997 is incorporated herein by reference to Exhibit 2.1
to the June 30, 1997 10-Q.
4.27 Securities Purchase Agreement by and among American
Banknote Corporation, RGC International Investors, dated
as of July 24, 1997. *
4.28 Forms of Warrant to purchase 140,00 shares and 75,000 shares
of common stock of American Banknote Corporation, dated as
of July 24, 1997. *<PAGE>
<PAGE>
4.29 Securities Purchase Agreement by and among the Company,
RGC International Investors, LDC and Halifax Fund, L.P.,
dated as of November 25, 1997 is incorporated herein by
reference to Exhibit 10.1 to the December 10, 1997
Form 8-K.
4.30 Zero Coupon Convertible Subordinated Debenture, Form of
Warrant to purchase 150,000 shares of common stock of the
Registration Rights Agreement by and among the Company,
RGC International Investors, LDC and Halifax Fund, L.P.,
dated November 25, 1997 is incorporated herein by reference to
Exhibits 10.2, 10.3 and 10.4 to the December 10, 1997 Form 8-K.
10.1 Second Amended and Restated Employment Agreement dated
as of October 1, 1993, between the Company, American
Bank Note Company and Morris Weissman is incorporated
herein by reference to Exhibit 10.1 to the Company's
Annual Report on From 10-K (as amended) for the year
ended December 31, 1993 (the "1993 10-K").
10.2 Employment Agreement dated July 24, 1990 between the
Company and John T. Gorman is incorporated herein by
reference to Exhibit (c)(32) to Amendment No. 3 to the
Company's Rule 13E-3 Transaction Statement on Schedule
13E-3 dated July 31, 1990 (the "Schedule 13E-3").
10.3 Employment Agreement Amendment Number 2 dated September
3, 1996 between the Company and John T. Gorman is
incorporated herein by reference to Exhibit 10.1 to
the September 30, 1996 10-Q.
10.4 Form of Performance Warrants dated July 25, 1990, is
incorporated herein by reference to Exhibit (c)(29) to
the Company's Rule 13E-3 Transaction Statement on
Schedule 13E-3 dated April 18, 1990.
10.5 Amended and Restated 1990 Employee Stock Option Plan
dated as of February 19, 1992 is incorporated herein by
reference to Exhibit 10.37 to the Annual Report on
Form 10-K for the year ended December 31, 1991.
10.6 Amendment dated September 23, 1993 to Amended and
Restated 1990 Employee Stock Option Plan dated as of
February 19, 1992, is incorporated herein by reference
to Exhibit 10.13 to the 1993 10-K.
10.7 Supplemental Executive Retirement Plan ("SERP") of the
Company effective as of April 1, 1994, is incorporated
herein by reference to Exhibit 10.22 to Amendment
No. 2 to the Company's Registration Statement on Form
S-4 (File No. 33-79726) filed July 18, 1994.<PAGE>
<PAGE>
10.8 Amendments to SERP effective April 1, 1994 is
incorporated herein by reference to Exhibit 10.12
to the 1995 10-K.
10.9 Amendment to SERP effective July 1, 1997. *
10.10 Form of severance agreement for designated officers is
incorporated herein by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1994 (the "1994 10-K").
10.11 Long-Term Performance Plan for Key employees is
incorporated herein by reference to Exhibit 10.26 to
the 1994 10-K.
10.12 Executive Incentive Plan for executive officers, as
amended, is incorporated herein by reference to Exhibit
10.27 to the 1994 10-K.
10.13 Deferred Stock and Compensation Plan for Non-employee
Directors (as amended April 25, 1996) is incorporated
herein by reference to Annex A of the Company's
Definitive Proxy Statement for the 1996 Annual Meeting
of Stockholders as filed with the Commission on May 6,
1996, is incorporated herein by reference to
Exhibit 10.26 to the 1994 10-K.
10.14 Long Term Performance Plan and Executive Incentive
Plan 1996 Challenge 2000 Criteria Schedule of vesting
and unit valuation is incorporated herein by reference to
Exhibit 10.13 to the 1996 10-K.
10.15 Amendment to Long-Term Performance Plan for Key
employees adopted June 11, 1997 is incorporated herein
by reference to Exhibit 10.1 to the September 30, 1997 10-Q.
10.16 Sublease dated January 31, 1996 between Grow Group, Inc.
and the Company for the Company's headquarters at 200
Park Avenue, New York is incorporated herein by
reference to Exhibit 10.17 to the 1995 10-K.
10.17 Real Estate Rental Agreement, dated February 29, 1996,
between Walter Torre Junior LTDA. And American Bank Note
Company Grafica E Servicos Ltda for property located in
Barueri, Sao Paulo, Brazil is incorporated herein by
reference to Exhibit 10.18 to the 1995 10-K.
10.18 Agreement of Lease, dated as of July 23, 1992, between
Robert Martin Company and American Banknote
Holographics, Inc. is incorporated herein by reference
to Exhibit 10.17 to the Company's Annual Report on
form 10-K for the year ended December 31, 1992.<PAGE>
<PAGE>
10.19 Contract dated September 4, 1995 with Telecomunicacoes
Brasileiras S.A. (Telebras) is incorporated herein
by reference to Exhibit 10.26 to the 1995 10-K.
10.20 Agreement for Services, effective October 1, 1995 between
Kelly, Anderson, Pethick & Associates, Inc. and the
Company is incorporated herein by reference to Exhibit
10.2 to the Company's quarterly report on Form 10-Q
for the quarter ended September 30, 1995.
10.21 Alfred Teo Director's Agreement dated April 30, 1996 is
incorporated herein by reference to Exhibit 10.20 to the
1996 10-K.
10.22+ Shareholder and Subscription Agreement between, American
Banknote Australasia Holdings, Inc., Leigh-Mardon Pty
Limited and American Banknote Australasia Limited dated
June 3, 1996 is incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated June 3, 1996 (the "June 3, 1996 Form 8-K").
10.23+ Senior Debt Facility Agreement dated June 3, 1996 between
American Banknote Australasia Limited, ABN Holdings Pty
Ltd, ABN Pacific Pty Ltd, ABN Security Pty Ltd, ABN New
Zealand Limited, Dresdner Australia Limited, Societe
Generale Australia Limited, AIDC Limited, ABN AMRO
Australia Limited, Bankers Trust Australia Limited, BT
Management Services Pty Limited, is incorporated herein
by reference to Exhibit 2.2 to the June 3, 1996 Form 8-K.
10.24+ Subordinated Debt Facility Agreement dated June 3, 1996
between American Banknote Australasia Limited, Amcor
Investments Pty Limited and ABN Holdings Pty Ltd, ABN
Pacific Pty Ltd, ABN Security Pty Ltd, ABN New Zealand
Limited, is incorporated herein by reference to Exhibit
2.3 to the June 3, 1996 Form 8-K.
10.25+ Australian Sale Agreement between Leigh-Mardon Pty
Limited, ABN Security Pty Ltd , ABN Holdings Pty Ltd ,
ABN Pacific Pty Ltd, Containers Pty Limited and
American Banknote Australasia Limited dated April 10,
1996 is incorporated herein by reference to
Exhibit 2.4 to the June 3, 1996 Form 8-K.
10.26+ Master Agreement between Leigh-Mardon Pty Limited
Containers Packaging (N.Z.) Limited, Kiwi Packaging
(Cartons) Limited, Leigh-Mardon (NZ)Limited, ABN
Security Pty Ltd ABN Holdings Pty Ltd, ABN Pacific Pty
Ltd, ABN New Zealand Limited, American Banknote
Australasia Limited and Containers Pty Limited dated
April 10,1996 is incorporated herein by reference to
Exhibit 2.5 to the June 3, 1996 Form 8-K.<PAGE>
<PAGE>
10.27 Share Sale and Exit Deed dated November 1, 1996 between
Leigh-Mardon Pty Limited, Containers Packaging (N.Z.)
Limited Kiwi Packaging (Cartons) Limited, Leigh-Mardon
(NZ) Limited, ABN Security Pty Ltd, ABN Holdings Pty Ltd
and ABN Pacific Pty Ltd ABN New Zealand Limited,
American Banknote Australasia Limited, Containers Pty
Limited, American Banknote Australasia Holdings Inc.,
Amcor Investments Pty Limited is incorporated herein
by reference to Exhibit 2 to the Company's Current
Report on form 8-K dated, November 14, 1996 Form 8-K
(the "November 14, 1996 8-K").
10.28 Share Mortgage between Leigh-Mardon Pty Limited
(Mortgagee) and American Banknote Australasia Holdings
Inc (Mortgagor) Share Mortgage is incorporated herein
by reference to Exhibit 3 to the November 14, 1996 8-K.
10.29 Contract dated June 2, 1995 with Banco Bradesco S.A.
for printing services. *
10.30 Contracts dated November 28, 1997 for the production of
stored-value telephone cards with the following
telephone companies in Brazil: Telecomunicac Es Do Esp
Rito Santo - Telest Telecomunicacoes De Roraima S/a -
Telelaima Telecomunicacoes De Alagoas S/a - Telasa
Telecomunicacoes De Mato Grosso Do Sul S/a - Telems
Telecomunicacoes Do Rio De Janeiro S/a - Telerj
Telecomunicacoes De Rondonia S/a - Teleron
21 Subsidiaries of the Registrant. *
23.1 Consent of Deloitte & Touche LLP. *
23.2 Consent of KPMG. *
27 Article 5 Financial Data Schedule. *
* Filed herewith
+ Portions deleted pursuant to grant of Confidential Treatment pursuant to
Rule 246-2 of the Securities Exchange Act of 1934.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMERICAN BANKNOTE CORPORATION
Registrant
s/ Morris Weissman
Morris Weissman
Chairman and Chief Executive Officer
March 30, 1998
s/ John T. Gorman
John T. Gorman
Executive Vice President,
Chief Financial Officer
and Chief Accounting Officer
March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated:
s/ Morris Weissman
Morris Weissman
Director, Chairman and
Chief Executive Officer
March 30, 1998
s/ Bette B. Anderson s/ Ira J. Hechler
Bette B. Anderson Ira J. Hechler
Director Director
March 30, 1998 March 30, 1998
s/ David S. Rowe-Beddoe
Dr. Oscar Arias S David S. Rowe-Beddoe
Director Director
March 30, 1998 March 30, 1998
s/ C. Gerald Goldsmith s/ Alfred S. Teo
C. Gerald Goldsmith Alfred S. Teo
Director Director
March 30, 1998 March 30, 1998
<PAGE>
<PAGE>
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - continued SCHEDULE I
<TABLE>
<CAPTION>
AMERICAN BANKNOTE CORPORATION
BALANCE SHEET
December 31, 1997
(Dollars in thousands, except share data)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 9,859
Receivables and other assets . . . . . . . . . . . 33
--------
Total current assets . . . . . . . . . . . . . 9,892
Investments in subsidiaries . . . . . . . . . . . . . 209,612
Due from subsidiaries - net . . . . . . . . . . . . . 34,424
Deferred taxes . . . . . . . . . . . . . . . . . . . . 28,178
Other assets. . . . . . . . . . . . . . . . . . . . . 8,299
--------
$290,406
========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt. . . . . . . . $ 975
Accrued expenses and other current liabilities. . . 3,979
--------
Total current liabilities . . . . . . . . . . . 4,954
Long-term debt - net (note) . . . . . . . . . . . . . 228,209
Other liabilities . . . . . . . . . . . . . . . . . . 2,202
Stockholders' equity
Preferred Stock, authorized 5,000,000 shares,
no shares issued or outstanding
Zero Coupon Convertible Subordinated Debentures . . 8,326
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
21,134,769 shares . . . . . . . . . . . . . . . . 211
Capital surplus . . . . . . . . . . . . . . . . . . 74,713
Retained-earnings (deficit) . . . . . . . . . . . . (23,282)
Treasury stock, at cost (281,000 shares). . . . . . (1,253)
Cumulative currency translation adjustment. . . . . (3,674)
--------
Total stockholders' equity . . . . 55,041
--------
$290,406
========
Note- The aggregate maturities of long-term debt is approximately
as follows: 1998 - $1.0 million; 2000 - $31.6 million;
2001 - $31.6 million; 2002 - $71.3 million; and
2007 - $95.0 million.
Also see Note H of Notes to Consolidated Financial Statements.
</TABLE>
S - 1<PAGE>
<PAGE>
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - continued SCHEDULE I
<TABLE>
<CAPTION>
AMERICAN BANKNOTE CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<S> <C>
Equity in net earnings of subsidiaries:
Dividends received . . . . . . . . . . . . . . . . $ 8,913
Undistributed earnings . . . . . . . . . . . . . . 8,184
--------
17,097
Costs and expenses. . . . . . . . . . . . . . . . . . (643)
Interest expense. . . . . . . . . . . . . . . . . . . (24,436)
Interest and other income - net . . . . . . . . . . . 196
--------
Loss before income tax benefit and
extraordinary item . . . . . . . . . . . . . . . . . (7,786)
Income tax benefit. . . . . . . . . . . . . . . . . . . 11,626
--------
Income before extraordinary item . . . . . . . . . . . 3,840
Extraordinary item - early extinguishment of debt,
net of tax benefit. . . . . . . . . . . . . . . . . . (5,589)
--------
Net loss . . . . . . . . . . . . . . . . . . . . . . . $ (1,749)
========
</TABLE>
S - 2<PAGE>
<PAGE>
CONDENSED FINANCIAL INFORMATION OF REGISTRANT - concluded SCHEDULE I
<TABLE>
<CAPTION>
AMERICAN BANKNOTE CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
<S> <C>
Operating Activities:
Income before extraordinary item . . . . . . . . . . $ 3,840
Adjustments to reconcile income to net
cash provided by operating activities:
Items not requiring (providing) cash:
Unremitted earnings of subsidiaries . . . . . . . (8,184)
Deferred taxes . . . . . . . . . . . . . . . . . (11,626)
Depreciation and amortization . . . . . . . . . . 1,262
Changes in operating assets and liabilities:
Marketable securities. . . . . . . . . . . . . . . 1,920
Receivables and other assets . . . . . . . . . . . (327)
Accounts payable and accrued expenses . . . . . . (4,650)
--------
Net cash used in by
operating activities . . . . . . . . . . . . . . . . (17,765)
--------
Investing Activities:
Acquisitions of subsidiaries . . . . . . . . . . . . (464)
-------
Financing Activities:
Due from subsidiaries . . . . . . . . . . . . (7,077)
Payment of long-term debt . . . . . . . . . . . . . . (3,755)
Proceeds from zero coupon subordinated
convertible debentures
(net of related expenses of $450) . . . . . . . . 9,550
Proceeds from financing:
11-1/4% Senior Subordinated Notes,
(net of related expenses of $4,389) . . . . . . . 89,411
Warrants . . . . . . . . . . . . . . . . . . . . . 1,200
Redemption of 11 5/8% Notes . . . . . . . . . . . . . (62,417)
Other . . . . . . . . . . . . . . . . . . . . . . . . 718
--------
Net cash provided by financing activities . . . . . . . 27,630
--------
Increase in cash and cash equivalents . . . . . . . . . 9,401
Cash and cash equivalents - beginning of year . . . . . 458
--------
Cash and cash equivalents - end of year . . . . . . . . $ 9,859
========
Interest paid ...................................... $ 23,092
Income taxes paid .................................. $ 0
</TABLE>
S - 3<PAGE>
<PAGE>
This page intentionally left blank.
EXHIBIT 4.5
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of June 23, 1993, is
delivered pursuant to Section 5 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledged Share Amendment
may be attached to the Pledge Agreement dated as of May 26, 1992,
between the undersigned and Chemical Bank, as Trustee (the "Pledge
Agreement"; capitalized terms defined therein being used herein as
therein defined), and that the Pledged Shares listed on this Pledged
Share Amendment shall be deemed to be part of the Pledged Shares and
shall become part of the Pledged Collateral and shall secure all Senior
Obligations as provided in the Pledge Agreement.
UNITED STATES BANKNOTE CORPORATION
By: S/Jeffrey A. Oberg
Name: Jeffrey A. Oberg
Title: Vice President,
Finance and Corporate Development
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
American Bank
Note Holographics,
Inc. Common 8, 9 $0.01 2,000 20%
ABN Investments,
Inc. Common 1 $1.00 10 100%
EXHIBIT 4.6
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of July 19, 1993, is
delivered pursuant to Section 5 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledged Share Amendment
may be attached to the Pledge Agreement dated as of May 26, 1992, between
the undersigned and Chemical Bank, as Trustee (the "Pledge Agreement";
capitalized terms defined therein being used herein as therein defined),
and that the Pledged Shares listed on this Pledged Share Amendment shall
be deemed to be part of the Pledged Shares and shall become part of the
Pledged Collateral and shall secure all Senior Obligations as provided in
the Pledge Agreement.
UNITED STATES BANKNOTE CORPORATION
By: s/Harvey Kesner
Name: Harvey J. Kesner
Title: Vice President
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
United States Banknote
Corporation,
International Common 1 $0.01 100 100%
EXHIBIT 4.7
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of August 1, 1994, is delivered
pursuant to Section 5 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledged Share Amendment may be attached
to the Pledge Agreement dated as of May 26, 1992, between the undersigned
and Chemical Bank, as Trustee, as amended from time to time (the "Pledge
Agreement", capitalized terms defined therein being used herein as therein
defined), and that the attached Schedule I shall replace in its entirety
Schedule I to the Pledge Agreement.
UNITED STATES
BANKNOTE CORPORATION
By:S/ Harvey J. Kesner
Title: Sr. Vice President
SCHEDULE I
Attached to and forming a part of that certain Pledge Agreement dated as of
May 26, 1992, by United States Banknote Corporation, as Pledgor, to Chemical
Bank, as Trustee, as amended from time to time.
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
American Bank
Note Company Common 4 $5.00 100 100%
American Bank Note
Holographics, Inc. Common 8, 9, 11 $0.01 10,000 100%
NMI Corporation Common 3 $0.01 1,000 100%
ABN Investments,
Inc. Common 1 $1.00 10 100%
United States Banknote
Corporation,
International Common 1 $0.01 100 100%
EXHIBIT 4.9
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of August 15, 1997, is delivered
pursuant to Section 5 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledged Share Amendment may be attached to
the Pledge Agreement dated as of May 26, 1992, between the undersigned and
Chemical Bank, as Trustee (the "Pledge Agreement"; capitalized terms defined
therein being used herein as therein defined), and that the Pledged Shares
listed on this Pledged Share Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and shall
secure all Senior Obligations as provided in the Pledge Agreement.
AMERICAN BANKNOTE CORPORATION
By: S/ Harvey J. Kesner
Name: Harvey J. Kesner
Title: Executive Vice President & General Counsel
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
Transaction Network
Plus, Inc. (American
Banknote Card
Services, Inc.) Common 10 0.001 4 million 94%
American Banknote
Merchant Services,
Inc. Common 1 0.01 1000 100%
EXHIBIT 4.10
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of August 27, 1997, is delivered
pursuant to Section 5 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledged Share Amendment may be attached to
the Pledge Agreement dated as of May 26, 1992, between the undersigned and
Chemical Bank, as Trustee (the "Pledge Agreement"; capitalized terms defined
therein being used herein as therein defined), and that the Pledged Shares
listed on this Pledged Share Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and shall
secure all Senior Obligations as provided in the Pledge Agreement.
AMERICAN BANKNOTE CORPORATION
By: S/ Harvey J. Kesner
Name: Harvey J. Kesner
Title: Executive Vice President & General Counsel
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
USBC Capital Corp. Common 1 0.01 100 100%
EXHIBIT 4.11
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of December 1, 1997, is
delivered pursuant to Section 1 (v) and Section 5 of the Pledge
Agreement referred to below. The undersigned hereby agrees that this
Pledged Share Amendment may be attached to the Pledge Agreement dated
as of May 26, 1992, between the undersigned and Chemical Bank, as
Trustee (the "Pledge Agreement"; capitalized terms defined therein
being used herein as therein defined), and that the Pledged Notes
listed on this Pledged Share Amendment shall be deemed to be part of
the Pledged Notes and shall become part of the Pledged Collateral and
shall secure all Senior Obligations as provided in the Pledge
Agreement.
AMERICAN BANKNOTE CORPORATION
By: Harvey J. Kesner
Name: Harvey J. Kesner
Title: Executive Vice President & General Counsel
PLEDGED NOTES
Issuer Payee Principal Amount
American Bank Note United States Banknote $40,000,000.00
Company, Inc. Corporation (name changed
to American Banknote
Corporation)
American Bank Note United States Banknote $5,300,000.00
Holographics, Inc. Corporation (name changed
to American Banknote
Corporation)
Transaction Network American Banknote Corporation $1,000,000.00
Plus, Inc. (name changed
to American Banknote Card
Services, Inc.)
EXHIBIT 4.12
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of December 11, 1997, is
delivered pursuant to Section 5 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledged Share
Amendment may be attached to the Pledge Agreement dated as of
May 26, 1992, between the undersigned and Chemical Bank, as Trustee
(the "Pledge Agreement"; capitalized terms defined therein being
used herein as therein defined), and that the Pledged Shares listed on
this Pledged Share Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Senior Obligations as provided in the Pledge
Agreement.
AMERICAN BANKNOTE CORPORATION
By: S/ Harvey J. Kesner
Name: Harvey J. Kesner
Title: Executive Vice President & General Counsel
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
ABN CBA,
Inc. Common 1 $0.01 1,000 100%
EXHIBIT 4.13
PLEDGED SHARE AMENDMENT
This Pledged Share Amendment, dated as of December 23, 1997, is
delivered pursuant to Section 5 of the Pledge Agreement referred to
below. The undersigned hereby agrees that this Pledged Share
Amendment may be attached to the Pledge Agreement dated as of May 26,
1992, between the undersigned and Chemical Bank, as Trustee (the
"Pledge Agreement"; capitalized terms defined therein being used
herein as therein defined), and that the Pledged Shares listed on
this Pledged Share Amendment shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and
shall secure all Senior Obligations as provided in the Pledge
Agreement.
AMERICAN BANKNOTE CORPORATION
By: S/ Harvey J. Kesner
Name: Harvey J. Kesner
Title: Executive Vice President & General Counsel
Percentage of
Stock All Capital
Class of Certificate Par Number of Stock
Stock Issuer Stock Number value Shares Outstanding
ABN
Government
Services,
Inc. Common 1 0.01 100 100%
<PAGE> 1 EXHIBIT 4.27
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of July 24, 1997, by and among American Banknote Corporation, a
Delaware corporation, with headquarters located at 200 Park
Avenue, 49th Floor, New York, New York 10166 ("Company"), and
each of the purchasers set forth on the signature pages hereto
(the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act");
B. The Company has authorized the issuance to the Buyers of
(i) convertible subordinated debentures, in the form attached
hereto as Exhibit "A", in the aggregate principal amount of Five
Million Dollars ($5,000,000), convertible into shares of common
stock, $.01 par value per share, of the Company (together with
any rights attached to such common stock pursuant to the
Company's Stockholders Rights Plan, the "Common Stock"), upon the
terms and subject to the limitations and conditions set forth in
such debentures (the "Debentures"), (ii) warrants, in the form
attached hereto as Exhibit "B", to purchase One Hundred Forty
Thousand (140,000) shares of Common Stock (the "A-Warrants") and
(iii) warrants, in the form attached hereto as Exhibit "C", to
purchase Seventy-Five Thousand (75,000) shares of Common Stock
(the "B-Warrants and, collectively with the A-Warrants, the
"Closing Warrants");
C. The Buyers desire to purchase and the Company desires to
issue and sell, upon the terms and conditions set forth in this
Agreement, the Debentures, the A-Warrants, and the B-Warrants,
for an aggregate purchase price of Five Million Dollars
($5,000,000).
D. Each Buyer wishes to purchase, upon the terms and
conditions stated in this Agreement, such principal amount of
Debentures and number of Warrants as is set forth immediately
below its name on the signature pages hereto;
E. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as
<PAGE>
<PAGE> 2
Exhibit "D" (the "Registration Rights Agreement"), pursuant to
which the Company has agreed to provide certain registration
rights under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws; and
F. In accordance with the terms of the Debentures, under
certain circumstances the Company may redeem the Debentures for
cash plus a number of additional warrants, in the form attached
hereto as Exhibit "E", determined based upon the redemption
amount (the "Redemption Warrants" and, collectively with the
Closing Warrants, the "Warrants").
NOW THEREFORE, the Company and each of the Buyers
(severally and not jointly) hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND CLOSING
WARRANTS.
a. Purchase of Debentures and Closing Warrants.
The Company shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company such principal
amount of Debentures as are set forth immediately below such
Buyer's name on the signatures pages hereto at the aggregate
purchase price (the "Purchase Price") as is set forth immediately
below such Buyer's name on the signature pages hereto. The
issuance, sale and purchase of the Debentures and Closing
Warrants shall take place at the closing (the "Closing").
Subject to the satisfaction (or waiver) of the conditions thereto
set forth in Section 6 and Section 7 below, at the Closing, the
Company shall issue and sell to each Buyer and each Buyer shall
purchase from the Company the aggregate principal amount of
Debentures and Closing Warrants which such Buyer is purchasing
hereunder for the Purchase Price. The aggregate principal amount
of Debentures to be issued at the Closing is Five Million Dollars
($5,000,000), the aggregate number of A-Warrants to be issued at
the Closing is One Hundred Forty Thousand (140,000) and the
aggregate number of B-Warrants to be issued at the Closing is
Seventy-Five Thousand (75,000), for an aggregate purchase price
of Five Million Dollars ($5,000,000). The term Debentures
includes the Debentures to be sold hereunder and any debenture(s)
issued in replacement thereof in accordance with the terms
thereof.
b. Form of Payment. On the Closing Date (as
defined below), (i) each Buyer shall pay the Purchase Price for
the Debentures and Closing Warrants to be issued and sold to it
at the Closing by wire transfer of immediately available funds to
the Company, in accordance with the Company's written wiring
instructions, against delivery of the Debentures and Closing
Warrants which such Buyer is purchasing, and (ii) the Company
shall deliver such Debentures and Closing Warrants against
delivery of such Purchase Price. <PAGE>
<PAGE> 3
c. Closing Date. Subject to the satisfaction
(or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, the date and time of the issuance and sale of
the Debentures and Closing Warrants pursuant to this Agreement
(the "Closing Date") shall be 12:00 noon Eastern Standard Time on
July 10, 1997 or such other mutually agreed upon time. The
Closing shall occur on the Closing Date at the offices of the
Company, 200 Park Avenue, 49th Floor, New York, New York 10166.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and
warrants to the Company solely as to such Buyer that:
a. Investment Purpose. The Buyer is purchasing
the Debentures and the shares of Common Stock issuable upon
conversion thereof (the "Conversion Shares") and the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants
(the "Warrants Shares") (collectively, the "Securities") for its
own account for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant
to sales registered or exempted under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D and a sophisticated investor (as defined in Rule
506(b)(2)(ii) at Regulation D).
c. Reliance on Exemptions. The Buyer
understands (i) that the Securities are being offered and sold to
it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities and (ii) it is not authorized, and acknowledges that
it has not, relied on any analyst or other reports or other third
party source information relating to the Company.
d. Information. The Buyer and its advisors, if
any, have been furnished with all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been
requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have not relied on any oral or written
representations or assurances made by third parties or any oral
or written representations or assurances from the Company or any
<PAGE>
<PAGE> 4
representative or agent of the Company other than as set forth in
this Agreement. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have
received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by Buyer or any of its advisors
or representatives shall modify, amend or affect Buyer's right to
rely on the Company's representations and warranties contained in
Section 3 below. The Buyer understands that its investment in
the Securities is speculative and involves a significant degree
of risk.
e. Governmental Review. The Buyer understands
that no United States federal or state agency or any other
government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands
that (i) except as provided in the Registration Rights Agreement,
the Securities have not been and are not being registered under
the 1933 Act or any applicable state securities laws, and may not
be transferred unless (a) subsequently included in an effective
registration statement thereunder, or (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion
shall be reasonably acceptable to the Company) to the effect that
the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(c) sold pursuant to Rule 144 promulgated under the 1933 Act (or
a successor rule); (ii) any sale of such Securities made in
reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable,
any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions
of any exemption thereunder (in each case, other than pursuant to
the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with a bona
fide margin account.
g. Legends. The Buyer understands that the
Debentures, Warrants and, until such time as the Conversion
Shares and Warrants Shares have been registered under the 1933
Act, as contemplated by the Registration Rights Agreement, the
Conversion Shares and Warrant Shares, may bear a restrictive
legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such
Securities): <PAGE>
<PAGE> 5
"The securities represented by this certificate
have not been registered under the Securities
Act of 1933, as amended. The securities have
been acquired for investment and may not be
sold, transferred or assigned in the absence of
an effective registration statement for the
securities under said Act, or an opinion of
counsel, in form, substance and scope
reasonably acceptable to the Company, that
registration is not required under said Act or
unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of
any Security upon which it is stamped, if, unless otherwise
required by applicable state securities laws, (a) such Security
is registered for sale under an effective registration statement
filed under the 1933 Act, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public
sale or transfer of such Security may be made without
registration under the 1933 Act and such Security is so sold or
transferred or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to
Rule 144 under the 1933 Act (or a successor rule thereto) without
any restriction as to the number of Securities acquired as of a
particular date that can then be immediately sold. The Buyer
agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any.
h. Authorization; Enforcement. This Agreement
and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of the Buyer and are
valid and binding agreements of the Buyer enforceable in
accordance with their terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies or
by other equitable principles of general application.
i. Residency. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the
signature pages hereto.
<PAGE>
<PAGE> 6
j. No Legal Advice. The Buyer acknowledges that
it has had the opportunity to review this Agreement and the
transactions contemplated hereby with its own legal counsel and
investment and tax advisors. The Buyer is relying solely on such
counsel and advisors and not on any statements of representatives
of the Company or its representatives as agents for legal, tax or
investment advice with respect to this investment, the
transactions contemplated hereby or the securities laws of any
jurisdiction.
k. No Brokers. The Buyer has taken no action
which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby, except for
dealings with Greystone Capital, Ltd. whose commissions and fees
will be paid by the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company
and each of its Subsidiaries (as defined below), is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated, with full
power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. Schedule 3(a)
sets forth a list of all of the subsidiaries of the Company
pursuant to which material operations of the Company are
conducted (the "Subsidiaries") and the jurisdiction in which each
is incorporated. The Company and each of its Subsidiaries is
duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the operations,
assets, financial condition or prospects of the Company and its
Subsidiaries taken as a whole, or which would prohibit or
otherwise adversely interfere with the ability of the Company to
enter into and perform its obligations under this Agreement, the
Debenture, the Registration Rights Agreement and the Warrants.
b. Authorization; Enforcement. (i) The Company
has all requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in
<PAGE>
<PAGE> 7
accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including without limitation the issuance of the
Debentures and the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by
the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of
the Registration Rights Agreement, the Debentures and the
Warrants, each such instrument will constitute, a legal, valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies or by other equitable principles
of general application.
c. Capitalization. As of June 30, 1997, the
authorized capital stock of the Company consists of (i)
50,000,000 shares of Common Stock of which 19,998,848 shares are
issued and outstanding, 5,187,363 shares are reserved for
issuance pursuant to the Company's benefit plans, no shares are
reserved for issuance pursuant to securities (other than the
Debentures and the Warrants) exercisable for, or convertible into
or exchangeable for shares of Common Stock and 1,850,000 shares
are reserved for issuance upon conversion of the Debentures and
exercise of the Warrants (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(h) below); and (ii)
5,000,000 shares of preferred stock, none of which shares are
issued and outstanding. All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized,
validly issued, fully paid and nonassessable. No shares of
capital stock of the Company are subject to preemptive rights or
any other similar rights of the stockholders of the Company.
Except as disclosed in Schedule 3(c) and except for the
transactions contemplated hereby, as of the effective date of
this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for any shares of
capital stock of the Company, or arrangements by which the
Company is or may become bound to issue additional shares of
<PAGE>
<PAGE> 8
capital stock of the Company, and (ii) there are no agreements or
arrangements under which the Company is obligated to register the
sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the
issuance of the Debentures or Conversion Shares or the Warrants
or Warrant Shares. The Company has furnished to the Buyer true
and correct copies of the Company's Restated Certificate of
Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws, as in effect on the date
hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company
and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written
update of this representation signed by the Company's Chief
Executive or Chief Financial Officer on behalf of the Company as
of the Closing Date.
d. Issuance of Shares. The Conversion Shares
and Warrant Shares are duly authorized and, upon issuance upon
conversion of the Debentures or upon exercise of the Warrants in
accordance with the terms thereof will be validly issued, fully
paid and non-assessable, and free from liens and charges with
respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the
Company. The term Conversion Shares includes the shares of
Common Stock issuable upon conversion of the Debentures,
including without limitation, such additional shares, if any, as
are issuable as a result of the events described in Section 2(c)
of the Registration Rights Agreement. The Company understands
and acknowledges the potentially dilutive effect to the Common
Stock of the issuance of the Conversion Shares and Warrant Shares
upon conversion or exercise of the Debentures or Warrants. The
Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Debentures and Warrant
Shares upon exercise of the Warrants in accordance with this
Agreement, the Debentures and the Warrants is absolute and
unconditional (subject to the Company's redemption rights as
provided in the Debentures) regardless of the dilutive effect
that such issuance may have on the ownership interests of other
stockholders of the Company.
e. No Conflicts. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement,
the Debentures and the Warrants by the Company and the
consummation by the Company of the transactions contemplated
<PAGE>
<PAGE> 9
hereby and thereby (including, without limitation, the issuance
and reservation for issuance of the Conversion Shares and Warrant
Shares) will not (i) conflict with or result in a violation of
any provision of the Certificate of Incorporation or By-laws or
(ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party, or
result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws
and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect and as set forth in
Schedule 3(e)). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of
its Subsidiaries is in default (and no event has occurred which
with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and neither the Company
nor any of its Subsidiaries has taken any action or failed to
take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party or by which any property or assets of
the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. To the knowledge of
the Company, the businesses of the Company and its Subsidiaries,
are not being conducted, and shall not be conducted so long as a
Buyer owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity which
violation would have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under
the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency
in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Registration Rights
Agreement, the Debentures or the Warrants in accordance with the
terms hereof or thereof. Except as disclosed in Schedule 3(e),
all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding
<PAGE>
<PAGE> 10
sentence have been obtained or effected on or prior to the date
hereof. The Company is unaware of any facts or circumstances
which would give rise to any of the foregoing. The Company is
not in violation of the listing requirements of the New York
Stock Exchange ("NYSE") and does not reasonably anticipate that
the Common Stock will be delisted by the NYSE in the foreseeable
future.
f. SEC Documents; Financial Statements. Since
December 31, 1995, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act of 1934, as amended (the "1934 Act") (all of
the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto
and documents (other than exhibits) incorporated by reference
therein, being hereinafter referred to herein as the "SEC
Documents"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits
and incorporated documents. As of their respective dates, the
SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As
of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the
consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in
the financial statements of the Company included in the SEC
Documents or on Schedule 3(f), the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 1996
<PAGE>
<PAGE> 11
and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company.
g. Absence of Certain Changes. Since December
31, 1996, there has been no adverse change and no adverse
development in the assets, liabilities, business, properties,
operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries except as
disclosed on any schedule hereto other than matters which would
not, individually or in the aggregate, have a Material Adverse
Effect.
h. Absence of Litigation. There is no action,
suit, claim, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company
(or any officer or director of the Company), threatened against
or affecting the Company or any of its Subsidiaries (or any
officer or director of the Company or any of its Subsidiaries)
that could have a Material Adverse Effect.
i. [Intentionally Omitted]
j. [Intentionally Omitted]
k. Tax Status. Except as set forth on Schedule
3(k), the Company and each of its Subsidiaries has made or filed
all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to
be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis
for any such claim.
l. [Intentionally Omitted]
<PAGE>
<PAGE> 12
m. Disclosure. All information relating to or
concerning the Company or any of its Subsidiaries set forth in
this Agreement and provided to the Buyers pursuant to Section
2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not
misleading. Except as set forth in Schedule 3(f), no event or
circumstance has occurred or exists with respect to the Company
or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purposes that the
Company's reports filed under the 1934 Act are being incorporated
into an effective registration statement filed by the Company
under the 1933 Act). Notwithstanding the foregoing, the Company
expressly disclaims any and all responsibility for any oral or
written statements about the Company made by any third party
(including but not limited to statements by analysts in research
reports or otherwise), and the Company makes no representation or
warranty as to the accuracy or completeness of such statements.
n. Acknowledgment Regarding Buyers' Purchase of
Securities. The Company acknowledges and agrees that the Buyers
are acting solely in the capacity of arm's length purchasers with
respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that no Buyer is acting
as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any
Buyer or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Buyers, purchase of the
Securities. The Company further represents to each Buyer that
the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
o. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in
any security or solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act
of the issuance of the Securities to the Buyers. The issuance of
the Securities to the Buyers will not be integrated with any
other issuance of the Company's securities (past, current or
future) which requires stockholder approval under the rules of
the NYSE.
<PAGE>
<PAGE> 13
p. No Brokers. The Company has taken no action
which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby, except for
dealings with Greystone Capital, Ltd. whose commissions and fees
will be paid for by the Company.
4. COVENANTS.
a. Best Efforts. The parties shall use their
best efforts to satisfy timely each of the conditions described
in Section 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to
file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for sale to the Buyers at
the applicable closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so
taken to each Buyer on or prior to such Closing Date.
c. Reporting Status; Eligibility to Use Form
S-3. The Company's Common Stock is registered under Section
12(b) of the 1934 Act. So long as any Buyer beneficially owns
any of the Securities, the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and
the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
The Company currently meets, and will take all necessary action
to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the
proceeds from the sale of the Debentures and Warrants in the
manner set forth in Schedule 4(d) attached hereto and made a part
hereof.
<PAGE>
<PAGE> 14
e. Additional Equity Capital; Right of First
Refusal. Subject to the exceptions described below, the Company
agrees that during the period beginning on the date hereof and
ending on the later of (i) seventy-five (75) days thereafter or
(ii) thirty (30) days following the effective date of the
Registration Statement to be filed pursuant to Section 2(a) of
the Registration Rights Agreement (the "Lock-Up Period"), the
Company will not, without the prior written consent of a
majority-in-interest of the Buyers, conduct any additional equity
financing (including debt financing with a discounted or
convertible equity component or warrants). After the expiration
of the Lock-Up Period, subject to the exceptions described below,
the Company shall not negotiate or contract with any party (other
than the Buyers) to obtain additional equity financing (including
debt financing with a discounted or convertible equity component
or warrants) that provides for the registration under the 1933
Act of public resales of Common Stock within one hundred eighty
(180) days of the effective date of the Registration Statement to
be filed pursuant to Section 2(a) of the Registration Rights
Agreement. Subject to the exceptions described below, the
Company will not conduct any equity financing (including debt
with a discounted or convertible equity component or warrants)
("Future Offerings") during the period beginning on the Closing
Date and ending one hundred eighty (180) days after the
expiration of the Lock-Up Period unless it shall have first
delivered to each Buyer, at least fifteen (15) business days
prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and
conditions thereof, and providing each Buyer an option during the
ten (10) business day period following delivery of such notice to
purchase its pro rata share (based on the ratio that the
principal amount of the Debentures purchased by it hereunder
bears to the aggregate principal amount of Debentures purchased
hereunder) of the securities being offered in the Future Offering
on the same terms as contemplated by such Future Offering (the
limitations referred to in this paragraph are collectively
referred to as the "Capital Raising Limitations"), provided that
if the Buyers, as a whole, do not purchase all of such Future
Offering, the Company will be free to pursue such Future Offering
entirely with third parties. The Lock-Up Period, Future Offering
and Capital Raising Limitations shall not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act) or (ii)
issuances of securities as consideration for a merger,
consolidation or sale of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
<PAGE>
<PAGE> 15
disposition or acquisition of a business, product or license by
the Company. The Lock-Up Period, Future Offering and Capital
Raising Limitations also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the
date hereof or to the grant of additional options or warrants, or
the issuance of additional securities, under any Company stock
option or restricted stock plan approved by a majority of the
Company's disinterested directors.
f. Expenses. The Company shall reimburse Rose
Glen Capital Management, L.P. ("RGC") for all expenses incurred
by it in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the other
agreements to be executed in connection herewith, including,
without limitation, attorneys' and consultants' fees and
expenses. The Company's obligation to reimburse RGC's expenses
under this Section 4(f) shall be limited to Thirty Thousand
Dollars ($30,000).
g. Financial Information. The Company agrees to
send the following reports to each Buyer until such Buyer
transfers, assigns, or sells all of the Securities: (i) within
ten (10) days after the filing with the SEC, a copy of its Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or
any of its Subsidiaries; and (iii) contemporaneously with the
making available or giving to the stockholders of the Company,
copies of any notices or other information the Company makes
available or gives to such stockholders.
h. Reservation of Shares. The Company shall at
all times have authorized, and reserved for the purpose of
issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Debentures and
issuance of the Conversion Shares in connection therewith (based
on the Conversion Price of the Debentures in effect from time to
time) and the full exercise of the Warrants and the issuance of
the Warrant Shares in connection therewith (based upon the
Exercise Price of the Warrants in effect from time to time),
initially, 1,850,000 shares. The Company shall not reduce the
number of shares of Common Stock reserved for issuance upon
conversion of the Debentures or exercise of the Warrants without
the consent of each Buyer, which consent will not be unreasonably
withheld except pursuant to redemptions as provided in the
Debentures. The Company shall use its best efforts at all times
<PAGE>
<PAGE> 16
to maintain the number of shares of Common Stock so reserved for
issuance at no less than one hundred fifty percent (150%) of the
number that is then actually issuable upon full conversion of the
Debentures (based on the Conversion Price of the Debentures in
effect from time to time) and the full exercise of the Warrants
(based on the Exercise Price of the Warrants in effect from time
to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of
Conversion Shares and Warrant Shares issued and issuable upon
conversion or exercise of the Debentures and the Warrants (based
on the Conversion Price and Exercise Price then in effect), the
Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to
authorize additional shares to meet the Company's obligations
under this Section 4(h), in the case of an insufficient number of
authorized shares, and using its best efforts to obtain
shareholder approval of an increase in such authorized number of
shares.
i. Listing. The Company shall promptly secure
the listing of the Conversion Shares and Warrant Shares upon each
national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject
to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares and Warrant Shares from time to time
issuable upon conversion or exercise of the Debentures and the
Warrants. The Company will obtain and maintain the listing and
trading of its Common Stock on the NYSE, Nasdaq National Market
("Nasdaq"), or the American Stock Exchange ("AMEX") and will
comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the National
Association of Securities Dealers ("NASD") and such exchanges, as
applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from the NYSE regarding the
continued eligibility of the Common Stock for listing on the
NYSE.
j. Corporate Existence. So long as a Buyer
beneficially owns any Debentures, the Company shall maintain its
corporate existence and shall not sell all or substantially all
of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common
Stock is listed for trading on the NYSE, Nasdaq or AMEX.
<PAGE>
<PAGE> 17
k. Solvency. The Company (both before and after
giving effect to the transactions contemplated by this Agreement)
is solvent and currently the Company has no information that
would lead it to reasonably conclude that the Company would not
have, nor does it intend to take any action that would impair,
its ability to pay or refinance its debts from time to time in
connection therewith. The Buyer hereby acknowledges (i) that the
Company does not currently have funds reserved specifically for
the repayment of the Debentures and (ii) that the Company expects
all amounts payable under the Debentures to be converted into
Common Stock in accordance with Article I thereof. The Company
did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and does not
anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
l. Compliance with Short Sale Regulations. As
of the date hereof, the Buyers represent that they do not have
any short positions in the Company's Common Stock. To the extent
the Buyer's engage in any hedging transaction involving "short
sales" of the Company's Common Stock subsequent to the date
hereof, the Buyers agree to comply with applicable rules and
regulations applying to short sales (subject to applicable
exemptions).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of
each Buyer or its nominee, for the Conversion Shares and Warrant
Shares in such amounts as specified from time to time by each
Buyer to the Company upon proper conversion or exercise of the
Debentures and the Warrants (the "Transfer Agent Instructions").
Prior to registration of the Conversion Shares and Warrant Shares
under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this
Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares or
Warrant Shares, prior to registration of the Conversion Shares or
Warrant Shares under the 1933 Act), will be given by the Company
to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement set forth in Section
2(g) hereof to comply with all applicable prospectus delivery
<PAGE>
<PAGE> 18
requirements, if any, upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, reasonably
satisfactory to the Company in form, substance and scope, that
registration of a resale by such Buyer of any of the Securities
is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares or Warrant
Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified
by such Buyer. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the
Buyers, by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this
Section, that the Buyers shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach
and requiring immediate transfer, without the necessity of
showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Debentures and the Warrants to a Buyer at the Closing is
subject to the satisfaction, at or before the Closing Dates of
each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered
the same to the Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the
applicable Buyer shall be true and correct in all material
respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable
Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.
<PAGE>
<PAGE> 19
d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Debentures and the Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time
in its sole discretion:
a. The Company shall have executed this
Agreement and the
Registration Rights Agreement, and delivered the same to the
Buyer.
b. The Company shall have delivered to such
Buyer duly executed Debentures and the Closing Warrants being so
purchased in accordance with Section 1(b) above.
c. The Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers,
shall have been delivered to and acknowledged in writing by the
Company's Transfer Agent.
d. The representations and warranties of the
Company shall be true and correct in all material respects as of
the date when made and as of the Closing Date as though made at
such time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chief executive
officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be
reasonably requested by such Buyer, including, but not limited to
certifications with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
<PAGE>
<PAGE> 20
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
f. The Conversion Shares and Warrant Shares
shall have been authorized for quotation on the NYSE and trading
in the Common Stock on the NYSE shall not have been suspended by
the SEC or the NYSE.
h. The Buyer shall have received an opinion of
the Company's counsel, dated as of the Closing Date, in form,
scope and substance reasonably satisfactory to the Buyer and in
substantially the same form as Exhibit "F" attached hereto.
i. The Buyer shall have received the officer's
certificate described in Section 3(c) above, dated as of the
Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be
governed by and interpreted in accordance with the laws of the
State of Delaware without regard to the principles of conflict of
laws. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in
Delaware with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or
the transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This
Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to the other party. This Agreement, once executed
by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. Headings. The headings of this Agreement are
for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
d. Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other
jurisdiction.<PAGE>
<PAGE> 21
e. Entire Agreement; Amendments. This Agreement
and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
party to be charged with enforcement.
f. Notices. Any notices required or permitted
to be given under the terms of this Agreement shall be sent by
certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be
effective five days after being placed in the mail, if mailed by
regular U.S. mail, or upon receipt, if delivered personally or by
courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for
such communications shall be:
If to the Company:
American Banknote Corporation
200 Park Avenue
49th Floor
New York, New York 10166
Attention: Morris Weissman
Facsimile: (212) 338-0747
With copy to:
Kramer, Levin, Natfalis & Frankel
919 Third Avenue, 38th Floor
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
Facsimile: (212) 983-0028
If to a Buyer: To the address set forth immediately below
such Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any
change in address.
<PAGE>
<PAGE> 22
g. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their
successors and assigns. Neither the Company nor any Buyer shall
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding
the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a
Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company. Buyer
agrees not to knowingly sell, assign, pledge or otherwise dispose
of or transfer in a private transaction the Debentures,
Conversion Shares or Warrant Shares to (i) any purchaser who is a
direct competitor of the Company or its Subsidiaries or (ii) any
purchaser who alone or together with other persons comprise a
"group" within the meaning of Section 13(d) of the 1934 Act as
the owner of 10% of the capital stock of the Company. The
foregoing sentence shall not apply to any transfer that does not
constitute a private transaction including, without limitation,
open market transactions affected on the NYSE or on any other
stock exchange or quotation system on which the Common Stock may
be quoted or listed and shall terminate with respect to such
sales.
h. Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival. The representations and warranties
of the Company and the agreements and covenants set forth in
Sections 2, 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or
on behalf of the Buyers.
j. Publicity. The Company and each of the
Buyers shall have the right to review a reasonable period of time
before issuance of any press releases, SEC, NYSE or NASD filings,
or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, NYSE or NASD filings with respect
to such transactions as is required by applicable law and
regulations (although each of the Buyers shall be consulted by
the Company in connection with any such press release prior to
its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon).
<PAGE>
<PAGE> 23
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
l. No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]<PAGE>
<PAGE> 24
IN WITNESS WHEREOF, the undersigned Buyers and the Company
have caused this Agreement to be duly executed as of the date
first above written.
AMERICAN BANKNOTE CORPORATION
By: Harvey J. Kesner
Harvey J. Kesner, Esq.
Executive Vice President, General Counsel and Secretary
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
By: RGC General Partner Corp.
By:
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o 440 E. Swedesford Road
Suite 2025
Wayne, PA 19087
Facsimile: (610) 971-2212
Telephone: (610) 902-0200
AGGREGATE SUBSCRIPTION AMOUNT:
Principal Amount of Debentures
$ 5,000,000
Number of A-Warrants:
140,000
Number of B-Warrants:
75,000
Aggregate Purchase Price:
$ 5,000,000
<PAGE> 1 EXHIBIT 4.28
EXHIBIT B
TO
SECURITIES
PURCHASE
AGREEMENT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT
AS OTHERWISE SET FORTH HEREIN OR IN A
SECURITIES PURCHASE AGREEMENT DATED AS OF JULY 24,
1997, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
MAY BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN
OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
Right to
Purchase
140,000
Shares of
Common Stock,
par value $.01 per share
STOCK PURCHASE WARRANT (A-WARRANT)
THIS CERTIFIES THAT, for value received, RGC International
Investors, LDC or its registered assigns, is entitled to purchase
from American Banknote Corporation, a Delaware corporation (the
"Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, One Hundred Forty Thousand
(140,000) fully paid and nonassessable shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), at
an exercise price of $5.70 per share (the "Exercise Price"). The
term "Warrant Shares", as used herein, refers to the shares of
Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The term Warrants means this Warrant and the
other A-Warrants, B-Warrants and Redemption Warrants issued
pursuant to that certain Securities Purchase Agreement, dated
July 24, 1997, by and among the Company and the Buyers listed on
the execution page thereof (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions,
and conditions:
<PAGE>
<PAGE> 2
1. Manner of Exercise; Issuance of Certificates;
Payment for Shares. Subject to the provisions hereof, this
Warrant may be exercised by the holder hereof, in whole or in
part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any
business day at the Company's principal executive offices (or
such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon (i) payment to the Company
in cash, by certified or official bank check or by wire transfer
for the account of the Company of the Exercise Price for the
Warrant Shares specified in the Exercise Agreement or (ii)
delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below)
for the Warrant Shares specified in the Exercise Agreement. The
Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been
made for such shares as set forth above. Certificates for the
Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to
the holder hereof within a reasonable time, not exceeding three
(3) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall
be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
Notwithstanding anything in this Warrant to the
contrary, in no event shall the Holder of this Warrant be
entitled to exercise a number of Warrants (or portions thereof)
in excess of the number of Warrants (or portions thereof) upon
exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised Warrants and
unconverted Debentures (as defined in the Securities Purchase
Agreement) and (ii) the number of shares of Common Stock issuable
upon exercise of the Warrants (or portions thereof) with respect
to which the determination described herein is being made, would
result in beneficial ownership by the Holder and its affiliates
of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (i)
hereof.
<PAGE>
<PAGE> 3
2. Period of Exercise. This Warrant is exercisable at
any time or from time to time on or after the date on which this
Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 5:00 p.m., New York City
time on July 24, 1999 (the "Exercise Period").
3. Certain Agreements of the Company. The Company
hereby covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares
will, upon issuance in accordance with the terms of this Warrant,
be validly issued, fully paid, and nonassessable and free from
liens and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise
Period, the Company shall at all times have authorized, and
reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide
for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of
the Warrant upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance upon exercise
of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of
Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case
may be, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated
quotation system.
(d) Certain Actions Prohibited. The Company will
not, by amendment of its charter or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of
this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will
take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.<PAGE>
<PAGE> 4
(e) Successors and Assigns. This Warrant will be
binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the
Company's assets.
4. Antidilution Provisions. During the Exercise
Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this
Paragraph 4.
In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise
Price shall be rounded up to the nearest cent.
(a) Adjustment of Exercise Price and Number of
Shares upon Issuance of Common Stock. Except as otherwise
provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on
or after the date of issuance of this Warrant the Company issues
or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction
of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than the Market Price
(as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an
amount equal to the sum of (x) the number of shares of Common
Stock actually outstanding immediately prior to the Dilutive
Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii)
the denominator of which is the total number of shares of Common
Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events.
For purposes of determining the adjusted Exercise Price under
Paragraph 4(a) hereof, the following will be applicable:
(i) Issuance of Rights or Options. If the
Company in any manner issues or grants any warrants, rights or
options, whether or not immediately exercisable, to subscribe for
or to purchase Common Stock or other securities convertible into
or exchangeable for Common Stock ("Convertible Securities") (such
warrants, rights and options to purchase Common Stock or
<PAGE>
<PAGE> 5
Convertible Securities are hereinafter referred to as "Options")
and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the
date of issuance or grant of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon
the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities
issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities.
If the Company in any manner issues or sells any Convertible
Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and the
price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date
of issuance, then the maximum total number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to
have been issued and sold by the Company for such price per
share. For the purposes of the preceding sentence, the "price
per share for which Common Stock is issuable upon such conversion
or exchange" is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof at
the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.
<PAGE>
<PAGE> 6
(iii) Change in Option Price or Conversion
Rate. If there is a change at any time in (i) the amount of
additional consideration payable to the Company upon the exercise
of any Options; (ii) the amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued
or sold.
(iv) Treatment of Expired Options and
Unexercised Convertible Securities. If, in any case, the total
number of shares of Common Stock issuable upon exercise of any
Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise
such Option or to convert or exchange such Convertible Securities
shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have
been in effect at the time of such expiration or termination had
such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than
in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received.
If any Common Stock, Options or Convertible Securities are
issued, granted or sold for cash, the consideration received
therefor for purposes of this Warrant will be the amount received
by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection
with such issuance, grant or sale. In case any Common Stock,
Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case
the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any
Common Stock, Options or Convertible Securities are issued in
connection with any acquisition, merger or consolidation in which
the Company is the surviving corporation, unless the Board of
Directors of the Company specifically provides otherwise, the
amount of consideration therefor will be deemed to be equal to
the Market Price of such Common Stock, Options or Convertible
Securities, as the case may be, on the date of issuance. The
fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the
Company.
<PAGE> 7
(vi) Exceptions to Adjustment of Exercise
Price. No adjustment to the Exercise Price will be made (i) upon
the exercise of any warrants, options or convertible securities
granted, issued and outstanding on the date of issuance of this
Warrant; (ii) upon the grant or exercise of any stock or options
which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in
the future, so long as the issuance of such stock or options is
approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a
committee of independent directors established for such purpose;
(iii) upon the exercise of the Warrants; (iv) upon the conversion
of the Debentures issued pursuant to the Securities Purchase
Agreement or (v) upon issuance, exercise or conversion of any
securities purchased by the Holder pursuant to the provisions of
Section 4(e) of the Securities Purchase Agreement.
(c) Subdivision or Combination of Common Stock.
If the Company at any time subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a
greater number of shares, then, after the date of record for
effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by reverse stock
split, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a
smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately
increased.
(d) Adjustment in Number of Shares. Upon each
adjustment of the Exercise Price pursuant to the provisions of
this Paragraph 4, the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted by multiplying a
number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Common Stock issuable
upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(e) Consolidation, Merger or Sale. In case of
any consolidation of the Company with, or merger of the Company
into any other corporation, or in case of any sale or conveyance
of all or substantially all of the assets of the Company other
than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the
holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common
Stock immediately theretofore acquirable upon the exercise of
this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore<PAGE>
<PAGE> 8
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In
any such case, the Company will make appropriate provision to
insure that the provisions of this Paragraph 4 hereof will
thereafter be applicable as nearly as may be in relation to any
shares of stock or securities thereafter deliverable upon the
exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than
the Company) assumes by written instrument the obligations under
this Paragraph 4 and the obligations to deliver to the holder of
this Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be
entitled to acquire.
(f) Distribution of Assets. In case the Company
shall declare or make any distribution of its assets (including
cash) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise, then, after
the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder
of this Warrant shall be entitled upon exercise of this Warrant
for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would
have been payable to the holder had such holder been the holder
of such shares of Common Stock on the record date for the
determination of stockholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of
any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice
thereof to the holder of this Warrant, which notice shall state
the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable
at such price upon exercise, setting forth in reasonable detail
the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by the
chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No
adjustment of the Exercise Price shall be made in an amount of
less than 5% of the Exercise Price in effect at the time such
adjustment is otherwise required to be made, but any such lesser
adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less
than 5% of such Exercise Price.
(i) No Fractional Shares. No fractional shares
of Common Stock are to be issued upon the exercise of this
Warrant, but the Company shall pay a cash adjustment in respect
of any fractional share which would otherwise be issuable in an
amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.<PAGE>
<PAGE> 9
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend
upon the Common Stock payable in shares of stock of any class or
make any other distribution (including dividends or distributions
payable in cash out of retained earnings) to the holders of the
Common Stock;
(ii) the Company shall offer for subscription
pro rata to the holders of the Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital
reorganization of the Company, or reclassification of the Common
Stock, or consolidation or merger of the Company with or into, or
sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of
this Warrant (a) notice of the date on which the books of the
Company shall close or a record shall be taken for determining
the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining
the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up and (b) in the case
of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation
thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common
Stock shall be entitled to receive such dividend, distribution,
or subscription rights or to exchange their Common Stock for
stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be.
Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.
(k) Certain Events. If any event occurs of the
type contemplated by the adjustment provisions of this Paragraph
4 but not expressly provided for by such provisions, the Company
will give notice of such event as provided in Paragraph 4(g)
hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of
shares of Common Stock acquirable upon exercise of this Warrant
so that the rights of the Holder shall be neither enhanced nor
diminished by such event.
<PAGE>
<PAGE> 10
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding"
shall mean the number of shares of Common Stock actually
outstanding (not including shares of Common Stock held in the
treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i)
hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such
issuance or grant of such Options, if any, and (y) pursuant to
Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible
Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i)
means the average of the last reported sale prices for the shares
of Common Stock on the New York Stock Exchange ("NYSE") for the
five (5) trading days immediately preceding such date as reported
by Bloomberg, L.P. ("Bloomberg"), or (ii) if the NYSE is not the
principal trading market for the shares of Common Stock, the
average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by
Bloomberg, or (iii) if market value cannot be calculated as of
such date on any of the foregoing bases, the Market Price shall
be the fair market value as reasonably determined in good faith
by (a) the Board of Directors of the Corporation or, at the
option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses
similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value
must be made hereunder.
(iii) "Common Stock," for purposes of this
Paragraph 4, includes the Common Stock, par value $.01 per share,
and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant
shall include only shares of Common Stock, par value $.01 per
share, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common
Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property
provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for
Warrant Shares upon the exercise of this Warrant shall be made
without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that
the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of
this Warrant.
<PAGE> 11
6. No Rights or Liabilities as a Shareholder. This
Warrant shall not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company. No provision of
this Warrant, in the absence of affirmative action by the holder
hereof to purchase Warrant Shares, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise
to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the
rights granted to the holder hereof are transferable, in whole or
in part, upon surrender of this Warrant, together with a properly
executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below,
provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Paragraph 7(f) hereof and
to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes,
and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Paragraph 8 are
assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of July 24, 1997, by and
among the Company and the other signatories thereto (the
"Registration Rights Agreement").
(b) Warrant Exchangeable for Different
Denominations. This Warrant is exchangeable, upon the surrender
hereof by the holder hereof at the office or agency of the
Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase
the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by the
holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss,
theft, destruction, or mutilation of this Warrant and, in the
case of any such loss, theft, or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
<PAGE>
<PAGE> 12
(d) Cancellation; Payment of Expenses. Upon the
surrender of this Warrant in connection with any transfer,
exchange, or replacement as provided in this Paragraph 7, this
Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and
all other expenses (other than legal expenses, if any, incurred
by the Holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants
pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of
the Company as it may designate by notice to the holder hereof),
a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If,
at the time of the surrender of this Warrant in connection with
any exercise, transfer, or exchange of this Warrant, this Warrant
(or, in the case of any exercise, the Warrant Shares issuable
hereunder), shall not be registered under the Securities Act of
1933, as amended (the "Securities Act") and under applicable
state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel, which
opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance
acceptable to the Company, and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under
the Securities Act; provided that no such opinion, letter or
status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the
distribution thereof.
8. Registration Rights. The initial holder of this
Warrant (and certain assignees thereof) is entitled to the
benefit of such registration rights in respect of the Warrant
Shares as are set forth in Section 2 of the Registration Rights
Agreement.
9. Notices. All notices, requests, and other
communications required or permitted to be given or delivered
hereunder to the holder of this Warrant shall be in writing, and
shall be personally delivered, or shall be sent by certified or
registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for<PAGE>
<PAGE> 13
such holder on the books of the Company, or at such other address
as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the Company
shall be in writing, and shall be personally delivered, or shall
be sent by certified or registered mail or by recognized
overnight mail courier, postage prepaid and addressed, to the
office of the Company at 200 Park Avenue, 49th Floor, New York,
New York 10166, Attention: Secretary, or at such other address
as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be
subsequently confirmed by a writing personally delivered or sent
by certified or registered mail or by recognized overnight mail
courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the
time of the receipt thereof by the person entitled to receive
such notice at the address of such person for purposes of this
Paragraph 9, or, if mailed by registered or certified mail or
with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if
postage is prepaid and the mailing is properly addressed, as the
case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE BODY OF LAW
CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision
hereof may only be amended by an instrument in writing signed by
the Company and the holder hereof.
(b) Descriptive Headings. The descriptive
headings of the several paragraphs of this Warrant are inserted
for purposes of reference only, and shall not affect the meaning
or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything
to the contrary contained in this Warrant, this Warrant may be
exercised by presentation and surrender of this Warrant to the
Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock
to be issued upon such exercise in accordance with the terms
hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the
Exercise Price, and the denominator of which shall be the then
current Market Price per share of Common Stock.
<PAGE> 14
(d) Other Agreements. This Warrant is subject
to the rights and restrictions set forth in the Securities
Purchase Agreement and the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<PAGE>
<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed by its duly authorized officer.
AMERICAN BANKNOTE CORPORATION
By:___________________________
Harvey J. Kesner, Esq.
Executive Vice President, General Counsel
and Secretary
Dated as of July 24, 1997<PAGE>
<PAGE> 16
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in
the within Warrant, hereby agrees to purchase ________ shares of
Common Stock covered by such Warrant, and makes payment herewith
in full therefor at the price per share provided by such Warrant
in cash or by certified or official bank check in the amount of,
or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, by
surrender of securities issued by the Company (including a
portion of the Warrant) having a market value (in the case of a
portion of this Warrant, determined in accordance with Section
11(c) of the Warrant) equal to $_________. Please issue a
certificate or certificates for such shares of Common Stock in
the name of and pay any cash for any fractional share to:
Name: ___________________________________
Signature: ______________________________
Address: ______________________________
______________________________
Note: The above signature should
correspond exactly with the
name on the face of
the within Warrant.
and, if said number of shares of Common Stock shall not be all
the shares purchasable under the within Warrant, a new Warrant is
to be issued in the name of said undersigned covering the balance
of the shares purchasable thereunder less any fraction of a share
paid in cash.<PAGE>
<PAGE> 17
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns,
and transfers all the rights of the undersigned under the within
Warrant, with respect to the number of shares of Common Stock
covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints
_______________________________ as agent and attorney-in-fact to
transfer said Warrant on the books of the within-named
corporation, with full power of substitution in the premises.
Dated: _____________________, ____,
In the presence of
__________________
Name:___________________________________
Signature:_________________________
Title of Signing Officer or Agent (if any):
__________________________________
Address:___________________________
___________________________
Note: The above signature should
correspond exactly with the
name on the face of the
within Warrant.
<PAGE>
<PAGE> 1 EXHIBIT 4.28
EXHIBIT C
TO
SECURITIES
PURCHASE
AGREEMENT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A
SECURITIES PURCHASE AGREEMENT DATED AS OF JULY
24, 1997, NEITHER THIS WARRANT NOR ANY OF SUCH
SHARES MAY BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN
OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
Right to
Purchase
75,000
Shares of
Common
Stock, par
value $.01
per share
STOCK PURCHASE WARRANT (B-WARRANT)
THIS CERTIFIES THAT, for value received, RGC International
Investors, LDC or its registered assigns, is entitled to purchase
from American Banknote Corporation, a Delaware corporation (the
"Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, Seventy-Five Thousand (75,000)
fully paid and nonassessable shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), at an
exercise price of $6.4125 per share (the "Exercise Price"). The
term "Warrant Shares", as used herein, refers to the shares of
Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The term Warrants means this Warrant and the
other A-Warrants, B-Warrants and Redemption Warrants issued
pursuant to that certain Securities Purchase Agreement, dated
July 24, 1997, by and among the Company and the Buyers listed on
the execution page thereof (the "Securities Purchase Agreement").
<PAGE>
<PAGE> 2
This Warrant is subject to the following terms, provisions, and
conditions:
1.Manner of Exercise; Issuance of Certificates; Payment for
Shares. Subject to the provisions hereof, this Warrant may be
exercised by the holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"),
to the Company during normal business hours on any business day
at the Company's principal executive offices (or such other
office or agency of the Company as it may designate by notice to
the holder hereof), and upon (i) payment to the Company in cash,
by certified or official bank check or by wire transfer for the
account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) delivery to
the Company of a written notice of an election to effect a
"Cashless Exercise" (as defined in Section 11(c) below) for the
Warrant Shares specified in the Exercise Agreement. The Warrant
Shares so purchased shall be deemed to be issued to the holder
hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been
made for such shares as set forth above. Certificates for the
Warrant Shares so purchased, representing the aggregate number of
shares specified in the Exercise Agreement, shall be delivered to
the holder hereof within a reasonable time, not exceeding three
(3) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall
be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in no
event shall the Holder of this Warrant be entitled to exercise a
number of Warrants (or portions thereof) in excess of the number
of Warrants (or portions thereof) upon exercise of which the sum
of (i) the number of shares of Common Stock beneficially owned by
the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of
the unexercised Warrants and unconverted Debentures (as defined
in the Securities Purchase Agreement) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or
portions thereof) with respect to which the determination
described herein is being made, would result in beneficial<PAGE>
<PAGE> 3
ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) hereof.
2.Period of Exercise. This Warrant is exercisable at any time or
from time to time on or after the date on which this Warrant is
issued and delivered pursuant to the terms of the Securities
Purchase Agreement and before 5:00 p.m., New York City time on
July 24, 2000 (the "Exercise Period").
3.Certain Agreements of the Company. The Company hereby
covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly
issued, fully paid, and nonassessable and free from liens and
charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of
this Warrant.
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant
upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this
Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of
Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case
may be, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be
listed on such national securities exchange or automated
quotation system.
(d) Certain Actions Prohibited. The Company will not, by
amendment of its charter or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed
<PAGE>
<PAGE> 4
or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be
requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4.Antidilution Provisions. During the Exercise Period, the
Exercise Price and the number of Warrant Shares shall be subject
to adjustment from time to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise
Price shall be rounded up to the nearest cent.
(a)Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock. Except as otherwise provided in
Paragraphs 4(c) and 4(e) hereof, if and whenever on or after the
date of issuance of this Warrant the Company issues or sells, or
in accordance with Paragraph 4(b) hereof is deemed to have issued
or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses
or commissions or underwriting discounts or allowances in
connection therewith) less than the Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then
immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise
Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the
sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y)
the quotient of the aggregate consideration, calculated as set
forth in Paragraph 4(b) hereof, received by the Company upon such
Dilutive Issuance, divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common
Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
<PAGE>
<PAGE> 5
(b)Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a)
hereof, the following will be applicable:
(i)Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities") (such warrants, rights
and options to purchase Common Stock or Convertible Securities
are hereinafter referred to as "Options") and the price per share
for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price on the date of issuance or
grant of such Options, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will,
as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon the exercise of such Options" is determined by dividing (i)
the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such
Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise
of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the
Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii)Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable
upon the exercise of Options) and the price per share for which
Common Stock is issuable upon such conversion or exchange is less
than the Market Price on the date of issuance, then the maximum
total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will,
as of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by
<PAGE>
<PAGE> 6
the Company as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(iii)Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the
Company upon the conversion or exchange of any Convertible
Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such
change will be readjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv)Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of
Common Stock issuable upon exercise of any Option or upon
conversion or exchange of any Convertible Securities is not, in
fact, issued and the rights to exercise such Option or to convert
or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted
to the Exercise Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or
conversion thereof), never been issued.
(v)Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this
Warrant will be the amount received by the Company therefor,
before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant
or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of
which shall be other than cash, the amount of the consideration
<PAGE>
<PAGE> 7
other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the Company will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger
or consolidation in which the Company is the surviving
corporation, unless the Board of Directors of the Company
specifically provides otherwise, the amount of consideration
therefor will be deemed to be equal to the Market Price of such
Common Stock, Options or Convertible Securities, as the case may
be, on the date of issuance. The fair value of any consideration
other than cash or securities will be determined in good faith by
the Board of Directors of the Company.
(vi)Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and
outstanding on the date of issuance of this Warrant; (ii) upon
the grant or exercise of any stock or options which may hereafter
be granted or exercised under any employee benefit plan of the
Company now existing or to be implemented in the future, so long
as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of
the Company or a majority of the members of a committee of
independent directors established for such purpose; (iii) upon
the exercise of the Warrants; (iv) upon the conversion of the
Debentures issued pursuant to the Securities Purchase Agreement
or (v) upon issuance, exercise or conversion of any securities
purchased by the Holder pursuant to the provisions of Section
4(e) of the Securities Purchase Agreement.
(c)Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a greater
number of shares, then, after the date of record for effecting
such subdivision, the Exercise Price in effect immediately prior
to such subdivision will be proportionately reduced. If the
Company at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller
number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior
to such combination will be proportionately increased.
(d)Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4,
the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted by multiplying a number equal to
<PAGE>
<PAGE> 8
the Exercise Price in effect immediately prior to such adjustment
by the number of shares of Common Stock issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
(e)Consolidation, Merger or Sale. In case of any consolidation
of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or
substantially all of the assets of the Company other than in
connection with a plan of complete liquidation of the Company,
then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of
this Warrant will have the right to acquire and receive upon
exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case,
the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be
applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any consolidation, merger
or sale or conveyance unless prior to the consummation thereof,
the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the
obligations to deliver to the holder of this Warrant such shares
of stock, securities or assets as, in accordance with the
foregoing provisions, the holder may be entitled to acquire.
(f)Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) to holders
of Common Stock as a partial liquidating dividend, by way of
return of capital or otherwise, then, after the date of record
for determining stockholders entitled to such distribution, but
prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase
of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable
to the holder had such holder been the holder of such shares of
Common Stock on the record date for the determination of
stockholders entitled to such distribution.
<PAGE>
<PAGE> 9
(g) Notice of Adjustment. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in
each such case, the Company shall give notice thereof to the
holder of this Warrant, which notice shall state the Exercise
Price resulting from such adjustment and the increase or decrease
in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
Such calculation shall be certified by the chief financial
officer of the Company.
(h)Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 5% of the
Exercise Price in effect at the time such adjustment is otherwise
required to be made, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with
the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 5%
of such Exercise Price.
(i)No Fractional Shares. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the
Company shall pay a cash adjustment in respect of any fractional
share which would otherwise be issuable in an amount equal to the
same fraction of the Market Price of a share of Common Stock on
the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in
cash out of retained earnings) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or
merger of the Company with or into, or sale of all or
substantially all its assets to, another corporation or entity;
or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
<PAGE>
<PAGE> 10
then, in each such case, the Company shall give to the holder of
this Warrant (a) notice of the date on which the books of the
Company shall close or a record shall be taken for determining
the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining
the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up and (b) in the case
of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation
thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common
Stock shall be entitled to receive such dividend, distribution,
or subscription rights or to exchange their Common Stock for
stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding-up, as the case may be.
Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above.
(k)Certain Events. If any event occurs of the type contemplated
by the adjustment provisions of this Paragraph 4 but not
expressly provided for by such provisions, the Company will give
notice of such event as provided in Paragraph 4(g) hereof, and
the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the
rights of the Holder shall be neither enhanced nor diminished by
such event.
(l)Certain Definitions.
(i)"Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares
of Common Stock held in the treasury of the Company), plus (x)
pursuant to Paragraph 4(b)(i) hereof, the maximum total number of
shares of Common Stock issuable upon the exercise of Options, as
of the date of such issuance or grant of such Options, if any,
and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total
number of shares of Common Stock issuable upon conversion or
exchange of Convertible Securities, as of the date of issuance of
such Convertible Securities, if any.
<PAGE>
<PAGE> 11
(ii)"Market Price," as of any date, (i) means the average of the
last reported sale prices for the shares of Common Stock on the
New York Stock Exchange ("NYSE") for the five (5) trading days
immediately preceding such date as reported by Bloomberg, L.P.
("Bloomberg"), or (ii) if the NYSE is not the principal trading
market for the shares of Common Stock, the average of the last
reported sale prices on the principal trading market for the
Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the fair market
value as reasonably determined in good faith by (a) the Board of
Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Warrants
by (b) an
independent investment bank of nationally recognized standing in
the valuation of businesses similar to the business of the
corporation. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii)"Common Stock," for purposes of this Paragraph 4, includes
the Common Stock, par value $.01 per share, and any additional
class of stock of the Company having no preference as to
dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only
shares of Common Stock, par value $.01 per share, in respect of
which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case
of any reorganization, reclassification, consolidation, merger,
or sale of the character referred to in Paragraph 4(e) hereof,
the stock or other securities or property provided for in such
Paragraph.
5.Issue Tax. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to
the holder of this Warrant or such shares for any issuance tax or
other costs in respect thereof, provided that the Company shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6.No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the holder hereof to any voting rights or other
rights as a shareholder of the Company. No provision of this
Warrant, in the absence of affirmative action by the holder
hereof to purchase Warrant Shares, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise
to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
<PAGE>
<PAGE> 12
7.Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in
part, upon surrender of this Warrant, together with a properly
executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below,
provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Paragraph 7(f) hereof and
to the applicable provisions of the Securities Purchase
Agreement. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes,
and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Paragraph 8 are
assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of July 24, 1997, by and
among the Company and the other signatories thereto (the
"Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the office or agency of the Company referred to in
Paragraph 7(e) below, for new Warrants of like tenor representing
in the aggregate the right to purchase the number of shares of
Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares
as shall be designated by the holder hereof at the time of such
surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company, or, in
the case of any such mutilation, upon surrender and cancellation
of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant in connection with any transfer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall
be promptly canceled by the Company. The Company shall pay all
taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
<PAGE>
<PAGE> 13
(e) Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company
as it may designate by notice to the holder hereof), a register
for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time
of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the
case of any exercise, the Warrant Shares issuable hereunder),
shall not be registered under the Securities Act of 1933, as
amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel, which
opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without
registration under said Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance
acceptable to the Company, and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under
the Securities Act; provided that no such opinion, letter or
status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and
holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the
distribution thereof.
8.Registration Rights. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such
registration rights in respect of the Warrant Shares as are set
forth in Section 2 of the Registration Rights Agreement.
9.Notices. All notices, requests, and other communications
required or permitted to be given or delivered hereunder to the
holder of this Warrant shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have
been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted
to be given or delivered hereunder to the Company shall be in
writing, and shall be personally delivered, or shall be sent by
<PAGE>
<PAGE> 14
certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to the office of the
Company at 200 Park Avenue, 49th Floor, New York, New York
10166, Attention: Secretary, or at such other address as shall
have been furnished to the holder of this Warrant by notice from
the Company. Any such notice, request, or other communication
may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified
or registered mail or by recognized overnight mail courier as
provided above. All notices, requests, and other communications
shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Paragraph 9, or,
if mailed by registered or certified mail or with a recognized
overnight mail courier upon deposit with the United States Post
Office or such overnight mail courier, if postage is prepaid and
the mailing is properly addressed, as the case may be.
10.Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF DELAWARE WITHOUT REGARD TO THE BODY OF LAW
CONTROLLING CONFLICTS OF LAW.
11.Miscellaneous.
(a)Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the
holder hereof.
(b)Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of
the provisions hereof.
(c)Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless
Exercise"). In the event of a Cashless Exercise, in lieu of
paying the Exercise Price in cash, the holder shall surrender
this Warrant for that number of shares of Common Stock determined
by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall
be the difference between the then current Market Price per share
of the Common Stock and the Exercise Price, and the denominator
of which shall be the then current Market Price per share of
Common Stock.
<PAGE>
<PAGE> 15
(d)Other Agreements. This Warrant is subject to the rights and
restrictions set forth in the Securities Purchase Agreement and
the Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]<PAGE>
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
AMERICAN BANKNOTE CORPORATION
By: ______________________________________
Harvey J. Kesner, Esq.
Executive Vice President, General Counsel
and Secretary
Dated as of July 24, 1997<PAGE>
<PAGE> 17
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the
within Warrant, hereby agrees to purchase ________ shares of
Common Stock covered by such Warrant, and makes payment herewith
in full therefor at the price per share provided by such Warrant
in cash or by certified or official bank check in the amount of,
or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended, by
surrender of securities issued by the Company (including a
portion of the Warrant) having a market value (in the case of a
portion of this Warrant, determined in accordance with Section
11(c) of the Warrant) equal to $_________. Please issue a
certificate or certificates for such shares of Common Stock in
the name of and pay any cash for any fractional share to:
Name: __________________________________
Signature: ______________________________
Address: ______________________________
______________________________
Note: The above signature
should correspond exactly
with the name on the face
of the within Warrant.
and, if said number of shares of Common Stock shall not be all
the shares purchasable under the within Warrant, a new Warrant is
to be issued in the name of said undersigned covering the balance
of the shares purchasable thereunder less any fraction of a share
paid in cash.
<PAGE>
<PAGE> 18
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within
Warrant, with respect to the number of shares of Common Stock
covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to
transfer said Warrant on the books of the within-named
corporation, with full power of substitution in the premises.
Dated: _____________________, ____,
In the presence of ______________________
Name: ___________________________________
Signature: _________________________
Title of Signing Officer or Agent (if any):
_________________________
Address: _________________________
_________________________
Note: The above signature
should correspond exactly
with the name on the face
of the within Warrant.
EXHIBIT 10.9
Second Amendment to
American Banknote Corporation
Supplemental Executive Retirement Plan
as Adopted July 1, 1997
Pursuant to resolution of the Compensation Committee under delegated
authority of the Board of Directors by resolution adopted June 11, 1997:
Notwithstanding the provisions of Article A(1) and (2) of Section IV,
Article B of Section IV and Article B of Section V, the participant who is
listed on Schedule A hereto shall receive retirement income as a percentage of
initial base salary which shall be defined as $800,000 or any lesser amount
provided to the participant by employment agreement for the period commencing
October 1, 1993 that shall be effective July 1, 1997.
All other plan provisions including adjusted retirement income credits
shall be applied as stated in the plan and First Amendment to the Plan as
adopted April 1, 1994.
<PAGE>
Amendment to
American Banknote Corporation
Supplemental Executive Retirement Plan
as Adopted April 1, 1994
Schedule A
Participant
Morris Weissman
c/o American Banknote Corporation
200 Park Avenue
New York, NY 10166
or
417 Park Avenue
New York, NY 10022
EXHIBIT 10.XX
AGREEMENT FOR THE RENDERING OF SERVICES AND PRODUCT SALE
By this private instrument, the parties, on one side, BANCO
BRADESCO S.A., a financial institution of private law with head
office in Cidade de Deus, municipality and county of Osasco, state
of S o Paulo, with CGC/MF Corporate Taxpayer Registration no.
60.746.948/0001-12, hereinafter referred to simply as "BRADESCO";
and on the other side, AMERICAN BANK NOTE COMPANY GRAFICA E
SERVICOS LTDA., a limited liability quota company, with head
office in the city of Rio de Janeiro, state of Rio de Janeiro, at
Rua Peter Lund no. 146, with CGC/MF Corporate Taxpayer
Registration no. 33.113.309/0001-47, hereinafter referred to
simply as "ABN", both by their undersigned legal representatives,
have mutually agreed and contracted as follows:
1. PURPOSE: The purpose of this Agreement is to regulate the
parties' activities, as regards the rendering of printing services
and similar to be effected by ABN, in favor of BRADESCO and its
affiliated companies, such as they are currently rendered by
GRAFICA BRADESCO LTDA., which, under the subscription agreement,
signed with AMERICAN BANK NOTE GRAFICA E SERVICOS LTDA., had its
activities transferred to the latter.
1.1. ABN and BRADESCO undertake to maintain the current system of
service rendered by GRAFICA BRADESCO LTDA., the first remaining
responsible for the total printing of the printing products and
similar used by the latter, and the latter remaining responsible
for continuing to order from the first the services which were
performed by GRAFICA BRADESCO LTDA.
2. SERVICES: ABN undertakes to make available to BRADESCO and
its affiliated companies, machine time and labor required to
perform the services which are ordered to same.
2.1. It is hereby set forth that the availability, subject matter
of the above item, is based at least on the levels of production
capacity currently existing in GRAFICA BRADESCO LTDA. and already
confirmed by ABN.
3. PRICES: Within 90 (ninety) days subsequent to July 1st. 1995,
the prices to be used by ABN shall be calculated identically to
those which were being charged by GRAFICA BRADESCO LTDA. and
already confirmed by ABN, including as regards their form of
adjustment, namely, based on the ISF (Form Sector Index)
variation which is monthly published by ABVIGRAF/ABRAFORM.
Since they are products of greater impact, those appearing in
annex I had their costs and sale price calculated jointly by
BRADESCO and ABN, taking as a basis the month of May 1995, both
parties having agreed thereon, same having only to be adjusted by
the ISF up to the beginning of the validity hereof.
3.1. From the ninety-first (91st.) day up to the one hundred and
eightieth (180th.) day, counting from July 1st., 1995, the cost
schedules shall be the subject matter of a parallel evaluation,
jointly effecxted by the parties involved, having as a comparative
basis the flowcharts of GRAFICA BRADESCO LTDA. and ABN, it being
certain that any differences shall be analyzed and adjusted by the
parties' mutual agreement.
3.2. From the one hundred and eighty first (181st.) day, provided
the cost flowcharts are already unified, ABN shall start to adopt
one sole flowchart to be prepared on the basis of what was
ascertained in the period indicated in item 3.1 hereof.
3.3 Contrary to other items, the checkbooks shall have their sale
prices adjusted in the following proportion:
40% (forty percent) RAW MATERIAL: the prices used by Champion
Papel e Celulose for the sale of 90 gr.me Cham-Xek paper shall be
used as a parameter.
60% (sixty percent) LABOR: based on salary changes resulting from
the printers' annual collective bargain or from any interim
collective agreements.
3.4 Upon the adjustment resulting from increase in labor cost,
ABN shall grant BRADESCO a discount of 4.89% representing salary
advances already effected by GRAFICA BRADESCO LTDA., whose value,
for purpose of setting the price of the 20-sheet checkbook, was
already allocated. NOTE: 4.89 = 3% (February) + 5% (May) = 8.15%
60% of 8.15% = 4.89%.
4. SAFEGUARDS: In order to maintain the prices of the printing
products and similar, to be acquired from ABN, within the market
parameters, BRADESCO and its affiliated companies may, as of
7/1/96, request budgets to other printing companies, regardless of
prior consultation to ABN.
4.1. Said budgets shall be requested to no less than six
qualified printing industries and in the same amounts as those
regularly acquired by BRADESCO and its affiliated companies.
4.2. In the event that the average prices obtained are lower than
those used by ABN, the parties, by mutual agreement, may align
them.
4.3. In case of disagreement, BRADESCO and its affiliated
companies may, at their sole discretion, accept or refuse the
prices used by ABN.
4.4 If BRADESCO and its affiliated companies do not agree with
the price offered by ABN, the product in question may be acquired
from other companies of the printing field.
5. TAXES: In case of new taxes, as well as of any change in the
rates of those currently existing, applied to the sale price used
by ABN, same may be passed on to the purchasers of its products or
to the beneficiaries of the services rendered.
6. SPECIAL CONDITIONS OF DELIVERY OF GOODS: Whenever the
transport of products acquired by BRADESCO and its affiliated
companies requires security measures for their delivery, same must
be performed by a specialized company, selected by the
parties' mutual agreement, under the condition of previously
contracting insurance against robbery or theft, loss or any other
reason which prevents the goods to arrive at their final receiver.
The insurance agreements, having BRADESCO and its affiliated
companies as beneficiaries, shall guarantee the full price of the
product replacement.
7. FREIGHT: Provided the purchase of goods is destined for Cidade
de Deus, the Transport Department (Osasco/SP) and Nucleo
Alphaville (Barueri/SP), the freight shall be included in the
price of said goods. The same applies to all goods that are taken
by BRADESCO and its affiliated companies at ABN's industrial
premises.
8. PRICE ADJUSTMENT: As an adjustment factor, it shall be
adopted the same index currently used by Grafica Bradesco Ltda.,
in its operations of sale to BRADESCO and its affiliated
companies, namely ISF (Form Sector Index) monthly published by
ABIGRAF/ABRAFORM, which shall be applied to the prices of
continuous forms, plain forms, envelopes, reels, and other
printing products made from paper, except for credit cards, stamps
and other items which use different raw material.
8.1. The utilization of the ISF index does not apply to the
checkbooks whose price shall be adjusted pursuant to item 3.3.
9. INVOICING AND PAYMENT TERMS: The products acquired shall be
delivered by ABN accompanied by their respective Invoices/Tax
Invoices, whose payment shall be effected upon credit to the
checking account opened solely for said purpose at BANCO BRADESCO
S.A., within 7 (seven) days from receipt, and provided the goods
are deemed to be in good condition and according to the order
placed by BRADESCO and its affiliated companies.
10. RESPONSIBILITIES: ABN shall notify BRADESCO and its
affiliated companies of any loss, even though partial or of small
amount of the products acquired, within no later than 24 (twenty-four) hours,
counting from the occurrence of said event, informing
in writing of all actions taken to ascertain the fact and any
responsible parties.
10.1 Upon being notified of the occurrence, BRADESCO and its
affiliated companies may, at their discretion, appoint
representatives to follow up all actions which are being taken by
ABN in order to clarify the fact.
10.2 In case BRADESCO and its affiliated companies deem
necessary, same are allowed, regardless of any ABN's actions in
course, to adopt any other actions which they may deem necessary
to safeguard their interests, as well as their clients, said fact
not implying that ABN should interrupt the measures which it might
be taking or cease to have responsibility for the event.
10.3 ABN shall be responsible for the full replacement of lost or
damaged products at no charges to BRADESCO and its affiliated
companies.
10.4 With regard to ABN's direct responsibility for security
products, until ABN transfers itself out of the premises
previously occupied by GRAFICA BRADESCO LTDA., same shall be
restricted to those appearing in item 10.3 above and should be
recovenanted as of the 25th. month of contractual validity,
counting from July 1st., 1995.
11. CONTRACTUAL VALIDITY: This agreement shall be binding on the
parties solely if and when GRAFICA BRADESCO LTDA. becomes ABN's
quotaholder, pursuant to the "subscription agreement" entered into
by the first and by the current partners of the latter, at said
agreement's date, which should occur on July 1st., 1995, thereafter
becoming effective for a term of 48 (forty-eight) months.
11.1 After the 24th month of contractual validity, always counting
from July 1st., 1995, the parties shall re-evaluate the agreement in
effect. If there is no fact, duly proven, which may higher its
continuity, same shall have maintained its initial 48-month validity.
11.2 In the event of a total or partial violation of any clause
of this contract, which may justify the rescission hereof, the
affected party, by means of written notice, may request its
rescission, which shall take place 60 (sixty) days after the
confirmed receipt by the other party, provided, however, that the
latter, within said period, shall not have remedied the fact which
generated said request for rescission.
12. RESCISSION: Without detriment to the provision in item 11.2
above, this agreement shall be lawfully rescinded and at any time
in the following events, other than those provided for under the
law:
a) If either party files for bankruptcy, enters into a
composition with creditors, has its bankruptcy decreed, enters
into insolvency or has its liquidation requested.
b) if ABN has its authorization to render the services contracted
hereby disfranchised.
c) failure, by either party, to comply with any relevant
obligation included herein.
13. TOLERANCE: The parties' omission of or tolerance towards
requiring the strict compliance with the terms and conditions
hereof shall not constitute novation or waiver, nor shall affect
their rights which may be exercised at any time.
14. ACTS OF GOD AND FORCE MAJEURE: Shall be excluded from both
parties' responsibilities pursuant to art. 1.058 and its sole
paragraph of the Brazilian Civil Code.
15. SAFEGUARD OF FILMS, PLATES AND ORIGINALS: If, for any reason,
this agreement is interrupted or rescinded, ABN shall be
responsible for the destruction of all graphic and printing
materials in its possession which might allow their reproduction,
mainly the security ones, assuming irrevocably and irreversibly
the responsibility for all losses and damages which the ill-utilization of
same may cause to BRADESCO, its
affiliated companies and clients, as well as to third parties, for
the total amount which is ascertained in the appropriate
proceedings.
16. COURTS: The parties elect the courts of the city of S o Paulo,
State of S o Paulo, to hear any disputes arising herefrom.
And, having thus agreed and covenanted, the parties sign this
agreement in three counterparts, jointly with the two undersigned
witnesses.
Osasco, June 2, 1995
BANCO BRADESCO S.A.
AMERICAN BANK NOTE COMPANY
GRAFICA E SERVICOS LTDA.
Witnesses:
(illegible signature)
(illegible signature)
Translated from the Portuguese EXHIBIT 10.30
TELECOMUNICAC ES DO ESP RITO SANTO - TELEST
Contract No 008.4350/97
Agreement made between TELECOMUNICAC ES DO ESP RITO SANTO S/A -
TELEST, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS LTDA.,
whose registered office is at Rua Peter Lund, 146, Sao Cristovao,
Rio de Janeiro, enrolled at CGC/MF under number 33.113.309/0001-47.
In one side TELECOMUNICAC ES DO ESP RITO SANTO S/A - TELEST, with
its main office at Rua Vitorio Nunes da Motta, 220, in Vitoria
city, State of Espirito Santo, enrolled at CGC/MF under
number 28.140.226/0001-07, in this act represented by its legal
representatives signed below hereinafter referred as ESTB, and on
the other side the above referred company, in this act represented
by its legal representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the following
terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and supply
by CONTRATADO of 4.560.000 inductive cards each of 20, 50, 90 and
100 units, with technology transferred by TELEBR S, for the period
between December/97 to November/98, with an option of
manufacturing and supply an additional amount of 6.240.000
inductive cards for the period between December/98 to November/99,
including:
a) substract preparation, image transfer, chemical processing,
sealing, graphic printing on both sides, individual final cut,
security system against frauds and misuse or any other process
result from transferred technology once it is approved by TELEBR S
in order to guarantee the technological compatibility with the
Inductive Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card Unit -
Acceptance's Specification), which is an integrant part of the
procesSaof inductive technology transfer of TELEBR S and the
respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000 card
boxes, which must be packing in 10.000 card boxes, except if
accorded diferentely between the parties. All boxes must be
resistant, identificated, weighted, and closed with security
sealing wax in order to storage, transport and distribution.
1.02 - 10.000 units is the minimum quantity established for cards
by picture. For manufacturing up to 49.999 cards by picture, is
allowed to the CONTRATADO increase in 20% the unitary price
accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB storehouses by
security transport and with an insurance in the sales price of the
card to the final consumer (number of card's credit versus the
credit value in Real), in the quantities described in the fisic
delivery chronogram which is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTSaoF THE CONTRACT
2.01 - The following documents make part of this Agreement as if
in thiSaone they were transcribed, which both parts declare to
have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditionSaof contracting
(version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC and
its annex.
2.02 - In case of divergence between the integrants documents and
this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution of
the contracted subject under the highest paternSaof the actual
technic..
2.04 - In case of doubts in the execution of this Agreement, this
should be settled in order to attend the specification showed by
ESTB as minimum essential conditions to be satisfied by
CONTRATADO.
2.05 - From the signature of this Agreement on, all additament
terms celebrated and the ones that involves any alteration of the
contractual condition comes to be aplicable to this Agreement,
unless agreed by both parties in writing on their behalf by
authorized officer of each party, alwaySaobserving the limits and
legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal aSaof November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at the
time of each payment, they will be readjusted annually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower than
twelve months, the priceSaonly will be readjusted on the hipotese
of fisic events after one year from base-date of prices, or in
function of delays in which the CONTRATADO is not responsable, and
in caseSaof additaments for the increase of quantitieSaor
prorrogation of the period of validity.
3.03 - The ESTB will pay for the subject of the present Agreement
the unitary price of
R$ 0,37, independent of the credit number.
3.04 - The price includes the payment for the Contract of Transfer
of Technology - FTI and cards storage costs, freights,
transportation insurance, social contributions such as COFINS and
PIS/PASEP and others, and excluding the value taxes such as IPI
and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed by ESTB
to CONTRATADO in the conditions related on ANNEX III - Materials
and Equipments ConditionSaof Contration (version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this Agreement must
follow the monthly amount established on the ANNEX IV, counted
from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be deducted
from the purchase obligations by ESTB independent of aplication of
fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20, 50, 90
and 100), up to the first useful day of previous month to the
delivery of cards. If this not occur, the CONTRATADO will be
authorized to manufacture the total amount of the month in cards
of 20 credits.
5.04 - For each type of card established in the subject of this
Agreement, ESTB will define one or more picture for them.
5.05 - ESTB will provide, in advance to the cards' delivery term,
the chromo and final art of each type of card to be printed, as
well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofSaof each
card with up to 20 days before the delivery term and will
determinate the quantity of cards by picture. If this not occur,
the CONTRATADO will be authorized to manufacture the cards with
the last picture defined for each type of card.
5.07 - The cards' rejection will not import in alteration of
Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly, in
the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONSaoF CONTRATADO
6.01 - Provide all materials and services which have not been
explicitly surveyed in the Proposals to ensure that it can
complete its contractual requirements pursuant to this Agreement,
as well as incorporate technological and manufacturing process
alterations that may have resulted from the technological
development of the procesSaor the product.
6.02 - Undertake all duties and responsabilities that may arise
out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf of
TELEBR S, should the Parties prove their inability to agree on
specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect all
phaseSaof the Project, building of the Industrial Line,
manufacturing and plant testSaof all equipment and cards subject
to this Agreement and grant access to the production process
information.
6.05 - Grantee all measures required in order to import
equipment, components and all the necessary to carry out its
obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBR S.
6.07 - Not modify the productive process presented in the approved
project by TELEBR S without prior negotiation with TELEBR S.
6.08 - Keep an authorised representative, during the term of this
Agreement, entitled to hold responsibility for solving any
problems that may arise during the Project with no costs to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole accountable
before TELEBR S for fulfilling the contract dispositions, arise
from sub-contracting as well as justification of delay from the
proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic blockade,
camera and manuals sensors that guarantee the access and
monitorament of people in all areas related to the production,
impression, storage and delivery of phone cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phaseSaof productive procesSaof the phone card
which allow to check possibles diversion in each phase, including
electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage panels,
able to guarantee the register and control of all that is
triturated, showing date, hour, month, year, people involved and
destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards, able to
guarantee the fisic and account security of cards, as well as the
register and the control of entrance and exit of people and phone
cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of tests
and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBR S, before the beginning of
the supplying and must be in continuously evolution in order to
guarantee the total and complete fisic security , since its
production until the delivery at ESTB storehouse.
6.15 - Constitution of an organizacional area responsable for
the patrimonial and fisic security, for the inspection of rejects
during the productive process, photolytos and plates, and for the
accompaniment of saleSaof useless parts and equipments. This
organizacional area could not be under direct or indirect
subordination of any organizacional area related to the
production, storage and delivery of the phone cards.
6.16 - Preparation of fluxograms representing the production
process, commercialization, storage and delivery of phone cards,
which will be under analyse by TELEBR S.
6.17 - If the CONTRATADO use prices inferior to the one used in
the Agreement with any other company that explore the Public Phone
Card System which do not belong to TELEBR S system, such price
will be used in this Agreement, from the moment on what the same
was used, so the CONTRATADO must compensate ESTB for any
difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical factor
that represents the letter "F" from the calculation formula of
penalties iSaof 2.
8.02 - The CONTRATADO will proceed the payment of fines if it was
constated in the market cards that is not commercialized by
ESTB. The penalties iSaof 5% over the total amount contracted,
without prejudice of losts, injury and ceasing profit proceeding
from this problem. ESTB can proceed the termination of this
Agreement.
8.03 - If it was constated that CONTRATADO is commercializing
cards for fisic people or juridical that not explore the Public
Phone Services by inductive cards and that are not authorized by
TELEBR S, the Agreement will be, immediately, terminated, accruing
to the CONTRATADO the payment of compensatory fine of 30% over the
total amount contracted, without prejudice of losts, injury or
ceasing profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to the
Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97 SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after its
qualification by TELEBR S.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption, being
stopped any payments, without prejudice of foreseen penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the lawSaof Espirito
Santo State, Brazil.
Witness whereof the parties execute 3 counterpartSaof this
Agreement in the presence of 2 witnesses.
Vitoria, 28 November 1997
by ESTB:
by CONTRATADO:
Witness:
PAGE
<PAGE>
TELECOMUNICACOES DE RORAIMA S/A - TELELAIMA
Contract No 3100/026/97
Agreement made between TELECOMUNICACOES DE RORAIMA S/A -
TELELAIMA, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
S o Cristovao, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE RORAIMA S/A - TELELAIMA,
with its main office at Av. Cap. Ene Garcez, 256, in Boa
Vista city, State of Roraima, enrolled at CGC/MF under
number 05.934.567/0001-59, in this act represented by its
legal representatives signed below hereinafter referred as
ESTB, and on the other side the above referred company, in
this act represented by its legal representatives signed
below, hereinafter referred as CONTRATADO, agree to enter
this Agreement under the following terms and conditions
described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 1.560.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 1.680.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Roraima State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Boa Vista, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
________________________________<PAGE>
<PAGE>
TELECOMUNICACOES DE ALAGOAS S/A - TELASA
Contract No DECU-54/97
Agreement made between TELECOMUNICACOES DE ALAGOAS S/A -
TELESA, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
S o Cristov o, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE ALAGOAS S/A - TELESA, with
its main office at Rua Antenor Gomes de Oliveira, 144,
Farol, in Maceio city, State of Alagoas, enrolled at CGC/MF
under number 12.286.423/0001-07, in this act
represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 1.560.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 2.040.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Alagoas State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Maceio, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DE MATO GROSSO DO SUL S/A - TELEMS
Contract No AS/44000/4200/052/97
Agreement made between TELECOMUNICACOES DE MATO GROSSO DO
SUL S/A - TELEMS, and AMERICAN BANK NOTE COMPANY GRAFICA E
SERVICOS LTDA., whose registered office is at Rua Peter
Lund, 146, Sao Cristovao, Rio de Janeiro, enrolled at CGC/MF
under number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE MATO GROSSO DO SUL S/A -
TELEMS, with its main office at Rua Tapajos, 660, Cruzeiro,
in Campo Grande city, State of Mato Grosso do Sul, enrolled
at CGC/MF under number 03.466.521/0001-27, in this
act represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 4.800.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 5.700.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Mato Grosso do Sul State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Campo Grande, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DO RIO DE JANEIRO S/A - TELERJ
Contract No 2525-DA-97-C
Agreement made between TELECOMUNICACOES DO RIO DE JANEIRO
S/A - TELERJ, and AMERICAN BANK NOTE COMPANY GRAFICA E
SERVICOS LTDA., whose registered office is at Rua Peter
Lund, 146, S o Cristov o, Rio de Janeiro, enrolled at CGC/MF
under number 33.113.309/0001-47.
In one side TELECOMUNICACOES DO RIO DE JANEIRO S/A - TELERJ,
with its main office at Av. Presidente Vargas, 2.560, in Rio
de Janeiro city, State of Rio de Janeiro, enrolled at CGC/MF
under number 33.000.118/0001-79, in this act
represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 38.400.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 45.600.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of Rio
de Janeiro State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Rio de Janeiro, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DE RONDONIA S/A - TELERON
Contract No EPET.3231.2.0001/97
Agreement made between TELECOMUNICACOES DE RONDONIA S/A -
TELERON, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
Sao Cristovao, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE RONDONIA S/A - TELERON, with
its main office at Av. Lauro Sodre, 3.290, Tanques, in Porto
Velho city, State of RondOnia, enrolled at CGC/MF under
number 05.904.883/0001-88, in this act represented by its
legal representatives signed below hereinafter referred as
ESTB, and on the other side the above referred company, in
this act represented by its legal representatives signed
below, hereinafter referred as CONTRATADO, agree to enter
this Agreement under the following terms and conditions
described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 2.400.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 3.360.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
RondOnia State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Porto Velho, 01 december 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
Translated from the Portuguese EXHIBIT 10.30
TELECOMUNICAC ES DO ESP RITO SANTO - TELEST
Contract No 008.4350/97
Agreement made between TELECOMUNICAC ES DO ESP RITO SANTO S/A -
TELEST, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS LTDA.,
whose registered office is at Rua Peter Lund, 146, Sao Cristovao,
Rio de Janeiro, enrolled at CGC/MF under number 33.113.309/0001-47.
In one side TELECOMUNICAC ES DO ESP RITO SANTO S/A - TELEST, with
its main office at Rua Vitorio Nunes da Motta, 220, in Vitoria
city, State of Espirito Santo, enrolled at CGC/MF under
number 28.140.226/0001-07, in this act represented by its legal
representatives signed below hereinafter referred as ESTB, and on
the other side the above referred company, in this act represented
by its legal representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the following
terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and supply
by CONTRATADO of 4.560.000 inductive cards each of 20, 50, 90 and
100 units, with technology transferred by TELEBR S, for the period
between December/97 to November/98, with an option of
manufacturing and supply an additional amount of 6.240.000
inductive cards for the period between December/98 to November/99,
including:
a) substract preparation, image transfer, chemical processing,
sealing, graphic printing on both sides, individual final cut,
security system against frauds and misuse or any other process
result from transferred technology once it is approved by TELEBR S
in order to guarantee the technological compatibility with the
Inductive Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card Unit -
Acceptance's Specification), which is an integrant part of the
procesSaof inductive technology transfer of TELEBR S and the
respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000 card
boxes, which must be packing in 10.000 card boxes, except if
accorded diferentely between the parties. All boxes must be
resistant, identificated, weighted, and closed with security
sealing wax in order to storage, transport and distribution.
1.02 - 10.000 units is the minimum quantity established for cards
by picture. For manufacturing up to 49.999 cards by picture, is
allowed to the CONTRATADO increase in 20% the unitary price
accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB storehouses by
security transport and with an insurance in the sales price of the
card to the final consumer (number of card's credit versus the
credit value in Real), in the quantities described in the fisic
delivery chronogram which is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTSaoF THE CONTRACT
2.01 - The following documents make part of this Agreement as if
in thiSaone they were transcribed, which both parts declare to
have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditionSaof contracting
(version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC and
its annex.
2.02 - In case of divergence between the integrants documents and
this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution of
the contracted subject under the highest paternSaof the actual
technic..
2.04 - In case of doubts in the execution of this Agreement, this
should be settled in order to attend the specification showed by
ESTB as minimum essential conditions to be satisfied by
CONTRATADO.
2.05 - From the signature of this Agreement on, all additament
terms celebrated and the ones that involves any alteration of the
contractual condition comes to be aplicable to this Agreement,
unless agreed by both parties in writing on their behalf by
authorized officer of each party, alwaySaobserving the limits and
legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal aSaof November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at the
time of each payment, they will be readjusted annually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower than
twelve months, the priceSaonly will be readjusted on the hipotese
of fisic events after one year from base-date of prices, or in
function of delays in which the CONTRATADO is not responsable, and
in caseSaof additaments for the increase of quantitieSaor
prorrogation of the period of validity.
3.03 - The ESTB will pay for the subject of the present Agreement
the unitary price of
R$ 0,37, independent of the credit number.
3.04 - The price includes the payment for the Contract of Transfer
of Technology - FTI and cards storage costs, freights,
transportation insurance, social contributions such as COFINS and
PIS/PASEP and others, and excluding the value taxes such as IPI
and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed by ESTB
to CONTRATADO in the conditions related on ANNEX III - Materials
and Equipments ConditionSaof Contration (version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this Agreement must
follow the monthly amount established on the ANNEX IV, counted
from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be deducted
from the purchase obligations by ESTB independent of aplication of
fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20, 50, 90
and 100), up to the first useful day of previous month to the
delivery of cards. If this not occur, the CONTRATADO will be
authorized to manufacture the total amount of the month in cards
of 20 credits.
5.04 - For each type of card established in the subject of this
Agreement, ESTB will define one or more picture for them.
5.05 - ESTB will provide, in advance to the cards' delivery term,
the chromo and final art of each type of card to be printed, as
well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofSaof each
card with up to 20 days before the delivery term and will
determinate the quantity of cards by picture. If this not occur,
the CONTRATADO will be authorized to manufacture the cards with
the last picture defined for each type of card.
5.07 - The cards' rejection will not import in alteration of
Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly, in
the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONSaoF CONTRATADO
6.01 - Provide all materials and services which have not been
explicitly surveyed in the Proposals to ensure that it can
complete its contractual requirements pursuant to this Agreement,
as well as incorporate technological and manufacturing process
alterations that may have resulted from the technological
development of the procesSaor the product.
6.02 - Undertake all duties and responsabilities that may arise
out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf of
TELEBR S, should the Parties prove their inability to agree on
specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect all
phaseSaof the Project, building of the Industrial Line,
manufacturing and plant testSaof all equipment and cards subject
to this Agreement and grant access to the production process
information.
6.05 - Grantee all measures required in order to import
equipment, components and all the necessary to carry out its
obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBR S.
6.07 - Not modify the productive process presented in the approved
project by TELEBR S without prior negotiation with TELEBR S.
6.08 - Keep an authorised representative, during the term of this
Agreement, entitled to hold responsibility for solving any
problems that may arise during the Project with no costs to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole accountable
before TELEBR S for fulfilling the contract dispositions, arise
from sub-contracting as well as justification of delay from the
proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic blockade,
camera and manuals sensors that guarantee the access and
monitorament of people in all areas related to the production,
impression, storage and delivery of phone cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phaseSaof productive procesSaof the phone card
which allow to check possibles diversion in each phase, including
electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage panels,
able to guarantee the register and control of all that is
triturated, showing date, hour, month, year, people involved and
destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards, able to
guarantee the fisic and account security of cards, as well as the
register and the control of entrance and exit of people and phone
cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of tests
and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBR S, before the beginning of
the supplying and must be in continuously evolution in order to
guarantee the total and complete fisic security , since its
production until the delivery at ESTB storehouse.
6.15 - Constitution of an organizacional area responsable for
the patrimonial and fisic security, for the inspection of rejects
during the productive process, photolytos and plates, and for the
accompaniment of saleSaof useless parts and equipments. This
organizacional area could not be under direct or indirect
subordination of any organizacional area related to the
production, storage and delivery of the phone cards.
6.16 - Preparation of fluxograms representing the production
process, commercialization, storage and delivery of phone cards,
which will be under analyse by TELEBR S.
6.17 - If the CONTRATADO use prices inferior to the one used in
the Agreement with any other company that explore the Public Phone
Card System which do not belong to TELEBR S system, such price
will be used in this Agreement, from the moment on what the same
was used, so the CONTRATADO must compensate ESTB for any
difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical factor
that represents the letter "F" from the calculation formula of
penalties iSaof 2.
8.02 - The CONTRATADO will proceed the payment of fines if it was
constated in the market cards that is not commercialized by
ESTB. The penalties iSaof 5% over the total amount contracted,
without prejudice of losts, injury and ceasing profit proceeding
from this problem. ESTB can proceed the termination of this
Agreement.
8.03 - If it was constated that CONTRATADO is commercializing
cards for fisic people or juridical that not explore the Public
Phone Services by inductive cards and that are not authorized by
TELEBR S, the Agreement will be, immediately, terminated, accruing
to the CONTRATADO the payment of compensatory fine of 30% over the
total amount contracted, without prejudice of losts, injury or
ceasing profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to the
Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97 SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after its
qualification by TELEBR S.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption, being
stopped any payments, without prejudice of foreseen penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the lawSaof Espirito
Santo State, Brazil.
Witness whereof the parties execute 3 counterpartSaof this
Agreement in the presence of 2 witnesses.
Vitoria, 28 November 1997
by ESTB:
by CONTRATADO:
Witness:
PAGE
<PAGE>
TELECOMUNICACOES DE RORAIMA S/A - TELELAIMA
Contract No 3100/026/97
Agreement made between TELECOMUNICACOES DE RORAIMA S/A -
TELELAIMA, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
S o Cristovao, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE RORAIMA S/A - TELELAIMA,
with its main office at Av. Cap. Ene Garcez, 256, in Boa
Vista city, State of Roraima, enrolled at CGC/MF under
number 05.934.567/0001-59, in this act represented by its
legal representatives signed below hereinafter referred as
ESTB, and on the other side the above referred company, in
this act represented by its legal representatives signed
below, hereinafter referred as CONTRATADO, agree to enter
this Agreement under the following terms and conditions
described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 1.560.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 1.680.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Roraima State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Boa Vista, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
________________________________<PAGE>
<PAGE>
TELECOMUNICACOES DE ALAGOAS S/A - TELASA
Contract No DECU-54/97
Agreement made between TELECOMUNICACOES DE ALAGOAS S/A -
TELESA, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
S o Cristov o, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE ALAGOAS S/A - TELESA, with
its main office at Rua Antenor Gomes de Oliveira, 144,
Farol, in Maceio city, State of Alagoas, enrolled at CGC/MF
under number 12.286.423/0001-07, in this act
represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 1.560.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 2.040.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Alagoas State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Maceio, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DE MATO GROSSO DO SUL S/A - TELEMS
Contract No AS/44000/4200/052/97
Agreement made between TELECOMUNICACOES DE MATO GROSSO DO
SUL S/A - TELEMS, and AMERICAN BANK NOTE COMPANY GRAFICA E
SERVICOS LTDA., whose registered office is at Rua Peter
Lund, 146, Sao Cristovao, Rio de Janeiro, enrolled at CGC/MF
under number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE MATO GROSSO DO SUL S/A -
TELEMS, with its main office at Rua Tapajos, 660, Cruzeiro,
in Campo Grande city, State of Mato Grosso do Sul, enrolled
at CGC/MF under number 03.466.521/0001-27, in this
act represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 4.800.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 5.700.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
Mato Grosso do Sul State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Campo Grande, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DO RIO DE JANEIRO S/A - TELERJ
Contract No 2525-DA-97-C
Agreement made between TELECOMUNICACOES DO RIO DE JANEIRO
S/A - TELERJ, and AMERICAN BANK NOTE COMPANY GRAFICA E
SERVICOS LTDA., whose registered office is at Rua Peter
Lund, 146, S o Cristov o, Rio de Janeiro, enrolled at CGC/MF
under number 33.113.309/0001-47.
In one side TELECOMUNICACOES DO RIO DE JANEIRO S/A - TELERJ,
with its main office at Av. Presidente Vargas, 2.560, in Rio
de Janeiro city, State of Rio de Janeiro, enrolled at CGC/MF
under number 33.000.118/0001-79, in this act
represented by its legal representatives signed below
hereinafter referred as ESTB, and on the other side the
above referred company, in this act represented by its legal
representatives signed below, hereinafter referred as
CONTRATADO, agree to enter this Agreement under the
following terms and conditions described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 38.400.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 45.600.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of Rio
de Janeiro State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Rio de Janeiro, 28 november 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
<PAGE>
<PAGE>
TELECOMUNICACOES DE RONDONIA S/A - TELERON
Contract No EPET.3231.2.0001/97
Agreement made between TELECOMUNICACOES DE RONDONIA S/A -
TELERON, and AMERICAN BANK NOTE COMPANY GRAFICA E SERVICOS
LTDA., whose registered office is at Rua Peter Lund, 146,
Sao Cristovao, Rio de Janeiro, enrolled at CGC/MF under
number 33.113.309/0001-47.
In one side TELECOMUNICACOES DE RONDONIA S/A - TELERON, with
its main office at Av. Lauro Sodre, 3.290, Tanques, in Porto
Velho city, State of RondOnia, enrolled at CGC/MF under
number 05.904.883/0001-88, in this act represented by its
legal representatives signed below hereinafter referred as
ESTB, and on the other side the above referred company, in
this act represented by its legal representatives signed
below, hereinafter referred as CONTRATADO, agree to enter
this Agreement under the following terms and conditions
described below.
l. FIRST CLAUSE - SUBJECT
1.01 - The subject of this Agreement is manufacturing and
supply by CONTRATADO of 2.400.000 inductive cards each of
20, 50, 90 and 100 units, with technology transferred by
TELEBRAS, for the period between december/97 to
november/98, with an option of manufacturing and supply an
addicional amount of 3.360.000 inductive cards for the
period between december/98 to november/99, including:
a) substract preparation, image transfer, chemical
processing, sealing, graphic printing on both sides,
individual final cut, security system against frauds and
misuse or any other process result from transferred
technology once it is approved by TELEBRAS in order to
guarantee the technological compatibility with the Inductive
Public Phone System.
b) manufacturing of all necessary photolithos.
c) Manufacturing of all cards in conformity with the
PD.21.TP.H3D.0006A/AC-01 document (100-C Inductive Card
Unit - Acceptance's Specification), which is an integrant
part of the process of inductive technology transfer of
TELEBRAS and the respective updates which can be introduced.
d) Packing in 200 card boxes, which must be packing in 2.000
card boxes, which must be packing in 10.000 card boxes,
except if accorded diferentely between the parties. All
boxes must be resistant, identificated, weighted, and closed
with security sealing wax in order to storage, transport and
distribution.
1.02 - 10.000 units is the minimum quantity stablished for
cards by picture. For manufacturing up to 49.999 cards by
picture, is allowed to the CONTRATADO increase in 20% the
unitary price accorded to cover the production fixed costs.
1.03 - The cards will be delivered directly to ESTB
storehouses by security transport and with an insurance in
the sales price of the card to the final consumer (number of
card's credit versus the credit value in Real), in the
quantities described in the fisic delivery chronogram which
is part of ANNEX IV.
2 - SECOND CLAUSE - DOCUMENTS
(A) PARTS OF THE CONTRACT
2.01 - The following documents make part of this Agreement
as if in this one they were transcribed, which the both
parts declare to have knowledge.
- ANNEX I - Penalties.
- ANNEX II - Prices Adjustment
- ANNEX III - Materials and Equipment conditions of
contracting (version no 02/jun/97).
- ANNEX IV - Fisic Chronogram
Bidding Edictal no 0663/97 - TELEPAR of Bid CO-0080/97 - SDC
and its annex.
2.02 - In case of divergence between the integrants
documents and this Agreement, the last one will predominate.
2.03 - The documents referred in this clause are considered
sufficient to, in complement to this Agreement, define its
extension and pretension, and this way conduct the execution
of the contracted subject under the highest paterns of the
actual technic..
2.04 - In case of doubts in the execution of this Agreement,
this should be settled in order to attend the specification
showed by ESTB as minimum essential conditions to be
satisfied by CONTRATADO.
2.05 - From the signature of this Agreement on, all
additament terms celebrated and the ones that involves any
alteration of the contractual condition comes to be
aplicable to this Agreement, unless agreed by both parties
in writing on their behalf by authorized officer of each
party, always observing the limits and legal formalities.
(B) APPLICABLE TO THE CONTRACT
2.06 - It is applicable to this Agreement the CONTRATADO's
Proposal as of November 13, 1997.
3 - THIRD CLAUSE - PRICES
3.01 - The contracted prices have as base-date the day of
November 13, 1997 and, observed the legislation in force at
the time of each payment, they will be readjusted anually in
accordance with the established formula in the annex of this
Agreement.
3.02 - In case of contractions which duration term is lower
than twelve months, the prices only will be readjusted on
the hipotese of fisic events after one year from base-date
of prices, or in function of delays in which the CONTRATADO
is not responsable, and in cases of additaments for the
increase of quantities or prorrogation of the period of
validity.
3.03 - The ESTB will pay for the subject of the present
Agreement the unitary price of R$ 0,37, independent of the
credit number.
3.04 - The price includes the payment for the Contract of
Transfer of Technology - FTI and cards storage costs,
freights, transportation insurance, social contributions
such as COFINS and PIS/PASEP and others, and excluding the
value taxes such as IPI and ICMS.
4 - FOURTH CLAUSE - PAYMENT CONDITIONS
4.01 - The values generated by the Agreement will be payed
by ESTB to CONTRATADO in the conditions related on ANNEX III
- Materials and Equipments Conditions of Contration
(version no 02 - Jun/97).
5 - FIFTH CLAUSE - TERMS, AMOUNTS AND DELIVERY SITES
5.01 - The term of cards' delivery subject of this
Agreement must follow the monthly amount established on the
ANNEX IV, counted from the first month of supply on.
5.02 - The amount of contracted cards in the month and not
delivered up to the end of respective month, could be
deducted from the purchase obligations by ESTB independent
of aplication of fine and contractual penalties.
5.03 - ESTB will define the quantity of cards' credit (20,
50, 90 and 100), up to the first useful day of previous
month to the delivery of cards. If this not occur, the
CONTRATADO will be authorized to manufacture the total
amount of the month in cards of 20 credits.
5.04 - For each type of card established in the subject of
this Agreement, ESTB will define one or more picture for
them.
5.05 - ESTB will provide, in advance to the cards' delivery
term, the chromo and final art of each type of card to be
printed, as well as the code and the back side text.
5.06 - ESTB will make the formal acceptance of the proofs of
each card with up to 20 days before the delivery term and
will determinate the quantity of cards by picture. If this
not occur, the CONTRATADO will be authorized to manufacture
the cards with the last picture defined for each type of
card.
5.07 - The cards' rejection will not import in alteration
of Fisic Chronogram of delivery established on ANNEX IV.
5.08 - Delivery Site: The cards must be delivered, directly,
in the storehouse indicated by ESTB.
6 - SIXTH CLAUSE - OBLIGATIONS OF CONTRATADO
6.01 - Provide all materials and services which have not
been explicitly surveyed in the Proposals to ensure that it
can complete its contractual requirements pursuant to this
Agreement, as well as incorporate technological and
manufacturing process alterations that may have resulted
from the technological development of the process or the
product.
6.02 - Undertake all duties and responsabilities that may
arise out of the subject of this Agreement.
6.03 - Employ the best engineering techniques, on the behalf
of TELEBRAS, should the Parties prove their inability to
agree on specifications.
6.04 - Allow ESTB ou whom it indicates to follow and inspect
all phases of the Project, building of the Industrial Line,
manufacturing and plant tests of all equipment and cards
subject to this Agreement and grant access to the production
process information.
6.05 - Gurantee all measures required in order to import
equipment, components and all the necessary to carry out
its obligations under this Agreement.
6.06 - Not modify the lay-out of the card unless upon
authorization granted by TELEBRAS.
6.07 - Not modify the productive process presented in the
approved project by TELEBRAS without prior negotiation with
TELEBRAS.
6.08 - Keep an authorised representative, during the term of
this Agreement, entitled to hold responsability for solving
any problems that may arise during the Project with no costs
to ESTB.
6.09 - Undertake entire responsibility with respect to all
manufacturing and supplying aspects, being the sole
accountable before TELEBRAS for fulfilling the contract
dispositions, arise from sub-contracting as well as
justification of delay from the proponent.
6.10 - Manufacture the product in Brazil.
6.11 - Improve fisic savety device using electronic
blockade, camera and manuals sensors that guarantee the
access and monitorament of people in all areas related to
the production, impression, storage and delivery of phone
cards.
6.12 - Improve the following fisic security systems in the
production process.
a) Register in all phases of productive process of the phone
card which allow to check possibles diversion in each phase,
including electronic control in the tests area.
b) Procedure of the trituration of phone cards and damage
panels, able to guarantee the register and control of all
that is triturated, showing date, hour, month, year, people
involved and destiny fo the tritured material.
c) Storage, accounting and delivery system of phone cards,
able to guarantee the fisic and account security of cards,
as well as the register and the control of entrance and exit
of people and phone cards.
d) Other necessary procedures to guarantee the total fisic
security of production process.
6.13 - Give to ESTB or another entity indicates by ESTB the
necessary means to remote monitorization with the system of
tests and supervision implanted.
6.14 - The measures mentioned on itens 6.11, 6.12 and 6.13
should be previously approved by TELEBRAS, before the
beginning of the supplying and must be in continuously
evolution in order to guarantee the total and complete
fisic security , since its production until the delivery at
ESTB storehouse.
6.15 - Constitution of an organizacional area responsable
for the patrimonial and fisic security, for the inspection
of rejects during the productive process, photolytos and
plates, and for the accompaniment of sales of useless parts
and equipments. This organizacional area could not be under
direct or indirect subordination of any organizacional area
related to the production, storage and delivery of the phone
cards.
6.16 - Preparation of fluxograms representing the
production process, commercialization, storage and delivery
of phone cards, which will be under analyse by TELEBRAS.
6.17 - If the CONTRATADO use prices inferior to the one used
in the Agreement with any other company that explore the
Public Phone Card System which do not belong to TELEBRAS
system, such price will be used in this Agreement, from the
moment on what the same was used, so the CONTRATADO must
compensate ESTB for any difference verified in the invoice.
7 - SEVENTH CLAUSE - PERIOD OF VALIDITY
7.01 - The present Agreement has the duration of 12 months,
counted from its signature, which can be renewed, for iqual
period, in case of ESTB option.
8 - EIGHTH CLAUSE - PENALTIES
8.01 - For not executed total ou partial this Agreement, the
CONTRATADO is submited to the payment of fines calculated in
accordance with the annex regarding Penalties. The critical
factor that represents the letter "F" from the calculation
formula of penalties is of 2.
8.02 - The CONTRATADO will proceed the payment of fines if
it was constated in the market cards that is not
commercialized by ESTB. The penalties is of 5% over the
total amount contracted, without prejudice of losts, injury
and ceasing profit proceeding from this problem. ESTB can
proceed the termination of this Agreement.
8.03 - If it was constated that CONTRATADO is
commercializing cards for fisic people or juridical that not
explore the Public Phone Services by inductive cards and
that are not authorized by TELEBRAS, the Agreement will be,
immediately, terminated, accruing to the CONTRATADO the
payment of compensatory fine of 30% over the total amount
contracted, without prejudice of losts, injury or ceasing
profit proceeding from this problem.
9 - NINTH CLAUSE - GENERAL CONDITIONS
9.01 - The present Agreement is being firmed according to
the Bidding Edictal no 0663/97 - TELEPAR ( Bid no 0080/97
SDC).
9.02 - The resources for the execution fo this Agreement are
assured in the ESTB General Budget.
9.03 - The parties are submited to the disposition fo Law no
8.666, from 21.06.93.
9.04 - The CONTRATADO can just start the cards' supply after
its qualification by TELEBRAS.
9.05 - In case of not compliment, by the CONTRATADO, of any
obligation, ESTB can determine the supply interruption,
being stopped any payments, without prejudice of foreseen
penalties.
10 - TENTH CLAUSE - GOVERNING LAW
10.01 - This Agreement shall be governed by the laws of
RondOnia State, Brazil.
Witness whereof the parties execute 3 counterparts of this
Agreement in the presence of 2 witnesses.
Porto Velho, 01 december 1997
by ESTB:
____________________________________
___________________________________
by CONTRATADO:
_____________________________________
_____________________________________
Witness:
_____________________________________
_____________________________________
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment
No. 2 to Registration Statement No. 33-52674 of American Banknote Corporation
on Form S-8; Post-Effective Amendment No. 1 to Registration Statement No.
33-67560 of American Banknote Corporation on Form S-8; and Registration
Statement No. 333-00223 of American Banknote Corporation on Form S-8 of our
report dated March 17, 1998 appearing in this Annual Report on Form 10-K of
American Banknote Corporation for the year ended December 31, 1997.
s/ Deloitte & Touche LLP
New York, New York
March 30, 1998
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference, in Post-Effective
Amendment No. 2 to Registration Statement No. 33-52674 of American Banknote
Corporation on Form S-8; Post-Effective Amendment No. 2 to Registration
Statement No. 33-67560 of American Banknote Corporation on Form S-8; and
Registration Statement No. 333-00223 of American Banknote Corporation, 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.
s/ KPMG
Melbourne, Australia
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financials contained in the body of the accompanying Form 10-K and is
qualified in its entirety by reference to such financials statements.
</LEGEND>
<CIK> 0000051124
<NAME> AMERICAN BANKNOTE CORPORATION
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<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.09)
</TABLE>
