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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1999 COMMISSION FILE NUMBER 1-11802
(Logo Omitted)
WORLD COLOR PRESS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 37-1167902
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
THE MILL, 340 PEMBERWICK ROAD 06831
GREENWICH, CONNECTICUT (Zip Code)
(Address of principal executive offices)
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 August 6, 1999, 38,036,302 shares of the registrant's common stock, $.01 par
value, were outstanding.
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<CAPTION>
WORLD COLOR PRESS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1999
INDEX
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Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of June 27, 1999
and December 27, 1998.......................................3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 27, 1999 and
June 28, 1998.............................................4-5
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 27, 1999 and June 28, 1998............6
Notes to Condensed Consolidated Financial Statements...........7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................10-14
PART II. OTHER INFORMATION.......................................15-16
</TABLE>
2
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<TABLE>
<CAPTION>
WORLD COLOR PRESS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 27, 1999 AND DECEMBER 27, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
JUNE 27, DECEMBER 27,
1999 1998
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 49,145 $ 199,932
Accounts receivable - net 147,607 229,209
Inventories 261,204 276,111
Deferred income taxes 13,915 16,986
Other 77,093 63,729
---------- ----------
Total current assets 548,964 785,967
Property, plant and equipment, at cost 1,710,177 1,613,674
Accumulated depreciation and amortization (780,434) (727,675)
---------- ----------
Property, plant and equipment - net 929,743 885,999
Goodwill - net 788,119 647,085
Other 100,353 114,835
---------- ----------
TOTAL ASSETS $2,367,179 $2,433,886
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 286,703 $ 321,208
Current maturities of long-term debt 22,631 225,331
---------- ----------
Total current liabilities 309,334 546,539
Long-term debt 1,242,697 1,030,589
Deferred income taxes 73,351 94,793
Other long-term liabilities 136,081 93,318
---------- ----------
Total liabilities 1,761,463 1,765,239
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value - shares
authorized, 100,000,000 in 1999 and
1998; shares outstanding, 39,265,320
in 1999 and 38,639,642 in 1998 393 386
Additional paid-in capital 731,546 721,913
Accumulated deficit (87,654) (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 (7,398) (3,729)
---------- ----------
Total stockholders' equity 605,716 668,647
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,367,179 $2,433,886
========== ==========
</TABLE>
Note: Derived from audited consolidated financial statements.
See notes to condensed consolidated financial statements.
3
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<CAPTION>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- ---------------------------------------------------------------------------
THREE MONTHS SIX MONTHS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 566,545 $ 546,503 $1,172,388 $1,096,910
Cost of sales 466,773 452,292 974,580 915,126
---------- ---------- ---------- ----------
Gross profit 99,772 94,211 197,808 181,784
Selling, general and
administrative expenses 56,749 55,166 113,284 106,593
Restructuring and other
special charges 62,410 - 62,410 -
---------- ---------- ---------- ----------
Operating income (loss) (19,387) 39,045 22,114 75,191
Interest expense and
securitization fees 25,050 22,341 48,959 42,491
---------- ---------- ---------- ----------
Income (loss) before income
taxes, extraordinary items
and cumulative effect of
change in accounting
principle (44,437) 16,704 (26,845) 32,700
Income tax provision (benefit) (18,219) 6,932 (11,006) 13,570
---------- ---------- ---------- ----------
Income (loss) before
extraordinary items and
cumulative effect of change
in accounting principle (26,218) 9,772 (15,839) 19,130
Extraordinary items, net of tax - - (11,992) -
Cumulative effect of change in
accounting principle,
net of tax - - (10,513) -
---------- ---------- ----------- ---------
Net income (loss) $ (26,218) $ 9,772 $ (38,344) $ 19,130
========== ========== ========== =========
Continued on next page.
</TABLE>
4
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<CAPTION>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
(In thousands, except per share data)
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THREE MONTHS SIX MONTHS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (loss) per common
share-basic:
Income (loss) before extraordinary
items and cumulative effect of
change in accounting principle $ (0.70) $ 0.25 $ (0.42) $ 0.50
Extraordinary items - - (0.31) -
Cumulative effect of change in
accounting principle - - (0.28) -
-------- -------- -------- --------
Net income (loss) per common
share-basic $ (0.70) $ 0.25 $ (1.01) $ 0.50
======== ======== ======== ========
Net income (loss) per common
share-diluted:
Income (loss) before extraordinary
items and cumulative effect of
change in accounting principle $ (0.70) $ 0.25 $ (0.42) $ 0.49
Extraordinary items - - (0.31) -
Cumulative effect of change in
accounting principle - - (0.28) -
------- --------- -------- --------
Net income (loss) per common
share - diluted $ (0.70) $ 0.25 $ (1.01) $ 0.49
======= ========= ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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<CAPTION>
WORLD COLOR PRESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 27, 1999 AND JUNE 28, 1998
(IN THOUSANDS)
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SIX MONTHS
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(38,344) $19,130
Adjustments to reconcile net income to net cash
flows provided by (used in) operating activities:
Depreciation and amortization 77,372 69,191
Restructuring and other special charges 62,410 -
Extraordinary items, net of tax 11,992 -
Cumulative effect of change in accounting principle,
net of tax 10,513 -
Deferred income tax (benefit) provision (20,609) 4,675
Changes in operating assets and liabilities:
Accounts receivable - net 106,693 16,343
Inventories 23,368 (47,443)
Accounts payable and accrued expenses (73,428) (63,442)
Other assets and liabilities - net (34,820) (26,959)
-------- --------
Net cash provided by (used in)
operating activities 125,147 (28,505)
-------- --------
INVESTING ACTIVITIES:
Additions to property, plant and equipment - net (60,565) (117,454)
Acquisitions of businesses, net of cash acquired (114,110) (190,095)
-------- --------
Net cash used in investing activities (174,675) (307,549)
-------- --------
FINANCING ACTIVITIES:
Net (payments) borrowings on debt (69,210) 308,690
Premium paid on debt extinguishment (6,840) -
Proceeds from issuance of common stock 5,349 -
Repurchases of common stock (30,558) -
-------- --------
Net cash (used in) provided by
financing activities (101,259) 308,690
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (150,787) (27,364)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 199,932 37,676
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 49,145 $ 10,312
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
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WORLD COLOR PRESS, 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 World Color Press, Inc. (along with its subsidiaries, the
"Company" or "World Color") 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 periods ended June 27, 1999, the Company acquired certain
businesses whose contributions were not significant to the Company's results
of operations for the periods presented, nor are they expected to have a
material effect on the Company's results on a continuing basis.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 27,
1999 1998
<S> <C> <C>
Work-in-process $128,790 $139,259
Raw materials 132,414 136,852
-------- --------
Total $261,204 $276,111
======== ========
</TABLE>
3. NET INCOME (LOSS) PER COMMON SHARE
The following represents the weighted average common and common equivalent
shares:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 37,672,685 38,397,053 37,929,835 38,375,118
Common equivalent shares 440,356 1,092,796 442,445 1,055,247
---------- ---------- ---------- ----------
Weighted average common
and common equivalent
shares outstanding 38,113,041 39,489,849 38,372,280 39,430,365
========== ========== ========== ==========
</TABLE>
Common equivalent shares were not included in the diluted net loss per
common share calculation for the three and six months ended June 27, 1999
since the effect was antidilutive. Options to purchase 1,242,200 and 25,000
shares of common stock were not included in the common equivalent shares for
the three and six months ended June 27, 1999 and June 28, 1998,
respectively, because the exercise price of the options was greater than the
average market price of the common shares. The Company omitted 109,904
restricted common shares from the 1999 common equivalent shares as well as
the impact of convertible debt securities from the 1999 and 1998 diluted
calculations since the effects were antidilutive.
7
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WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
4. RESTRUCTURING AND OTHER SPECIAL CHARGES
In the second quarter of 1999, the Company recorded restructuring and other
special charges of $62,410, or $36,822 net of tax, to eliminate redundant
and less efficient capacity resulting from its ongoing acquisition strategy.
The restructuring and other special charges included the costs to exit a
facility and certain sales offices, write down impaired assets, eliminate
administrative positions and consolidate facilities. These charges,
consisting primarily of $14,699 for the writedown 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 $3,145 included
additional costs to exit the facility and severance.
The Company has closed the facility and sales offices and terminated
affected employees. Fixed assets have been adjusted to reflect their
appropriate values. Cash transactions charged against the reserve through
the second quarter have been nominal. The Company expects approximately
$5,000 of cash to be expended in the third and fourth quarters 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, writedown 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 third quarter of 1999.
5. RESTRICTED STOCK
In April 1999, the Company issued 202,500 restricted shares of common stock
to certain key employees. The shares vest ratably over five years and are
contingent upon continued employment. The restricted shares were issued
under the Company's restricted stock plan at $21.19, the fair market value
at the date of grant.
6. DEBT ISSUANCE AND EXTINGUISHMENT
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 Second Amended
and Restated Credit Agreement dated June 6, 1996, as amended (the "Credit
Agreement"). In connection with the issuance of these notes, the Company
amended the Credit Agreement resulting in, among other modifications, a
$95,000 permanent reduction in borrowings and commitments under the 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 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.
8
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WORLD COLOR PRESS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
7. 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.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. Gains or losses resulting from changes in the
values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. In June 1999,
the Financial Accounting Standards Board issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133," to delay the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. Therefore, the Company plans
to adopt SFAS No. 133 in the first quarter of fiscal year 2001. Based on
the Company's current portfolio of derivative financial instruments, it does
not expect the adoption of SFAS No. 133 to have a material impact on its
consolidated financial statements.
9. SUBSEQUENT EVENT
On July 12, 1999, the Company and Quebecor Printing Inc. ("Quebecor
Printing") entered into a definitive merger agreement pursuant to which
Quebecor Printing will acquire all of the shares of World Color in a
transaction valued at approximately $2,700,000, including assumption of debt.
The new company will be known as Quebecor World Inc. and will be a wholly
owned subsidiary of Quebecor Printing.
The merger agreement provides for the acquisition by Printing Acquisition
Inc. ("Purchaser"), a subsidiary of Quebecor Printing, pursuant to a tender
offer to purchase for cash up to 23.5 million shares of common stock
representing approximately 62% of the outstanding shares of World Color at
a cash price of $35.69 per share. This is to be followed by a merger pursuant
to which each outstanding share of World Color common stock that remained
outstanding (other than shares purchased by Quebecor Printing in the tender
offer) would be converted into the right to receive 1.6455 subordinate voting
shares of Quebecor Printing.
9
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
GENERAL
In the first five months of fiscal year 1999, we acquired four businesses
serving customers in the commercial, retail and directory markets for an
aggregate purchase price of approximately $195,000, 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 the first four months of fiscal year 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 JUNE 27, 1999 COMPARED TO THREE MONTHS ENDED JUNE 28, 1998
Net sales increased $20,042 or 3.7% to $566,545 in 1999 from $546,503 in 1998.
The increase was primarily due to the inclusion of sales from the acquisitions
in 1999, partially offset by a decrease in paper prices.
Gross profit increased $5,561 or 5.9% to $99,772 in 1999 from $94,211 in 1998.
The gross profit margin increased to 17.6% in 1999 from 17.2% 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 $62,410, increased $63,993 or 116.0% to $119,159 in 1999 from
$55,166 in 1998. Excluding the one-time charge, the 1999 increase of $1,583 or
2.9% to $56,749 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 $2,709 or 12.1% to $25,050 in
1999 from $22,341 in 1998. The increase was due to higher average borrowings
incurred to fund acquisitions, slightly offset by a lower average cost of funds.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41.0% for the second quarter of fiscal year 1999 compared
to 41.5% for the comparable period in 1998.
SIX MONTHS ENDED JUNE 27, 1999 COMPARED TO SIX MONTHS ENDED JUNE 28, 1998
Net sales increased $75,478 or 6.9% to $1,172,388 in 1999 from $1,096,910 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 $16,024 or 8.8% to $197,808 in 1999 from $181,784 in
1998. The gross profit margin increased to 16.9% in 1999 from 16.6% in 1998 due
to decreased sales resulting from lower paper prices, synergies resulting from
the integration of the acquired businesses and certain cost reduction
initiatives.
10
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
Selling, general and administrative expenses, including restructuring and other
special charges of $62,410, increased $69,101 or 64.8% to $175,694 in 1999 from
$106,593 in 1998. Excluding the one-time charge, the 1999 increase of $6,691 or
6.3% to $113,284 was primarily due 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 $6,468 or 15.2% to $48,959 in
1999 from $42,491 in 1998. The increase was due to higher average borrowings
incurred to fund acquisitions, slightly offset by a lower average cost of funds.
The effective tax rate, primarily composed of the combined federal and state
statutory rates, was 41.0% for the first six months of fiscal year 1999 compared
to 41.5% for the comparable period in 1998.
RESTRUCTURING AND OTHER SPECIAL CHARGES
In the second quarter of 1999, we recorded restructuring and other special
charges of $62,410, or $36,822 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 a
facility and certain sales offices, write down impaired assets, eliminate
administrative positions and consolidate facilities. These charges, consisting
primarily of $14,699 for the writedown 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 $3,145 included additional costs to exit the facility and severance.
We have closed the facility and sales offices and terminated affected employees.
Fixed assets have been adjusted to reflect their appropriate values. Cash
transactions charged against the reserve through the second quarter have been
nominal. We expect approximately $5,000 of cash to be expended in the third and
fourth quarters 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, writedown of assets and elimination of administrative positions.
We have not yet determined whether the effect of further restructuring plans
will be recognized in the third quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
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 credit agreement. In connection with the issuance of
these notes, we amended our credit agreement resulting in, among other
modifications, a $95,000 permanent reduction in borrowings and commitments under
the 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 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.
11
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WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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 one-time
charges, plus depreciation and amortization and deferred income taxes was
$103,334 and $92,996 for the six months ended June 27, 1999 and June 28, 1998,
respectively. Our outstanding indebtedness less cash increased $160,195 from
December 27, 1998 to June 27, 1999 due primarily to borrowings incurred to fund
acquisitions. Working capital was $239,630 at June 27, 1999 and $219,475 at June
28, 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.
Our capital expenditures and acquisitions have been funded in part by borrowings
under our Second Amended and Restated Credit Agreement dated as of June 6, 1996,
as amended, which provides for aggregate total commitments of $825,000 comprised
of $85,000 in term loan commitments, $250,000 of revolving loan commitments and
$490,000 in acquisition term loan commitments. The credit agreement provides for
varying semi-annual reductions, and borrowings bear interest at rates that
fluctuate with the prime rate and the Eurodollar rate. As of June 27, 1999, we
had unused commitments of $327,020 under our credit agreement.
In April 1999, we issued 202,500 restricted shares of common stock to certain
key employees. The shares were awarded because, among other things, certain 1998
operational targets were achieved. The restricted shares were issued under our
restricted stock plan at $21.19, the fair market value at the date of grant. The
restricted shares vest ratably over five years and are contingent upon continued
employment.
In the first six 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 through June 27, 1999, we have repurchased
1,750,153 shares at a weighted average cost of $26.02 per share and reissued
466,255 shares.
Concentrations of credit risk with respect to accounts receivable are limited
due to our diverse operations and large customer base. As of June 27, 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 addition, we
have entered into interest rate cap and swap agreements in order to further
reduce the exposure on our variable rate obligations. Our interest rate cap
agreements have a notional value of $400,000 and expire in the third
quarter of fiscal year 1999. Our interest rate swap agreements have a
notional value of $75,000 and exchange floating rate for fixed interest payments
periodically over five years. The swap agreements are cancelable by the
respective counterparties in September and December 1999. These agreements did
not have a material impact on the consolidated financial statements for the
periods presented. While the counterparties of these agreements expose us to
credit loss in the event of nonperformance, we believe that the possibility of
incurring such a loss is remote due to the creditworthiness of the
counterparties. We do not hold or issue any derivative financial instruments for
trading purposes.
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 for the foreseeable future.
12
<PAGE>
<PAGE>
WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SUBSEQUENT EVENT
On July 12, 1999, World Color and Quebecor Printing Inc. ("Quebecor Printing")
entered into a definitive merger agreement pursuant to which Quebecor Printing
will acquire all of our shares in a transaction valued at approximately
$2,700,000, including assumption of debt. The new company will be known as
Quebecor World Inc. and will be a wholly owned subsidiary of Quebecor Printing.
The merger agreement provides for the acquisition by Printing Acquisition Inc.
("Purchaser"), a subsidiary of Quebecor Printing, pursuant to a tender offer to
purchase for cash up to 23.5 million shares of common stock representing
approximately 62% of our outstanding shares at a cash price of $35.69 per
share. This is to be followed by a merger pursuant to which each outstanding
share of World Color common stock that remained outstanding (other than shares
purchased by Quebecor Printing in the tender offer) would be converted into the
right to receive 1.6455 subordinate voting shares of Quebecor Printing.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires companies to
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. Gains or losses resulting from changes in the values
of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In June 1999, the
Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133," to delay the effective date of SFAS No. 133 to
fiscal years beginning after June 15, 2000. Therefore, we plan to adopt SFAS
No. 133 in the first quarter of fiscal year 2001. Based on our current
portfolio of derivative financial instruments, we do not expect the adoption of
SFAS No. 133 to have a material impact on our consolidated financial statements.
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 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. We have substantially completed our readiness efforts
with respect to our non-information systems.
13
<PAGE>
<PAGE>
WORLD COLOR PRESS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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
second half 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 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.
14
<PAGE>
<PAGE>
WORLD COLOR PRESS, INC.
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 5, 1999. At that
time, the stockholders of the Company voted to elect seven directors to serve
for the ensuing year. A total of 33,663,568 and 4,468,268 shares were voted and
unvoted, respectively. The following table sets forth certain information with
respect to such election.
<TABLE>
<CAPTION>
Shares Withholding
Nominee Shares Voted For Authority
------- ---------------- -----------------
<S> <C> <C>
Gerald S. Armstrong 32,489,790 1,173,778
Robert G. Burton 32,378,790 1,284,778
Patrice M. Daniels 32,378,790 1,284,778
Mark J. Griffin 32,489,690 1,173,878
Alexander Navab, Jr. 32,378,790 1,284,778
Marc L. Reisch 32,378,890 1,284,678
Scott M. Stuart 32,378,790 1,284,778
</TABLE>
No other matters were submitted for stockholder vote.
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 Form of Director Stock Option Agreement.
27.0 Financial Data Schedule for the period ended June 27, 1999 (filed in
electronic form only).
(b) Reports on Form 8-K
The registrant filed a Current Report on Form 8-K dated July 13, 1999, with
respect to a merger agreement with Quebecor Printing Inc. The items
reported in such Current Report were Item 5 (Other Events) and Item 7
(Financial Statements, Pro Forma Financial Information and Exhibits).
15
<PAGE>
<PAGE>
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.
WORLD COLOR PRESS, INC.
Date: August 6, 1999 By:/s/ ROBERT B. LEWIS
--------------------------
Robert B. Lewis
Executive Vice President,
Chief Financial Officer
16
<PAGE>
<PAGE>
Exhibit 10.1
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") dated as of ____________ is
made by and between World Color Press, Inc., a Delaware corporation ("WCP"), and
_________________, an individual with a residence at___________________________.
WCP and the Optionholder are sometimes herein referred to collectively as the
"Parties."
RECITALS
A. The Optionholder is a member of the Board of Directors (the "Board")
of WCP.
B. WCP has established the 1998 Senior Management Stock Option Plan of
World Color Press, Inc. (the "Option Plan"), and, pursuant to the Option Plan,
WCP wishes to afford the Optionholder the opportunity to purchase shares of its
common stock, par value $.01 per share (the "Common Stock"). The term "Options"
as used in this Agreement shall include all Options granted to the Optionholder
pursuant to this Agreement. Upon exercise of Options granted hereunder in
accordance with the terms hereof and issuance of Common Stock upon such exercise
the Optionholder will become the holder of "Option Shares."
C. The Compensation Committee (the "Committee") of the Board of Directors
of WCP (the "Board") has determined that it would be to the advantage and best
interest of WCP and its stockholders to grant the Options provided for herein to
the Optionholder as an inducement to continue to perform services for the
Company (as hereinafter defined) and as an incentive for increased efforts
during such service, and has advised WCP thereof and instructed the undersigned
officer to issue said Options. For the purposes of this Agreement, the
"Company" shall mean WCP, together with its subsidiaries.
D. This Agreement is one of several agreements ("Other Stock Option
Agreements") which have been, or which in the future will be, entered into
between WCP and other holders of Options granted pursuant to the Option Plan
(collectively, the "Other Optionholders").
<PAGE>
<PAGE>
AGREEMENTS
1. GRANT OF OPTIONS. In consideration of the Optionholder's agreement to
provide services to the Company and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, WCP irrevocably
grants to the Optionholder on the date hereof and effective as of ___________
(the "Grant Date") an aggregate of _____ Options, each to purchase initially one
share of Common Stock (shares issuable upon exercise of the Options are
collectively referred to herein as the "Option Shares"), upon the terms and
conditions set forth in this Agreement. This Agreement and the grant of the
Options herein are subject to all of the terms and provisions of the Option Plan
attached hereto as Exhibit A (which terms and provisions are incorporated herein
by reference and are expressly made part of this Agreement). In the event of
any conflict between the provisions of this Agreement and the Option Plan, the
terms of the Option Plan shall govern. All capitalized terms used herein
without definition and defined in the Option Plan have the meanings ascribed to
such terms in the Option Plan. The Options granted hereby are designated
non-qualified stock options (and not "Incentive Options" under Section 422 of
the Internal Revenue Code ("Code")) and are nontransferable except as otherwise
expressly set forth in the Option Plan.
2. EXERCISE PRICE. The purchase price of the Option Shares upon exercise
of any of the Options (the "Exercise Price" or "Option Price Per Share") shall
initially be ______ per share, without commission or other charge.
3. EXERCISABILITY. (a) The Options shall become exercisable as follows:
<TABLE>
<CAPTION>
Date Options Become Exercisable Exercisable Percentage
of Options
- ------------------------------ ----------------------
<S> <C>
From Grant Date until the earlier of 0%
the date of the Company's __________
annual meeting and the first
anniversary of the Grant Date (the
"Vesting Date")
On and after the Vesting Date 100%
</TABLE>
(b) Notwithstanding the foregoing, 100% of the Options shall become
exercisable (but only to the extent such Option has not otherwise then
terminated or become unexercisable) immediately prior to the occurrence of a
Change of Control (as herein defined); provided, however, that as a condition
subsequent to the acceleration of the exercisability of the Option pursuant to
this paragraph, the Change of Control shall be consummated. In the event the
contemplated Change of Control is not consummated, the acceleration of
exercisability and the exercise, if any, of the Option shall be void ab initio.
(c) Notwithstanding the foregoing, all Options that are not exercisable at
the time of the cessation of the Optionholder's position as a member of the
Board for any reason other than by reason of the Optionholder's death or
Permanent Disability (each as hereinafter defined) shall be automatically and
immediately canceled without any payment or other action by the Company. In the
event of and upon the cessation of the Optionholder's position as a member of
the Board because of the Optionholder's death or Permanent Disability, all of
the Optionholder's Options granted hereunder shall immediately become
exercisable.
(d) For purposes of this Agreement, the Optionholder shall be deemed to
have a "Permanent Disability" if he or she is unable to engage in the activities
required as a Director by reason of any medically determined physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months, as
reasonably determined by the Board in good faith and in its discretion.
4. MANNER OF EXERCISE
(a) PARTIAL EXERCISE. An exercisable Option may be exercised at any time
prior to the time when the Option becomes unexercisable under Section 10;
provided that each exercise shall be for not less than ___ Option Shares and
shall be for whole Option Shares only.
<PAGE>
<PAGE>
(b) MANNER OF EXERCISE. An exercisable Option shall be deemed exercised
upon delivery of all of the following to the Secretary of the Company or his or
her office:
(i) A written notice complying with the applicable rules established
by the Committee stating that the Option is exercised. The Optionholder or
other person then entitled and authorized to exercise the Option shall sign
the notice;
(ii) Such representations and documents as the Committee, in its
discretion, deems necessary, appropriate or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as amended
(the "Act"), and any other federal or state securities laws, rules or
regulations. The Committee may, in its discretion, also take whatever
additional actions it deems necessary, appropriate or advisable to effect
such compliance, including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to transfer agents and
registrars;
(iii) In the event that the Option shall be exercised by any
person or persons other than the Optionholder, appropriate proof of the
right of such person or persons to exercise the Option; and
(iv) Full payment (by certified or bank check or by wire transfer of
immediately available funds) to the Secretary of the Company for the Option
Shares with respect to which Options are exercised and any applicable
withholding taxes. In its discretion, however, the Committee may (A) allow
a delay in payment up to thirty (30) days from the date the Option is
exercised; (B) allow payment, in whole or in part, through the delivery of
shares of Common Stock owned by the Optionholder (including, subject to
Section 4(c), Option Shares issuable upon such exercise), duly endorsed for
transfer to WCP, having an Aggregate Market Value (as hereinafter defined)
on the date of delivery equal to the aggregate Exercise Price of the
Options; (C) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration;
(D) allow payment, in whole or in part, through the delivery of a full
recourse promissory note bearing interest (at no less than such rate as
shall then preclude the imputation of interest under the Code) and payable
upon such terms as may be prescribed by the Committee; or (E) allow payment
through any combination of the consideration provided in the foregoing
subparagraphs (B), (C) and (D). In the case of a promissory note, the
Committee may also prescribe the form of such note and the security to be
given for such note. No Option may be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan or
other extension of credit is prohibited by law.
(c) CERTAIN TIMING REQUIREMENTS. At the discretion of the Committee,
shares of Common Stock issuable to the Optionholder upon exercise of the Option
may be used to satisfy the Option Exercise Price or the tax withholding
consequences of such exercise.
(d) RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of WCP in respect of any shares
purchasable upon the exercise of any Option unless and until certificates
representing such shares have been issued by the Company to such holders.
<PAGE>
<PAGE>
(e) CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. WCP may postpone the
time of delivery of the certificates for Option Shares for such additional time
as WCP shall deem necessary or desirable to enable it to comply with the listing
requirements of any securities exchange with which the Common Stock may be
listed or the requirements of the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any rules and regulations of the Securities and
Exchange Commission promulgated thereunder, or the requirements of applicable
state laws relating to the authorization, issuance or sale of securities.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE OPTIONHOLDER
(a) (1) The Optionholder hereby represents and warrants that he or she is
acquiring the Options and any Option Shares issued upon exercise thereof for
investment for his or her own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof. The
Optionholder acknowledges and affirms Section 7.1 of the Option Plan.
(2) The Optionholder acknowledges and agrees that no Option or
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
that nothing in this Section 5 shall prevent transfers by will, by the
applicable laws of descent and distribution or, with the consent of the
Committee, the transfer of Options by gift made in compliance with the federal
securities laws to a family member of the Optionholder or a family trust or for
other estate planning purposes.
(3) The Optionholder further agrees and acknowledges that he or she
will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of (any such act being referred to herein as a
"transfer") any Option Shares unless such transfer complies with Section 6 of
this Agreement and such transfer is pursuant to (i) an effective registration
statement under the Act and the rules and regulations thereunder and in
compliance with any applicable state securities or "blue sky" laws, or (ii) (A)
an opinion of counsel to the Optionholder (which counsel shall be reasonably
acceptable to WCP) furnished to WCP and satisfactory in form and substance to
WCP that no such registration is required because of the availability of an
exemption from registration under the Act and (B) if the Optionholder is a
citizen or resident of any country other than the United States, or the
Optionholder desires to effect any transfer in any such country, counsel for the
Optionholder (which counsel shall be reasonably satisfactory to WCP) shall have
furnished WCP with an opinion or other advice satisfactory in form and substance
to WCP to the effect that such transfer will comply with the securities laws of
such jurisdiction.
<PAGE>
<PAGE>
(b) Notwithstanding the foregoing, WCP acknowledges and agrees that any of
the following transfers of Option Shares are deemed to be in compliance with the
Act and this Agreement and no opinion of counsel is required in connection
therewith:
(i) A transfer of Option Shares made pursuant to Sections 7 or 8 of
this Agreement;
(ii) A transfer of Option Shares upon the death of the Optionholder to
his or her executors, administrators, testamentary trustees, legatees or
beneficiaries (the "Optionholder's Estate") or a transfer to the executors,
administrators, testamentary trustees, legatees or beneficiaries of a
person who has become a holder of Option Shares in accordance with the
terms of this Agreement; provided that such transfer is made expressly
subject to this Agreement and that the transferee agrees in writing to be
bound by the terms and conditions of this Agreement as if such transferee
were the Optionholder;
(iii) A transfer of Option Shares made in compliance with the
federal securities laws to a trust or custodianship the beneficiaries of
which, a partnership (general or limited) the partners of which, or a
limited liability company the members of which, may include only the
Optionholder, his or her spouse or his or her lineal descendants by blood
or adoption (the "Optionholder's Trust") or a transfer of Option Shares
made after the third anniversary of the Grant Date to such a trust,
partnership or limited liability corporation by a person who has become a
holder of such Option Shares in accordance with the terms of this
Agreement; provided that such transfer is made expressly subject to this
Agreement and that the transferee agrees in writing to be bound by the
terms and conditions of this Agreement as if such transferee were the
Optionholder; and
(iv) A pledge or hypothecation by the Optionholder or the
Optionholder's Trust of the Option Shares or his or her or its interest
therein to a bank or other financial institution (a "Pledgee") reasonably
satisfactory to WCP to secure a loan by such Pledgee to the Optionholder or
the Optionholder's Trust, as the case may be, for the purchase of the
Option Shares or the refinancing of any indebtedness incurred for the
purchase of the Option Shares; provided that (A) such Pledgee agrees in
writing to accept the Option Shares or interest therein subject to all of
the terms and conditions of this Agreement as if such Pledgee were the
Optionholder and to notify WCP upon the happening of any default or event
of default under the terms of the agreement with the Optionholder or the
Optionholder's Trust, as the case may be, relating to such pledge or
hypothecation and (B) the Optionholder or the Optionholder's Trust, as the
case may be, delivers to the Board a copy of all proposed documentation
relating to such pledge or hypothecation at least ten days before the
scheduled date of such pledge or hypothecation, and prior to such scheduled
date WCP has confirmed that such documentation is reasonably satisfactory
to it in form and substance.
(c) The certificate (or certificates) representing the Option Shares shall
bear the following legend:
<PAGE>
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF STOCK OPTION AGREEMENT
DATED MAY 5, 1999 BETWEEN WORLD COLOR PRESS, INC. ("WCP") AND THE
OPTIONHOLDER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF WCP). EXCEPT AS OTHERWISE PROVIDED IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN COMPLIANCE
WITH ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR (B) (I) IF
WCP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE
ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER, AND IN
COMPLIANCE WITH APPLICABLE PROVISIONS OF STATE SECURITIES LAWS, AND
(II) IF THE HOLDER IS A CITIZEN OR RESIDENT OF ANY COUNTRY OTHER THAN
THE UNITED STATES, OR THE HOLDER DESIRES TO EFFECT ANY SUCH
TRANSACTION IN ANY SUCH COUNTRY, THE COMPANY HAS BEEN FURNISHED WITH A
SATISFACTORY OPINION OR OTHER ADVICE OF COUNSEL FOR THE HOLDER THAT
SUCH TRANSACTION WILL NOT VIOLATE THE LAWS OF SUCH COUNTRY."
(d) The Optionholder acknowledges that he or she has been advised that
(i) the issuance of the Option Shares upon exercise of the Options will not have
been registered under the Act, (ii) the Option Shares must be held indefinitely
and the Optionholder must continue to bear the economic risk of the investment
in the Option Shares unless they are subsequently registered under the Act or an
exemption from such registration is available, (iii) no assurance can be given
that there will be any public market for the Option Shares, (iv) no assurance
can be given that Rule 144 promulgated under the Act will be available with
respect to the sales of any securities of WCP, and WCP has made no covenant to
make such Rule available, (v) when and if any of the Option Shares may be
disposed of without registration in reliance on Rule 144, such disposition can
be made only in limited amounts in accordance with the terms and conditions of
such Rule, (vi) if the Rule 144 exemption is not available, public sale without
registration will require compliance with some other exemption under the Act,
(vii) a restrictive legend in the form heretofore set forth shall be placed on
the certificates representing the Option Shares and (viii) a notation shall be
made in the appropriate records of WCP and/or the transfer agent for the Common
Stock indicating that the Option Shares are subject to restriction on transfer
and appropriate stop transfer restrictions will be issued to WCP's stock
transfer agent with respect to the Option Shares.
<PAGE>
<PAGE>
(e) If any of the Option Shares are to be disposed of in accordance with
Rule 144 under the Act or otherwise, the Optionholder shall promptly notify WCP
of such intended disposition and shall deliver to WCP at or prior to the time of
such disposition such documentation as WCP may reasonably request in connection
with such sale and, in the case of a disposition pursuant to Rule 144, shall
deliver to WCP an executed copy of any notice on Form 144 required to be filed
with the Securities and Exchange Commission ("SEC").
(f) The Optionholder agrees that, if any securities of WCP are offered to
the public pursuant to an effective registration statement under the Act, the
Optionholder will not effect any public sale or distribution of any Option
Shares not covered by such registration statement within seven days prior to, or
within 180 days (or in an underwritten public offering, any such lesser period
as the underwriters may agree to) after, the effective date of such registration
statement, unless otherwise agreed to in writing by WCP; provided that the
Optionholder shall have been notified in writing of such offering.
6. RESTRICTION ON TRANSFER OF OPTION SHARES
(a) Except for transfers otherwise permitted by this Agreement, the
Optionholder agrees that he or she will not transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any Option Shares at any time prior to the
Vesting Date. The restrictions on transfer provided in this Section 6 shall not
apply as of any date (the "Calculation Date") to a number of Option Shares (the
"Unrestricted Shares") held in the aggregate by the Optionholder, the
Optionholder's Trust, the Optionholder's Estate and all Pledgees equal to the
excess, if any, of (i) the product of (A) the total number of Option Shares
covered by all Options received by the Optionholder on the Grant Date and (B)
the Vested Percentage as of such date over (ii) the total number of Option
Shares transferred by the Optionholder, the Optionholder's Trust, the
Optionholder's Estate and all Pledgees after the date hereof, other than
pursuant to transfers permitted by clauses (ii), (iii) and (iv) of Section 5(b)
hereof. No transfer of any such shares in violation hereof shall be made or
recorded on the books of WCP (or any transfer agent or registrar therefor) and
any such transfer shall be null and void and of no force or effect.
(b) For purposes of this Agreement, the "Vested Percentage" with respect
to Option Shares shall be determined as follows:
<TABLE>
<CAPTION>
Calculation Date Vested Percentage
- ---------------- ------------------
<S> <C>
From Grant Date until the Vesting 0%
Date
On and after the Vesting Date 100%
</TABLE>
7. OPTIONHOLDER'S RIGHT TO RESELL OPTION SHARES AND OPTIONS TO WCP UPON
DEATH OR DISABILITY
(a) Except as otherwise provided herein, if on or before the Vesting Date,
(i) the Optionholder dies or becomes Permanently Disabled (as hereinafter
defined) and (ii) at the time of his or her death or Permanent Disability, the
Optionholder was still a director of the Company, then the Optionholder, the
Optionholder's Estate and/or the Optionholder's Trust, as the case may be, shall
have the right for six months from the date of death or Permanent Disability to
elect on one occasion (x) to sell to WCP, and WCP shall be required to purchase
all or any portion of the Option Shares then held by the Optionholder, the
Optionholder's Estate and/or the Optionholder's Trust, as the case may be, at
the Section 7 Repurchase Price, as determined in accordance with Section 9
and/or (y) to require WCP to pay to the Optionholder an amount equal to the
Option Excess Price (as defined in Section 10(a)) determined on the basis of the
Section 7 Repurchase Price as provided in Section 9 with respect to the
termination of all or any portion of outstanding Options held by the
Optionholder.
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(b) The Optionholder, the Optionholder's Estate and/or the Optionholder's
Trust, as the case may be, shall send written notice to WCP of his, her or its
election to sell such Option Shares and/or to terminate such Options in exchange
for the payment referred to in the preceding subsection (a) (the "Redemption
Notice") within the six-month period referred to in Section 7(a). The
completion of the purchase shall take place at the principal office of WCP on
the 15th business day after the receipt by WCP of a properly given Redemption
Notice. The Section 7 Repurchase Price and any payment with respect to the
Options as described above shall be paid by delivery to the Optionholder, the
Optionholder's Estate or the Optionholder's Trust, as the case may be, of a
certified or bank check or checks in the appropriate amount payable to the order
of the Optionholder, the Optionholder's Estate or the Optionholder's Trust, as
the case may be, against delivery of certificates or other instruments
representing the Option Shares so purchased and appropriate documents canceling
the Options so terminated, appropriately endorsed or executed by the
Optionholder, the Optionholder's Estate or the Optionholder's Trust, or his, her
or its duly authorized representative.
(c) Notwithstanding any other provision of this Section 7 and subject to
Section 13, if there exists and is continuing a default or any event which after
a notice or lapse of time or both would cause a default under any loan,
guarantee or other agreement under which WCP or any of its subsidiaries, as
defined in Section 424(f) of the Code ("Subsidiaries") has borrowed money or
such repurchase would result in any default or event of default on the part of
the WCP or any of its Subsidiaries under any such agreement or if the capital of
WCP or any of its Subsidiaries is then impaired or would be impaired as a result
of such repurchase or such repurchase would otherwise violate the General
Corporation Law of the State of Delaware (each such occurrence being an
"Event"), WCP shall not be obligated to repurchase any of the Option Shares
from, or to make any payment with respect to the Options to, the Optionholder,
the Optionholder's Estate and/or the Optionholder's Trust, as the case may be
until the first business day which is five business days after all of the
foregoing Events have ceased to exist (the "Repurchase Eligibility Date"),
provided that (i) the Section 7 Repurchase Price shall be calculated as of the
time of the delivery of a Redemption Notice in accordance with Section 7(b) and
(ii) the number of Option Shares subject to repurchase under this Section 7(c)
and the number of Exercisable Option Shares (as defined in Section 10(a)) for
purposes of calculating the Option Excess Price payable under Section 7(a),
shall be that number of Option Shares and Exercisable Option Shares,
respectively, held by the Optionholder, the Optionholder's Estate or the
Optionholder's Trust, as the case may be, at the time of the delivery of a
Redemption Notice in accordance with Section 7(b). All Options exercisable as
of the date of a Redemption Notice shall continue to be exercisable until the
repurchase pursuant to such Redemption Notice.
(d) Notwithstanding any other provision of this Section 7 to the contrary,
the Optionholder, the Optionholder's Estate or the Optionholder's Trust, as the
case may be, shall have the right to withdraw any Redemption Notice which has
been pending for 120 or more days and which has remained unsatisfied because of
the provisions of Section 7(c).
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8. WCP'S RIGHT TO REPURCHASE OPTION SHARES AND TERMINATE OPTIONS OF
OPTIONHOLDER
(a) If on or prior to the Vesting Date, (i) the Optionholder's position as
a director of WCP (and, if applicable, its Subsidiaries) is voluntarily or
involuntarily terminated for any reason whatsoever, (ii) the beneficiaries of an
Optionholder's Trust shall include any person or entity other than the
Optionholder, his or her spouse or his or her lineal descendants by blood or
adoption, (iii) the Optionholder shall effect a transfer of any of the Option
Shares other than as permitted by this Agreement or (iv) there shall occur a
transfer of Option Shares then held by the Optionholder pursuant to a bankruptcy
proceeding, levy, property settlement or disposition pursuant to law incident to
marital separation or divorce (alternatively, a "Call Event"), then WCP shall
have the right to purchase all, but not less than all, of the Option Shares then
held by the Optionholder, the Optionholder's Estate, the Optionholder's Trust
and all Pledgees at the Section 8 Repurchase Price determined in accordance with
Section 9 hereof; provided that the Call Event described in clause (iv) of this
Section 8 shall entitle WCP to repurchase only the number of Option Shares that
are the subject of the transfer resulting in the Call Event; and provided,
further, that if the Call Event results from the death or Permanent Disability
of the Optionholder, or the cessation of the Optionholder's position as a
director for any other reason, WCP shall have the right to purchase all, but not
less than all, of the Option Shares held by the Optionholder, the Optionholder's
Estate, the Optionholder's Trust and any Pledgee at the Section 7 Repurchase
Price. WCP shall have a period of 75 days after the date of a Call Event (or
the date of WCP's knowledge that a Call Event described in clause (ii) or (iii)
above has occurred) in which to give notice in writing to the Optionholder of
WCP's exercise of such repurchase election (the "Call Notice"). If (X) the
Optionholder holds Option Shares and Options and WCP exercises its right to
repurchase Option Shares pursuant to this Section 8 or (Y) the Optionholder
holds only Options and WCP elects (in accordance with the requirements of the
Call Notice), WCP shall also pay the Optionholder an amount equal to the Option
Excess Price determined on the basis of the Section 8 Repurchase Price or
Section 7 Repurchase Price, as applicable, with respect to the termination of
(A) if the Call Event is described in clause (i), (ii) or (iii) above, all, but
not less than all, of the then exercisable outstanding Options held by the
Optionholder and (B) if the Call Event is described in clause (iv) above, a pro
rata portion (based on the number of Option Shares that are the subject of the
transfer) of the then exercisable outstanding Options held by the Optionholder.
(b) Subject to Section 13 hereof, the completion of the purchases pursuant
to Section 8 (a) shall take place at the principal office of WCP on the 15th
business day after the giving of notice of the exercise by WCP of its right to
purchase Option Shares and/or to terminate Options. All payments as described
above shall be made by delivery to the Optionholder, the Optionholder's Estate,
the Optionholder's Trust and/or the Pledgee, as the case may be, of a certified
or bank check or checks in the appropriate amounts payable to the order of the
Optionholder, the Optionholder's Estate, the Optionholder's Trust and/or the
Pledgee, as the case may be, against delivery of certificates or other
instruments representing the Option Shares so purchased and appropriate
documents canceling the Options so terminated, in each case appropriately
endorsed or executed by the Optionholder, the Optionholder's Estate, the
Optionholder's Trust, the Pledgee or his or her or its duly authorized
representatives.
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(c) Notwithstanding any other provision of this Section 8 to the contrary
and subject to Section 13, if there exists and is continuing any Event, WCP
shall delay the repurchase of any of the Option Shares or the Options (pursuant
to a Call Notice timely given in accordance with Section 8(a) hereof) from the
Optionholder, the Optionholder's Estate or the Optionholder's Trust, as the case
may be, until the Repurchase Eligibility Date; provided that (i) the Section 8
Repurchase Price or the Section 7 Repurchase Price, as the case may be, shall be
calculated as of the time of the delivery of a Call Notice in accordance with
Section 8(a) and (ii) the number of Option Shares subject to repurchase under
this Section 8 and the number of Exercisable Option Shares for purposes of
calculating the Option Excess Price payable under this Section 8, shall be the
number of Option Shares and Exercisable Option Shares, respectively, held by the
Optionholder, the Optionholder's Estate or the Optionholder's Trust, as the case
may be, at the time of the delivery of a Call Notice in accordance with Section
8(a). All Options exercisable as of the date of a Call Notice shall continue to
be exercisable until the repurchase pursuant to such Call Notice.
(d) Notwithstanding any other provision of this Section 8 to the contrary,
WCP's right to purchase Option Shares and cancel Options pursuant to this
Section 8 shall terminate with respect to any Option Shares and Options that
have not been so repurchased or canceled on or before the 120th day after the
date of the Call Notice.
9. DETERMINATION OF REPURCHASE PRICE
(a) The Section 7 Repurchase Price and the Section 8 Repurchase Price are
hereinafter collectively referred to as the "Repurchase Price." The Repurchase
Price shall be calculated on the basis of the unaudited financial statements of
the Company or the Market Price Per Share (as defined in Section 9(e)) as of the
last day of the month preceding the month in which the event giving rise to the
repurchase occurs (the "Repurchase Calculation Date"). The event giving rise to
the repurchase shall be the transfer, death, Permanent Disability or cessation
as a director of the Company for any other reason, or other event, as the case
may be, not the giving of any notice required pursuant to Section 7 or 8.
(b) The Section 7 Repurchase Price per Option Share shall be equal to the
greater of the Market Price Per Share and the Option Price Per Share.
(c) If the Call Event results from the occurrence of an event described in
clauses (i), (ii), (iii) or (iv) of Section 8(a), the Section 8 Repurchase Price
per Option Share shall be equal to the lesser of (x) the Market Price Per Share
and (y) the Option Price Per Share plus the product of (I) the Vested Percentage
(as defined in Section 6) and (II) the amount, if any, by which the Market Price
Per Share exceeds the Option Price Per Share.
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(d) As used herein the term "Public Offering" shall mean the sale of
shares of Common Stock to the public pursuant to a registration statement under
the Act which has been declared effective by the Securities and Exchange
Commission (other than a registration statement on Form S-8 or any other similar
form) immediately after which sale an active trading market in the Common Stock
exists; provided that an active trading market in the Common Stock shall be
deemed to exist if the Common Stock is listed on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market System, but the
failure of the Common Stock to be so listed shall not per se be determinative as
to whether an active trading market does not exist.
(e) As used herein the term "Market Price Per Share" shall mean the price
per share equal to the average of the last sale price of the Common Stock on
each of the ten trading days prior to the Repurchase Calculation Date on each
exchange on which the Common Stock may at the time be listed and on which the
Common Stock traded on such date or, if there shall have been no sales on any of
such exchanges on any such trading day, the average of the closing bid and asked
prices on each such exchange at the end of each such trading day or, if there is
no such bid and asked price on such trading day, on the next preceding date when
such bid and asked price occurred or, if the Common Stock shall not be so
listed, the average of the closing sales prices as reported by NASDAQ at the end
of each of the ten trading days prior to the Repurchase Calculation Date in the
over-the-counter market. If the Common Stock is not so listed or reported by
NASDAQ, then the Market Price Per Share shall be the fair market value
established by the Board acting in good faith.
(f) As used herein the term "Aggregate Market Value" shall mean the
product of (i) the number of shares of Common Stock to be applied as payment of
the Exercise Price pursuant to Section 4(b)(iv)(B) and (ii) the Market Value Per
Share as of the payment date.
(g) In determining the Repurchase Price, appropriate adjustments shall be
made for any future issuances of rights to acquire and securities convertible
into Common Stock and any stock dividends, splits, combinations,
recapitalizations or any other adjustment in the number of shares of outstanding
shares of Common Stock.
10. SHARES ISSUED TO OPTIONHOLDER UPON EXERCISE OF OPTIONS; TERMINATION OF
OPTIONS
(a) All Options, whether or not then exercisable, shall be automatically
terminated to the extent that, pursuant to the provisions of this Agreement, WCP
shall pay the Optionholder an amount equal to the Option Excess Price with
respect to such Options. If the Option Excess Price is zero or a negative
number, all outstanding Options granted to the Optionholder, whether or not then
exercisable, shall be automatically terminated upon the repurchase of any Option
Shares pursuant to Section 7 or Section 8. For purposes hereof, "Option Excess
Price" shall mean the excess, if any, of the Section 7 Repurchase Price or the
Section 8 Repurchase Price, depending on which Repurchase Price is (or would be)
used to repurchase the Option Shares, over the exercise price applicable to such
Options multiplied by the number of Exercisable Option Shares. For purposes
hereof, "Exercisable Option Shares" shall mean the shares of Common Stock which,
at the time of determination, could be purchased by the Optionholder upon
exercise of his or her outstanding exercisable Options.
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(b) Except as otherwise provided herein or in the Option Plan, the Options
shall expire and cease to be exercisable to any extent after the first to occur
of the following events:
(i) the tenth anniversary of the Grant Date; or
(ii) the date that is six months after the Optionholder's termination
of employment by reason of death or Permanent Disability; or
(iii) the first business day which is fifteen calendar days after
the earlier of (A) 75 days after the Optionholder's cessation as a director of
the Company for any reason other than death or Permanent Disability; or (B) the
delivery of notice by WCP that it does not intend to exercise its call right
under Section 8; provided that in any event the Options shall remain exercisable
under this Section 10 until at least 45 days after termination of the
Optionholder's cessation as a director of the Company for any reason other than
death or Permanent Disability or
(iv) upon the occurrence of a Transfer Event (as hereinafter defined)
and upon payment to the Optionholder of an amount in cash equal to the
difference between (i) the product of (A) the Per Share Consideration (as
hereinafter defined) received in such Transfer Event by a holder of Common Stock
multiplied by (B) the number of Option Shares for which the unexercised Options
are then exercisable and (ii) the aggregate Option Price Per Share for such
unexercised Options which are then exercisable. For the purposes of this
Section 10, the term "Per Share Consideration" shall mean the quotient of (x)
the aggregate consideration paid or to be paid (but only as and when received)
in respect of the Transfer Event to the holders of Common Stock of WCP, as
applicable, divided by (y) the number of outstanding shares of Common Stock on a
fully diluted basis (after giving effect to the exercise of all outstanding
options to acquire Common Stock to the extent then exercisable); and the term
"Transfer Event" shall mean any of a merger or consolidation involving WCP, a
sale or exchange of all or substantially all of the assets of WCP, an
acquisition by another corporation or other entity of 80% or more of WCP's
outstanding shares of voting stock or the liquidation or dissolution of WCP.
11. WCP'S REPRESENTATIONS AND WARRANTIES
(a) WCP represents and warrants to the Optionholder that (i) this
Agreement has been duly authorized, executed and delivered by WCP and (ii) the
Option Shares, when issued and delivered in accordance with the terms hereof,
will be duly and validly issued, fully paid and nonassessable.
(b) WCP shall file the reports required to be filed by it under the Act
and the Exchange Act to the extent required from time to time to enable the
Optionholder to sell Option Shares without registration under the Act within the
limitations of the exemptions provided by (i) Rule 144 under the Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Notwithstanding anything contained in this
Section 11(b), WCP may deregister under Section 12 of the Exchange Act if it is
then permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder, and, upon such deregistration, shall be relieved of its
obligations to file reports pursuant to this Section 11(b). Nothing in this
Section 11(b) shall be deemed to limit in any manner the restrictions on sales
of Option Shares contained in this Agreement.
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12. "PIGGYBACK" REGISTRATION RIGHTS
(a) If WCP, in connection with any Public Offering, plans to register any
shares of Common Stock held by WCP Associates, L.P., APC Associates, L.P., GR
Associates, L.P., KKR Partners II, L.P. or any other KKR Affiliate (as defined
below) (the "Institutional Investors") for public offering pursuant to the Act,
WCP will promptly notify the Optionholder in writing (a "Registration Notice")
of such proposed registration (the "Proposed Registration"). If within ten
business days of the receipt by the Optionholder of such Registration Notice
(and, in any event, within 15 business days after such Registration Notice is
sent by WCP), WCP receives from the Optionholder, the Optionholder's Estate or
the Optionholder's Trust a written request (a "Registration Request") to
register Option Shares held by the Optionholder, the Optionholder's Estate or
the Optionholder's Trust (which Registration Request will be irrevocable unless
otherwise mutually agreed to in writing by the Optionholder and WCP), Option
Shares will be so registered as provided in this Section 12; provided that for
each such Proposed Registration only one Registration Request, which shall be
executed by the Optionholder, the Optionholder's Estate or the Optionholder's
Trust, as the case may be, may be submitted for all Registrable Securities held
by the Optionholder, the Optionholder's Estate and the Optionholder's Trust,
respectively. All Option Shares acquired by the Optionholder pursuant to the
exercise of Options granted pursuant to this Agreement and held by the
Optionholder, the Optionholder's Estate or the Optionholder's Trust, including
shares purchased upon the exercise of Options, shall be deemed to be Registrable
Securities.
(b) The maximum number of Option Shares which will be registered pursuant
to a Registration Request will be the lowest of (i) the number of Option Shares
then held by the Optionholder (which for purposes of this subparagraph (b) shall
include shares held by the Optionholder's Estate or a Optionholder's Trust),
including all Option Shares which the Optionholder is then entitled to acquire
under an unexercised Option to the extent then exercisable (the "Maximum
Shares"), (ii) the Maximum Shares then held by the Optionholder multiplied by
the ratio of (A) the number of shares of Common Stock to be registered by the
Institutional Investors in the Proposed Registration to (B) the total number of
shares of Common Stock beneficially owned by all Institutional Investors and
(iii) the maximum number of shares which the Optionholder can register in the
public offering pursuant to any limits set by the managing underwriter for
inclusion in such public offering and agreed to in good faith by WCP.
(c) Except as may otherwise be provided in this Section 12, Option Shares
will be registered by WCP and offered to the public pursuant to this Section 12
on the same terms and subject to the same conditions applicable to registration
in the Proposed Registration of shares held by an Institutional Investor. Such
terms and conditions shall include, without limitation: the public offering
price; the payment of fees, commissions and expenses; the provision of, and
representation and warranty as to, information requested by WCP; and the
provision of requisite indemnifications.
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(d) Upon delivering a Registration Request, the Optionholder will, if
requested by WCP, execute and deliver a Custody Agreement and Power of Attorney
in form and substance satisfactory to WCP with respect to the Option Shares to
be registered pursuant to this Section 12 (a "Custody Agreement and Power of
Attorney"). The Custody Agreement and Power of Attorney will provide, among
other things, that the Optionholder, the Optionholder's Estate or the
Optionholder's Trust, as the case may be, will deliver to and deposit in custody
with the custodian and attorney-in-fact named therein a certificate or
certificates representing such Option Shares (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as the
Optionholder, the Optionholder's Estate's or the Optionholder's Trust's, as the
case may be, agent and attorney-in-fact with full power and authority to act
under the Custody Agreement and Power of Attorney on behalf of the Optionholder,
the Optionholder's Estate or the Optionholder's Trust, as the case may be, with
respect to the matters specified therein. The Optionholder agrees that he will
execute such other agreements as WCP may reasonably request to further evidence
the provisions of this Section 12.
13. CONTINUED EXERCISABILITY OF WCP'S RIGHT OR OBLIGATION TO REPURCHASE.
Notwithstanding anything to the contrary contained in Sections 7 and 8 hereof,
if at any time consummation of all purchases and payments to be made by the
Company pursuant to this Agreement and the Other Stock Option Agreements would
result in an Event, then the Company shall make purchases from, and payments to,
the Optionholder and Other Optionholders pro rata (on the basis of the
proportion of the number of Option Shares and the number of Options each such
Optionholder and all Other Optionholders have elected or are required to sell to
the Company) for the maximum number of Option Shares and shall pay the Option
Excess Price for the maximum number of Options permitted without resulting in an
Event (the "Maximum Repurchase Amount"). The provisions of Section 7(d) and
8(c) shall apply in their entirety to payments and repurchases with respect to
Options and Option Shares which may not be made due to the limits imposed by the
Maximum Repurchase Amount under this Section 13. Until all of such Options and
Option Shares are purchased and paid for by the Company, the Optionholder and
the Other Optionholders whose Options and Option Shares are not purchased in
accordance with this Section 13 shall have priority, on a pro rata basis, over
other purchases of Options and Option Shares by the Company pursuant to this
Agreement and Other Stock Option Agreements.
14. RIGHT TO NEGOTIATE PURCHASE PRICE. Nothing contained in this
Agreement shall be deemed to restrict or prohibit WCP from purchasing Option
Shares and the Options from the Optionholder, the Optionholder's Estate or the
Optionholder's Trust, at any time, for such price upon such other terms and
conditions as may be mutually agreed upon between such parties, whether or not
at the time of such purchase circumstances exist which specifically grant WCP
the right to purchase, or the Optionholder, the Optionholder's Estate or the
Optionholder's Trust to sell, Option Shares and the Options under the terms of
this Agreement, and all such purchases shall be deemed to be in accordance with
the terms of this Agreement.
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15. COVENANT REGARDING 83(B) ELECTION. EXCEPT AS WCP MAY OTHERWISE AGREE
IN WRITING, THE OPTIONHOLDER HEREBY COVENANTS AND AGREES THAT TO THE EXTENT (IF
ANY) APPLICABLE TO THE GRANT OR EXERCISE OF OPTIONS HEREUNDER, HE OR SHE WILL
MAKE AN ELECTION UNDER SECTION 83(B) OF THE CODE PURSUANT TO TREASURY REGULATION
SECTION 1.83-2 WITH RESPECT TO ANY OPTION SHARES ISSUED UPON EXERCISE OF THE
OPTIONS. THE OPTIONHOLDER FURTHER COVENANTS AND AGREES THAT HE OR SHE WILL
FURNISH WCP WITH COPIES OF THE FORM OF ANY SUCH ELECTION THE OPTIONHOLDER FILES
WITHIN 30 DAYS AFTER EACH EXERCISE OF ANY OF THE OPTIONS AND WITH EVIDENCE THAT
EACH SUCH ELECTION (IF ANY) HAS BEEN FILED IN A TIMELY MANNER.
16. NOTICE OF CHANGE OF BENEFICIARY. Immediately prior to any transfer of
Option Shares to the Optionholder's Trust, the Optionholder shall provide WCP
with a copy of the instruments creating the Optionholder's Trust and with the
identity of the beneficiaries of the Optionholder's Trust. The Optionholder
shall notify WCP immediately prior to any change in the identity of any
beneficiary of the Optionholder's Trust.
17. EXPIRATION OF CERTAIN PROVISIONS
(a) The provisions contained in Sections 7 and 8 of this Agreement, and
the portions of other provisions of this Agreement which incorporates the
provisions of Sections 7 and 8, shall terminate and be of no further force or
effect with respect to any Option Shares which are permitted to be sold by the
Optionholder pursuant to this Agreement and which are sold by the Optionholder
(i) pursuant to an effective registration statement filed by the Company under
the Act or (ii) pursuant to Rule 144, as amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
(b) The provisions contained in Sections 5(f), 6, 7, 8 and 15 of this
Agreement, and the portion of any other provisions of this Agreement which
incorporate the provisions of any of such Sections, shall terminate and be of no
further force or effect upon the consummation of a Change of Control. For
purposes of this Section, "Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company taken as
a whole to any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) other than the "KKR Affiliates" (as hereinafter
defined), (ii) the adoption of a plan relating to the liquidation or dissolution
of WCP, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the KKR Affiliates, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, of more than 50% of the voting stock
of WCP, (iv) the consummation of the first transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as defined above),
directly or indirectly, of more of the voting stock of WCP than is at the time
"beneficially owned" (as defined above) by the KKR Affiliates. For purposes of
this Agreement, "KKR Affiliate" shall mean any other Person directly or
indirectly controlling, controlled by, or under common control with, Kohlberg
Kravis Roberts & Co., L.L.P., its successors or assigns; "Person" means an
individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature, and "control" shall have the meaning given such
term under Rule 405 of the Act.
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18. RECAPITALIZATION. Except as other wise provided herein, in the event
that the outstanding shares of the stock subject to Options are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares, the
Committee shall make an appropriate and equitable adjustment in the number and
kind of shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionholder's proportionate interest shall be maintained as before he
occurrence of such event. Such adjustment in an outstanding Option shall be
made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share. Any such
adjustment made by the Committee shall be final and binding upon the
Optionholder, the Company and all other interested persons.
19. OPTIONHOLDER'S EMPLOYMENT BY THE COMPANY. [Intentionally omitted]
20. STATE SECURITIES LAWS. WCP hereby agrees to use all reasonable
efforts to comply with all state securities or "blue sky" laws, which might be
applicable to the issuance of the Option Shares to the Optionholder.
21. BINDING EFFECT. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns. In the case of a transferee
permitted under Section 5(b) hereof, such transferee shall be deemed to be the
Optionholder hereunder; provided that no transferee (including, without
limitation, any transferee referred to in Section 5(b) hereof) shall derive any
rights under this Agreement unless and until such transferee has delivered to
WCP a valid undertaking and becomes bound by the terms of this Agreement.
22. AMENDMENT. This Agreement may be amended only by a written agreement
or instrument signed by the Parties hereto; provided that WCP may, in its
discretion, amend this Agreement by a written agreement or instrument signed
only by WCP to reduce or eliminate any restriction on the sale, transfer or
other disposition of Option Shares.
23. CLOSING. Except as otherwise provided herein, the closing of each
purchase and sale of Option Shares and any outstanding Options pursuant to this
Agreement shall take place at the principal office of WCP on the 15th business
day following delivery of the notice by either Party to the other of its
exercise of the right to purchase or sell hereunder.
24. APPLICABLE LAW. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
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25. ASSIGNABILITY OF CERTAIN RIGHTS BY WCP. WCP shall have the right to
assign any or all of its rights or obligations to purchase Option Shares and any
outstanding Options pursuant to Sections 7 and 8 hereof.
26. PAYMENT BY WCP. If at any time WCP purchases Option Shares or any
outstanding Options from the Optionholder hereunder, and the Optionholder is
indebted to WCP in any amount whatsoever, WCP, in its sole discretion, may apply
all or any part of such indebtedness to the purchase price.
27. NOTICES. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed delivered when delivered in person or sent by first-class mail (certified
or registered mail, return receipt requested, postage prepaid), facsimile or
overnight air courier guaranteeing next day delivery, addressed as follows:
(a) If to WCP, to it at the following address:
World Color Press, Inc.
The Mill
340 Pemberwick Road
Greenwich, Connecticut 06831
Facsimile No.: (203) 532-4371
Attn: Chief Legal Officer
(b) If to the Optionholder, to him or her at the following address:
_________________________________
_________________________________
_________________________________
_________________________________
28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
29. SECTION HEADINGS. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
30. REMEDIES FOR VIOLATIONS. The Parties agree that they would be
irreparably damaged and that money damages would not be a sufficient remedy in
the event that the Parties do not follow this Agreement. In the event of any
such breach, the non-breaching Party shall be entitled, without being required
to post a bond or other security, to equitable relief (including, without
limitation, injunction and specific performance) as a remedy for such breach.
Such remedies shall not be deemed to be the exclusive remedies for any such
breach but shall be in addition to all other remedies available at law or equity
to the non-breaching Party.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
World Color Press, Inc.
By: ----------------------------------
Jennifer L. Adams
Vice Chairman
----------------------------------
_________________
<PAGE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 27, 1999 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 27, 1999 OF
WORLD COLOR PRESS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-END> JUN-27-1999
<CASH> 49,145
<SECURITIES> 0
<RECEIVABLES> 147,607
<ALLOWANCES> 0
<INVENTORY> 261,204
<CURRENT-ASSETS> 548,964
<PP&E> 1,710,177
<DEPRECIATION> 780,434
<TOTAL-ASSETS> 2,367,179
<CURRENT-LIABILITIES> 309,334
<BONDS> 1,242,697
0
0
<COMMON> 393
<OTHER-SE> 605,323
<TOTAL-LIABILITY-AND-EQUITY> 2,367,179
<SALES> 1,172,388
<TOTAL-REVENUES> 1,172,388
<CGS> 974,580
<TOTAL-COSTS> 974,580
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,959
<INCOME-PRETAX> (26,845)
<INCOME-TAX> (11,006)
<INCOME-CONTINUING> (15,839)
<DISCONTINUED> 0
<EXTRAORDINARY> (11,992)
<CHANGES> (10,513)
<NET-INCOME> (38,344)
<EPS-BASIC> (1.01)
<EPS-DILUTED> (1.01)
</TABLE>
