<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1999
COMMISSION FILE NUMBER 1-11802
------------------------
QUEBECOR WORLD (USA) INC.
(FORMERLY KNOWN AS WORLD COLOR PRESS, INC.)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 37-1167902
(State or other jurisdiction (IRS Employer
of Identification Number)
incorporation or
organization)
THE MILL, 340 PEMBERWICK ROAD 06831
GREENWICH, CONNECTICUT (Zip Code)
(Address of principal
executive offices)
</TABLE>
203-532-4200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ No / /
At October 8, 1999, prior to the merger described herein, there were
38,036,302 shares of the registrant's common stock, $.01 par value, outstanding.
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<PAGE>
QUEBECOR WORLD (USA) INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of September
26, 1999 and December 27, 1998....................... 3
Condensed Consolidated Statements of Operations for
the Three and Nine Months Ended September 26, 1999
and September 27, 1998............................... 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 26, 1999 and
September 27, 1998................................... 5
Notes to Condensed Consolidated Financial
Statements........................................... 6-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 10-15
PART II. OTHER INFORMATION.................................. 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
QUEBECOR WORLD (USA) INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 26, 1999 AND DECEMBER 27, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 26, DECEMBER 27,
1999 1998
------------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 16,127 $ 199,932
Accounts receivable--net.................................. 245,494 229,209
Inventories............................................... 301,758 276,111
Deferred income taxes..................................... 13,915 16,986
Other..................................................... 78,642 63,729
---------- ----------
Total current assets.................................... 655,936 785,967
Property, plant and equipment, at cost...................... 1,735,112 1,613,674
Accumulated depreciation and amortization................... (814,472) (727,675)
---------- ----------
Property, plant and equipment--net........................ 920,640 885,999
Goodwill--net............................................... 797,441 647,085
Other....................................................... 89,154 114,835
---------- ----------
TOTAL ASSETS................................................ $2,463,171 $2,433,886
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 343,035 $ 321,208
Current maturities of long-term debt...................... 6,165 225,331
---------- ----------
Total current liabilities............................... 349,200 546,539
Long-term debt.............................................. 1,330,661 1,030,589
Deferred income taxes....................................... 51,805 94,793
Other long-term liabilities................................. 134,496 93,318
---------- ----------
Total liabilities....................................... 1,866,162 1,765,239
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value--shares authorized,
100,000,000 in 1999 and 1998; shares outstanding,
39,320,200 in 1999 and 38,639,642 in 1998............... 393 386
Additional paid-in capital................................ 732,673 721,913
Capital contribution from Printing Acquisition Inc........ 92,167 --
Accumulated deficit....................................... (197,053) (49,310)
Treasury stock, at cost: 1,283,898 shares in 1999 and
20,246 shares in 1998................................... (31,171) (613)
Unamortized restricted stock compensation................. -- (3,729)
---------- ----------
Total stockholders' equity.............................. 597,009 668,647
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $2,463,171 $2,433,886
========== ==========
</TABLE>
- ------------------------
Note: Derived from audited consolidated financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE>
QUEBECOR WORLD (USA) INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 26, 1999 AND SEPTEMBER 27, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
-------------------- -----------------------
1999 1998 1999 1998
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales............................................ $ 686,840 $635,980 $1,859,228 $1,732,890
Cost of sales........................................ 547,163 508,943 1,521,743 1,424,069
--------- -------- ---------- ----------
Gross profit......................................... 139,677 127,037 337,485 308,821
Selling, general and administrative expenses......... 228,567 54,609 341,851 161,202
Restructuring and other special charges.............. 12,397 -- 74,807 --
--------- -------- ---------- ----------
Operating income (loss).............................. (101,287) 72,428 (79,173) 147,619
Interest expense and securitization fees............. 25,521 22,877 74,480 65,368
--------- -------- ---------- ----------
Income (loss) before income taxes, extraordinary
items and cumulative effect of change in accounting
principle.......................................... (126,808) 49,551 (153,653) 82,251
Income tax provision (benefit)....................... (17,409) 20,564 (28,415) 34,134
--------- -------- ---------- ----------
Income (loss) before extraordinary items and
cumulative effect of change in accounting
principle.......................................... (109,399) 28,987 (125,238) 48,117
Extraordinary items, net of tax...................... -- -- (11,992) --
Cumulative effect of change in accounting principle,
net of tax......................................... -- -- (10,513) --
--------- -------- ---------- ----------
Net income (loss).................................... $(109,399) $ 28,987 $ (147,743) $ 48,117
========= ======== ========== ==========
Net income (loss) per common share--basic:
Income (loss) before extraordinary items and
cumulative effect of change in accounting
principle........................................ $ (2.89) $ 0.76 $ (3.30) $ 1.25
Extraordinary items................................ -- -- (0.32) --
Cumulative effect of change in accounting
principle........................................ -- -- (0.28) --
--------- -------- ---------- ----------
Net income (loss) per common share--basic............ $ (2.89) $ 0.76 $ (3.90) $ 1.25
========= ======== ========== ==========
Net income (loss) per common share--diluted:
Income (loss) before extraordinary items and
cumulative effect of change in accounting
principle........................................ $ (2.89) $ 0.71 $ (3.30) $ 1.21
Extraordinary items................................ -- -- (0.32) --
Cumulative effect of change in accounting
principle........................................ -- -- (0.28) --
--------- -------- ---------- ----------
Net income (loss) per common share--diluted.......... $ (2.89) $ 0.71 $ (3.90) $ 1.21
========= ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
QUEBECOR WORLD (USA) INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 26, 1999 AND SEPTEMBER 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
---------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $(147,743) $ 48,117
Adjustments to reconcile net income (loss) to net cash
flows provided by (used in) operating activities:
Depreciation and amortization........................... 116,435 104,848
Settlement of stock options............................. 67,474 --
Amortization of restricted stock........................ 8,020 182
Restructuring and other special charges................. 74,807 --
Extraordinary items, net of tax......................... 11,992 --
Cumulative effect of change in accounting principle, net
of tax................................................ 10,513 --
Deferred income tax (benefit) provision................. (28,415) 11,762
Changes in operating assets and liabilities:
Accounts receivable--net.............................. 10,809 (606)
Inventories........................................... (16,122) (112,078)
Accounts payable and accrued expenses................. (62,886) (3,009)
Other assets and liabilities--net..................... (34,611) (68,891)
--------- ---------
Net cash provided by (used in) operating
activities........................................ 10,273 (19,675)
--------- ---------
INVESTING ACTIVITIES:
Additions to property, plant and equipment--net........... (94,251) (148,703)
Proceeds from sale and leaseback.......................... -- 60,648
Acquisitions of businesses, net of cash acquired.......... (120,689) (190,095)
--------- ---------
Net cash used in investing activities............... (214,940) (278,150)
--------- ---------
FINANCING ACTIVITIES:
Net borrowings on debt.................................... 485 291,449
Capital contribution from Printing Acquisition Inc........ 51,299 --
Premium paid on debt extinguishment....................... (6,840) --
Proceeds from issuance of common stock.................... 6,476 1,989
Repurchases of common stock............................... (30,558) (9,668)
--------- ---------
Net cash provided by financing activities........... 20,862 283,770
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS....................... (183,805) (14,055)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 199,932 37,676
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 16,127 $ 23,621
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial statements have
been prepared by Quebecor World (USA) Inc., formerly known as World Color
Press, Inc., (along with its subsidiaries, the "Company" or "World") pursuant to
the rules and regulations of the Securities and Exchange Commission and reflect
normal and recurring adjustments, which are, in the opinion of the Company,
considered necessary for a fair presentation. As permitted by these regulations,
these statements do not include all information required by generally accepted
accounting principles to be included in an annual set of financial statements,
however, the Company believes that the disclosures made are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K.
During the nine month period ended September 26, 1999, the Company acquired
certain businesses whose contributions were not significant to the Company's
results of operations for the period presented, nor are they expected to have a
material effect on the Company's results on a continuing basis.
2. ACQUISITION BY QUEBECOR PRINTING INC.
On July 12, 1999, the Company entered into an Agreement and Plan of Merger
with Quebecor Printing Inc. ("QPI") and its indirect wholly owned subsidiary,
Printing Acquisition Inc. ("Acquisition Inc."), which provided for the
acquisition of the Company. On July 16, 1999, QPI, through Acquisition Inc.,
commenced a tender offer to acquire up to 23,500,000 shares of the Company's
common stock at a price of $35.69 per share. On August 20, 1999, QPI acquired,
through Acquisition Inc., 19,179,495, or approximately 50.4%, of the Company's
outstanding shares (the "Tender Offer").
On October 8, 1999, the Company and Acquisition Inc. completed the merger
following receipt of approval from the Company's stockholders. As a result, the
Company became an indirect wholly owned subsidiary of QPI and at that time was
renamed Quebecor World (USA) Inc. The remaining outstanding shares of World's
common stock (other than shares purchased by QPI in the Tender Offer) were
converted into the right to receive 1.2685 subordinate voting shares of QPI and
$8.18 in cash per share. In addition, each 6% Convertible Senior Subordinated
Note due 2007 became convertible into the number of QPI subordinate voting
shares and cash that would have been received had the Convertible Note been
converted prior to October 8, 1999.
3. TENDER OFFER RELATED EXPENSES
In connection with the Tender Offer, the Company incurred $169,301 of
non-recurring expenses in the third quarter of 1999. These expenses included:
the cancellation and settlement by Acquisition Inc. of all vested and unvested
options, bonuses, severance, legal and attorney fees, and other fees
specifically related to the Tender Offer. In addition, the Company's outstanding
restricted stock became fully vested in connection with the Tender Offer. The
Tender Offer related expenses are included in selling, general and
administrative expenses in the Company's 1999 consolidated statement of
operations. Excluding the settlement of options by Acquisition Inc., the Company
paid the majority of these expenses during August and September 1999.
Approximately $16,400 of these expenses were included in accounts payable and
accrued expenses at September 26, 1999.
6
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. RESTRICTED STOCK
As discussed in Note 3, all of the Company's outstanding restricted shares
became fully vested in connection with the Tender Offer. Unamortized restricted
stock compensation of $7,306 was recognized in selling, general and
administrative expenses as part of the Tender Offer related expenses for the
period ended September 26, 1999.
5. NET INCOME (LOSS) PER COMMON SHARE
The following represents the weighted average common and common equivalent
shares:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding.... 37,852,534 38,345,545 37,917,566 38,365,261
Common equivalent shares:
Stock options............................... -- 1,001,455 -- 1,037,245
Convertible debt............................ -- 3,660,477 -- 3,660,477
---------- ---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding.......................... 37,852,534 43,007,477 37,917,566 43,062,983
========== ========== ========== ==========
</TABLE>
As discussed in Note 3, in connection with the Tender Offer, all of the
vested and unvested options were cancelled and settled by Acquisition Inc. In
addition, the impact of convertible debt securities was not included in the 1999
diluted calculation since the effect was antidilutive.
Options to purchase 25,000 shares of common stock were not included in the
computations of net income per common share-diluted for the three and nine month
periods ended September 27, 1998 because the exercise price of the options was
greater than the average market price of the common shares. Interest charges on
convertible debt, net of tax, of $1,391 and $4,172, respectively, have been
added back to net income for the calculation of net income per common
share-diluted for the three and nine month periods ended September 27, 1998.
6. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 26, DECEMBER 27,
1999 1998
------------- ------------
<S> <C> <C>
Work-in-process............................................. $183,748 $139,259
Raw materials............................................... 118,010 136,852
-------- --------
Total....................................................... $301,758 $276,111
======== ========
</TABLE>
7. RESTRUCTURING AND OTHER SPECIAL CHARGES
In the second and third quarters of 1999, respectively, the Company recorded
restructuring and other special charges of $62,410 and $12,397, or $36,822 and
$7,475, respectively, net of tax, to eliminate redundant and less efficient
capacity resulting from its ongoing acquisition strategy.
7
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. RESTRUCTURING AND OTHER SPECIAL CHARGES (CONTINUED)
The restructuring and other special charges included the costs to exit and
consolidate certain facilities and sales offices, write down impaired assets and
eliminate administrative positions. These charges, consisting primarily of
$26,615 for the write down of equipment and $44,566 to reserve for certain lease
costs, resulted from changes in the Company's strategic growth objectives and
were primarily determined based on independent appraisals. Other restructuring
charges of $3,626 included additional severance and costs to exit facilities.
The Company has closed the facilities and sales offices and terminated
affected employees. Fixed assets have been adjusted to reflect their appropriate
values. Cash transactions of approximately $750 have been charged against the
reserve through the third quarter. The Company expects approximately $4,800 of
cash to be expended in the fourth quarter of 1999. The remaining costs,
primarily lease payments, will extend through 2008.
The aggregate effect of all restructuring and other special charges was
originally estimated to be in the range of $125,000 to $175,000 for the closure
of facilities, write down of assets and elimination of administrative positions.
The Company has not yet determined whether the effect of further restructuring
plans will be recognized in the fourth quarter of 1999.
8. RELATED PARTY TRANSACTIONS
As part of the Tender Offer expenses discussed in Note 3, the Company
recognized a non-cash charge of $67,474 for the cancellation and settlement by
Acquisition Inc. of all vested and unvested options. Of this amount, $40,868 was
paid directly by Acquisition Inc. to the option holders on behalf of the Company
and $26,606 was paid in stock of QPI upon consummation of the merger. In
addition, Acquisition Inc. contributed $51,299 to the Company to pay certain
other Tender Offer expenses. These amounts will not be repaid and are,
therefore, included in stockholders' equity in the September 26, 1999
consolidated balance sheet.
In addition to the above, certain wholly owned subsidiaries of QPI provided
the Company with $511,500, which was borrowed on the Company's behalf from the
subsidiaries' external long-term credit facilities. The Company used these funds
to pay certain Tender Offer expenses and repay $491,600 in outstanding debt
incurred under the Second Amended and Restated Credit Agreement dated June 6,
1996, as amended (the "1996 Credit Agreement"). The Company's resulting
indebtedness has an annual interest rate of 7.23%. Payment is not required prior
to October 1, 2000. Therefore, the indebtedness has been classified as long-term
debt in the September 26, 1999 consolidated balance sheet. The Company paid
$3,801 of interest expense to QPI in the third quarter of 1999.
On August 20, 1999, the Company entered into a credit agreement with a third
party lender with a maximum commitment of $100,000. Interest is payable at a
variable floating rate based on LIBOR or prime rate. At September 26, 1999,
$36,500 was outstanding under the credit agreement at an interest rate of 8.25%.
The credit agreement matures on December 31, 1999, however, if the maturity of
this facility is not extended beyond October 1, 2000, QPI will refinance the
outstanding indebtedness under this agreement on behalf of the Company. QPI will
not require the Company to repay the amount earlier than October 1, 2000.
Therefore, the amount outstanding is included in long-term debt in the
September 26, 1999 consolidated balance sheet.
8
<PAGE>
QUEBECOR WORLD (USA) INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. DEBT ISSUANCE AND EXTINGUISHMENT
As discussed in Note 8, the Company repaid all of its outstanding debt
incurred under the 1996 Credit Agreement. In conjunction with this repayment,
the Company amended the 1996 Credit Agreement so that there were no available
commitments except for certain outstanding letters of credit.
On December 28, 1998, the Company used proceeds from its November 1998 debt
issuance to redeem all of its outstanding 9.125% Senior Subordinated Notes due
2003 in an aggregate principal amount of $150,000. The notes were redeemed for
approximately $160,800, including the redemption premium of $6,840 and accrued
interest. This early extinguishment of debt generated an extraordinary charge of
$5,946, net of taxes of $4,132, for the redemption premium and write-off of
deferred financing costs.
On February 22, 1999, the Company issued Senior Subordinated Notes in the
aggregate principal amount of $300,000, receiving net proceeds of approximately
$294,000. Interest on the notes is payable semi-annually at the annual rate of
7.75%. The notes do not have required principal payments prior to maturity on
February 15, 2009. The net proceeds from the notes issuance were used to repay
certain indebtedness under the 1996 Credit Agreement. In connection with the
issuance of these notes, the Company amended the 1996 Credit Agreement resulting
in, among other modifications, a $95,000 permanent reduction in borrowings and
commitments under the 1996 Credit Agreement. As a result, aggregate total
commitments decreased from $920,000 to $825,000. This amendment and related
permanent reduction in total borrowings and commitments resulted in a
substantial modification of the terms under the 1996 Credit Agreement.
Accordingly, the Company recognized an extraordinary charge for the early
extinguishment of debt of $6,046, net of taxes of $4,201, for the write-off of
deferred financing costs. As discussed above, the 1996 Credit Agreement was
amended in the third quarter of 1999.
10. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities and
organization costs to be expensed as incurred. The Company adopted this SOP in
the first quarter of fiscal year 1999, which resulted in a charge of $10,513,
net of taxes of $7,305, as the cumulative effect of a change in accounting
principle for the non-recurring write-off of deferred start-up costs. The
adoption of this SOP did not have a material effect on operating income.
9
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GENERAL
On July 12, 1999, we entered into an Agreement and Plan of Merger with
Quebecor Printing Inc. ("QPI") and its indirect wholly owned subsidiary,
Printing Acquisition Inc. ("Acquisition Inc."), which provided for the
acquisition of World Color. On July 16, 1999, QPI, through Acquisition Inc.,
commenced a tender offer to acquire up to 23,500,000 shares of our common stock
at a price of $35.69 per share. On August 20, 1999, QPI acquired, through
Acquisition Inc., 19,179,495, or approximately 50.4%, of our outstanding shares.
On October 8, 1999, World Color and Acquisition Inc. completed the merger
following receipt of approval from our stockholders. As a result, World Color
became an indirect wholly owned subsidiary of QPI and at that time was renamed
Quebecor World (USA) Inc. The remaining outstanding shares of our common stock
(other than shares purchased by QPI in the tender offer) were converted into the
right to receive 1.2685 subordinate voting shares of QPI and $8.18 in cash per
share. In addition, each 6% Convertible Senior Subordinated Note due 2007 became
convertible into the number of QPI subordinate voting shares and cash that would
have been received had the Convertible Note been converted prior to October 8,
1999.
In connection with the tender offer, we incurred $169,301 of non-recurring
expenses in the third quarter of 1999. These expenses included: the cancellation
and settlement by Acquisition Inc. of all vested and unvested options, bonuses,
severance, legal and attorney fees, and other fees specifically related to the
tender offer. In addition, our outstanding restricted stock became fully vested
in connection with the tender offer. The expenses related to the tender offer
are included in selling, general and administrative expenses in our 1999
consolidated statement of operations. Excluding the settlement of options by
Acquisition Inc., we paid the majority of these expenses during August and
September 1999. Approximately $16,400 of these expenses were included in
accounts payable and accrued expenses at September 26, 1999.
In 1999, we acquired five businesses serving customers in the commercial,
retail and directory markets for an aggregate purchase price of approximately
$203,000, including assumed indebtedness. These companies, which have been
included in results of operations since their respective acquisition dates, have
not had a material effect on our results of operations, nor are they expected to
on a continuing basis. These acquisitions have been accounted for as purchases.
In 1998, we acquired four businesses serving customers in the commercial,
direct mail and book markets for an aggregate purchase price of approximately
$200,000. These companies, which have been included in results of operations
since their respective acquisition dates, have not had a material effect on our
results of operations, nor are they expected to on a continuing basis. These
acquisitions have been accounted for as purchases.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 26, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 27, 1998
Net sales increased $50,860 or 8.0% to $686,840 in 1999 from $635,980 in
1998. The increase was primarily due to the inclusion of sales from the
acquisitions in 1999 and improved sales in our base business, partially offset
by a decrease in paper prices.
10
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Gross profit increased $12,640 or 9.9% to $139,677 in 1999 from $127,037 in
1998. The gross profit margin increased to 20.3% in 1999 from 20.0% in 1998 due
primarily to decreased sales resulting from lower paper prices and synergies
resulting from the integration of the acquired businesses.
Selling, general and administrative expenses, including restructuring and
other special charges of $12,397 and expenses related to the tender offer of
$169,301 increased $186,355 to $240,964 in 1999 from $54,609 in 1998. Excluding
the non-recurring charges, the 1999 increase of $4,657 or 8.5% to $59,266 was
primarily due to the acquisitions in 1999, including the related additional
amortization expense for goodwill, partially offset by benefits derived from
cost saving initiatives.
Interest expense and securitization fees increased $2,644 or 11.6% to
$25,521 in 1999 from $22,877 in 1998. The increase was due to higher average
borrowings incurred to fund acquisitions and tender offer expenses. Related
party interest expense in 1999 was $3,801.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 13.7% for the third quarter of fiscal year 1999 compared to
41.5% for the comparable period in 1998. The decrease in the tax rate in 1999
was due primarily to permanent differences in tender offer related expenses and
goodwill.
Net income before non-recurring charges for the three month period ended
September 26, 1999 was $33,109.
NINE MONTHS ENDED SEPTEMBER 26, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 27, 1998
Net sales increased $126,338 or 7.3% to $1,859,228 in 1999 from $1,732,890
in 1998. The increase was due to the inclusion of sales from the acquisitions in
1999 and 1998 and improved sales in our base business, partially offset by a
decrease in paper prices.
Gross profit increased $28,664 or 9.3% to $337,485 in 1999 from $308,821 in
1998. The gross profit margin increased to 18.2% in 1999 from 17.8% in 1998 due
to decreased sales resulting from lower paper prices and synergies resulting
from the integration of the acquired businesses.
Selling, general and administrative expenses, including restructuring and
other special charges of $74,807 and expenses related to the tender offer of
$169,301, increased $255,456 to $416,658 in 1999 from $161,202 in 1998.
Excluding the non-recurring charges, the 1999 increase of $11,348 or 7.0% to
$172,550 was due primarily to the acquisitions in 1999 and 1998, including the
related additional amortization expense for goodwill, partially offset by
benefits derived from cost saving initiatives.
Interest expense and securitization fees increased $9,112 or 13.9% to
$74,480 in 1999 from $65,368 in 1998. The increase was due to higher average
borrowings incurred to fund acquisitions and tender offer expenses. Related
party interest expense in 1999 was $3,801.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 18.5% for the first nine months of fiscal year 1999
compared to 41.5% for the comparable period in 1998. The decrease in the 1999
tax rate was due primarily to permanent differences in tender offer related
expenses and goodwill.
Net income before non-recurring charges for the nine month period ended
September 26, 1999 was $54,092.
11
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RESTRUCTURING AND OTHER SPECIAL CHARGES
In the second and third quarters of 1999, respectively, we recorded
restructuring and other special charges of $62,410, and $12,397, or $36,822 and
$7,475, respectively, net of tax, to eliminate redundant and less efficient
capacity resulting from our ongoing acquisition strategy.
The restructuring and other special charges included the costs to exit and
consolidate certain facilities and sales offices, write down impaired assets and
eliminate administrative positions. These charges, consisting primarily of
$26,615 for the write down of equipment and $44,566 to reserve for certain lease
costs, resulted from changes in our strategic growth objectives and were
primarily determined based on independent appraisals. Other restructuring
charges of $3,626 included additional costs to exit facilities and severance.
We have closed the facilities and sales offices and terminated affected
employees. Fixed assets have been adjusted to reflect their appropriate values.
Cash transactions of approximately $750 have been charged against the reserve
through the third quarter. We expect approximately $4,800 of cash to be expended
in the fourth quarter of 1999. The remaining costs, primarily lease payments,
will extend through 2008.
The aggregate effect of all restructuring and other special charges was
originally estimated to be in the range of $125,000 to $175,000 for the closure
of facilities, write down of assets and elimination of administrative positions.
We have not yet determined whether the effect of further restructuring plans
will be recognized in the fourth quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
As part of the tender offer expenses discussed above, we recognized a
non-cash charge of $67,474 for the cancellation and settlement by Acquisition
Inc. of all vested and unvested options. Of this amount, $40,868 was paid
directly by Acquisition Inc. to the option holders on our behalf and $26,606 was
paid in stock of QPI upon consummation of the merger. In addition, we received
$51,299 from Acquisition Inc. to pay certain other tender offer expenses. These
amounts will not be repaid and are, therefore, included in stockholders' equity
in the September 26, 1999 consolidated balance sheet.
In addition to the above, certain wholly owned subsidiaries of QPI provided
us with $511,500, which was borrowed on our behalf from the subsidiaries'
external long-term credit facilities. We used these funds to pay certain tender
offer expenses and repay $491,600 in outstanding debt incurred under the Second
Amended and Restated Credit Agreement dated June 6, 1996, as amended (the "1996
Credit Agreement"). Our resulting indebtedness has an annual interest rate of
7.23%. Payment is not required prior to October 1, 2000. The indebtedness has
been classified as long-term debt in the September 26, 1999 consolidated balance
sheet.
On August 20, 1999, we entered into a credit agreement with a third party
lender with a maximum commitment of $100,000. Interest is payable at a variable
floating rate based on LIBOR or prime rate. At September 26, 1999, $36,500 was
outstanding under the credit agreement at an interest rate of 8.25%. The credit
agreement matures on December 31, 1999, however, if the maturity of this
facility is not extended beyond October 1, 2000, QPI will refinance the
outstanding indebtedness under this agreement on our behalf. QPI will not
require us to repay the amount earlier than October 1, 2000. Therefore, the
amount outstanding is included in long-term debt in the September 26, 1999
consolidated balance sheet.
12
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
As discussed above, we repaid all of the outstanding debt under the 1996
Credit Agreement, at which time we amended the agreement so that there are no
available commitments except for certain outstanding letters of credit.
On February 22, 1999, we issued Senior Subordinated Notes in the aggregate
principal amount of $300,000, receiving net proceeds of approximately $294,000.
Interest on the notes is payable semi-annually at the annual rate of 7.75%. The
notes do not have required principal payments prior to maturity on February 15,
2009. The net proceeds from the notes issuance were used to repay certain
indebtedness under our 1996 Credit Agreement. In connection with the issuance of
these notes, we amended our 1996 Credit Agreement resulting in, among other
modifications, a $95,000 permanent reduction in borrowings and commitments under
the 1996 Credit Agreement. As a result, aggregate total commitments decreased
from $920,000 to $825,000. This amendment and related permanent reduction in
total borrowings and commitments resulted in a substantial modification of the
terms under the 1996 Credit Agreement. Accordingly, we recognized an
extraordinary charge for the early extinguishment of debt of $6,046, net of
taxes of $4,201, for the write-off of deferred financing costs. As discussed
above, the 1996 Credit Agreement was modified in the third quarter of 1999.
On December 28, 1998, we used proceeds from our November 1998 debt issuance
to redeem all of our outstanding 9.125% Senior Subordinated Notes due 2003 in an
aggregate principal amount of $150,000. The notes were redeemed for
approximately $160,800, including the redemption premium of $6,840 and accrued
interest. This early extinguishment of debt generated an extraordinary charge of
$5,946, net of taxes of $4,132, for the redemption premium and write-off of
deferred financing costs.
We have historically met our liquidity and capital investment needs with
internally generated funds and external borrowings. Net income before
non-recurring charges, plus depreciation and amortization and deferred income
taxes was $183,128 and $164,727 for the nine months ended September 26, 1999 and
September 27, 1998, respectively. Our outstanding indebtedness less cash
increased $264,711 from December 27, 1998 to September 26, 1999 due primarily to
borrowings incurred to fund acquisitions and tender offer expenses. Working
capital was $306,736 at September 26, 1999 and $248,200 at September 27, 1998.
In accordance with our ongoing program to maintain modern, efficient plants and
increase productivity, we anticipate that 1999 net capital expenditures will be
approximately 4 - 5% of net sales.
In the first nine months of 1999, we repurchased 1,263,652 shares of our
common stock at a weighted average cost of $24.18 per share. From the inception
of our stock repurchase plan in August 1998, we have repurchased 1,750,153
shares at a weighted average cost of $26.02 per share and reissued 466,255
shares. We have terminated our share repurchase program.
Concentrations of credit risk with respect to accounts receivable are
limited due to our diverse operations and large customer base. As of
September 26, 1999 we had no significant concentrations of credit risk.
In the normal course of business, we are exposed to changes in interest
rates. However, we manage this exposure by having a balanced variety of debt
maturities as well as a combination of fixed and variable rate obligations. In
1998, we entered into interest rate swap agreements in order to further reduce
the exposure on our variable rate obligations. The swap agreements were
cancelled by the respective counterparties in September 1999. These agreements
did not have a material impact on the consolidated financial statements for the
periods presented. We do not hold or issue any derivative financial instruments
for trading purposes.
13
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
We believe that our liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working capital
requirements and interest and principal payments on third party indebtedness for
the foreseeable future.
YEAR 2000
The Year 2000 issue, which affects virtually all corporations, arises due to
the inability of certain computer software and hardware and embedded chips found
in manufacturing and other equipment to properly recognize dates beyond 1999.
This inability may cause errors in information and/or system failures. We have
engaged in a comprehensive effort to address the Year 2000 issue. As discussed
below, we have, among other things, evaluated our present information technology
and non-information technology systems (i.e. equipment with embedded chips),
monitored and addressed our vendor and customer Year 2000 issues and engaged in
remediative measures as necessary.
In connection with our readiness program, we have inventoried and assessed
the state of compliance of all information systems and non-information systems.
We commenced remediation of our information systems in 1994. As a result, our
information systems, including our financial, human resources and payroll
functions, are substantially Year 2000 compliant. At this time, we have
substantially completed our readiness efforts with respect to our information
systems. With respect to our non-information systems, we have completed an
inventory and assessment of facilities (HVAC, safety and security) and
manufacturing (pre-press, press, bindery and finishing) systems. We have worked
with the outside suppliers of such systems as well as with an outside consultant
to remediate non-compliant components. Accordingly, we have substantially
completed our readiness efforts with respect to our non-information systems.
As part of our readiness program, we have communicated with our major
customers and vendors to assess such parties' respective efforts to identify and
remediate their own Year 2000 issues in a timely and comprehensive manner. We
have also requested our vendors to certify to the compliancy of their systems
and equipment that we currently own or lease. We intend to continue to follow up
with non-compliant vendors through the balance of 1999 in order to continually
assess the extent of such third parties' Year 2000 exposure and to adjust our
contingency plans accordingly.
The costs incurred to date solely related to our Year 2000 efforts have not
been material to us, and based upon current estimates, we do not believe that
the total cost of our Year 2000 readiness programs will have a material adverse
effect upon our operating results or financial condition. While we cannot make
assurances as to the impact of the Year 2000 issue on our operations, we
currently anticipate that any adverse consequences of the Year 2000 issue on our
systems will not create a significant disruption to our operations. However, the
failure or delay by us, our customers and/or vendors to identify and remediate
each respective instance of Year 2000 non-compliance could result in a material
adverse effect on our results of operations, liquidity or financial condition.
Our readiness program includes the development of contingency plans
addressing potential business interruptions arising from Year 2000-related
disruptions. Such plans include assessing the movement of work among our
facilities. In the fourth quarter of 1999, we will further hone our contingency
plans, taking into account, among other things, the state of readiness of our
vendors, including, without limitation, utility suppliers, as well as our major
customers.
The statements set forth herein concerning Year 2000 issues which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially
14
<PAGE>
QUEBECOR WORLD (USA) INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
from those in the forward-looking statements. In particular, the costs
associated with our Year 2000 programs, the time-frame in which we plan to
complete Year 2000 modifications and the potential impact of the Year 2000
issues on us are based upon our best estimates. These estimates were derived
from internal assessments and numerous assumptions of future events. These
estimates may be adversely affected by, among other things, the continued
availability of personnel and system resources, the accurate identification of
all relevant computer codes, the success of remediation efforts, the
effectiveness of our contingency plans and by the failure of significant third
parties to properly address Year 2000 issues. Therefore, we cannot guarantee
that any estimates or other forward-looking statements will be achieved and
actual results could differ significantly from those contemplated.
SEASONALITY
Results of operations for this interim period are not necessarily indicative
of results for the full year. Our operations are seasonal. Historically,
approximately two-thirds of our operating income has been generated in the
second half of the fiscal year, primarily due to the higher number of magazine
pages, new product launches and back-to-school and holiday catalog promotions.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the statements in this
document are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks and uncertainties, which may cause our actual
results in future periods to differ materially from forecasted results. Those
risks include, among others, changes in customers' demand for our products,
changes in raw material and equipment costs and availability, seasonal changes
in customer orders, pricing actions by our competitors, changes in estimates of
our readiness or the readiness of our vendors and customers with regard to Year
2000 issues and the significance of costs thereof, and general changes in
economic condition.
15
<PAGE>
QUEBECOR WORLD (USA) INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits required in accordance with Item 601 of Regulation S-K are
incorporated by reference herein as filed with registrant's Annual Report on
Form 10-K for the fiscal year ended December 27, 1998, dated March 26, 1999.
In addition, the Company has filed herewith the following exhibits:
10.1 Retention and Severance Agreement dated August 16, 1999 between World
Color Press, Inc. and Jennifer L. Adams.
10.2 Retention and Severance Agreement dated August 16, 1999 between World
Color Press, Inc. and Marc L. Reisch.
10.3 Settlement Agreement dated August 16, 1999 between World Color Press,
Inc. and Robert G. Burton.
27.0 Financial Data Schedule for the period ended September 26, 1999 (filed
in electronic form only).
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated October 8, 1999,
with respect to the merger with an indirect wholly owned subsidiary of
Quebecor Printing Inc. The items reported in such Current Report were Item 2
(Acquisition or Disposition of Assets) and Item 7 (Financial Statements, Pro
Forma Financial Information and Exhibits).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
QUEBECOR WORLD (USA) INC.
By: /s/ MICHEL SALBAING
-----------------------------------------
Michel Salbaing
Date: November 8, 1999 SENIOR VICE PRESIDENT
</TABLE>
16
<PAGE>
Ex 10.1
EXECUTION COPY
RETENTION AND SEVERANCE AGREEMENT
AGREEMENT made as of August 16, 1999 between World Color Press, Inc., a
Delaware corporation (the "Company"), with offices at 340 Pemberwick Road,
Greenwich, CT 06831, and Jennifer L. Adams (the "Executive").
WHEREAS, the Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries;
WHEREAS, Executive and the Company entered into a Change in Control
Severance Agreement as of April 16, 1999 (the "CIC Agreement"), which provides
for severance benefits upon certain terminations within two years following a
"Change in Control" (as defined therein);
WHEREAS, through a wholly-owned subsidiary, Quebecor Printing Inc. (the
"Parent") intends to acquire the Company in a two-step transaction, and the
consummation of the first step tender offer (the "Effective Date") will
constitute a Change in Control under the CIC Agreement; PROVIDED, HOWEVER, that
in the event the transaction is converted to a one-step merger, the Change in
Control and therefore the Effective Date hereunder will occur upon the effective
date of such merger;
WHEREAS, the Company wishes to encourage and provide incentive to the
Executive to remain with and devote full time and attention to the business
affairs of the Company and wishes to provide income protection to the Executive
following the Change in Control;
NOW, THEREFORE, in consideration of the mutual agreement and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS.
(a) "BASE SALARY" shall mean the Executive's regular
annual rate of base pay as of the date in question.
(b) "CAUSE" shall mean the Executive's (i) conviction or
guilty plea or plea of nolo contendere of a felony involving fraud or
dishonesty; (ii) theft or embezzlement of property from Parent or the Company;
or (iii) willful and continued refusal by the Executive substantially to perform
the duties of his or her position (other than any such failure resulting from
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the Executive's issuance of a notice of termination
for "Good Reason" (as defined herein)), within a reasonable period of time after
receipt of written notice from the Company specifying the manner in which the
Company believes the Executive is not substantially performing the duties of his
or her position. For this definition, no act or failure to act shall be deemed
willful unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act was in
the best interests of the Company.
(c) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
<PAGE>
2
(d) "DATE OF TERMINATION" shall mean fifteen days
following a party's receipt of the Notice of Termination, or upon the death of
the Executive.
(e) The Executive shall have "GOOD REASON" to terminate
employment if (i) the Executive is not elected, reelected, or otherwise
continued in the office of the Company which he or she held immediately prior to
the Effective Date, or he or she is removed as a member of the Board of
Directors of the Company if the Executive was a director immediately prior to
the Effective Date; (ii) the Executive's duties, responsibilities, status or
authority are materially reduced, diminished or adversely altered from those in
effect immediately prior to the Effective Date or the Executive is assigned
duties inconsistent with the Executive's status as a senior officer of the
Company; (iii) the Executive's level of compensation or benefits in effect
immediately prior to or after the Effective Date is reduced; (iv) the potential
benefit of the Executive under any performance-based bonus, equity or other
incentive plan of the Company in effect immediately prior to the Effective Date
is reduced; (v) the Executive's employment is based at a location more than ten
miles away from the location at which it is based immediately prior to the
Effective Date; (vi) any purchaser, assign, surviving corporation, or successor
of Parent or the Company or their respective businesses or assets (whether by
acquisition, merger, liquidation, consolidation, reorganization, sale or
transfer of assets of business or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations of the
Company hereunder pursuant to Paragraph 14 hereof; (vii) Parent or the Company
fails to pay any amounts due to the Executive; (viii) the Executive is required
to travel substantially more than he or she traveled prior to the Effective
Date; or (ix) the Company breaches any of the provisions of this Agreement.
(f) "NOTICE OF TERMINATION" During the term of this
Agreement, any purported termination of the Executive's employment (other than
by reason of death) shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Paragraph 15
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstance
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(g) "PERMANENT DISABILITY" shall mean the Executive is
unable to engage in the activities required by the Executive's job by reason of
any medically determined physical or mental impairment for a period of six
consecutive months or for an aggregate of nine months in any twenty-four
consecutive month period.
(h) "SEVERANCE PERIOD" shall be the three-year period
commencing on the date of the Executive's Termination of Employment.
(i) "TARGET BONUS" shall mean the Executive's maximum
bonus eligibility under the Company's management bonus plan.
<PAGE>
3
(j) "TERMINATION OF EMPLOYMENT" shall mean the
termination of the Executive's employment with the Company and its affiliates
for any reason.
2. TERM. The initial term of this Agreement shall be for the
period commencing on the Effective Date, if and only if such Effective Date
occurs, and ending on the fifth anniversary thereafter. The term shall be
automatically extended by one additional day for each day beyond the fifth
anniversary of the date of this Agreement that the Executive remains employed by
Parent or the Company until such time as Parent or the Company (as applicable)
elects to cease such extension by giving written notice of such to the
Executive. The Agreement shall thus terminate on the second anniversary of the
effective date of such notice.
3. RETENTION BONUSES. The Executive shall be entitled to a
bonus (the "Retention Bonus") equal to a cash payment of (i) one and one-half
times the sum of the Executive's Base Salary and Target Bonus, as in effect on
the Effective Date and (ii) the benefits under all defined benefit and cash
balance plans (including but not limited to the World Color Press, Inc. Cash
Balance Plan and Supplemental Executive Retirement Plan (collectively, the
"Pension Plans")) which the Executive would accrue during the period beginning
on the Effective Date and ending on the third anniversary of the Effective Date
if he or she were to continue employment with the Company, assuming no change in
Base Salary and Target Bonus, each as in effect immediately prior to the
Effective Date, assuming full bonus payout and without regard to any amendment
to the Pension Plans made subsequent to the Effective Date. Forty percent of
such cash amount shall be paid on the Effective Date and sixty percent of such
cash amount shall be paid on the first anniversary of the Effective Date if the
Executive remains employed by the Company or its affiliates.
4. SEVERANCE BENEFITS.
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. The
Executive shall be entitled to severance benefits if, during the two year period
commencing on the Effective Date, the Executive has a Termination of Employment
initiated (i) by the Company or any of its affiliates without Cause or (ii) by
the Executive for Good Reason. Such severance benefits shall include (i) a cash
payment, which shall be payable in one lump sum as soon as reasonably
practicable after the Date of Termination, but in no event later than fourteen
days thereafter, equal to (x) one and one-half times the sum of the Executive's
Base Salary and Target Bonus, each as in effect upon the Termination of
Employment (without giving effect to any reduction which constitutes Good
Reason) (or, if higher, immediately prior to the Effective Date), and (y) the
amount under all of the Pension Plans which the Executive would have accrued
during the period from the Date of Termination until the third anniversary of
the Date of Termination had the Executive continued employment with the Company,
assuming no change in Base Salary and Target Bonus, each as in effect
immediately prior to the Termination of Employment (without giving effect to any
reduction that constitutes Good Reason) (or, if higher, immediately prior to the
Effective Date), assuming full bonus payout and without regard to any amendment
to the Pension Plans made upon or subsequent to the Effective Date, PROVIDED,
HOWEVER, that such amount shall be reduced by the amount, if any, of the
Retention Bonus (defined below) already paid to the Executive; PROVIDED,
FURTHER, that after such reduction the Executive shall be entitled
<PAGE>
4
to no less than one times the sum of the Executive's then current Base Salary
and the Target Bonus; (ii) continuation during the Severance Period of coverage
under and participation in employee welfare and fringe benefit plans or
programs that the Executive (and any beneficiary) is covered under or
participating in immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits which constitutes Good
Reason) (or, if more favorable to the Executive, immediately prior to
the Effective Date) (or substantially equivalent plans or programs on a
benefit by benefit basis), subject to reduction of such employee welfare
and fringe benefit plans upon re-employment and receipt by the Executive
of comparable benefits under welfare and fringe benefit plans of a
successor employer during the Severance Period; and (iii) receipt of
outplacement services during the Severance Period, which services are
no less favorable than the executive outplacement provided by the Company,
consistent with past practices.
(b) TERMINATION UPON DEATH OR DISABILITY. The Executive
(or his or her representative, if applicable) shall be entitled to the following
severance benefits if, during the two year period commencing on the Effective
Date, the Executive has a Termination of Employment due to death or permanent
disability: (i) a cash payment, which shall be payable in one lump sum as soon
as reasonably practicable after the Date of Termination, but in no event later
than fourteen days thereafter, equal to (x) one and one-half times the sum of
the Executive's Base Salary and Target Bonus, each as in effect upon the
Termination of Employment (or, if higher, immediately prior to the Effective
Date), and (y) the amount under all of the Pension Plans which the Executive
would have accrued during the period from the Date of Termination until the
third anniversary of the Date of Termination had the Executive continued
employment with the Company, assuming no change in Base Salary and Target Bonus,
each as in effect immediately prior to the Termination of Employment (or, if
higher, immediately prior to the Effective Date), assuming full bonus payout and
without regard to any amendment to the Pension Plans made subsequent to the
Effective Date; PROVIDED, HOWEVER, that such amount shall be reduced by the
amount, if any, of the Retention Bonus already paid to the Executive; and
(ii) continuation during the Severance Period of coverage under and
participation in employee welfare and fringe benefit plans or
programs that the Executive (and any beneficiary) is covered under
or participating in immediately prior to the Date of Termination
(or, if more favorable to the Executive, immediately prior to the
Effective Date) (or substantially equivalent plans or programs on a
benefit by benefit basis).
(c) LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company
also shall pay to the Executive all legal and accounting fees and expenses
incurred by the Executive as a result of a termination which entitles the
Executive to the severance benefits hereunder (including all such fees and
expenses, if any, incurred in disputing any such termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code to any payment of benefit provided
by the Company). Such payments shall be made within five business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
<PAGE>
5
5. PAYMENTS OTHER THAN SEVERANCE. Subject to Paragraph 9
herein, upon any Termination of Employment, whether or not the severance
benefits outlined in Paragraph 4 above are payable, the Executive shall also be
entitled to all compensation and other amounts accrued, due and owing to
Executive from Parent or the Company or under any employee benefit plan of
Parent or the Company, as of the Date of Termination including, without
limitation, under the Pension Plans.
6. EXECUTIVE'S AGREEMENTS.
(a) NON-COMPETE. In consideration of the Noncompete
Payment, the Executive hereby covenants and agrees that for the eighteen-month
period following the earlier of any Termination of Employment and the first
anniversary of the Effective Date, he or she shall not directly or indirectly,
own, manage, operate, join, control or participate in the ownership, management,
operation or control, or be connected as a director, officer, employee, partner,
consultant or otherwise with any Competing Business, other than as a shareholder
or beneficial owner, directly or indirectly of five percent or less of the
outstanding securities of a publicly held Competing Business. For purposes of
this Agreement, "Competing Business" means any business, firm or enterprise
engaged in a business substantially similar to the Company's printing business
as it exists at the time of the Effective Date within the same geographical
locations in the United States in which the Company operates on the Effective
Date. The "Noncompete Payment" shall be equal to $1,145,625, forty percent of
which shall be paid on the Effective Date and sixty percent of which shall be
paid on the earlier of the first anniversary of the Effective Date and
termination of the Executive's employment without Cause, for Good Reason or by
reason of death or Permanent Disability.
(b) NON-SOLICITATION. In consideration of the Noncompete
Payment, the Executive hereby covenants and agrees that for the eighteen-month
period following the earlier of any Termination of Employment and the first
anniversary of the Effective Date, he or she shall not directly or indirectly,
(i) solicit any employee of the Company or its affiliates to leave the
employment of the Company or its affiliates, or (ii) solicit any customer of the
Company or its affiliates to end its business relations with the Company or its
affiliates.
(c) ENFORCEMENT. It is expressly understood and agreed
that although the Executive and the Company consider the restrictions contained
in this Paragraph 6 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction against
the Executive, the provisions of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
7. GOLDEN PARACHUTE GROSS-UP. If, in the written opinion of a
nationally recognized accounting firm, selected by the Company and reasonably
acceptable to the
<PAGE>
6
Executive for this purpose (at the Company's expense), or if so alleged by the
Internal Revenue Service ("IRS"), the aggregate of the benefit payments and
provisions under this Agreement and any other arrangement between the Executive
and Parent or the Company (the "Payments") would cause the payment or provision
of one or more of such benefits to constitute an "excess parachute payment"
as defined in Section 280G(b) of the Code, then the Company will pay to the
Executive an additional amount in cash (the "Gross-Up Payment") equal to
the amount necessary to cause the net amount retained by the Executive,
after deduction of any (i) excise tax on the Payments, (ii) federal, state
or local income tax on the Gross-Up Payment, (iii) excise tax on the
Gross-Up Payment and (iv) any penalty and interest related to the Payments,
to be equal to the aggregate remuneration the Executive would have received,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law. The Gross-Up Payment
provided for in this Paragraph shall be made within ten days after the
termination of Executive's employment or the date on which any Payment
is made that is reasonably likely to constitute an "excess parachute
payment"; PROVIDED, HOWEVER, that if the amount of the Gross-Up Payment
cannot be finally determined at the time, the Company shall pay to
Executive an estimate as determined in good faith by the Company of
such payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined
but in no event after the earlier of (i) the date any related withholding
taxes are due or (ii) the thirtieth day after the date of termination or
the date on which any Payment is made that is reasonably likely to
constitute an "excess parachute payment."
The Company agrees to reimburse the Executive for reasonable
fees and expenses (including reasonable attorneys and accountants fees and
expenses) in connection with any audit or assessment by the IRS if a claim
("Claim") arises out of, or results from the treatment or characterization by
the IRS of any Payments made by Parent or the Company and for the cost of
preparing the Executive's income tax returns for the year in which any Payment
by Parent or the Company may be characterized as an excess parachute payment.
The Executive shall notify the Company in writing of any such Claim as soon as
practicable, but in no event later than ten business days after the Executive is
informed of such Claim and shall cooperate with the Company in good faith to
effectively contest the Claim. The Company shall, at its expense, control all
proceedings in connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such Claim and the Executive
agrees to cooperate in the prosecution of such contest in such manner as the
Company shall reasonably determine, subject to the Company's obligations
hereunder; PROVIDED, HOWEVER, that no final resolution of such claim may be made
by the Company without the Executive's consent if such resolution could
adversely affect the Executive. Notwithstanding the foregoing, if the Company
forgoes further prosecution of such contest, the Executive may elect to continue
such prosecution and the Company shall cooperate with the Executive and shall be
liable for the fees and expenses in connection with such further prosecution.
8. EMPLOYMENT AT-WILL. Notwithstanding anything to the
contrary contained herein, the Executive's employment with the Company is not
for any specified term
<PAGE>
7
and may be terminated by the Executive or by the Company at any time, for any
reason, with or without cause, without liability except with respect to
the severance benefits provided hereunder or as required by law or any
other contract or employee benefit plan or practice.
9. WAIVER OF OTHER SEVERANCE BENEFITS. The benefits payable
pursuant to this Agreement are in lieu of any other severance benefits which may
otherwise be payable to the Executive upon termination within two years
following a change in control pursuant to agreement, policy or practice, except
those benefits which are to be made available to the Executive as required by
applicable law.
10. DISPUTE. All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the Board of Directors of
the Company and shall be in writing. Any denial by the Board of Directors of the
Company of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. Any dispute or
controversy arising under, out of, in connection with or in relation to this
Agreement shall, at the election and upon written demand of either party, be
finally determined and settled by binding arbitration in the town of Greenwich,
CT, using a mutually agreeable single arbitrator, in accordance with the Labor
Arbitration rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
The arbitrator shall have the power to order specific performance, mandamus, or
other appropriate legal or equitable relief to enforce the provisions of this
Agreement. The Company shall pay all costs of the arbitration and all reasonable
attorney's and accountant's fees and expenses of the Executive in connection
therewith.
11. COMPENSATION DURING DISPUTE. If a purported termination
occurs during the two years following the Effective Date, and such termination
is disputed by any party, the Company shall continue to pay the Executive the
full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to the dispute was given
until the dispute is finally resolved in accordance with Paragraph 10 hereof.
Amounts paid under this Paragraph 11 are in addition to all other amounts due
under this Agreement (other than those due under Paragraph 5 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement. In
addition, any Gross-Up Payment due under Paragraph 7 shall be increased to take
into account any increased benefits under this Paragraph.
12. NO SET-OFF. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement.
13. NO MITIGATION OBLIGATION. The parties hereto expressly
agree that the payment of the benefits by the Company to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and,
except with respect to reduction of employee welfare and fringe benefits but
only to the extent specifically provided for in Paragraph 4(a), that
<PAGE>
8
the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source
whatsoever create any mitigation, offset, reduction or any other obligation
on the part of the Executive hereunder or otherwise.
14. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company or by any merger or
consolidation where the Company is not the surviving corporation, or upon any
transfer of all or substantially all of the Company's assets, or any other
change in control. The Company shall require any purchaser, assign, surviving
corporation, or successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in the form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any purchaser,
assign, surviving corporation or successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially all
of the business and assets of the Company whether by purchase, merger,
consolidation, reorganization, transfer of all or substantially all of the
business or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation or successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but this Agreement shall not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in this Paragraph 14. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any claim, debt, or
obligation, or to execution, attachment, levy or similar process, or assignment
by operation of law, other than by a transfer by his or her will or by the laws
of descent and distribution. Any attempt, voluntary or involuntary, to effect
any action prohibited by this Paragraph shall be null, void, and of no effect.
15. NOTICES. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex, telecopy, or certified or registered mail, postage prepaid, or other
similar means of communication, as follows:
<PAGE>
9
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him or her at the address
set forth in the signature page hereto after Executive's name, or at any such
other address as either party shall have specified by notice in writing to the
other.
16. AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Company. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform; provided, HOWEVER, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity.
17. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, including the CIC Agreement and
Schedule 6.11 to the Agreement and Plan of Merger among Parent, Printing
Acquisition Inc. and the Company dated as of July 12, 1999 (the "Merger
Agreement"), promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
Notwithstanding the foregoing, nothing in this Agreement shall affect the
treatment of the Executive's stock options or restricted stock or the
Executive's third party beneficiary rights under the Merger Agreement (except
with respect to Schedule 6.11 of the Merger Agreement).
18. SEVERABILITY; ENFORCEMENT. If any provision of this
Agreement, or the application thereof to any person, place or circumstance shall
be held by a court of competent jurisdiction to be invalid, unenforceable or
void, the remainder of this Agreement and such provisions as applied to other
persons, places and circumstances shall remain in full force and effect.
19. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Executive harmless from and against any liability, damages, costs, or
expenses (including legal and accounting fees and expenses) in connection with
any claim, cause of action, investigation, litigation, or proceeding involving
him or her by reason of his or her having been an officer, director, employee,
or agent of the Company, unless it is judicially determined, in a final,
nonappealable order, that the Executive was guilty of gross negligence or
willful misconduct. The Company also agrees to maintain directors and officer
liability insurance for the benefit of the Executive for at least six years
after the Effective Date; PROVIDED that the Company shall be
<PAGE>
10
deemed to maintain such insurance if Parent so maintains directors and
officer liability insurance for the benefit of the Executive.
20. GOVERNING LAW. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of
Connecticut, except to the extent pre-empted by Federal law.
21. SURVIVAL. Any paragraph hereunder that requires
performance beyond the termination of this Agreement, and the Company's or the
Executive's (as applicable) obligations thereunder, shall survive any
termination of this Agreement.
22. COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
<PAGE>
11
The parties have duly executed this Agreement as of the date
first written above.
WORLD COLOR PRESS, INC. EXECUTIVE
- ---------------------------------- ------------------------------
By: Jennifer L. Adams
Title: 80 Delafield Island Road
Darien, CT 06820
<PAGE>
Ex 10.2
EXECUTION COPY
RETENTION AND SEVERANCE AGREEMENT
AGREEMENT made as of August 16, 1999 between World Color Press, Inc., a
Delaware corporation (the "Company"), with offices at 340 Pemberwick Road,
Greenwich, CT 06831, and Marc L. Reisch (the "Executive").
WHEREAS, the Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries;
WHEREAS, Executive and the Company entered into a Change in Control
Severance Agreement as of April 16, 1999 (the "CIC Agreement"), which provides
for severance benefits upon certain terminations within two years following a
"Change in Control" (as defined therein);
WHEREAS, through a wholly-owned subsidiary, Quebecor Printing Inc. (the
"Parent") intends to acquire the Company in a two-step transaction, and the
consummation of the first step tender offer (the "Effective Date") will
constitute a Change in Control under the CIC Agreement; PROVIDED, HOWEVER, that
in the event the transaction is converted to a one-step merger, the Change in
Control and therefore the Effective Date hereunder will occur upon the effective
date of such merger;
WHEREAS, the Company wishes to encourage and provide incentive to the
Executive to remain with and devote full time and attention to the business
affairs of the Company and wishes to provide income protection to the Executive
following the Change in Control;
NOW, THEREFORE, in consideration of the mutual agreement and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. DEFINITIONS.
(a) "BASE SALARY" shall mean the Executive's regular
annual rate of base pay as of the date in question.
(b) "CAUSE" shall mean the Executive's (i) conviction or
guilty plea or plea of nolo contendere of a felony involving fraud or
dishonesty; (ii) theft or embezzlement of property from Parent or the Company;
or (iii) willful and continued refusal by the Executive substantially to perform
the duties of his or her position (other than any such failure resulting from
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the Executive's issuance of a notice of termination
for "Good Reason" (as defined herein)), within a reasonable period of time after
receipt of written notice from the Company specifying the manner in which the
Company believes the Executive is not substantially performing the duties of his
or her position. For this definition, no act or failure to act shall be deemed
willful unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act was in
the best interests of the Company.
(c) "CODE" shall mean the Internal Revenue Code of 1986,
as amended.
<PAGE>
2
(d) "DATE OF TERMINATION" shall mean fifteen days
following a party's receipt of the Notice of Termination, or upon the death of
the Executive.
(e) The Executive shall have "GOOD REASON" to terminate
employment if (i) the Executive shall not have the title, duties,
responsibilities, status and authority of (x) Chairman, CEO and President of the
North American Group of the Company (U.S. and Canada) and (y) a member of the
Office of the President of Parent, in each case, reporting only to the Chief
Executive Officer of Parent; (ii) the Executive is assigned duties inconsistent
with the Executive's status as a senior officer of Parent in the positions
described in (i)(x) and (y) above (including, without limitation, the reduction
of the Executive's authority and responsibility for the operation of the
Company); (iii) the Executive's level of compensation or benefits in effect
immediately prior to or after the Effective Date is reduced; (iv) the potential
benefit of the Executive under any performance-based bonus, equity or other
incentive plan of the Company in effect immediately prior to the Effective Date
is reduced; (v) Parent and the Executive fail to agree before September 30, 1999
on an increase in the Executive's Base Salary and Target Bonus that is
reasonably related to the increase in the Executive's authorities and
responsibilities, or such increased Base Salary or Target Bonus are reduced at
any time; (vi) the Executive's place of employment or the North American Group
corporate headquarters is based at a location more than ten miles away from
Greenwich, CT; (vii) any purchaser, assign, surviving corporation, or successor
of Parent or the Company or their respective businesses or assets (whether by
acquisition, merger, liquidation, consolidation, reorganization, sale or
transfer of assets of business or otherwise) fails or refuses to expressly
assume in writing this Agreement and all of the duties and obligations of the
Company hereunder pursuant to Paragraph 14 hereof; (viii) Parent or the Company
fails to pay any amounts due to the Executive; (ix) the Executive is required to
travel substantially more than he or she traveled prior to the Effective Date;
(x) the Company breaches any of the provisions of this Agreement; or (xi) the
Executive shall not be entitled to diversify Parent stock holdings without
limitation (except if prohibited by law).
(f) "NOTICE OF TERMINATION" During the term of this
Agreement, any purported termination of the Executive's employment (other than
by reason of death) shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Paragraph 15
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstance
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
(g) "PERMANENT DISABILITY" shall mean the Executive is
unable to engage in the activities required by the Executive's job by reason of
any medically determined physical or mental impairment for a period of six
consecutive months or for an aggregate of nine months in any twenty-four
consecutive month period.
(h) "SEVERANCE PERIOD" shall be the three-year period
commencing on the date of the Executive's Termination of Employment.
<PAGE>
3
(i) "TARGET BONUS" shall mean the Executive's maximum
bonus eligibility under the Company's management bonus plan.
(j) "TERMINATION OF EMPLOYMENT" shall mean the
termination of the Executive's employment with the Company and its affiliates
for any reason.
2. TERM. The initial term of this Agreement shall be for the
period commencing on the Effective Date, if and only if such Effective Date
occurs, and ending on the fifth anniversary thereafter. The term shall be
automatically extended by one additional day for each day beyond the fifth
anniversary of the date of this Agreement that the Executive remains employed by
Parent or the Company until such time as Parent or the Company (as applicable)
elects to cease such extension by giving written notice of such to the
Executive. The Agreement shall thus terminate on the second anniversary of the
effective date of such notice.
3. RETENTION BONUSES. The Executive shall be entitled to a
bonus (the "Retention Bonus") equal to a cash payment of (i) one and one-half
times the sum of the Executive's Base Salary and Target Bonus, as in effect on
the Effective Date and (ii) the benefits under all defined benefit and cash
balance plans (including but not limited to the World Color Press, Inc. Cash
Balance Plan and Supplemental Executive Retirement Plan (collectively, the
"Pension Plans")) which the Executive would accrue during the period beginning
on the Effective Date and ending on the third anniversary of the Effective Date
if he or she were to continue employment with the Company, assuming no change in
Base Salary and Target Bonus, each as in effect immediately prior to the
Effective Date, assuming full bonus payout and without regard to any amendment
to the Pension Plans made subsequent to the Effective Date. Forty percent of
such cash amount shall be paid on the Effective Date and sixty percent of such
cash amount shall be paid on the first anniversary of the Effective Date if the
Executive remains employed by the Company or its affiliates.
4. SEVERANCE BENEFITS.
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. The
Executive shall be entitled to severance benefits if, during the two year period
commencing on the Effective Date, the Executive has a Termination of Employment
initiated (i) by the Company or any of its affiliates without Cause or (ii) by
the Executive for Good Reason. Such severance benefits shall include (i) a cash
payment, which shall be payable in one lump sum as soon as reasonably
practicable after the Date of Termination, but in no event later than fourteen
days thereafter, equal to (x) one and one-half times the sum of the Executive's
Base Salary and Target Bonus, each as in effect upon the Termination of
Employment (without giving effect to any reduction which constitutes Good
Reason) (or, if higher, immediately prior to the Effective Date), and (y) the
amount under all of the Pension Plans which the Executive would have accrued
during the period from the Date of Termination until the third anniversary of
the Date of Termination had the Executive continued employment with the Company,
assuming no change in Base Salary and Target Bonus, each as in effect
immediately prior to the Termination of Employment (without giving effect to any
reduction that constitutes Good Reason) (or, if higher, immediately prior to the
Effective Date), assuming full bonus payout and without regard to any amendment
to the
<PAGE>
4
Pension Plans made upon or subsequent to the Effective Date, PROVIDED,
HOWEVER, that such amount shall be reduced by the amount, if any, of the
Retention Bonus (defined below) already paid to the Executive; PROVIDED,
FURTHER, that after such reduction the Executive shall be entitled to no less
than one times the sum of the Executive's then current Base Salary and the
Target Bonus; (ii) continuation during the Severance Period of coverage under
and participation in employee welfare and fringe benefit plans or programs that
the Executive (and any beneficiary) is covered under or participating in
immediately prior to the Notice of Termination (without giving effect to any
reduction in such benefits which constitutes Good Reason) (or, if more favorable
to the Executive, immediately prior to the Effective Date) (or substantially
equivalent plans or programs on a benefit by benefit basis), subject to
reduction of such employee welfare and fringe benefit plans upon re-employment
and receipt by the Executive of comparable benefits under welfare and fringe
benefit plans of a successor employer during the Severance Period; and (iii)
receipt of outplacement services during the Severance Period, which services are
no less favorable than the executive outplacement provided by the Company,
consistent with past practices.
(b) TERMINATION UPON DEATH OR DISABILITY. The Executive
(or his or her representative, if applicable) shall be entitled to the following
severance benefits if, during the two year period commencing on the Effective
Date, the Executive has a Termination of Employment due to death or permanent
disability: (i) a cash payment, which shall be payable in one lump sum as soon
as reasonably practicable after the Date of Termination, but in no event later
than fourteen days thereafter, equal to (x) one and one-half times the sum of
the Executive's Base Salary and Target Bonus, each as in effect upon the
Termination of Employment (or, if higher, immediately prior to the Effective
Date), and (y) the amount under all of the Pension Plans which the Executive
would have accrued during the period from the Date of Termination until the
third anniversary of the Date of Termination had the Executive continued
employment with the Company, assuming no change in Base Salary and Target Bonus,
each as in effect immediately prior to the Termination of Employment (or, if
higher, immediately prior to the Effective Date), assuming full bonus payout and
without regard to any amendment to the Pension Plans made subsequent to the
Effective Date; PROVIDED, HOWEVER, that such amount shall be reduced by the
amount, if any, of the Retention Bonus already paid to the Executive; and (ii)
continuation during the Severance Period of coverage under and participation in
employee welfare and fringe benefit plans or programs that the Executive (and
any beneficiary) is covered under or participating in immediately prior to the
Date of Termination (or, if more favorable to the Executive, immediately prior
to the Effective Date) (or substantially equivalent plans or programs on a
benefit by benefit basis).
(c) LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company
also shall pay to the Executive all legal and accounting fees and expenses
incurred by the Executive as a result of a termination which entitles the
Executive to the severance benefits hereunder (including all such fees and
expenses, if any, incurred in disputing any such termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code to any payment of benefit provided
by the Company). Such payments shall be made within five business days after
delivery of the Executive's written requests for
<PAGE>
5
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require.
5. PAYMENTS OTHER THAN SEVERANCE. Subject to Paragraph 9
herein, upon any Termination of Employment, whether or not the severance
benefits outlined in Paragraph 4 above are payable, the Executive shall also be
entitled to all compensation and other amounts accrued, due and owing to
Executive from Parent or the Company or under any employee benefit plan of
Parent or the Company, as of the Date of Termination including, without
limitation, under the Pension Plans.
6. EXECUTIVE'S AGREEMENTS.
(a) NON-COMPETE. In consideration of the Noncompete
Payment, the Executive hereby covenants and agrees that for the eighteen-month
period following the earlier of any Termination of Employment and the first
anniversary of the Effective Date, he or she shall not directly or indirectly,
own, manage, operate, join, control or participate in the ownership, management,
operation or control, or be connected as a director, officer, employee, partner,
consultant or otherwise with any Competing Business, other than as a shareholder
or beneficial owner, directly or indirectly of five percent or less of the
outstanding securities of a publicly held Competing Business. For purposes of
this Agreement, "Competing Business" means any business, firm or enterprise
engaged in a business substantially similar to the Company's printing business
as it exists at the time of the Effective Date within the same geographical
locations in the United States in which the Company operates on the Effective
Date. The "Noncompete Payment" shall be equal to $2,268,750, forty percent of
which shall be paid on the Effective Date and sixty percent of which shall be
paid on the earlier of the first anniversary of the Effective Date and
termination of the Executive's employment without Cause, for Good Reason or by
reason of death or Permanent Disability.
(b) NON-SOLICITATION. In consideration of the Noncompete
Payment, the Executive hereby covenants and agrees that for the eighteen-month
period following the earlier of any Termination of Employment and the first
anniversary of the Effective Date, he or she shall not directly or indirectly,
(i) solicit any employee of the Company or its affiliates to leave the
employment of the Company or its affiliates, or (ii) solicit any customer of the
Company or its affiliates to end its business relations with the Company or its
affiliates.
(c) ENFORCEMENT. It is expressly understood and agreed
that although the Executive and the Company consider the restrictions contained
in this Paragraph 6 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction against
the Executive, the provisions of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
<PAGE>
6
7. GOLDEN PARACHUTE GROSS-UP. If, in the written opinion of a
nationally recognized accounting firm, selected by the Company and reasonably
acceptable to the Executive for this purpose (at the Company's expense), or if
so alleged by the Internal Revenue Service ("IRS"), the aggregate of the benefit
payments and provisions under this Agreement and any other arrangement between
the Executive and Parent or the Company (the "Payments") would cause the payment
or provision of one or more of such benefits to constitute an "excess parachute
payment" as defined in Section 280G(b) of the Code, then the Company will pay to
the Executive an additional amount in cash (the "Gross-Up Payment") equal to the
amount necessary to cause the net amount retained by the Executive, after
deduction of any (i) excise tax on the Payments, (ii) federal, state or local
income tax on the Gross-Up Payment, (iii) excise tax on the Gross-Up Payment and
(iv) any penalty and interest related to the Payments, to be equal to the
aggregate remuneration the Executive would have received, excluding such
Gross-Up Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions thereto)
had not been enacted into law. The Gross-Up Payment provided for in this
Paragraph shall be made within ten days after the termination of Executive's
employment or the date on which any Payment is made that is reasonably likely to
constitute an "excess parachute payment"; PROVIDED, HOWEVER, that if the amount
of the Gross-Up Payment cannot be finally determined at the time, the Company
shall pay to Executive an estimate as determined in good faith by the Company of
such payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event after the earlier of (i) the date any related withholding taxes are
due or (ii) the thirtieth day after the date of termination or the date on which
any Payment is made that is reasonably likely to constitute an "excess parachute
payment."
The Company agrees to reimburse the Executive for reasonable fees
and expenses (including reasonable attorneys and accountants fees and expenses)
in connection with any audit or assessment by the IRS if a claim ("Claim")
arises out of, or results from the treatment or characterization by the IRS of
any Payments made by Parent or the Company and for the cost of preparing the
Executive's income tax returns for the year in which any Payment by Parent or
the Company may be characterized as an excess parachute payment. The Executive
shall notify the Company in writing of any such Claim as soon as practicable,
but in no event later than ten business days after the Executive is informed of
such Claim and shall cooperate with the Company in good faith to effectively
contest the Claim. The Company shall, at its expense, control all proceedings in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such Claim and the Executive agrees to cooperate
in the prosecution of such contest in such manner as the Company shall
reasonably determine, subject to the Company's obligations hereunder; PROVIDED,
HOWEVER, that no final resolution of such claim may be made by the Company
without the Executive's consent if such resolution could adversely affect the
Executive. Notwithstanding the foregoing, if the Company forgoes further
prosecution of such contest, the Executive may elect to continue such
prosecution and the Company shall cooperate with the Executive and shall be
liable for the fees and expenses in connection with such further prosecution.
<PAGE>
7
8. EMPLOYMENT AT-WILL. Notwithstanding anything to the contrary
contained herein, the Executive's employment with the Company is not for any
specified term and may be terminated by the Executive or by the Company at any
time, for any reason, with or without cause, without liability except with
respect to the severance benefits provided hereunder or as required by law or
any other contract or employee benefit plan or practice.
9. WAIVER OF OTHER SEVERANCE BENEFITS. The benefits payable
pursuant to this Agreement are in lieu of any other severance benefits which may
otherwise be payable to the Executive upon termination within two years
following a change in control pursuant to agreement, policy or practice, except
those benefits which are to be made available to the Executive as required by
applicable law.
10. DISPUTE. All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board of Directors of the
Company and shall be in writing. Any denial by the Board of Directors of the
Company of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. Any dispute or
controversy arising under, out of, in connection with or in relation to this
Agreement shall, at the election and upon written demand of either party, be
finally determined and settled by binding arbitration in the town of Greenwich,
CT, using a mutually agreeable single arbitrator, in accordance with the Labor
Arbitration rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction thereof.
The arbitrator shall have the power to order specific performance, mandamus, or
other appropriate legal or equitable relief to enforce the provisions of this
Agreement. The Company shall pay all costs of the arbitration and all reasonable
attorney's and accountant's fees and expenses of the Executive in connection
therewith.
11. COMPENSATION DURING DISPUTE. If a purported termination
occurs during the two years following the Effective Date, and such termination
is disputed by any party, the Company shall continue to pay the Executive the
full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to the dispute was given
until the dispute is finally resolved in accordance with Paragraph 10 hereof.
Amounts paid under this Paragraph 11 are in addition to all other amounts due
under this Agreement (other than those due under Paragraph 5 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement. In
addition, any Gross-Up Payment due under Paragraph 7 shall be increased to take
into account any increased benefits under this Paragraph.
12. NO SET-OFF. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement.
13. NO MITIGATION OBLIGATION. The parties hereto expressly agree
that the payment of the benefits by the Company to the Executive in accordance
with the terms of this
<PAGE>
8
Agreement will be liquidated damages, and, except with respect to reduction of
employee welfare and fringe benefits but only to the extent specifically
provided for in Paragraph 4(a), that the Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor shall any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise.
14. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company or by any merger or
consolidation where the Company is not the surviving corporation, or upon any
transfer of all or substantially all of the Company's assets, or any other
change in control. The Company shall require any purchaser, assign, surviving
corporation, or successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in the form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any purchaser,
assign, surviving corporation or successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially all
of the business and assets of the Company whether by purchase, merger,
consolidation, reorganization, transfer of all or substantially all of the
business or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation or successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but this Agreement shall not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in this Paragraph 14. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, or otherwise subject to anticipation, alienation, sale,
encumbrance, charge, hypothecation, or set-off in respect of any claim, debt, or
obligation, or to execution, attachment, levy or similar process, or assignment
by operation of law, other than by a transfer by his or her will or by the laws
of descent and distribution. Any attempt, voluntary or involuntary, to effect
any action prohibited by this Paragraph shall be null, void, and of no effect.
15. NOTICES. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and
<PAGE>
9
shall be in writing and delivered personally or sent by telex, telecopy, or
certified or registered mail, postage prepaid, or other similar means of
communication, as follows:
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him or her at the address
set forth in the signature page hereto after Executive's name, or at any such
other address as either party shall have specified by notice in writing to the
other.
16. AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Company. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform; provided, HOWEVER, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity.
17. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, including the CIC Agreement and
Schedule 6.11 to the Agreement and Plan of Merger among Parent, Printing
Acquisition Inc. and the Company dated as of July 12, 1999 (the "Merger
Agreement"), promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
Notwithstanding the foregoing, nothing in this Agreement shall affect the
treatment of the Executive's stock options or restricted stock or the
Executive's third party beneficiary rights under the Merger Agreement (except
with respect to Schedule 6.11 of the Merger Agreement).
18. SEVERABILITY; ENFORCEMENT. If any provision of this
Agreement, or the application thereof to any person, place or circumstance shall
be held by a court of competent jurisdiction to be invalid, unenforceable or
void, the remainder of this Agreement and such provisions as applied to other
persons, places and circumstances shall remain in full force and effect.
19. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Executive harmless from and against any liability, damages, costs, or
expenses (including legal and accounting fees and expenses) in connection with
any claim, cause of action, investigation, litigation, or proceeding involving
him or her by reason of his or her having been an officer, director, employee,
or agent of the Company, unless it is judicially determined, in a final,
<PAGE>
10
nonappealable order, that the Executive was guilty of gross negligence or
willful misconduct. The Company also agrees to maintain directors and officer
liability insurance for the benefit of the Executive for at least six years
after the Effective Date; PROVIDED that the Company shall be deemed to maintain
such insurance if Parent so maintains directors and officer liability insurance
for the benefit of the Executive.
20. GOVERNING LAW. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of
Connecticut, except to the extent pre-empted by Federal law.
21. SURVIVAL. Any paragraph hereunder that requires
performance beyond the termination of this Agreement, and the Company's or the
Executive's (as applicable) obligations thereunder, shall survive any
termination of this Agreement.
22. COUNTERPARTS. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
<PAGE>
11
The parties have duly executed this Agreement as of the date
first written above.
WORLD COLOR PRESS, INC. EXECUTIVE
- ---------------------------------- ------------------------------
By: Marc L. Reisch
Title: 21 Trails End
Chappaqua, NY 10514
<PAGE>
Ex 10-3
EXECUTION COPY
SETTLEMENT AGREEMENT
AGREEMENT made as of August 16, 1999 between World Color Press, Inc., a
Delaware corporation (the "Company"), with offices at 340 Pemberwick Road,
Greenwich, CT 06831, and Robert G. Burton (the "Executive").
WHEREAS, the Executive is employed by the Company or by one of its
wholly-owned consolidated subsidiaries;
WHEREAS, Executive and the Company entered into a Change in Control
Severance Agreement as of April 16, 1999 (the "CIC Agreement") (as attached
hereto as Exhibit A), which provides for severance benefits upon certain
terminations within two years following a "Change in Control" (as defined
therein);
WHEREAS, through a wholly-owned subsidiary, Quebecor Printing Inc. (the
"Parent") intends to acquire the Company in a two-step transaction, and the
consummation of the first step tender offer (the "Effective Date") will
constitute a Change in Control under the CIC Agreement; PROVIDED, HOWEVER, that
in the event the transaction is converted to a one-step merger, the Change in
Control and therefore the Effective Date hereunder will occur upon the effective
date of such merger;
WHEREAS, the Executive's employment will be deemed terminated for Good
Reason as defined under the CIC Agreement upon the Effective Date;
WHEREAS, the Company and the Executive wish to enter into an agreement
embodying the terms of their settlement and the Company wishes to encourage the
Executive to become a member of the Board of Directors of Parent;
NOW, THEREFORE, in consideration of the mutual agreement and
understandings set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. EFFECTIVE DATE. This Agreement shall be effective as of the
Effective Date, if and only if such Effective Date occurs.
2. SETTLEMENT BENEFITS. (a) The Executive (or his
representative, beneficiary or estate, if applicable) shall be entitled to
settlement benefits representing severance payments and noncompete payments
including (i) a cash payment equal to $9,450,000, less applicable withholding
taxes, which is three times the sum of the Executive's annual base salary and
maximum bonus eligibility under the Company's Management By Objectives bonus
plan, each as in effect immediately prior to the Effective Date; (ii) to the
extent not already vested, 100% vesting of any and all equity-based awards
granted to Executive; (iii) a cash payment equal to 100% payout under The World
Color Press, Inc. Third Amended and Restated Supplemental Retirement Plan
("SERP") (as attached hereto as Exhibit B, and incorporated herein by
reference), which the parties agree, assuming the Effective Date occurs August
12, 1999, equals $12,431,404, less applicable withholding taxes; (iv) a cash
payment equal to $2,250,000, less applicable withholding taxes, which is 100%
payout of the bonus for the fiscal year ended December 31, 1999 under the
Company's Management by Objective bonus plan, assuming
<PAGE>
2
achievement of all performance targets and deeming the Executive to have been
employed by the Company for all relevant periods to be entitled to such full
payout; and (v) continuation for three years after the Effective Date of welfare
and fringe benefit plans or programs that the Executive (and any beneficiary) is
covered under or participating in immediately prior to the Effective Date (or
substantially equivalent plans or programs on a benefit by benefit basis),
subject to reduction of such employee welfare and fringe benefit plans upon
re-employment and receipt by the Executive of comparable benefits under welfare
and fringe benefit plans of a successor employer during such three-year period.
Settlement benefits in (i), (iii) and (iv) above shall be paid as soon as
practicable following the Effective Date, but in no event more than fourteen
days thereafter.
(b) LEGAL AND ACCOUNTING FEES AND EXPENSES. The Company
also shall pay to the Executive all legal and accounting fees and expenses
incurred by the Executive as a result of termination of employment (including
all such fees and expenses, if any, incurred in any dispute or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment of benefit provided by the Company). Such payments
shall be made within five business days after delivery of the Executive's
written requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
3. DIVERSIFICATION. The Executive shall be entitled to diversify
his Parent stock holdings without limitation, other than as prohibited by law.
4. BOARD MEMBERSHIP. The Executive shall be appointed to the
Board of Directors of Parent as of the Effective Date.
5. FULL SATISFACTION. The Executive hereby acknowledges and
agrees that, except for the settlement benefits and subject to Paragraph 6
herein, the Executive will not be entitled to any other compensation or benefits
from the Company or its affiliates, including, without limitation, any other
severance or termination benefits (other than directors fees, if any).
6. PAYMENTS OTHER THAN SETTLEMENT BENEFITS. The Executive shall
be entitled to all compensation and other amounts accrued, due and owing to the
Executive from the Company or under any employee benefit plan of the Company
(including, without limitation, the vacation policy and the Cash Balance Plan)
as of the Effective Date.
7. EXECUTIVE'S AGREEMENTS.
(a) NON-COMPETE. In consideration for the noncompete
portion of the settlement benefits provided hereunder, the Executive hereby
covenants and agrees that for the eighteen-month period following the Effective
Date, he shall not directly or indirectly, own, manage, operate, join, control
or participate in the ownership, management, operation or control, or be
connected as a director, officer, employee, partner, consultant or otherwise
with any Competing Business, other than as a shareholder or beneficial owner,
directly or indirectly of
<PAGE>
3
five percent or less of the outstanding securities of a publicly held Competing
Business. For purposes of this Agreement, "Competing Business" means any
business, firm or enterprise engaged in a business substantially similar to the
Company's printing business as it exists at the time of the Effective Date
within the same geographical locations in the United States in which the Company
operates on the Effective Date. At least $6,270,000 of the settlement benefits
provided herein is in exchange for this non-competition covenant.
(b) NON-SOLICITATION. The Executive hereby covenants and
agrees that for the eighteen-month period following the Effective Date, he shall
not directly or indirectly, (i) solicit any employee of the Company or its
affiliates to leave the employment of the Company or its affiliates, or (ii)
solicit any customer of the Company or its affiliates to end its business
relations with the Company or its affiliates.
(c) ENFORCEMENT. It is expressly understood and agreed
that although the Executive and the Company consider the restrictions contained
in this Paragraph 7 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction against
the Executive, the provisions of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
8. GOLDEN PARACHUTE GROSS-UP. If, in the written opinion of
a nationally recognized accounting firm, selected by the Company and reasonably
acceptable to the Executive for this purpose (at the Company's expense), or if
so alleged by the Internal Revenue Service ("IRS"), the aggregate of the benefit
payments and provisions under this Agreement and any other arrangement between
the Executive and Parent or the Company (the "Payments") would cause the payment
or provision of one or more of such benefits to constitute an "excess parachute
payment" as defined in Section 280G(b) of the Code, then the Company will pay to
the Executive an additional amount in cash (the "Gross-Up Payment") equal to the
amount necessary to cause the net amount retained by the Executive, after
deduction of any (i) excise tax on the Payments, (ii) federal, state or local
income tax on the Gross-Up Payment, (iii) excise tax on the Gross-Up Payment and
(iv) any penalty and interest relating to the Payments, to be equal to the
aggregate remuneration the Executive would have received, excluding such
Gross-Up Payment (net of all federal, state and local excise and income taxes),
as if Sections 280G and 4999 of the Code (and any successor provisions thereto)
had not been enacted into law. The Gross-Up Payment provided for in this
Paragraph shall be made within ten days after the Effective Date or the date on
which any Payment is made that is reasonably likely to constitute an "excess
parachute payment"; PROVIDED, HOWEVER, that if the amount of the Gross-Up
Payment cannot be finally determined at the time, the Company shall pay to the
Executive an estimate as determined in good faith by the Company of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
after the earlier of (i) the date any related withholding taxes are due or (ii)
the
<PAGE>
4
thirtieth day after the Effective Date or the date on which any Payment is
made that is reasonably likely to constitute an "excess parachute payment."
The Company agrees to reimburse the Executive for reasonable fees
and expenses (including reasonable attorneys and accountants fees and expenses)
in connection with any audit or assessment by the IRS if a claim ("Claim")
arises out of, or results from the treatment or characterization by the IRS of
any Payments made by Parent or the Company and for the cost of preparing the
Executive's income tax returns for the year in which any Payment by Parent or
the Company may be characterized as an excess parachute payment. The Executive
shall notify the Company in writing of any such Claim as soon as practicable,
but in no event later than ten business days after the Executive is informed of
such Claim and shall cooperate with the Company in good faith to effectively
contest the Claim. The Company shall, at its expense, control all proceedings in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such Claim and the Executive agrees to cooperate
in the prosecution of such contest in such manner as the Company shall
reasonably determine, subject to the Company's obligations hereunder; PROVIDED,
HOWEVER, that no final resolution of such claim may be made by the Company
without the Executive's consent if such resolution could adversely affect the
Executive. Notwithstanding the foregoing, if the Company forgoes further
prosecution of such contest, the Executive may elect to continue such
prosecution and the Company shall cooperate with the Executive and shall be
liable for the fees and expenses in connection with such further prosecution.
9. NOTICES. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex, telecopy, or certified or registered mail, postage prepaid, or other
similar means of communication, as follows:
(a) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(b) If to the Executive, to him at the address set forth
below under the Executive's signature, or at any such other address as either
party shall have specified by notice in writing to the other.
6. DISPUTE. All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the Board of Directors of
the Company and shall be in writing. Any denial by the Board of Directors of the
Company of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. Any dispute or
controversy arising under, out of, in connection with or in relation to this
Agreement shall, at the election and upon written demand of either party, be
finally determined and settled by binding arbitration in the town of Greenwich,
CT, using a mutually agreeable single arbitrator, in accordance with the Labor
Arbitration rules and procedures of the American Arbitration Association, and
judgment upon the award may be entered in any court having jurisdiction
<PAGE>
5
thereof. The arbitrator shall have the power to order specific performance,
mandamus, or other appropriate legal or equitable relief to enforce the
provisions of this Agreement. The Company shall pay all costs of the arbitration
and all reasonable attorney's and accountant's fees and expenses of the
Executive in connection therewith.
11. NO SET-OFF. There shall be no right of set-off or
counterclaim in respect of any claim, debt, or obligation against any payment to
or benefit for the Executive provided for in this Agreement.
12. NO MITIGATION OBLIGATION. The parties hereto expressly
agree that the payment of the benefits by the Company to the Executive in
accordance with the terms of this Agreement will be liquidated damages, and,
except with respect to reduction of employee welfare and fringe benefits, but
only to the extent specifically provided for in Paragraph 2(a)(v), that the
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor shall any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
13. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company or by any merger or
consolidation where the Company is not the surviving corporation, or upon any
transfer of all or substantially all of the Company's assets, or any other
change in control. The Company shall require any purchaser, assign, surviving
corporation, or successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in the form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the Company and any purchaser,
assign, surviving corporation or successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially all
of the business and assets of the Company whether by purchase, merger,
consolidation, reorganization, transfer of all or substantially all of the
business or assets of the Company, or otherwise (and such purchaser, assign,
surviving corporation or successor shall thereafter be deemed the "Company" for
the purposes of this Agreement), but this Agreement shall not otherwise be
assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in this Paragraph 13. Without
<PAGE>
6
limiting the generality of the foregoing, the Executive's right to receive
payments hereunder shall not be assignable, transferable or delegable, whether
by pledge, creation of a security interest or otherwise, or otherwise subject to
anticipation, alienation, sale, encumbrance, charge, hypothecation, or set-off
in respect of any claim, debt, or obligation, or to execution, attachment, levy
or similar process, or assignment by operation of law, other than by a transfer
by his or her will or by the laws of descent and distribution. Any attempt,
voluntary or involuntary, to effect any action prohibited by this Paragraph
shall be null, void, and of no effect.
14. AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, signed by the
Executive and by a duly authorized representative of the Company. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform; provided, HOWEVER, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity.
15. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and, except for the SERP, supersedes all prior agreements (including the
CIC Agreement), promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
Notwithstanding the foregoing, nothing in this Agreement shall affect the
treatment of the Executive's stock options or restricted stock or the
Executive's third party beneficiary rights under the Agreement and Plan of
Merger among Parent, Printing Acquisition Inc. and the Company dated as of July
12, 1999.
16. SEVERABILITY; ENFORCEMENT. If any provision of this
Agreement, or the application thereof to any person, place or circumstance shall
be held by a court of competent jurisdiction to be invalid, unenforceable or
void, the remainder of this Agreement and such provisions as applied to other
persons, places and circumstances shall remain in full force and effect.
17. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Executive harmless from and against any liability, damages, costs, or
expenses (including legal and accounting fees and expenses) in connection with
any claim, cause of action, investigation, litigation, or proceeding involving
him by reason of his having been an officer, director, employee, or agent of the
Company, unless it is judicially determined, in a final, nonappealable order,
that the Executive was guilty of gross negligence or willful misconduct. The
Company also agrees to maintain directors and officer liability insurance for
the benefit of the Executive for at least six years after the Effective Date;
PROVIDED that the Company shall be deemed to
<PAGE>
7
maintain such insurance if Parent so maintains directors and officer liability
insurance for the benefit of the Executive.
18. GOVERNING LAW. This Agreement shall be interpreted,
administered and enforced in accordance with the law of the State of
Connecticut, except to the extent pre-empted by Federal law.
19. COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
<PAGE>
8
The parties have duly executed this Agreement as of the date
first written above.
WORLD COLOR PRESS, INC. EXECUTIVE
- --------------------------------- ------------------------------
By: Robert Burton
Title: 170 Clapboard Ridge Road
Greenwich, CT 06831
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 26, 1999 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 26,
1999 OF QUEBECOR WORLD (USA) INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-26-1999
<CASH> 16,127
<SECURITIES> 0
<RECEIVABLES> 245,494
<ALLOWANCES> 0
<INVENTORY> 301,758
<CURRENT-ASSETS> 655,936
<PP&E> 1,735,112
<DEPRECIATION> 814,472
<TOTAL-ASSETS> 2,463,171
<CURRENT-LIABILITIES> 349,200
<BONDS> 1,330,661
0
0
<COMMON> 393
<OTHER-SE> 596,616
<TOTAL-LIABILITY-AND-EQUITY> 2,463,171
<SALES> 1,859,228
<TOTAL-REVENUES> 1,859,228
<CGS> 1,521,743
<TOTAL-COSTS> 1,521,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,480
<INCOME-PRETAX> (153,653)
<INCOME-TAX> (28,415)
<INCOME-CONTINUING> (125,238)
<DISCONTINUED> 0
<EXTRAORDINARY> (11,992)
<CHANGES> (10,513)
<NET-INCOME> (147,743)
<EPS-BASIC> (3.90)
<EPS-DILUTED> (3.90)
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