<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998
REGISTRATION NO. 333-48821
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 4
to
Form S-4
Registration Statement
Under
The Securities Act of 1933
---------------
IMPAC Group, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 2657 23-2923682
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
---------------
1950 North Ruby Street David C. Underwood
Melrose Park, Illinois 60160 Chief Financial Officer
(708) 344-9100 IMPAC Group, Inc.
(Address, including zip code, 1950 North Ruby Street,
and telephone number, Melrose Park, Illinois 60160
including area code, (708) 344-9100
of Registrant's principal (Name, address, including zip
executive offices) code, and telephone
number, including area code,
--------------- of agent for service)
Copy to:
John R. Utzschneider, Esq.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
(617) 951-8852
Facsimile No. (617) 951-8736
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
The subsidiaries of IMPAC Group, Inc., AGI Incorporated, Klearfold, Inc.,
KF-Delaware, Inc. and KF-International, Inc. (collectively, the "Guarantors"),
have guaranteed on a senior subordinated basis, jointly and severally, the
payment of all amounts on the New Notes being registered hereby (the
"Subsidiary Guarantees"). The Guarantors are registering the Subsidiary
Guarantees.
Set forth below is the name, address, I.R.S. Employer Identification Number
and primary industrial classification number for each of the Guarantors.
<TABLE>
<CAPTION>
SIC
NAME ADDRESS IRS ID# CODE
- ---- ---------------------------- ---------- ----
<S> <C> <C> <C>
AGI Incorporated c/o IMPAC Group, Inc. 36-2262685 2657
1950 North Ruby Street
Melrose Park, Illinois 60160
(708) 344-9100
Klearfold, Inc. c/o IMPAC Group, Inc. 23-1996496 3089
1950 North Ruby Street
Melrose Park, Illinois 60160
(708) 344-9100
KF-Delaware, Inc. c/o IMPAC Group, Inc. 51-0346583 6794
1950 North Ruby Street
Melrose Park, Illinois 60160
(708) 344-9100
KF-International, Inc. c/o IMPAC Group, Inc. 66-0503968 9999
1950 North Ruby Street
Melrose Park, Illinois 60160
(708) 344-9100
</TABLE>
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 28, 1998
PROSPECTUS
OFFER TO EXCHANGE UP TO $100,000,000 OF 10 1/8%
SENIOR SUBORDINATED NOTES DUE 2008, SERIES B OF IMPAC GROUP, INC., WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
IMPAC GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
----------
IMPAC Group, Inc. ("IMPAC") hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal," and together with this Prospectus,
the "Exchange Offer"), to exchange up to an aggregate amount of $100,000,000 of
IMPAC's 10 1/8% Senior Subordinated Notes Due 2008, Series B (the "New Notes"),
for a like principal amount of IMPAC's outstanding 10 1/8% Senior Subordinated
Notes due 2008 (the "Existing Notes"). The Existing Notes have been guaranteed
(the "Existing Guarantees") and the New Notes will be guaranteed (the "New
Guarantees" and together with the Existing Guarantees, the "Guarantees") by AGI
Incorporated, Klearfold, Inc., KF-Delaware, Inc. and KF-International, Inc.
(the "Guarantors") and by certain future subsidiaries of IMPAC and the
Guarantors. The Guarantees are full and unconditional, joint and several
guarantees of IMPAC's payment obligations of all amounts under the Notes. The
terms of the New Notes and the New Guarantees are identical in all material
respects to the terms of the Existing Notes and the Existing Guarantees, except
for certain transfer restrictions and registration rights relating to the
Existing Notes. The New Notes will be issued pursuant to, and entitled to the
benefits of, the Indenture, dated as of March 12, 1998 (the "Indenture"),
between IMPAC, the Guarantors and State Street Bank and Trust Company, as
trustee, governing the Existing Notes. The New Notes and the Existing Notes are
hereinafter sometimes collectively referred to as the "Notes". The New Notes
and New Guarantees have been registered under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to a Registration Statement of which
this Prospectus is a part.
The Notes will be general, unsecured obligations of IMPAC, will rank at the
same level with all senior subordinated debt of IMPAC and will be senior in
right of payment to all existing and future subordinated debt of IMPAC, if any.
There is currently no indebtedness outstanding that is subordinated to the
Notes. The claims of the holders of Notes will be subordinated to Senior Debt
(as defined under "Description of Notes"). At March 31, 1998, approximately
$11.6 million in Senior Debt was outstanding, fully secured by approximately
$12.6 million in letters of credit issued under IMPAC's credit facility with
Bank of America, National Trust & Savings Association (the "New Credit
Facility"). The Guarantors' obligations under the Guarantees will be
subordinated to all of the Guarantors' Senior Debt, including guarantees of all
obligations under the New Credit Facility. The New Credit Facility is
guaranteed by all current and future subsidiaries of the Company (as defined
under "Prospectus Summary") and is secured by all assets of IMPAC and its
subsidiaries. See "The Combination", "Capitalization" and "Description of Other
Indebtedness".
IMPAC will accept for exchange any and all Existing Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1998, unless the Exchange Offer is extended
(the "Expiration Date"). Tenders of Existing Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Existing Notes being tendered for exchange. However, the
Exchange Offer is subject to certain conditions which may be waived by the
Company and to the terms and provisions of a registration rights agreement
entered into by IMPAC in connection with the initial sale of the Existing
Notes. See "Exchange Offer". IMPAC has agreed to pay the expenses of the
Exchange Offer. The New Notes and New Guarantees will not be listed on any
securities exchange.
Holders of Existing Notes whose notes are not tendered and accepted in the
Exchange Offer will continue to hold such Existing Notes. Following
consummation of the Exchange Offer, the holders of Existing Notes will continue
to be subject to the existing restrictions upon transfer thereof and, except as
provided herein, IMPAC and the Guarantors will have no further obligation to
such holders to provide for the registration under the Securities Act of the
Existing Notes held by them or the Existing Guarantees.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
RISKS THAT SHOULD BE CONSIDERED BY HOLDERS OF EXISTING NOTES AND PROSPECTIVE
PURCHASERS OF NEW NOTES.
----------
IMPAC will not receive any proceeds from this Exchange Offer and no
underwriter is being utilized in connection with this Exchange Offer.
----------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
----------
The date of this Prospectus is , 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
THE EXCHANGE OFFER IS BEING MADE ON THE BASIS OF THIS PROSPECTUS. ANY
DECISION TO EXCHANGE NOTES IN THE EXCHANGE OFFER MUST BE BASED ON THE
INFORMATION CONTAINED HEREIN. EACH PROSPECTIVE PURCHASER OF THE NEW NOTES MUST
COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION
IN WHICH IT PURCHASES, OFFERS OR SELLS THE NEW NOTES OR POSSESSES OR
DISTRIBUTES THIS PROSPECTUS AND MUST OBTAIN ANY CONSENT, APPROVAL OR
PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF THE NEW
NOTES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION TO WHICH IT
IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND NEITHER
THE COMPANY NOR THE INITIAL PURCHASERS SHALL HAVE ANY RESPONSIBILITY THEREFOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE NOTES TO ANY PERSON IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
----------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.
NEITHER ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR EXCEPTION IS
AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF
THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATION OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.
----------------
THE INITIAL PURCHASERS WHO PARTICIPATED IN THE OFFERING OF THE EXISTING
NOTES MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT
THE PRICE OF THE NOTES. SPECIFICALLY, THE INITIAL PURCHASERS MAY BID FOR AND
PURCHASE INITIAL NOTES AND NEW NOTES IN THE OPEN MARKET.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise stated in this Prospectus, references to (a) "AGI"
shall mean AGI Incorporated, an Illinois corporation which, after the
Combination (as defined under "--The Transactions"), became a wholly-owned
subsidiary of KFI Holding Corporation, a Delaware corporation ("KFI Holding"),
which changed its corporate name upon consummation of the Transactions to
"IMPAC Group, Inc." ("IMPAC"); (b) "Klearfold" shall mean Klearfold, Inc., a
Pennsylvania corporation and a wholly owned subsidiary of IMPAC, and
Klearfold's subsidiaries; and (c) the "Company" shall mean IMPAC and its
consolidated subsidiaries, including AGI and Klearfold. See "--The
Transactions." All references to a fiscal year refer to the 12 months ended
December 31 of the year referenced. An index showing where other terms are
defined in this Prospectus begins on page 128.
THE COMPANY
The Company is a designer, manufacturer and marketer of high-end, value-added
specialty packaging for various consumer products markets including
entertainment, cosmetics and personal care. Through its creative design work,
specialized manufacturing techniques and diverse printing capabilities, the
Company offers innovative specialty packaging solutions for customers that seek
to differentiate their products in the consumer marketplace. In addition,
unlike most of its competitors, the Company utilizes a broad range of paper,
paperboard and transparent rigid plastic materials for its products. As a
result, the Company believes that it is well-positioned to supply the growing
demand for distinctive consumer product packaging resulting from increased
competition and consolidation in the retail marketplace. For the 12 months
ended December 31, 1997, the Company had pro forma net sales and EBITDA (as
defined under "Summary Unaudited Pro Forma Data") of $160.8 million and $24.5
million, respectively.
IMPAC was formed through the combination of AGI and Klearfold. Management
believes the packaging industry has not historically had a participant that
offers manufacturers of consumer products the broad range of unique and
innovative specialty packaging solutions that are available from the Company.
The Company intends to acquire all of the issued and outstanding shares of
capital stock of Tinsley Robor plc (together with its subsidiaries, "Tinsley",
with such acquisition referred to as the "Tinsley Acquisition"). Tinsley is a
supplier of printed packaging for the United Kingdom music and multimedia
market and has an established presence in Europe. For the year ended March 31,
1998, Tinsley generated revenues of (Pounds)65.0 million, or $107.0 million at
an average exchange rate of (Pounds)0.606/$1.
1
<PAGE>
SUMMARY RISK FACTORS
LEVERAGE
In connection with the consummation of the Transactions, the Company incurred
a significant amount of indebtedness and, as a result, the Company is highly
leveraged. The Company is permitted to incur substantial additional
indebtedness in the future.
RANKING
The Notes and the Subsidiary Guarantees are subordinated in right of payment
to all current and future Senior Debt of IMPAC and the Guarantors. The
Indenture permits the incurrence of substantial additional indebtedness,
including Senior Debt, by the Company and its subsidiaries in the future. There
is currently no indebtedness outstanding that is subordinated to the Notes.
BUSINESS INTEGRATION RISK
The Company has no prior history as a combined entity and its operations have
not previously been managed on a combined basis. Prior to the Transactions, AGI
and Klearfold were operated as separate entities. The historical financial
statements and unaudited pro forma statements presented in this Prospectus may
not necessarily be indicative of the results that would have been attained had
the Company operated on a combined basis.
EFFECTS OF INDUSTRY SHIFTS
The Company's packaging products are almost entirely targeted to consumer
products companies. Sales of consumer products are subject to changing tastes
and technologies that cannot be predicted.
TECHNOLOGICAL CHANGE
The markets for the Company's products may be affected by technological
change and new product introductions. The Company's success will depend, in
part, upon its continued ability to manufacture products that meet changing
customer needs, successfully anticipate or respond to technological changes in
manufacturing processes on a cost-effective and timely basis and enhance and
expand its existing product offerings.
RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS
The Company intends to acquire all of the outstanding capital stock of
Tinsley. In addition, the Company may in the future pursue other selective
acquisitions within the specialty packaging industry, although the Company
currently has no agreement or commitment with respect to any other acquisition.
In the event that the Tinsley Acquisition or any other such acquisition were to
occur, there can be no assurance that the Company's business, financial
condition and results of operations would not be materially adversely affected.
COMPETITION
Most of the Company's products are sold in highly competitive markets in the
United States.
ENVIRONMENTAL MATTERS
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes, the recycling, composition and recycled
content of packaging, or otherwise, relating to the protection of the
environment.
2
<PAGE>
DEPENDENCE ON CONTRACTS
If fiscal 1997, BMG, PolyGram and Universal accounted for 11.6% of the
Company's net sales. The Company has entered into supply contracts with three
key customers, BMG, PolyGram and Universal. These supply contracts are
generally terminable for any material breach or events of insolvency. Three of
these contracts expire in 1999 and one expires in 2004. These contracts also
provide for minimum levels of purchases by the customer, with these minimums
expressed either in dollars of sales or percentages of the customer's
requirements for packaging. While the Company believes that the contracts
expiring in 1999 will be renewed, there can be no assurance that these
contracts will be renewed. The Company does not have a long term contract with
either EMI or Sony. See "Risk Factors--Dependence on Key Contracts."
CONTROLLING STOCKHOLDERS
Heritage (as defined under "The Transactions") and certain members of senior
management or their affiliates own substantially all of the outstanding voting
stock of IMPAC, which is the sole stockholder of AGI and Klearfold and, by
virtue of such ownership, have the power to control all matters submitted to
stockholders of IMPAC and to elect all directors of IMPAC and its subsidiaries,
including AGI and Klearfold.
FRAUDULENT TRANSFER STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, the Notes or the Subsidiary
Guarantees, could be voided, or claims in respect of the Notes or the
Subsidiary Guarantees could be subordinated to all other debts of IMPAC or any
Guarantor. In addition, the payment of interest and principal by the Company or
any Guarantor pursuant to the Notes could be voided and required to be returned
to the person making such payment, or to a fund for the benefit of the
creditors of the Company or any Guarantor.
GUARANTEES BY FOREIGN SUBSIDIARIES
In the event that the Company acquires 50% of the capital stock of Tinsley,
under the terms of the Indenture certain Foreign Subsidiaries acquired or
created by the Company, including certain Subsidiaries of Tinsley, may not be
required to deliver a Guarantee with respect to the Notes.
POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control (as defined under "Description of Notes"), IMPAC
will be required to offer to repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages (as defined under "Exchange Offer"), if any, to the date of repurchase.
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered or that restrictions in the New Credit Facility will allow IMPAC to
make such required repurchases.
RISK OF ADVERSE CONSEQUENCES OF POTENTIAL FAILURE TO ADHERE TO EXCHANGE OFFER
PROCEDURES
Holders of Existing Notes who fail to participate in the Exchange Offer could
be adversely affected.
ABSENCE OF A PUBLIC MARKET
There can be no assurance regarding the future development of a market for
any of the Notes, or the ability of holders of any of the Notes to sell their
Notes, or the price at which such holders may be able to sell such Notes.
----------------
These and other risk factors are described in greater detail in "Risk
Factors."
3
<PAGE>
THE TRANSACTIONS
THE COMBINATION
In February 1998, KFI Holding, its stockholders, and certain stockholders and
holders of stock appreciation rights of AGI entered into an Investment
Agreement (the "Investment Agreement"), under which (i) the stockholders of KFI
Holding agreed to contribute to KFI Holding the entire outstanding capital
stock of KFI Holding and a warrant to purchase KFI Holding capital stock and to
invest approximately $4.6 million in cash, and (ii) certain stockholders and
holders of stock appreciation rights of AGI agreed to contribute to KFI Holding
shares of AGI common stock and to invest the proceeds of their stock
appreciation rights, totaling an aggregate of $14.4 million. In exchange for
these contributions and cash investments, KFI Holding agreed to issue to the
contributing or investing parties shares of its common stock (the "Common
Stock") and upon consummation of such issuance, KFI Holding was renamed IMPAC
Group, Inc.
At the same time, KFI Holding, its wholly-owned subsidiary AGI Acquisition
Corp., AGI and certain stockholders of AGI and KFI Holding entered into an
Agreement and Plan of Merger (the "Agreement and Plan of Merger"), under which
AGI Acquisition Corp. merged on March 12, 1998 with and in to AGI, with AGI as
the surviving corporation. In this merger, the shares of AGI not contributed to
the Company under the Investment Agreement, a stock option and certain stock
appreciation rights were converted into a right to receive cash in the
aggregate amount of approximately $30.5 million, net of fees. In addition,
immediately prior to the closing of the Combination the stockholders of AGI
received a dividend in the aggregate amount of approximately $22.5 million. See
"Management" and "Certain Relationships and Related Transactions".
Klearfold and AGI are wholly-owned subsidiaries of IMPAC. The combination of
AGI with KFI Holding and its subsidiaries pursuant to the Agreement and Plan of
Merger, and related transactions, are referred to together in this Prospectus
as "the Combination". The Combination, a new credit facility providing for
$40.0 million in revolving credit borrowings and $13.0 million in letters of
credit and secured by substantially all the assets of IMPAC and its
subsidiaries (the "New Credit Facility"), the offering of the Existing Notes
(the "Offering") and the application of the proceeds therefrom are collectively
referred to as the "Transactions".
The senior management of the Company together own approximately 55% of
IMPAC's Common Stock. An affiliate of Heritage Partners, Inc. ("Heritage") owns
approximately 40% of IMPAC's Common Stock, with the remaining 5% held by
certain former stockholders of AGI. Heritage is a Boston-based private
investment company with $530 million in capital under management, specializing
in the acquisition and equity-based recapitalization of private, family owned
businesses.
Set forth below is a diagram showing the post-Combination structure of IMPAC
Group, Inc. and its subsidiaries.
IMPAC Group, Inc.
X X
AGI Incorporated (a wholly owned Klearfold, Inc. (a wholly owned
subsidiary of IMPAC Group, Inc.) subsidiary of IMPAC Group, Inc.)
X X
KF-Delaware, Inc. (a
wholly owned
subsidiary of
Klearfold, Inc.)
KF-International, Inc. (a
wholly owned subsidiary of
Klearfold, Inc.)
4
<PAGE>
THE FINANCING
The Combination was effected through the establishment of the New Credit
Facility, the issuance of the Existing Notes and the equity contributions
described in the Investment Agreement. The Offering was conditioned on the
concurrent closing of the Transactions. The following table illustrates the
sources and uses of funds in connection with the Transactions. See "The
Combination" and "Unaudited Pro Forma Combined Financial Data".
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
New Credit Facility(1)............................................ $ 0.0
10 1/8% Senior Subordinated Notes(2).............................. 100.0
Equity contributions:
AGI management equity investment................................ 14.4
KFI Holding management equity investment(3)..................... 6.0
Heritage equity investment(4)................................... 13.6
------
Total sources of funds........................................ $134.0
======
USES OF FUNDS
Purchase AGI equity(5)............................................ $ 69.0
Contributed KFI Holding equity.................................... 15.0
Retirement of Klearfold indebtedness(6)........................... 30.3
Retirement of AGI indebtedness(7)................................. 8.3
Cash for working capital.......................................... 6.4
Fees and expenses................................................. 5.0
------
Total uses of funds........................................... $134.0
======
</TABLE>
- --------
(1) The New Credit Facility provides for up to $40.0 million of revolving
credit borrowings and up to $13.0 million of letters of credit, and matures
in 2003. As of the date of the closing of the Transactions, letters of
credit in the aggregate amount of approximately $12.6 million were
outstanding under the New Credit Facility and $40.0 million of revolving
credit borrowings were available to the Company. The New Credit Facility is
guaranteed by all current and future subsidiaries of IMPAC and is secured
by all assets of IMPAC and its subsidiaries. In connection with the Tinsley
Acquisition the Company has entered into the Amended and Restated
Multicurrency Credit Facility. See "Description of Other Indebtedness."
(2) There is currently no indebtedness outstanding that is subordinated to the
Notes.
(3) Represents $1.2 million in cash and $4.8 million in contributed stock of
KFI Holding (the value ascribed to the equity of KFI Holding taking into
account (i) the repayment of approximately $30.3 million of Klearfold
indebtedness (including accrued interest) and (ii) approximately $4.0
million of the Klearfold IRBs (as defined under "Description of Other
Indebtedness") remaining outstanding after the Transactions).
(4) Represents $3.4 million in cash and $10.2 million in contributed stock of
KFI Holding (the value ascribed to the equity of KFI Holding taking into
account (i) the repayment of approximately $30.3 million of Klearfold
indebtedness (including accrued interest) and (ii) approximately $4.0
million of the Klearfold IRBs remaining outstanding after the
Transactions).
(5) Represents the acquisition by the Company of all of the outstanding common
stock of AGI and settlement of certain stock appreciation rights, for $54.6
million of cash, including a dividend of approximately $22.5 million paid
to AGI stockholders immediately prior to the Combination, and $14.4 million
(the ascribed value) of Common Stock of the Company issued to AGI
management. Approximately $7.6 million of the AGI IRBs (as defined under
"Description of Other Indebtedness") remain outstanding after the
Transactions. See "Management" and "Certain Relationships and Related
Transactions".
(6) Reflects the total funded indebtedness (including accrued interest) of
Klearfold, other than the Klearfold IRBs, that was outstanding immediately
prior to the Combination.
(7) Reflects the total funded indebtedness of AGI, other than the AGI IRBs,
that was outstanding immediately prior to the Combination.
5
<PAGE>
THE EXCHANGE OFFER
Securities Offered.......... Up to $100,000,000 aggregate principal amount
of 10 1/8% Senior Subordinated Notes due
2008, Series B of IMPAC (the "New Notes"),
together with guarantees thereof by each of
the Guarantors (the "New Guarantees"), in
exchange for up to $100,000,000 aggregate
principal amount of outstanding 10 1/8%
Senior Subordinated Notes due 2008 of IMPAC
(together with a guarantee thereof by each of
the Guarantors, referred to hereinafter as
the "Existing Guarantees," and together with
the New Guarantees, the "Guarantees"). The
terms of the New Notes and the New Guarantees
and those of the Existing Notes and the
Existing Guarantees are identical in all
material respects, except for certain
transfer restrictions relating to the
Existing Notes. There is currently no
indebtedness outstanding that is subordinated
to the Notes. The Guarantees are full and
unconditional, joint and several guarantees
of IMPAC's payment obligations under the
Notes. See "Description of Notes" and "--
Comparison of New Notes with Existing Notes".
Registration Rights The Existing Notes were issued on March 12,
Agreement................... 1998 to Goldman, Sachs & Co. and Donaldson,
Lufkin & Jenrette Securities Corporation (the
"Initial Purchasers"). The Initial Purchasers
resold the Existing Notes to certain
qualified institutional buyers in reliance
on, and subject to the restrictions imposed
pursuant to, Rule 144A and Regulation S under
the Securities Act. In connection therewith,
the Company and the Initial Purchasers
entered into the Registration Rights
Agreement, dated as of March 12, 1998 (the
"Registration Rights Agreement"), providing,
among other things, for the Exchange Offer.
See "The Exchange Offer".
Resale of New Notes......... Based on interpretations by the staff of the
Commission (as defined under "Description of
Notes") as set forth in no-action letters
issued to third parties, the Company believes
that the New Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold or otherwise transferred by any holder
thereof (other than any such holder that is a
broker-dealer or an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) without compliance with
the registration and prospectus delivery
provisions of the Securities Act, provided
that: (i) neither IMPAC nor any Guarantor has
entered into any arrangement or understanding
with any person to distribute the New Notes
to be received in the Exchange Offer, (ii) to
the best of IMPAC's information and belief,
each Holder (as defined under "Description of
Notes") participating in the Exchange Offer
is acquiring the New Notes in its ordinary
course of business, and (iii) to the best of
IMPAC's information and belief, each Holder
participating in the Exchange Offer has no
arrangement or
6
<PAGE>
understanding with any person to participate
in the distribution of the New Notes received
in the Exchange Offer. By tendering Existing
Notes in exchange for New Notes, each holder
will represent to IMPAC that: (i) it is not
such an affiliate of IMPAC, (ii) it is not
engaged in, and does not intend to engage in,
and has no arrangement or understanding with
any person to participate in, a distribution
of the New Notes to be issued in the Exchange
Offer, and (iii) any New Notes to be received
by it will be acquired in the ordinary course
of business. If a holder of Existing Notes is
unable to make the foregoing representations,
such holder may not rely on the applicable
interpretations of the staff of the
Commission as set forth in such no-action
letters, and must comply with the
registration and prospectus delivery
requirement of the Securities Act in
connection with any secondary resale
transaction.
Each broker-dealer that receives New Notes
for its own account pursuant to the Exchange
Offer in exchange for Existing Notes, where
such Existing Notes were acquired by such
broker-dealer as a result of market-making
activities or other activities, must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities
Act and that it has not entered into any
arrangement or understanding with IMPAC or an
affiliate of IMPAC to distribute the New
Notes in connection with any resale of such
New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
This Prospectus, as it may be amended or
supplemented from time to time, may be used
by a broker-dealer in connection with resales
of New Notes where such Existing Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed that,
starting on the Expiration Date, and ending
on the close of business 180 days after the
Expiration Date, it will make this Prospectus
available to any participating broker dealer
for use in connection with any such resale.
See "Plan of Distribution". The Company has
also agreed that, during this period, it will
amend the Registration Statement or amend or
supplement this Prospectus as may be required
under the Securities Act or the rules
thereunder or as may be required so that this
Prospectus will not contain an untrue
statement of a material fact or omit to state
any material fact necessary to make the
statements contained herein, in light of the
circumstances under which they were made, not
misleading.
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify
for sale or register the New Notes prior to
offering or selling such New Notes in such
7
<PAGE>
jurisdictions. The Company has agreed,
pursuant to the Registration Rights Agreement
and subject to certain specified limitations
therein, to cause all necessary filings in
connection with the registration and
qualification of the New Notes to be made
under the "Blue Sky" laws of such
jurisdictions as are necessary to permit the
Exchange Offer to be consummated.
The Exchange Offer.......... The New Notes are being offered in exchange
for a like principal amount of Existing
Notes. Existing Notes may be exchanged only
in existing multiples of $1,000. The issuance
of the New Notes is intended to satisfy
obligations of the Company under the
Registration Rights Agreement. For a
description of the procedures for tendering,
see "Exchange Offer--Procedures for Tendering
Existing Notes".
Expiration Date; The Exchange Offer will expire at 5:00 p.m.,
Withdrawal.................. New York City time, on , 1998, or such
later date and time to which it may be
extended in the sole discretion of the
Company (the "Expiration Date"). The tender
of Existing Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to
any time prior to 5:00 p.m., New York City
time, on the business day prior to the
Expiration Date. Any Existing Notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holders thereof as promptly as practicable
after the expiration or termination of the
Exchange Offer. See "Exchange Offer--
Expiration Date; Extensions; Termination;
Amendments; and Withdrawal Rights".
Conditions to Exchange The Exchange Offer is subject to the
Offer....................... following conditions:
(A) an injunction, order or decree shall not
have been issued by any court or governmental
agency that would prohibit, prevent or
otherwise materially impair the ability of
the Company to proceed with the Exchange
Offer; and
(B) there shall not have occurred a change in
the current interpretation of the staff of
the Commission which current interpretation
permits the New Notes issued pursuant to the
Exchange Offer in exchange for the Existing
Notes to be offered for resale, resold and
otherwise transferred by holders thereof
(other than (i) a broker-dealer who purchases
such New Notes directly from the Company to
resell pursuant to Rule 144A, Regulation S or
any other available exemption under the
Securities Act or (ii) a person that is an
affiliate of the Company within the meaning
of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the
Securities Act provided that such New Notes
are acquired in the ordinary course of such
holders' business and such holders have no
arrangement with any person to participate in
the distribution of New Notes.
8
<PAGE>
Procedures for Tendering
Existing Notes.............
Each holder of Existing Notes wishing to
accept the Exchange Offer must complete, sign
and date a Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Existing Notes and any other required
documents, to the Exchange Agent (as defined
below) at the address set forth herein. See
"Exchange Offer--Procedures for Tendering
Existing Notes".
Use of Proceeds............. There will be no proceeds to the Company from
the exchange of Notes pursuant to the
Exchange Offer.
Federal Income Tax
Consequences...............
Subject to certain limitations discussed in
"Federal Income Tax Consequences", the
exchange pursuant to the Exchange Offer will
not be a taxable event to the holder for
federal income tax purposes, and the holder
will not recognize any taxable gain or loss
as a result of such exchange. See "Federal
Income Tax Consequences".
Untendered Existing Notes... Upon consummation of the Exchange Offer, the
holders of Existing Notes, if any, will have
no further rights under the Registration
Rights Agreement, except as provided herein.
Holders of Existing Notes whose Existing
Notes are not tendered or are tendered but
not accepted in the Exchange Offer will
continue to hold such Existing Notes and will
be entitled to all the rights and preferences
and subject to the limitations applicable
thereto. Following consummation of the
Exchange Offer, the holders of Existing Notes
will continue to be subject to the existing
restrictions upon transfer thereof and,
except as provided herein, IMPAC will have no
further obligation to such holders to provide
for the registration under the Securities Act
of the Existing Notes held by them. To the
extent that Existing Notes are tendered and
accepted in the Exchange Offer, the trading
market for untendered and tendered by
unaccepted Existing Notes could be adversely
affected.
Exchange Agent.............. State Street Bank and Trust Company is
serving as the Exchange Agent in connection
with the Exchange Offer.
TERMS OF THE NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes issued pursuant to the Offering and to the New Notes to be
issued in exchange for Existing Notes in connection with the Exchange Offer.
The New Notes will be obligations of IMPAC evidencing the same indebtedness as
the Existing Notes, and will be entitled to the benefits of the same Indenture.
The form and terms of the New Notes are the same as the form and terms of the
Existing Notes, except that
9
<PAGE>
the New Notes have been registered under the Securities Act and therefore will
not bear legends restricting the transfer thereof. The following description
also gives effect to the amendments made to the Indenture pursuant to the First
Supplemental Indenture, dated July 21, 1998 (the "First Supplemental
Indenture"), although these amendments will not become operative unless and
until the Company or one of its subsidiaries acquires at least 50% of the
capital stock of Tinsley. For a more complete description of the Notes see
"Description of Notes". Throughout this Prospectus, references to the "Notes"
refer to the New Notes and the Existing Notes collectively.
Issuer...................... IMPAC Group, Inc.
Securities Offered.......... $100.0 million in aggregate principal amount
of 10 1/8% Senior Subordinated Notes due
March 15, 2008, Series B.
Maturity Date............... March 15, 2008
Guarantees..................
IMPAC's payment obligations under the Notes
are guaranteed on a senior subordinated basis
(the "Subsidiary Guarantees") by each of
IMPAC's current Subsidiaries and all future
Subsidiaries other than those IMPAC
designates as being "Unrestricted
Subsidiaries" (with all other Subsidiaries
referred to as "Restricted Subsidiaries")
and, in the event the Company completes the
Tinsley Acquisition, all "Foreign Non-
Guarantor Subsidiaries", which are defined as
any non-U.S. Subsidiaries which (i) at the
time of determination are not permitted under
applicable law to deliver an unlimited
Guarantee of the Notes and all Senior Debt of
the Company and its Subsidiaries or if the
delivery of such a Guarantee is permitted
under applicable law but would have
significant adverse tax or accounting effects
on such Foreign Subsidiary or the Company and
its other Subsidiaries, as determined in good
faith by the Board of Directors, and (ii) do
not guarantee any Indebtedness of the Company
or otherwise provide credit support directly
to the holder of any Indebtedness of the
Company. All of IMPAC's existing Subsidiaries
are Restricted Subsidiaries and none of
IMPAC's existing Subsidiaries would qualify
as Foreign Non-Guarantor Subsidiaries. The
Guarantees are joint and several unsecured
guarantees of all of IMPAC's payment
obligations under the Notes. The Subsidiary
Guarantees are subordinated to all Senior
Debt of the Guarantors. There is currently no
indebtedness outstanding that is subordinated
to the Guarantees. See "Description of
Notes--Subsidiary Guarantees".
Guarantors.................. The Guarantors currently are AGI
Incorporated, an Illinois corporation that
designs, manufactures and markets specialty
packaging for various consumer products
markets, Klearfold, Inc., a Pennsylvania
corporation that designs, manufactures and
markets specialty packaging for various
consumer products markets, KF-Delaware, Inc.,
a Delaware corporation formed to hold certain
intellectual property related to Klearfold,
Inc.'s business, and KF-International, Inc.,
a U.S. Virgin Islands corporation formed to
effect certain types of international sales
on behalf of Klearfold, Inc.
10
<PAGE>
Interest on the Notes....... The Existing Notes accrue interest at a rate
of 10 1/8% per annum from the Issue Date. The
New Notes will accrue interest at a rate of
10 1/8% per annum from March 12, 1998 (the
"Issue Date") or from the most recent date to
which interest had been paid on the Existing
Notes.
Interest Payment Dates...... March 15 and September 15 of each year,
commencing September 15, 1998.
Optional Redemption......... Except as described below, the Notes are not
redeemable at IMPAC's option prior to March
15, 2003. From and after March 15, 2003, the
Notes will be subject to redemption at the
option of IMPAC, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
In addition, prior to March 15, 2001, up to
an aggregate of $35.0 million in aggregate
principal amount of Notes will be redeemable
at the option of IMPAC from the net proceeds
of public equity offerings by IMPAC, at a
price of 110.125% of the principal amount of
the Notes, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date
of redemption; provided that at least $65.0
million in aggregate principal amount of
Notes remains outstanding immediately after
each such redemption; and provided, further,
that the notice of any such redemption shall
be mailed within 60 days of the receipt by
IMPAC of proceeds from the public offering.
See "Description of Notes--Optional
Redemption".
Change of Control........... In the event of a Change of Control, Holders
of the Notes will have the right to require
IMPAC to repurchase their Notes, in whole or
in part, at a price equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase.
See "Description of Notes--Repurchase at the
Option of Holders".
Ranking..................... The Notes constitute general, unsecured
obligations of IMPAC, are subordinated in
right of payment to all Senior Debt of IMPAC,
rank at the same level with all senior
subordinated debt of IMPAC and are senior in
right of payment to all existing and future
subordinated debt of IMPAC, if any. There is
currently no indebtedness outstanding that is
subordinated to the Notes. The claims of the
Holders of the Notes are subordinated to
Senior Debt. At March 31, 1998, approximately
$11.6 million in Senior Debt was outstanding,
fully secured by approximately $12.6 million
in letters of credit issued under the New
Credit Facility. The Indenture will permit
the incurrence of additional Senior Debt in
the future. See "Description of Notes--
Subordination" and "Description of Other
Indebtedness".
11
<PAGE>
Restrictive Covenants....... The Indenture governing the Notes contains
certain covenants that, among other things,
limits the ability of IMPAC and its
Subsidiaries to incur additional Indebtedness
(as defined under "Description of Notes") and
issue Disqualified Stock (as defined under
"Description of Notes"), pay dividends or
distributions or make investments or make
certain other Restricted Payments (as defined
under "Description of Notes"), enter into
certain transactions with affiliates, dispose
of certain assets, incur liens securing
subordinated indebtedness and indebtedness
ranking at the same level and engage in
mergers and consolidations. See "Description
of Notes".
Use of Proceeds............. The gross proceeds of $100.0 million from the
Offering along with the proceeds of equity
investments made by Heritage and members of
management were used to fund the Combination,
repay certain existing Indebtedness, pay
certain fees and expenses in connection with
the Transactions, and for general corporate
purposes. See "Use of Proceeds". No proceeds
will be received by IMPAC and the Guarantors
from the Exchange Offer.
COMPARISON OF NEW NOTES WITH EXISTING NOTES
Freely Transferable......... Generally, the New Notes will be freely
transferable under the Securities Act by
holders thereof other than any holder that is
either an affiliate of the Company or a
broker-dealer that purchased the Notes from
IMPAC to resell pursuant to Rule 144A,
Regulation S or any other available
exemption. The New Notes otherwise will be
substantially identical in all material
respects (including interest rate and
maturity) to the Existing Notes. See
"Exchange Offer".
Registration Rights......... The holders of Existing Notes currently are
entitled to certain registration rights
pursuant to the Registration Rights
Agreement. However, upon consummation of the
Exchange Offer, subject to certain
exceptions, holders of Existing Notes who do
not exchange their Existing Notes for New
Notes in the Exchange Offer will no longer be
entitled to registration rights and will not
be able to offer or sell their Existing
Notes, unless such Existing Notes are
subsequently registered under the Securities
Act (which, subject to certain limited
exceptions, IMPAC will have no obligation to
do), except pursuant to an exemption from, or
in a transaction not subject to, the
Securities Act and applicable state
securities laws. See "Risk Factors--Failure
to Exchange Existing Notes".
12
<PAGE>
Absence of a Public Market
for the New Notes..........
The New Notes are new securities and there is
currently no established market for the New
Notes. Accordingly, there can be no assurance
as to the development or liquidity of any
market for the New Notes. IMPAC does not
intend to apply for listing on a securities
exchange of the New Notes.
For more complete information regarding the Existing Notes and the New Notes,
including the definitions of certain capitalized terms used above, see
"Description of Notes".
13
<PAGE>
SUMMARY UNAUDITED PRO FORMA DATA--IMPAC GROUP, INC.
The summary unaudited pro forma data for the year ended December 31, 1997 and
the three months ended March 31, 1997 and 1998 have been derived from the
Unaudited Pro Forma Combined Financial Data included elsewhere in this
Prospectus. The Unaudited Pro Forma Combined Financial Data are based on the
historical consolidated financial statements of KFI Holding and AGI included
elsewhere in this Prospectus, adjusted to give effect to the pro forma
adjustments described in the notes thereto. The unaudited pro forma income
statement data presented below gives effect to the Offering and the Combination
as though these transactions had occurred as of January 1, 1997. The Unaudited
Pro Forma Combined Financial Data do not purport to represent what the
Company's financial position or results of operations would actually have been
had the Transactions in fact occurred on the assumed date or to project the
Company's financial position or results of operations for any future date or
period. The information contained in the following table should also be read in
conjunction with "Capitalization", "Unaudited Pro Forma Combined Financial
Data", "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AGI/KFI HOLDING COMBINED
-----------------------------
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales...................................... $160,774 $33,849 $31,306
Cost of goods sold............................. 116,416 24,552 23,375
-------- ------- -------
Gross profit................................. 44,358 9,327 7,931
Selling, general and administrative expenses... 28,087 6,407 6,345
-------- ------- -------
Operating income............................. $ 16,271 $ 2,920 $ 1,586
Interest expense, net.......................... (11,398) (2,845) (2,884)
Gain on sale of fixed assets................... 139 -- --
-------- ------- -------
Income (loss) before income taxes and extraor-
dinary loss................................... 5,012 75 (1,298)
Income (taxes) benefit......................... (2,411) (133) 418
-------- ------- -------
Income (loss) before extraordinary loss........ $ 2,601 $ (58) $ (880)
======== ======= =======
OTHER DATA
EBITDA (as defined)(1)......................... $ 24,536 $ 4,929 $ 3,717
Depreciation and amortization.................. 8,298 2,039 2,131
Capital expenditures........................... 10,171 1,870 814
Ratio of earnings to fixed charges(2).......... 1.4x 1.0x --
</TABLE>
- --------
(1) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and excludes,
to the extent applicable for the relevant period, (i) gain (loss) on sale
of fixed assets, (ii) stock-based compensation expense, and (iii) PTP
Industries, Inc. ("PTP") royalty and commission income of $33 for the year
ended December 31, 1997 and $30 for the three months ended March 31, 1997.
EBITDA is not a substitute for operating income, net earnings and cash flow
from operating activities as determined in accordance with generally
accepted accounting principles as a measure of profitability or liquidity.
EBITDA is presented as additional information because management believes
it to be a useful indicator of the Company's ability to service and/or
incur indebtedness.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, plus fixed charges. Fixed
charges consist of interest expenses on all indebtedness (including
amortization of deferred financing costs) and a portion of operating lease
rental expense (one-third) that is representative of the interest factor.
IMPAC's earnings were insufficient to cover fixed charges by $1,298 for the
three months ended March 31, 1998.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA--KFI HOLDING CORPORATION
The summary consolidated financial data of KFI Holding set forth below as of
and for the five years ended December 31, 1997 have been derived from the
financial statements of KFI Holding which have been audited by KPMG Peat
Marwick LLP, independent public accountants. The audited consolidated financial
statements of KFI Holding as of December 31, 1996 and 1997 and for the three
years ended December 31, 1997 are included elsewhere herein. The summary
historical financial and other data of KFI Holding presented below for the
three months ended March 31, 1997 and March 31, 1998 are unaudited and are not
necessarily indicative of KFI Holding's results for the full fiscal year. The
summary historical financial and other data of KFI Holding include AGI from
March 13, 1998. Upon consummation of the Transactions, KFI Holding changed its
name to "IMPAC Group, Inc." The information contained in the following table
should also be read in conjunction with "Capitalization", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and the related notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............... $38,309 $47,714 $51,214 $54,218 $52,493 $10,837 $ 15,801
Cost of goods sold...... 28,186 35,223 36,757 40,094 39,322 7,789 12,418
------- ------- ------- ------- ------- ------- --------
Gross profit.......... 10,123 12,491 14,457 14,124 13,171 3,048 3,383
Selling, general and
administrative
expenses............... 6,121 7,029 7,942 7,594 7,589 1,748 2,530
PTP royalty and
commission
(income)(1)............ (176) (200) (377) (731) (33) (30) --
------- ------- ------- ------- ------- ------- --------
Operating income...... 4,178 5,662 6,892 7,261 5,615 1,330 853
Interest expense, net... (1,013) (1,020) (1,197) (2,324) (3,469) (766) (1,216)
------- ------- ------- ------- ------- ------- --------
Income (loss) from con-
tinuing operations be-
fore income taxes...... 3,165 4,642 5,695 4,937 2,146 564 (363)
Income (taxes) benefit.. (1,159) (1,616) (2,417) (2,003) (754) (198) 128
------- ------- ------- ------- ------- ------- --------
Income (loss) from
continuing
operations(2) $ 2,006 $ 3,026 $ 3,278 $ 2,934 $ 1,392 $ 366 $ (235)
======= ======= ======= ======= ======= ======= ========
OTHER DATA
EBITDA (as defined)(3).. $ 5,625 $ 6,983 $ 8,289 $ 8,499 $ 7,396 $ 1,704 $ 1,585
Depreciation and amorti-
zation................. 1,623 1,521 1,774 1,969 1,814 459 732
Capital expenditures.... 741 2,980 1,394 1,271 4,144 463 814
Ratio of earnings to
fixed charges(4)....... 3.4x 4.2x 4.2x 2.7x 1.5x 1.4x --
BALANCE SHEET DATA(5)
(AT PERIOD END)
Total assets............ $27,430 $33,602 $38,025 $27,275 $28,247 $24,926 $142,258
Long-term debt,
including current
portion................ 7,828 9,120 6,623 30,950 33,850 32,591 111,640
Stockholders' equity
(deficit).............. 6,255 8,807 11,511 (15,279) (13,887) (15,048) 4,324
</TABLE>
- -------
(1) Klearfold received commissions and royalties on certain sales made by PTP.
Klearfold owned 51% of PTP prior to the sale of this subsidiary on April
19, 1996. PTP ceased operations in 1997.
(2) The results of operations for the three months ended March 31, 1998 include
an extraordinary loss of $553 (net of tax benefit of $368) due to the
write-off of deferred financing costs.
(3) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and excludes,
to the extent applicable for the relevant period, (i) gain (loss) on sale
of fixed assets, (ii) stock-based compensation expense, and (iii) PTP
royalty and commission income. EBITDA is not a substitute for operating
income, net earnings and cash flow from operating activities as determined
in accordance with generally accepted accounting principles as a measure of
profitability or liquidity. EBITDA is presented as additional information
because management believes it to be a useful indicator of the Company's
ability to service and/or incur indebtedness.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, plus fixed charges. Fixed
charges consist of interest expense on all indebtedness (including
amortization of deferred financing costs) and a portion of operating lease
rental expense (one-third) that is representative of the interest factor.
IMPAC's earnings were insufficient to cover fixed charges by $363 for the
three months ended March 31, 1998.
(5) Balance sheet data includes amounts related to PTP at December 31, 1993,
1994 and 1995 prior to the sale of PTP on April 19, 1996.
15
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA--AGI INCORPORATED
The summary financial data of AGI set forth below as of and for the four
years ended December 31, 1996 have been derived from the financial statements
of AGI which have been audited by Arthur Andersen LLP, independent public
accountants. The summary financial data of AGI set forth below as of and for
the year ended December 31, 1997 have been derived from the financial
statements of AGI which have been audited by Price Waterhouse LLP, independent
public accountants. The audited financial statements of AGI as of December 31,
1996 and 1997 and for the three years ended December 31, 1997 are included
elsewhere herein. The information contained in the following table should also
be read in conjunction with "Capitalization", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales....................... $72,354 $74,756 $97,463 $92,834 $108,281
Cost of goods sold.............. 55,259 58,492 74,441 67,860 76,459
------- ------- ------- ------- --------
Gross profit.................. 17,095 16,264 23,022 24,974 31,822
Selling, general and administra-
tive expenses.................. 11,456 12,584 15,374 15,894 19,444
Stock-based compensation ex-
pense(1)....................... -- -- -- 171 2,326
------- ------- ------- ------- --------
Operating income.............. 5,639 3,680 7,648 8,909 10,052
Interest expense, net........... (913) (807) (1,365) (1,370) (1,242)
Gain (loss) on sale of fixed as-
sets........................... -- 658 45 (204) 139
------- ------- ------- ------- --------
Income before income taxes...... 4,726 3,531 6,328 7,335 8,949
Income taxes.................... (141) (71) (23) (234) (231)
------- ------- ------- ------- --------
Net income...................... $ 4,585 $ 3,460 $ 6,305 $ 7,101 $ 8,718
======= ======= ======= ======= ========
OTHER DATA
EBITDA (as defined)(2).......... $ 8,261 $ 6,928 $11,613 $13,667 $ 17,140
Depreciation and amortization... 2,622 3,248 3,965 4,587 4,762
Capital expenditures............ 5,430 9,776 9,792 7,644 6,027
BALANCE SHEET DATA (AT PERIOD
END)
Total assets.................... $37,506 $44,550 $54,418 $56,928 $ 58,919
Long-term debt, including cur-
rent portion................... 13,183 16,084 18,242 18,241 16,040
Stockholders' equity............ 11,718 13,284 17,276 20,911 24,756
</TABLE>
- --------
(1) Stock-based compensation relates to stock appreciation rights held by
certain executives of AGI.
(2) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and excludes,
to the extent applicable for the relevant period, (i) gain (loss) on sale
of fixed assets, (ii) stock-based compensation expense, and (iii) PTP
royalty and commission income. EBITDA is not a substitute for operating
income, net earnings and cash flow from operating activities as determined
in accordance with generally accepted accounting principles as a measure of
profitability or liquidity. EBITDA is presented as additional information
because management believes it to be a useful indicator of the Company's
ability to service and/or incur indebtedness.
16
<PAGE>
RISK FACTORS
This Prospectus includes statements that may be considered "forward
looking". Although the Company believes that its plans, intentions and
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such plans, intentions or expectations will be
achieved. Important factors that could cause actual results to differ
materially from the Company's forward-looking statements are set forth below
and elsewhere in this Prospectus. All forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in
their entirety by the cautionary statements set forth below. See "Special Note
Regarding Forward-Looking Statements".
LEVERAGE
Significant Leverage as a Result of Transactions
In connection with the consummation of the Transactions, the Company
incurred a significant amount of indebtedness and, as a result, the Company is
highly leveraged. At March 31, 1998, approximately $11.6 million in Senior
Debt was outstanding, fully secured by approximately $12.6 million in letters
of credit issued under the New Credit Facility, and the Company had
stockholders' equity of approximately $4.1 million. Also, after giving pro
forma effect to the Transactions, the Company's ratio of earnings to fixed
charges would have been 1.4x for the year ended December 31, 1997 and 0.6x for
the three months ended March 31, 1998. The Company is permitted to incur
substantial additional indebtedness in the future, and the Company intends to
incur substantial additional indebtedness in connection with the Tinsley
Acquisition. See "Capitalization", "Proposed Acquisition of Tinsley",
"Unaudited Pro Forma Combined Financial Data" and "Description of Notes".
Liquidity and Capital Resources
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures
and any acquisitions will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and anticipated cost savings and revenue
growth, management believes that cash flow from operations and available cash,
together with available borrowings under the New Credit Facility, will be
adequate to meet the Company's future liquidity needs for at least the next
several years. The Company may, however, need to refinance all or a portion of
the principal of the Notes on or prior to maturity. There can be no assurance
that the Company's business will generate sufficient cash flow from
operations, that anticipated revenue growth and operating improvements will be
realized or that future borrowings will be available under the New Credit
Facility in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to fund its other liquidity needs. In
addition, there can be no assurance that the Company will be able to effect
any such refinancing on commercially reasonable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-IMPAC Group, Inc. Liquidity and Capital Resources".
Effects of Leverage
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with
respect to the Notes, (ii) increasing the Company's vulnerability to general
adverse economic and industry conditions, (iii) limiting the Company's ability
to obtain additional financing to fund future working capital, capital
expenditures, acquisitions and other general corporate requirements, (iv)
requiring the dedication of a substantial portion of the Company's cash flow
from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures, research and development
17
<PAGE>
or other general corporate purposes, (v) limiting the Company's flexibility in
planning for, or reacting to, changes in its business and the specialty
packaging industry, and (vi) placing the Company at a competitive disadvantage
with respect to less leveraged competitors.
EFFECTS OF COVENANT NON-COMPLIANCE
The Indenture and the New Credit Facility contain financial and other
restrictive covenants that limit the ability of the Company to, among other
things, borrow additional funds. Failure by the Company to comply with such
covenants could result in an event of default which, if not cured or waived,
could have a material adverse effect on the Company. In addition, the degree
to which the Company is leveraged could prevent it from repurchasing all of
the Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Notes--Repurchase at the Option of Holders--Change of Control"
and "Description of Other Indebtedness--New Credit Facility".
RANKING
The Notes and the Subsidiary Guarantees are subordinated in right of payment
to all current and future Senior Debt of IMPAC and the Guarantors. However,
the Indenture provides that IMPAC will not, and will not permit any of the
Guarantors to, incur or otherwise become liable for any indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes or any of the Subsidiary Guarantees.
Upon any distribution to creditors of IMPAC or a Guarantor in a liquidation or
dissolution of IMPAC or a Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to IMPAC or a
Guarantor or its property, the holders of Senior Debt will be entitled to be
paid in full before any payment may be made with respect to the Notes. In
addition, the subordination provisions of the Indenture provide that payments
with respect to the Notes will be blocked in the event of a payment default on
Senior Debt and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on Senior Debt. In the event of a bankruptcy,
liquidation or reorganization of IMPAC or a Guarantor, holders of the Notes
will participate ratably with all holders of subordinated indebtedness of
IMPAC or such Guarantor that is deemed to be of the same class as the Notes,
and potentially with all other general creditors of IMPAC, based upon the
respective amounts owed to each holder or creditor, in the remaining assets of
IMPAC. In any of the foregoing events, there can be no assurance that there
would be sufficient assets to pay amounts due on the Notes. As a result,
holders of Notes may receive less, ratably, than the holders of Senior Debt.
As of March 31, 1998, approximately $11.6 million in Senior Debt was
outstanding, fully secured by approximately $12.6 million in letters of credit
issued under the New Credit Facility, and approximately $40.0 million was
available for additional borrowing under the New Credit Facility. The
Indenture permits the incurrence of substantial additional indebtedness,
including Senior Debt, by IMPAC and its Subsidiaries in the future. There is
currently no indebtedness outstanding that is subordinated to the Notes. See
"Description of Other Indebtedness--New Credit Facility".
ABILITY OF COMPANY TO OBTAIN FUNDS FROM SUBSIDIARIES
IMPAC has no operations of its own and derives substantially all of its
revenue from its subsidiaries. Holders of indebtedness of, and trade creditors
of, Subsidiaries of IMPAC would generally be entitled to payment of their
claims from the assets of the affected Subsidiaries before such assets were
made available for distribution to IMPAC. The Indenture permits the incurrence
of substantial additional indebtedness by IMPAC and its Subsidiaries and
permits significant investments by IMPAC in its Subsidiaries. In the event of
a bankruptcy, liquidation or reorganization of a Subsidiary, holders of any of
such Subsidiary's indebtedness will have a claim to the assets of such
Subsidiary that is prior to IMPAC's interest in those assets.
GUARANTEES BY FOREIGN SUBSIDIARIES
In the event that the Company acquires 50% of the capital stock of Tinsley,
under the terms of the Indenture certain Foreign Subsidiaries acquired or
created by the Company, including certain
18
<PAGE>
Subsidiaries of Tinsley, may not be required to deliver a Guarantee with
respect to the Notes. In the event of a bankruptcy, liquidation or
reorganization of such a Subsidiary, holders of any of such Subsidiary's
indebtedness will have a claim to the assets of such Subsidiary that is prior
to IMPAC's interest in those assets. See "Description of Notes."
FAILURE TO INTEGRATE BUSINESSES
The Company has no prior history as a combined entity and its operations
have not previously been managed on a combined basis. Prior to the
Transactions, AGI and Klearfold were operated as separate entities. The
Company's future operations and earnings are largely dependent upon
management's ability to successfully execute the Company's strategy of
offering the combined product line of AGI and Klearfold to the Company's
customers. This requires substantial attention from the Company's management
team which, to date, has not operated on a combined basis. In addition,
management is required to apply its business strategy to an entity which is
significantly larger than the entity it previously managed. Additionally, the
need to focus management's attention on integration of the businesses and
implementation of the Company's post-Combination strategy may limit the
Company's ability to successfully pursue other opportunities related to its
business for the foreseeable future. In the event that the Company completes
the Tinsley Acquisition, the Company's management will be required to
integrate and manage a significantly larger entity. The historical financial
statements and pro forma financial statements presented in this Prospectus may
not necessarily be indicative of the results that would have been attained had
the Company operated on a combined basis.
EFFECTS OF INDUSTRY SHIFTS
The Company's packaging products are almost entirely targeted to consumer
products companies. Sales of consumer products are subject to changing tastes
and technologies that cannot be predicted. Moreover, the adoption by various
consumer products industries of new forms of packaging or industry shifts in
the manner in which certain products, such as music, are delivered to
consumers may in the future have a material adverse effect on the Company. For
example, the Company experienced significant, although temporary, declines in
revenues as the CD (as defined under "Business") displaced the LP and as the
CD industry abandoned the long-box. Although the Company has in the past
successfully adapted to industry changes, no assurances can be made that the
Company will be able to do so in the future without substantial loss of
revenues, or at all, or that in the future the medium for delivery of products
such as music, including delivery through the Internet, will not result in
lower demand for the Company's products or cause the Company's products to
become less competitive or obsolete.
VARIABILITY OF QUARTERLY RESULTS
A significant portion of the Company's business is attributable to special
projects relating to particular hit movie or music releases. The existence and
timing of such major releases may cause the Company's quarterly and annual
revenues to vary significantly. These swings in quarterly results could have a
material adverse effect on the Company's ability to comply with the financial
covenants in its financing agreements and could have a material adverse effect
on the market prices for the Notes.
EFFECT OF TECHNOLOGY CHANGES IN MARKET DEMAND AND COMPETITION
The markets for the Company's products may be affected by technological
change and new product introductions. The Company's success will depend, in
part, upon its continued ability to manufacture products that meet changing
customer needs, successfully anticipate or respond to technological changes in
manufacturing processes on a cost-effective and timely basis and enhance and
expand its existing product offerings. Current competitors or new market
entrants may develop new products with features that could adversely affect
the competitive position of the Company's
19
<PAGE>
products. The Company has invested and continues to invest resources in the
development of new products and improved manufacturing processes; however,
there can be no assurance that the Company's new product or process
development efforts will be successful or that the emergence of new
technologies, industry standards or customer requirements will not render the
Company's technology, equipment or processes obsolete or uncompetitive. Any
failure or delay in accomplishing these goals could have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition, to the extent that the Company determines that new
manufacturing equipment or processes are required to remain competitive, the
acquisition and implementation of these technologies, equipment and processes
are likely to require significant capital investment by the Company.
POTENTIAL FUTURE ACQUISITIONS COULD INCREASE DEBT OR DISRUPT OPERATIONS
The Company intends to acquire all of the outstanding capital stock of
Tinsley. In addition, the Company may in the future pursue other selective
acquisitions within the specialty packaging industry, although, except for the
Tinsley Acquisition, the Company currently has no agreement or commitment with
respect to any other acquisition. Future acquisitions by the Company could
result in the incurrence of debt and contingent liabilities and an increase in
amortization expenses related to goodwill and other intangible assets, which
could have a material adverse effect upon the Company's business, financial
condition and results of operations. In addition, acquisitions involve
numerous risks, including difficulties in the assimilation of the operation,
technologies, services and products of the acquired companies and the
diversion of management's attention from other business concerns. In the event
that the Tinsley Acquisition or any other such acquisition were to occur,
there can be no assurance that the Company's business, financial condition and
results of operations would not be materially adversely affected.
COMPETITION
Most of the Company's products are sold in highly competitive markets in the
United States. The Company competes with a significant number of companies of
varying sizes on the basis of quality, service and price and the ability to
supply products to customers in a timely manner. The Company believes that its
primary competitors are Ivy Hill Corporation, Queens Group, Inc. and Shorewood
Packaging Corporation, some of which are larger than the Company and may have
substantially greater financial resources. Competitive pressures or other
factors could cause the Company to lose existing business or opportunities to
generate new business or could result in significant price erosion, all of
which would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Competition".
FAILURE TO COMPLY WITH ENVIRONMENTAL MATTERS AND GOVERNMENTAL REGULATIONS
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes, the recycling, composition and recycled
content of packaging, or otherwise relating to the protection of the
environment. These laws include, but are not limited to, the Comprehensive
Environmental Response Compensation and Liability Act, the Water Pollution
Control Act, the Clean Air Act and the Resource Conservation and Recovery Act,
as those laws have been amended and supplemented, the regulations promulgated
thereunder, and any applicable state analogs. The Company's operations are
also governed by laws and regulations relating to employee health and safety.
Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines or the entry of
injunctions or both. The Company believes that it is in material compliance
with such applicable laws and regulations and that its current environmental
controls are adequate to address existing regulatory requirements.
20
<PAGE>
As is the case with other companies engaged in similar businesses, the
Company could incur costs relating to environmental compliance, including
remediation costs related to historical hazardous materials handling and
disposal practices at certain facilities. In the past the Company has
undertaken remedial activities to address on-site soil contamination caused by
historic operations. None of these cleanups has resulted in any material
liability. It is possible that future developments (for example, new
regulations or stricter regulatory requirements) could result in the Company
incurring material costs to comply with applicable environmental laws and
regulations. In addition, the Company has not undertaken an independent
investigation of all of its facilities; accordingly, there can be no assurance
that in the future conditions requiring remediation will not be identified.
EFFECT OF ENVIRONMENTAL CONCERNS ON MARKET
In addition to the effects of regulation, the Company's business may also be
affected by environmental concerns of consumers with respect to packaging. For
example, in the early 1990's the music industry voluntarily stopped using
"long-box" packaging for CDs in response to these concerns. Future
environmental concerns could have a material effect on the demand for the
Company's packaging. See "Effects of Industry Shifts".
DEPENDENCE ON KEY CONTRACTS
In fiscal 1997, BMG, PolyGram and Universal accounted for 11.6% of the
Company's net sales. The Company has entered into supply contracts with three
key customers, BMG, PolyGram and Universal. These supply contracts are
generally terminable for any material breach or events of insolvency. Three of
these contracts expire in 1999 and one expires in 2004. These contracts also
provide for minimum levels of purchases by the customer, with these minimums
expressed either in dollars of sales or percentages of the customer's
requirements for packaging. While the Company believes that the contracts
expiring in 1999 will be renewed, there can be no assurance that these
contracts will be renewed. The Company does not have a long term contract with
either EMI or Sony, which are also significant customers.
CONTROLLING STOCKHOLDERS
Heritage and certain members of senior management or their affiliates own
substantially all of the outstanding voting stock of IMPAC, which is the sole
stockholder of AGI and Klearfold and, by virtue of such ownership, have the
power to control all matters submitted to stockholders of IMPAC and to elect
all directors of IMPAC and its subsidiaries, including AGI and Klearfold. In
addition, Heritage and certain members of senior management have the right,
under certain circumstances, to sell their stock back to IMPAC (subject to
certain restrictions under the Indenture and the New Credit Facility) which
could result in further concentration of ownership. Pursuant to the
Stockholder Agreement (as defined under "Description of Notes"), Heritage has
the right to elect a majority of IMPAC's board of directors in the event the
Company does not meet certain levels of financial performance, with testing of
these targets to commence after June 30, 1999, and under certain other
circumstances. In addition, in the event the Tinsley Acquisition occurs
Heritage and its affiliate will own a significantly larger percentage of
IMPAC's outstanding voting stock. See "Proposed Acquisition of Tinsley",
"Principal Stockholders", "Management" and "Certain Relationships and Related
Transactions".
EFFECT OF FRAUDULENT TRANSFER STATUTES ON VALIDITY OF NOTES AND GUARANTEES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, IMPAC, or
any Guarantor, at the time it incurred the indebtedness evidenced by the Notes
or the Subsidiary Guarantees, (i) (a) was or is insolvent or rendered
insolvent by reason of such incurrence or (b) was or is engaged in a business
or transactions for which the assets remaining with IMPAC or any Guarantor
constituted unreasonably small capital or (c) intended or intends to incur, or
believed or believes that it would incur debts beyond its ability to pay such
debts
21
<PAGE>
as they mature, and (ii) received or receives less than reasonably equivalent
value or fair consideration for the incurrence of such indebtedness, then the
Notes or the Subsidiary Guarantees, could be voided, or claims in respect of
the Notes or the Subsidiary Guarantees could be subordinated to all other
debts of IMPAC or any Guarantor. In addition, the payment of interest and
principal by IMPAC or any Guarantor pursuant to the Notes could be voided and
required to be returned to the person making such payment, or to a fund for
the benefit of the creditors of IMPAC or any Guarantor.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, IMPAC or any Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature or (ii)
it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, IMPAC and the Guarantors believe that, after giving effect
to the indebtedness incurred in connection with the Transactions, neither
IMPAC nor any Guarantor will be insolvent, will have unreasonably small
capital for the business in which it is engaged or will incur debts beyond its
ability to pay such debts as they mature. There can be no assurance, however,
as to what standard a court would apply in making such determinations or that
a court would agree with IMPAC's and the Guarantors' conclusions in this
regard.
POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, IMPAC will be required to offer to repurchase all
outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of repurchase. A
Change of Control is defined as including (i) certain transfers of all or
substantially all of the assets of IMPAC, (ii) the acquisition of 50% or more
of the Voting Stock (as defined under "Description of Notes") of IMPAC by
certain persons, (iii) the acquisition of 35% or more of the Voting Stock of
IMPAC if certain current stockholders and their affiliates then own less than
35% of the Voting Stock of IMPAC and (iv) certain changes in a majority of the
Board of Directors of IMPAC. Under the terms of the Stockholder Agreement,
Heritage has the right to cause a sale of the Company under certain
circumstances, which would constitute a Change of Control. See "Management"
and "Certain Relationships and Related Transactions". However, there can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required repurchases of Notes tendered or that
restrictions in the New Credit Facility will allow IMPAC to make such required
repurchases. The Indenture does not contain provisions that permit the Holders
of the Notes to require that IMPAC repurchase or redeem the Notes in the event
of a takeover, recapitalization or similar transaction except as described in
"Description of Notes--Repurchase at the Option of Holders--Change of
Control". See "Description of Notes--Repurchase at the Option of Holders".
FAILURE TO EXCHANGE EXISTING NOTES
Issuance of the New Notes in exchange for the Existing Notes pursuant to the
Exchange Offer will be made only after a timely receipt by IMPAC of such
Existing Notes, a properly completed and duly executed Letter of Transmittal
and all other required documents. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of the Existing Notes
tendered for exchange will be determined by IMPAC in its sole discretion,
which determination will be final and binding on all parties. Holders of the
Existing Notes desiring to tender such Existing Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. IMPAC is under
no duty to give notification of defects or irregularities with respect to the
tenders of the Existing Notes for exchange. Existing Notes that are not tender
or are tendered but not accepted will, following the consummation of the
Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, except as
22
<PAGE>
provided herein, the Company will have no further obligations to provide for
the registration under the Securities Act of such Existing Notes. To the
extent that Existing Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Existing Notes
could be adversely affected. See "Exchange Offer."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
There can be no assurance regarding the future development of a market for
any of the Notes, or the ability of holders of any of the Notes to sell their
Notes, or the price at which such holders may be able to sell such Notes. If
such a market were to develop, the Notes could trade at prices that may be
lower than the initial offering price depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. The Initial Purchasers have advised IMPAC that they
currently intend to make a market in the Notes. The Initial Purchasers are not
obliged to do so, however, and any market-making activity with respect to the
Notes may be discontinued at any time without notice. Therefore, there can be
no assurance as to the liquidity of any trading market for the Notes, or that
an active public market for the New Notes will develop. In addition, such
market-making activity will be subject to the limitations imposed by the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and may be limited during the Exchange Offer. IMPAC does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market; however, the Existing Notes are eligible for trading
in the PORTAL market of the National Association of Securities Dealers, Inc.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because IMPAC anticipates
that most holders of the Existing Notes will elect to exchange such Existing
Notes for New Notes due to the absence of restrictions on the resale of New
Notes under the Securities Act, IMPAC anticipates that the liquidity of the
market for any Existing Notes remaining after the consummation of the Exchange
Offer may be substantially limited.
23
<PAGE>
USE OF PROCEEDS
No proceeds will be received by IMPAC and the Guarantors from the Exchange
Offer. The net proceeds of the sale of the Existing Notes were approximately
$97.0 million, after deducting discounts and commissions and expenses related
to the sale of the Existing Notes. The Company used the net proceeds of the
sale of the Existing Notes to consummate the Combination, repay certain
existing indebtedness, pay certain fees and expenses in connection with the
Transactions and for general corporate purposes.
The following table summarizes the sources and uses of funds for the sale of
the Existing Notes:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
SOURCES OF FUNDS
New Credit Facility(1)............................................ $ 0.0
10 1/8% Senior Subordinated Notes(2)............................. 100.0
Equity contributions:
AGI management equity investment............................... 14.4
KFI Holding management equity investment(3).................... 6.0
Heritage equity investment(4).................................. 13.6
------
Total sources of funds..................................... $134.0
======
USES OF FUNDS
Purchase of AGI equity(5)......................................... $ 69.0
Contributed KFI Holding equity.................................... 15.0
Retirement of Klearfold indebtedness(6)........................... 30.3
Retirement of AGI indebtedness(7)................................. 8.3
Cash for working capital.......................................... 6.4
Fees and expenses................................................. 5.0
------
Total uses of funds........................................ $134.0
======
</TABLE>
- --------
(1) The New Credit Facility provides for up to $40.0 million of revolving
credit borrowings and up to $13.0 million of letters of credit, and
matures in 2003. As of the date of the closing of the Transaction, letters
of credit in the aggregate amount of approximately $12.6 million were
outstanding under the New Credit Facility and $40.0 million of revolving
credit borrowings were available to the Company. The New Credit Facility
is guaranteed by all current and future subsidiaries of IMPAC and is
secured by all assets of the Company and its subsidiaries. In connection
with the Tinsley Acquisition, the Company has entered into an Amended and
Restated Multicurrency Credit Facility. See "Description of Other
Indebtedness."
(2) There is currently no indebtedness outstanding that is subordinated to the
Notes.
(3) Represents $1.2 million in cash and $4.8 million in contributed stock of
KFI Holding (the value ascribed to the equity of KFI Holding taking into
account (i) the repayment of approximately $30.3 million of Klearfold
indebtedness (including accrued interest) and (ii) approximately $4.0
million of the Klearfold IRBs remaining outstanding after the
Transactions).
(4) Represents $3.4 million in cash and $10.2 million in contributed stock of
KFI Holding (the value ascribed to the equity of KFI Holding taking into
account (i) the repayment of approximately $30.3 million of Klearfold
indebtedness (including accrued interest) and (ii) approximately $4.0
million of the Klearfold IRBs remaining outstanding after the
Transactions).
(5) Represents the acquisition by the Company of all of the outstanding common
stock of AGI and settlement of certain stock appreciation rights for $54.6
million of cash, including a dividend of approximately $22.5 million paid
to AGI stockholders immediately prior to the Combination, and $14.4
million (the ascribed value) of common stock of the Company issued to
AGI's management. Approximately $7.6 million of the AGI IRBs remain
outstanding after the Transactions. See "Management" and "Certain
Relationships and Related Transactions".
24
<PAGE>
(6) Reflects the total funded indebtedness (including accrued interest) of
Klearfold, other than the Klearfold IRBs, that was outstanding immediately
prior to the Combination. All of such indebtedness was owed under the
Revolving Credit and Term Loan Agreement (the "Revolving Credit and Term
Loan Agreement"), dated as of June 7, 1996, with BankBoston, N.A. and
National Westminster Bank Plc., as co-agents, providing for two term loans
aggregating $31.0 million in principal amount (the "Term Loans") and
revolving credit loans of up to $12.0 million, including letters of credit
(the "Revolving Loan"). Term Loan A ($21.0 million) had a final maturity
date of June 30, 2002. Term Loan B ($10.0 million) had a final maturity
date of June 30, 2003. Term Loans bore interest at the bank's base rate
plus applicable margins. The effective rates at December 31, 1997 were
8.5% and 9.0% for Term Loans A and B, respectively. As of December 31,
1997, no borrowings were outstanding and $4.0 million of letters of credit
were outstanding under the Revolving Loan. The effective interest rate on
the Revolving Loans at December 31, 1997 was 9.75% per annum and letters
of credit bore fees equal to 3.0% per annum. This Revolving Credit and
Term Loan Agreement was terminated and refinanced concurrently with the
Transactions.
(7) Reflects the total funded indebtedness of AGI, other than the AGI IRBs,
that was outstanding immediately prior to the Combination.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998. This table should be read in conjunction with the related financial
statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1998
-------------
(IN MILLIONS)
<S> <C>
New Credit Facility(1)............................................ $ 0.0
IRB Financings(2)................................................. 11.6
10 1/8% Senior Subordinated Notes(3).............................. 100.0
-------
Total debt........................................................ 111.6
Total stockholders' equity........................................ 4.3
-------
Total capitalization.............................................. $ 115.9
=======
</TABLE>
- --------
(1) The New Credit Facility provides for up to $40.0 million of revolving
credit borrowings and up to $13.0 million of letters of credit, and
matures in 2003. As of March 31, 1998, letters of credit in the aggregate
amount of approximately $12.6 million were outstanding under the New
Credit Facility and $40.0 million of revolving credit borrowings were
available to the Company. The New Credit Facility is guaranteed by all
current and future subsidiaries of IMPAC and is secured by all assets of
IMPAC and its subsidiaries. In connection with the Tinsley Acquisition the
Company has entered into the Amended and Restated Multicurrency Credit
Facility. See "Description of Other Indebtedness."
(2) Consists of the IRB Financings (as defined under "Description of Other
Indebtedness") incurred by AGI and Klearfold. The IRB Financings are fully
secured by approximately $12.6 million of letters of credit issued under
the New Credit Facility. See "Description of Other Indebtedness".
(3) There is currently no indebtedness outstanding that is subordinated to the
Notes.
26
<PAGE>
PROPOSED ACQUISITION OF TINSLEY
TINSLEY ROBOR PLC
Tinsley is a supplier of printed packaging for the U.K. music and multimedia
market with an established presence in Europe. Its plants in the U.K.,
Netherlands, Ireland and Austria enable it to offer fast turnaround times,
high quality and large volumes to satisfy customer demand. Tinsley also
provides design and pre-press services to a wide customer base from its
operations in the U.K. and has operations involved in the production of
labels, particularly in the self-adhesive market. It employs approximately 750
people at 10 plants.
The Company has had a significant relationship with Tinsley for over 10
years. During the late 1980s, AGI formed a strategic alliance with a worldwide
network of entertainment packaging companies (the "Diginet"), each of which
serves as a licensee in its respective territory for a specialized CD package
(the "DIGIPAK") developed by AGI. The participants in this network have shared
best practices and effective strategies, and AGI has enhanced its competitive
position with its music and video customers by being able to offer the
capabilities of its strategic partners in other regions. Tinsley has been a
member of the Diginet since 1990.
From its base of operations in the U.K., currently contributing roughly 60%
of its revenues, Tinsley has expanded significantly over the last five years
in the northern region of Western Europe, establishing a presence in Uden,
Holland and Salzburg, Austria, in each case near major customers' CD pressing
plants.
In addition to internal growth, in July 1997 Tinsley consummated the
acquisition of Van de Steeg Packaging BV, a (Pounds)12.6 million revenue,
Amsterdam-based Diginet member, and a European manufacturer of specialty music
packaging. The Company believes that this acquisition strengthened Tinsley's
position as a provider of music packaging in the region and represents an
excellent platform for further expansion in Europe.
Tinsley is guided by a management team led by Lee Newbon, CEO, and Shaun
Lawson, Chairman.
The Company believes the opportunity to combine IMPAC and Tinsley will
create several competitive advantages for IMPAC, including the following:
. Strengthened Position in Music Packaging: The Company believes that the
combination would enhance the combined enterprise's position with music
companies relative to their respective competitors. The Company believes
this combination will enhance the Company's position in the standard and
specialty music packaging industry, and will also position the Company
as an international service provider.
. Synergistic Revenue Potential in Other Entertainment Markets: The
Company believes that each of IMPAC and Tinsley brings to the
combination a strong position in certain other closely related
entertainment markets such as video and multimedia packaging that the
other company should be able to leverage in the near future.
. Broadened Opportunity to Leverage the Klearfold Franchise: While
products generally similar to those of Klearfold already exist in
Europe, the Company believes that few manufacturers possess the same
inherent product development capabilities or produce products of
comparable quality. The Company believes that Tinsley represents an
excellent platform from which to offer the Klearfold product
capabilities to some of the same end markets (in Europe) that were
targeted by Klearfold in connection with the Combination.
27
<PAGE>
THE PROPOSED ACQUISITION
On July 7, 1998, the Boards of Directors of IMPAC and Tinsley announced that
agreement had been reached on the terms of a pre-conditional recommended cash
offer (the "Offer") to acquire all of the issued and to be issued share
capital of Tinsley. The Offer is being made by BT Wolfensohn, on behalf of a
newly-formed subsidiary of the Company ("Newco"). The Offer values each
Tinsley ordinary share at 218 pence per share and the fully diluted share
capital at (Pounds)83.6 million. As part of the Offer, Tinsley shareholders
will have the option to receive all or a portion of the offer price in the
form of five year promissory notes ("Loan Notes"). The Company formally
commenced the Offer on July 22, 1998.
The Board of Directors of Tinsley has unanimously recommended all Tinsley
shareholders to accept the Offer. The Offer is being made on the terms and
subject to certain conditions contained in the definitive offer documents
including the Company receiving valid acceptance of the Offer with respect to
ninety percent (90%) of the outstanding Tinsley shares to which the Offer
relates (or such lesser percentage as the Company may decide). Upon completion
of the Offer, the Company intends to thereafter complete the statutory
procedures available to force the purchase of any remaining outstanding
shares, resulting in Tinsley becoming a wholly-owned indirect subsidiary of
the Company. The Company intends to fund the Offer through borrowings under
the Amended and Restated Multicurrency Credit Facility (as defined below),
approximately $60.0 million in proceeds from the sale of shares of common
stock to one or more of the Company's existing stockholders or their
affiliates and, if Tinsley shareholders elect to receive Loan Notes, the
issuance of Loan Notes. If Newco issues Loan Notes to fund part of the Offer,
then the total borrowings under the Amended and Restated Multicurrency Credit
Facility will be reduced. In addition, the Company has entered into one or
more foreign currency exchange contracts to cover its exposure to foreign
currency fluctuations related to the Offer.
The Offer is not being made, directly or indirectly, in or into, or by use
of the mails or any means or instrumentality (including, without limitation,
facsimile transmission, telex, or telephone) of interstate or foreign commerce
of, or any facilities of a national securities exchange of, the United States,
Canada, Australia or Japan and may not be accepted by any such use, means,
instrumentality or facility.
As noted above, the Offer is subject to certain conditions, and no
assurances can be made that the Tinsley Acquisition will be completed.
THE FINANCING
The Company intends to finance the Tinsley Acquisition through the
establishment of the Amended and Restated Credit Facility described below
under "Amended and Restated Multicurrency Credit Facility", the equity
investments described below under "Additional Equity Financing" and the
issuance of the Loan Notes described under "Loan Notes". The following table
illustrates the estimated sources and uses of funds in connection with the
Tinsley Acquisition.
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS(1)
Amended and Restated Multicurrency Credit Facility
Borrowings(2)............................................ $ 84.2
Additional equity financing............................... 60.0
Loan Notes(3)............................................. 24.8
------
Total sources of funds................................ $169.0
======
USES OF FUNDS
Purchase Tinsley equity................................... $138.0
Retirement of Tinsley indebtedness(4)..................... 21.8
Fees and expenses......................................... 9.2
------
Total uses of funds................................... $169.0
======
</TABLE>
- --------
(1) Based on the Offer, which values each Tinsley ordinary share at 218 pence
and the fully diluted share capital at (Pounds)83.6 million and using an
exchange rate of 1.65 dollars to pounds. In the event that the Company
increases the amount payable in the Offer, it anticipates that, of that
increase, approximately 40% would be financed through additional equity
financing and approximately 60% through the incurrence of additional debt.
28
<PAGE>
(2) The Amended and Restated Multicurrency Credit Facility provides for $107.0
million in term loans and a $53.0 million revolving credit and letter of
credit facility (and as a sublimit thereof a (Pounds)15.4 million guaranty
of the Loan Notes) of which $13.0 million will be used to issue letters of
credit to support the IRB Financings and up to $20.0 million (inclusive of
the $13.0 million in letters of credit to support the IRB Financings) may
be used as a letter of credit facility. Management estimates that, based
on the price of the Offer without giving effect to any increase as
contemplated by Note 1 above, as of the date of the closing of the Tinsley
Acquisition, $84.2 million in term loans will be outstanding and letters
of credit in the aggregate amount of approximately $12.6 million will be
outstanding, up to a $25.4 million guarantee of the Loan Notes will be
outstanding and the balance of the $53.0 million of revolving credit and
letter of credit facility borrowings will be available to the Company
under the Amended and Restated Multicurrency Credit Facility. It is
anticipated that, after the consummation of the Tinsley Acquisition, any
drawings under the (Pounds)15.4 million guaranty of the Loan Notes will be
converted into borrowings under the term loans.
(3) Assumes that Tinsley shareholders elect to receive the maximum amount of
Loan Notes.
(4) Reflects the Company's estimate of total funded indebtedness of Tinsley
that will be outstanding immediately prior to the Tinsley Acquisition,
assuming a closing on or about August 31, 1998.
AMENDED AND RESTATED MULTICURRENCY CREDIT FACILITY
In March 1998, the Company entered into a credit facility with Bank of
America, National Trust and Savings Association ("Bank of America") that
provides for up to $40.0 million of revolving credit borrowings by IMPAC and
up to $13.0 million in letters of credit for Klearfold and AGI (the "New
Credit Facility"). The New Credit Facility has a five-year maturity. Bank of
America issued approximately $13.0 million of letter of credit accommodations
to provide credit enhancement to outstanding AGI and Klearfold municipal
variable rate demand bonds. As of June 30, 1998, no revolving credit
borrowings were outstanding under the New Credit Facility.
In connection with the consummation of the proposed Tinsley Acquisition, the
Company has entered into an amended and restated multicurrency credit facility
(the "Amended and Restated Multicurrency Credit Facility") with Bank of
America, as agent, and certain other financial institutions parties thereto.
Although the Company has entered into the Amended and Restated Multicurrency
Credit Facility, the Amended and Restated Multicurrency Credit Facility will
not become operative until the funding of the Tinsley Acquisition. The Amended
and Restated Multicurrency Credit Facility provides up to $53.0 million of
revolving credit borrowings and letter of credit facilities (the "Revolver")
by IMPAC, up to $37.0 million of term loan A borrowings (the "Term Loan A")
and up to $70.0 million term loan B borrowings (the "Term Loan B"). The
Revolver will have a five-year maturity. The Term Loan A will have a five and
one-half year maturity. The Term Loan B will have a six and one-half year
maturity. The Revolver will include a $20.0 million letter of credit
subfacility.
The Amended and Restated Multicurrency Credit Facility will rank senior to
the Notes, and the Company's obligations under the Amended and Restated
Multicurrency Credit Facility will be guaranteed by each of the Company's
existing and future domestic Subsidiaries on a senior basis and secured by
substantially all of the assets of the Company and its domestic Subsidiaries.
In addition, the Amended and Restated Multicurrency Credit Facility will in
certain instances be guaranteed by certain existing and future foreign
Subsidiaries on a senior basis and will be secured by substantially all of the
assets of certain foreign subsidiaries of the Company. Any foreign Subsidiary
that provides a guarantee with respect to the Amended and Restated
Multicurrency Credit Facility will also be required to deliver a guarantee
with respect to the Notes. Interest on the Company's loan balance will be
payable at Bank of America's base rate (plus an applicable margin), with an
IBOR (plus an applicable margin) option on customary terms. The applicable
margins for base rate loans will range between 0.50% and 1.75% based upon the
Company's ratio of Senior Debt to EBITDA (as defined in the Amended and
Restated Multicurrency Credit Facility) and the applicable margin for IBOR
loans will range between 1.50% and 2.75% based upon the Company's ratio of
Senior Debt to EBITDA. The Revolver will include a $20.0 million swing line
subfacility available in Pounds Sterling. The Company will pay customary fees
in connection with the execution of the Amended and Restated Multicurrency
Credit Facility, with respect to any unused portion of the Revolver, Term Loan
A and Term Loan B commitment and with respect to the maintenance of the letter
of credit accommodations. In addition to customary covenants, the Amended and
Restated Multicurrency Credit Facility will impose substantial limitations on
the Company's ability to incur additional indebtedness, incur liens, pay
dividends, make
29
<PAGE>
other restricted payments, issue guaranties, make advances to affiliates and
dispose of assets. The Amended and Restated Multicurrency Credit Facility will
constitute Senior Debt for purposes of the Notes and the Indenture. The
Company expects to use the proceeds from borrowings under the Amended and
Restated Multicurrency Credit Facility for making loans and equity
contributions for use in financing the Tinsley Acquisition and refinancing
existing Tinsley indebtedness and to provide for working capital, other
acquisitions and general corporate purposes.
ADDITIONAL EQUITY FINANCING
Affiliates of Heritage have entered into commitments to purchase
approximately $60.0 million of the Company's Common Stock in order to provide
equity financing for the Tinsley Acquisition. Certain other stockholders of
the Company will participate in this financing, including Mr. Richard Block,
the Chief Executive Officer of the Company, whom the Company anticipates will
invest approximately $3.0 million. To the extent that other stockholders
participate in the equity financing, the amount invested by the Heritage
affiliates will decrease. One of these affiliates of Heritage currently owns
40% of the Company's Common Stock, and after this financing affiliates of
Heritage will control a majority of the Company's outstanding Common Stock.
LOAN NOTES
As part of the Offer, Tinsley shareholders will have the option to elect to
receive all or a portion of the purchase price in the form of Loan Notes, not
to exceed (Pounds)15.0 million in the aggregate for all Tinsley shareholders.
The Loan Notes mature in 2003, subject to earlier redemption at the option of
the holder or, subject to certain conditions, Newco, and will bear interest at
a rate of per annum based on LIBOR less 1%. The Loan Notes will be guaranteed
as to principal and interest, up to an aggregate of (Pounds)15.4 million, by
Bank of America. Drawings under this guarantee will be converted into
borrowings under the Amended and Restated Multicurrency Credit Facility. The
Company is providing Tinsley shareholders the option of receiving Loan Notes
as part of the purchase price in order to permit Tinsley shareholders in the
United Kingdom to defer a portion of any capital gain that may be applicable
to the Offer.
30
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
In February 1998, KFI Holding, its stockholders, and certain stockholders
and holders of stock appreciation rights of AGI entered into an Investment
Agreement (the "Investment Agreement"), under which (i) the stockholders of
KFI Holding agreed to contribute to KFI Holding the entire outstanding capital
stock of KFI Holding and a warrant to purchase KFI Holding capital stock and
to invest approximately $4.6 million in cash, and (ii) certain stockholders
and holders of stock appreciation rights of AGI agreed to contribute to KFI
Holding shares of AGI common stock and to invest the proceeds of their stock
appreciation rights, totaling an aggregate of $14.4 million. In exchange for
these contributions and cash investments, KFI Holding agreed to issue to the
contributing or investing parties shares of its common stock (the "Common
Stock") and upon consummation of such issuance, KFI Holding was renamed IMPAC
Group, Inc.
At the same time, KFI Holding, its wholly-owned subsidiary AGI Acquisition
Corp., AGI and certain stockholders of AGI and KFI Holding entered into an
Agreement and Plan of Merger (the "Agreement and Plan of Merger"), under which
AGI Acquisition Corp. merged on March 12, 1998 with and into AGI, with AGI as
the surviving corporation. In this merger, the shares of AGI not contributed
to KFI Holding under the Investment Agreement, a stock option and certain
stock appreciation rights were converted into a right to receive cash in the
aggregate amount of approximately $30.5 million, net of fees. In addition,
immediately prior to the closing of the Combination the stockholders of AGI
received a dividend in the aggregate amount of approximately $22.5 million. As
a result of the foregoing transactions Klearfold and AGI became wholly-owned
subsidiaries of IMPAC.
In order to finance the Combination and the Company's working capital needs
thereafter, the Company issued $100 million aggregate principal amount of
Existing Notes and entered into the New Credit Facility.
On July 7, 1998, the Boards of Directors of IMPAC and Tinsley announced that
an agreement had been reached on the terms of a recommended cash offer (the
"Offer") to acquire all of the issued and to be issued share capital of
Tinsley. The Offer is being made by BT Wolfensohn, on behalf of a newly-formed
subsidiary of the Company ("Newco"). The Offer values each Tinsley ordinary
share at 218 pence per share and the fully diluted share capital at
(Pounds)83.6 million. As part of the Offer, Tinsley shareholders will have the
option to receive all or a portion of the offer price in the form of five year
promissory notes ("Loan Notes"). The Company formally commenced the Offer on
July 22, 1998.
The following Unaudited Pro Forma Combined Financial Data of IMPAC are based
on the historical financial statements of AGI for the year ended December 31,
1997, the historical consolidated financial statements of KFI Holding for the
year ended December 31, 1997, and the historical consolidated financial
statements of Tinsley for the fiscal year ended March 31, 1998 included
elsewhere in this Prospectus, adjusted to give effect to the pro forma
adjustments described in the notes thereto. The Unaudited Pro Forma Combined
Statements of Income give effect to the Offering, the Combination and the
Tinsley Acquisition as though these transactions had occurred on January 1,
1997. The Unaudited Pro Forma Combined Balance Sheet gives effect to the
Tinsley Acquisition as though these transactions had occurred on March 31,
1998.
The pro forma adjustments are based upon available data and certain
assumptions that Company management believes are reasonable. Management does
not believe that any pro forma adjustments are necessary to reflect the
exchange of New Notes for Existing Notes. The Unaudited Pro Forma Combined
Financial Data are not necessarily indicative of the Company's results of
operations that might have occurred had the aforementioned transactions been
completed as of the date indicated above and do not purport to represent what
the Company's results of operations might be for any future period or date.
The Unaudited Pro Forma Combined Financial Data should be read in conjunction
with the financial statements and the related notes and the information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
31
<PAGE>
IMPAC GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AGI/KFI
AGI HOLDING TINSLEY
KFI ACQUISITION OFFERING COMBINED TINSLEY ACQUISITION SENIOR DEBT
HOLDING AGI ADJUSTMENTS ADJUSTMENTS PRO FORMA ROBOR PLC(6) ADJUSTMENTS(7) ADJUSTMENTS(7)
------- -------- ----------- ----------- --------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... $52,493 $108,281 $ -- $ -- $160,774 $113,629 $ -- $ --
Cost of goods
sold............. 39,322 76,459 635 (2) -- 116,416 78,388 420 (8) --
------- -------- ------- ------- -------- -------- ------- -------
Gross profit.... 13,171 31,822 (635) -- 44,358 35,241 (420) --
Selling, general
and
administrative
expenses......... 7,556 19,444 1,087 (2) -- 28,087 22,162 2,156 (8) --
Stock-based
compensation
expense.......... -- 2,326 (2,326)(3) -- -- -- -- --
------- -------- ------- ------- -------- -------- ------- -------
Operating
income......... 5,615 10,052 604 -- 16,271 13,079 (2,576) --
Interest expense,
net.............. (3,469) (1,242) -- (6,687)(5) (11,398) (1,800) -- (8,553)(9)
Gain on sale of
fixed assets..... -- 139 -- -- 139 91 -- --
------- -------- ------- ------- -------- -------- ------- -------
Income before
income taxes .... 2,146 8,949 604 (6,687) 5,012 11,370 (2,576) (8,553)
Income (taxes) ... (754) (231) (4,101)(4) 2,675 (4) (2,411) (4,119) (503)(4) 3,293 (4)
------- -------- ------- ------- -------- -------- ------- -------
Net income ....... $ 1,392 $ 8,718 $(3,497) $(4,012) $ 2,601 $ 7,251 $(3,079) $(5,260)
======= ======== ======= ======= ======== ======== ======= =======
OTHER DATA:
EBITDA (as
defined)(10)..... $ 24,536
Cash interest
expense(11)...... 10,891
Depreciation and
amortization..... 8,298
Ratio of earnings
to fixed
charges(12)...... 1.4x
<CAPTION>
IMPAC
GROUP
PRO FORMA
----------
<S> <C>
Net sales......... $274,403
Cost of goods
sold............. 195,224
----------
Gross profit.... 79,179
Selling, general
and
administrative
expenses......... 52,405
Stock-based
compensation
expense.......... --
----------
Operating
income......... 26,774
Interest expense,
net.............. (21,751)
Gain on sale of
fixed assets..... 230
----------
Income before
income taxes .... 5,253
Income (taxes) ... (3,740)
----------
Net income ....... $ 1,513
==========
OTHER DATA:
EBITDA (as
defined)(10)..... $ 45,762
Cash interest
expense(11)...... 20,554
Depreciation and
amortization..... 19,021
Ratio of earnings
to fixed
charges(12)...... 1.2x
</TABLE>
32
<PAGE>
IMPAC GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AGI/KFI IMPAC
AGI HOLDING TINSLEY TINSLEY GROUP
IMPAC ACQUISITION OFFERING COMBINED ROBOR ACQUISITION SENIOR DEBT PRO
GROUP AGI(1) ADJUSTMENTS ADJUSTMENTS PRO FORMA PLC(6) ADJUSTMENTS(7) ADJUSTMENTS(7) FORMA
------- ------- ----------- ----------- --------- ------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........... $15,801 $15,505 $ -- $ -- $31,306 $18,955 $ -- $ -- $50,261
Cost of goods sold.. 12,418 11,299 (342)(2) -- 23,375 13,149 105 (8) -- 36,629
------- ------- ------ ------ ------- ------- ----- ------- -------
Gross profit....... 3,383 4,206 342 -- 7,931 5,806 (105) -- 13,632
Selling, general and
administrative
expenses........... 2,530 5,157 (1,342)(2) -- 6,345 3,486 539 (8) -- 10,370
Stock-based
compensation
expense............ -- 1,171 (1,171)(3) -- -- -- -- -- --
------- ------- ------ ------ ------- ------- ----- ------- -------
Operating income
(loss)............ 853 (2,122) 2,855 -- 1,586 2,320 (644) -- 3,262
Interest expense,
net................ (1,216) (152) -- (1,516)(5) (2,884) (472) -- (2,138)(9) (5,494)
------- ------- ------ ------ ------- ------- ----- ------- -------
(Loss) before income
taxes and
extraordinary
item............... (363) (2,274) 2,855 (1,516) (1,298) 1,848 (644) (2,138) (2,232)
Income (taxes)
benefit............ 128 68 (384)(4) 606 (4) 418 (567) (201)(4) 834 (4) 484
------- ------- ------ ------ ------- ------- ----- ------- -------
Income (loss) before
extraordinary
item............... $ (235) $(2,206) $2,471 $ (910) $ (880) $ 1,281 $(845) $(1,304) $(1,748)
======= ======= ====== ====== ======= ======= ===== ======= =======
OTHER DATA:
EBITDA (as
defined)(10)....... $ 3,717 $ 7,726
Cash interest
expense(11)........ 2,755 4,000
Depreciation and
amortization....... 2,131 4,464
Ratio of earnings to
fixed changes(12)
................... -- --
</TABLE>
33
<PAGE>
IMPAC GROUP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
KFI ACQUISITION OFFERING PRO
HOLDING AGI(1) ADJUSTMENTS ADJUSTMENTS FORMA
------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Net sales............... $10,837 $23,012 $ -- $ -- $33,849
Cost of goods sold...... 7,789 16,584 149 (2) -- 24,522
------- ------- ----- ------- -------
Gross profit.......... 3,048 6,428 (149) -- 9,327
Selling, general and ad-
ministrative expenses.. 1,718 4,408 281 (2) -- 6,407
Stock-based compensation
expense................ -- 582 (582)(3) -- --
------- ------- ----- ------- -------
Operating income...... 1,330 1,438 152 -- 2,920
Interest expense, net... (766) (307) -- (1,772)(5) (2,845)
------- ------- ----- ------- -------
Income before income
taxes.................. 564 1,131 152 (1,772) 75
Income (taxes).......... (198) (54) (628)(4) 747 (4) (133)
------- ------- ----- ------- -------
Net income (loss)....... $ 366 $ 1,077 $(476) $(1,025) $ (58)
======= ======= ===== ======= =======
OTHER DATA:
EBITDA (as de-
fined)(10)............. $ 4,929
Cash interest ex-
pense(11).............. 2,722
Depreciation and amorti-
zation................. 2,039
Capital expenditures.... 1,870
Ratio of earnings to
fixed charges(12)...... 1.0x
</TABLE>
34
<PAGE>
IMPAC GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(1) Adjustments to the three months ended March 31, 1998 were made to
reflect the operations of AGI for the period from January 1, 1998 to March 12,
1998. AGI operations are included in the Company's historical operations from
March 13, 1998. Adjustments for the three months ended March 31, 1997 are made
to reflect the operations of AGI for that period. The unaudited Pro Forma
Combined Statement of Income for the three months ended March 31, 1997 was
prepared to give effect to the Combination only and is included to be read in
conjunction with IMPAC's Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in this Prospectus.
(2) Reflects adjustments to record amortization of the excess of the
purchase price of the AGI common stock over the fair value of the net assets
acquired ("Excess Purchase Price") after the preliminary allocation of the
purchase price to the estimated fair value of AGI's assets and liabilities
acquired and to record depreciation of Excess Purchase Price allocated to
property, plant and equipment. The amortization of the allocation of the
Excess Purchase Price to inventory is not reflected in the Unaudited Pro Forma
Combined Statements of Income as it is non-recurring in nature. This
adjustment also reflects the elimination of certain non-recurring Combination-
related fees which are included in the AGI historical results.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
----------------------
SELLING,
COST OF GENERAL AND
GOODS ADMINISTRATIVE
SOLD EXPENSES
------- --------------
<S> <C> <C>
Amortization of intangible assets...................... $-- $1,016
Depreciation of property, plant and equipment.......... 635 71
---- ------
Total adjustment..................................... $635 $1,087
==== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
---------------------- ----------------------
SELLING, SELLING,
COST OF GENERAL AND COST OF GENERAL AND
GOODS ADMINISTRATIVE GOODS ADMINISTRATIVE
SOLD EXPENSES SOLD EXPENSES
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Amortization of intangible
assets........................ $ -- $ 212 $-- $254
Depreciation of property, plant
and equipment................. 114 27 149 27
Amortization of inventory...... (456) -- -- --
Non-recurring combination
related fees.................. -- (1,581) -- --
----- ------- ---- ----
Total adjustment............. $(342) $(1,342) $149 $281
===== ======= ==== ====
</TABLE>
(3) In connection with the Combination, certain AGI executives signed
employment agreements which specify such executives' compensation through the
term of the agreements. The new employment agreements do not contain stock
appreciation rights or any other equity component requiring variable
accounting. It is anticipated that the compensation expense associated with
the AGI executives in 1998 will approximate the 1997 expense less the expense
associated with the stock-based compensation. This adjustment eliminates the
expense associated with the stock appreciation rights ("SARs") recorded in the
historical AGI financial statements.
(4) Represents the income tax adjustment required to result in a pro forma
income tax provision based upon (i) pro forma pre-tax income plus non
deductible amortization of intangibles; and (ii) an estimated effective tax
rate of 39%.
35
<PAGE>
(5) The increase in pro forma interest expense as a result of the Offering
is as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31,
YEAR ENDED ---------------
DECEMBER 31, 1997 1998 1997
----------------- ------- ------
<S> <C> <C> <C>
Interest on new borrowings:
Interest expense on the Notes at an in-
terest rate of 10.125%................. $10,125 $ 2,531 $2,531
Commitment fee of 0.5% on unused
availability under the New Credit
Facility............................... 200 50 50
Interest expense on outstanding Letters
of Credit under the New Credit Facility
at an assumed rate of 1.625%........... 205 51 51
Amortization of deferred financing cost
incurred in connection with the
Offering and the New Credit Facility... 492 123 123
------- ------- ------
Total interest from debt requirements
of the Offering....................... $11,022 $ 2,755 $2,755
Elimination of historical interest ex-
pense, except for IRB interest........... (4,335) (1,239) (983)
------- ------- ------
Net increase in interest expense........ $ 6,687 $ 1,516 $1,772
======= ======= ======
</TABLE>
(6) The following tables summarize the adjustments made to: (i) convert the
U.K. GAAP historical operations of Tinsley to U.S. GAAP and (ii) reflect the
operations of Van de Steeg and Pinepoint for the periods from April 1, 1997 to
July 29, 1997 and from April 1, 1997 to August 20, 1997, respectively. Van de
Steeg and Pinepoint operations are included in the historical results of
Tinsley from July 30, 1997 and August 21, 1997, respectively.
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
U.K. GAAP HISTORICAL ADJUSTMENTS ADJUSTMENTS U.S.
---------------------------------- TO U.S. FOR TINSLEY GAAP AS
(Pounds) AVG. RATE US$ GAAP ACQUISITIONS ADJUSTED
-------------- --------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... (Pounds)64,992 0.607 $107,058 $ -- $6,571 $113,629
Cost of goods sold...... 45,020 0.607 74,159 -- 4,229 78,388
-------------- -------- ----- ------ --------
Gross profit.......... 19,972 32,899 -- 2,342 35,241
Selling, general and
administrative
expenses............... 12,367 0.607 20,371 178 (a) 1,613 22,162
-------------- -------- ----- ------ --------
Operating income...... 7,605 12,528 (178) 729 13,079
Interest expense, net... (1,048) 0.607 (1,726) -- (74) (1,800)
Gain on sale of fixed
assets................. 55 0.607 91 -- -- 91
-------------- -------- ----- ------ --------
Income before income
taxes.................. 6,612 10,893 (178) 655 11,370
Income taxes............ (2,233) 0.607 (3,678) (209)(b) (232)(b) (4,119)
-------------- -------- ----- ------ --------
Net income.............. (Pounds) 4,379 $ 7,215 $(387) $ 423 $ 7,251
============== ======== ===== ====== ========
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------
U.K. GAAP HISTORICAL ADJUSTMENTS U.S. GAAP
--------------------------------- TO U.S. AS
(Pounds) AVG. RATE US$ GAAP ADJUSTED
-------------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... (Pounds)11,488 0.606 $18,955 $ -- $18,955
Cost of goods sold...... 7,969 0.606 13,149 -- 13,149
-------------- ------- ----- -------
Gross profit.......... 3,519 5,806 -- 5,806
Selling, general and
administrative
expenses............... 2,083 0.606 3,437 49 (a) 3,486
-------------- ------- ----- -------
Operating income...... 1,436 2,369 (49) 2,320
Interest expense, net... (286) 0.606 (472) -- (472)
-------------- ------- ----- -------
Income before income
taxes.................. 1,150 1,897 (49) 1,848
Income taxes............ (312) 0.606 (515) (52)(b) (567)
-------------- ------- ----- -------
Net income.............. (Pounds) 838 $ 1,382 $(101) $ 1,281
============== ======= ===== =======
</TABLE>
36
<PAGE>
(a) Adjustments to U.S. GAAP are made up of the following components:
<TABLE>
<CAPTION>
FOR THE FOR THE
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
------------------- ------------------
<S> <C> <C>
Selling, general and administrative
expenses:
Depreciation expense................. $ (26) $ (7)
Goodwill amortization................ 600 150
Pension expense...................... (396) (94)
----- ----
$ 178 $ 49
===== ====
</TABLE>
(b) Represents the income tax adjustment required to result in a pro forma
income tax provision based upon: (i) pro forma pre-tax income plus non
deductible amortization of intangibles; (ii) an estimated tax rate of 35%; and
(iii) deferred tax expense.
(7) These columns give effect to the proposed acquisition of Tinsley and the
related issuance of senior debt as if the transaction occurred on January 1,
1997. These adjustments are based on a 218 pence per share purchase price.
(8) Reflects adjustments to record amortization of the excess of the
purchase price of Tinsley common stock over the fair value of the net assets
acquired ("Excess Purchase Price") after the preliminary allocation of the
purchase price to the estimated fair value of Tinsley's assets and liabilities
acquired, and to record depreciation of Excess Purchase Price allocated to
property, plant and equipment. This adjustment also reflects a reduction of
certain corporate expenses associated with being a public company which will
be eliminated upon the acquisition.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
---------------------- ----------------------
SELLING, SELLING,
COST OF GENERAL AND COST OF GENERAL AND
GOODS ADMINISTRATIVE GOODS ADMINISTRATIVE
SOLD EXPENSES SOLD EXPENSES
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Amortization of intangible
assets...................... $-- $2,460 $-- $615
Depreciation of property,
plant and equipment......... 420 -- 105 --
Corporate expenses........... -- (304) -- (76)
---- ------ ---- ----
Total adjustment......... $420 $2,156 $105 $539
==== ====== ==== ====
</TABLE>
(9) The increase in pro forma interest expense as a result of the Senior
Debt is as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
------------------- ------------------
<S> <C> <C>
Interest expense on senior debt:
Term A at IBOR plus 2.25%, or 7.91%.. $ 963 $ 241
Term B at IBOR plus 2.75%, or 8.41%.. 5,884 1,471
Interest expense on Loan Notes......... 1,962 490
Additional interest expense on
outstanding Letters of Credit under
the New Credit Facility at an assumed
increase in rate of .625%............. 74 18
Amortization of deferred financing cost
incurred in connection with the
senior debt and senior subordinated
debt.................................. 690 173
------- ------
Total interest from debt
requirements of Senior Debt....... 9,573 2,393
Elimination of Tinsley historical
interest expense...................... (1,020) (255)
------- ------
Net increase in interest expense... $ 8,553 $2,138
======= ======
</TABLE>
37
<PAGE>
(10) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and excludes, to
the extent applicable, (i) gain (loss) on sale of fixed assets, (ii) stock-
based compensation expense, and (iii) PTP royalty and commission income of $33
for the year ended December 31, 1997. EBITDA is not a substitute for operating
income, net earnings and cash flow from operating activities as determined in
accordance with generally accepted accounting principles as a measure of
profitability or liquidity. EBITDA is presented as additional information
because management believes it to be a useful indicator of the Company's
ability to service and/or incur indebtedness.
(11) For purposes of this computation, cash interest expense consists of pro
forma interest expense before the amortization of deferred financing costs.
(12) For purposes of computing the ratio of earnings to fixed charges,
earnings are defined as income before income taxes, plus fixed charges. Fixed
charges consist of interest expense on all indebtedness (including
amortization of deferred financing costs) and a portion of operating lease
rental expense (one-third) that is representative of the interest factor.
AGI/KFI Holding's Combined Pro Forma earnings were insufficient to cover fixed
charges by $1,298 for the three months ended March 31, 1998. IMPAC Group Pro
Forma earnings were insufficient to cover fixed charges by $2,232 for the
three months ended March 31, 1998.
38
<PAGE>
IMPAC GROUP, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TINSLEY IMPAC
IMPAC TINSLEY ACQUISITION GROUP
GROUP, INC. ROBOR PLC(1) ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash................... $ 5,175 $ 2,064 $ 2,742 (2) $ 9,981
Trade account
receivable, net....... 16,316 21,175 -- 37,491
Other receivables...... 2,676 1,336 -- 4,012
Inventories............ 15,508 7,887 -- 23,395
Prepaid expenses....... 1,122 766 -- 1,888
Deferred income taxes.. 2,351 -- -- 2,351
Other current assets... 156 344 -- 500
-------- -------- -------- --------
Total current assets..... 43,304 33,572 2,742 79,618
Long-term assets:
Property, plant and
equipment, net........ 51,681 42,565 4,200 (3) 98,446
Goodwill............... 40,547 24,543 98,386 (4) 163,476
Deferred financing
costs, net............ 4,731 -- 3,700 (2)(5) 8,431
Restricted cash........ 404 -- -- 404
Other assets........... 1,591 -- -- 1,591
-------- -------- -------- --------
Total assets............. $142,258 $100,680 $109,028 $351,966
======== ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
- --------------------
Current liabilities:
Bank overdraft......... $ 789 $ 130 $ -- $ 919
Trade payables......... 8,782 8,363 -- 17,145
Bank loans............. -- 5,228 (5,228)(2) --
Obligations under
capital leases........ -- 3,806 -- 3,806
Accrued expenses....... 9,910 13,170 -- 23,080
-------- -------- -------- --------
Total current
liabilities............. 19,481 30,697 (5,228) 44,950
-------- -------- -------- --------
Long-term debt........... 111,640 11,830 (11,830)(2) 218,640
107,000 (2)
Obligations under capital
leases.................. -- 10,558 -- 10,558
Deferred liabilities..... 6,813 5,085 1,596 (3) 13,494
-------- -------- -------- --------
Total liabilities........ 137,934 58,170 91,538 287,642
-------- -------- -------- --------
Shareholders' equity:
Common stock........... -- 3,143 (3,143)(6) --
Paid in capital........ 38,964 28,212 (28,212)(6) 98,964
60,000 (2)
Carryover basis
adjustment............ (37,142) -- -- (37,142)
Retained earnings...... 2,502 11,155 (11,155)(6) 2,502
-------- -------- -------- --------
Total shareholders'
equity.................. 4,324 42,510 17,490 64,324
-------- -------- -------- --------
Total liabilities and
shareholders' equity.... $142,258 $100,680 $109,028 $351,966
======== ======== ======== ========
</TABLE>
39
<PAGE>
IMPAC GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) The following table outlines the adjustments made to convert the U.K.
GAAP historical condensed balance sheet of Tinsley to U.S. GAAP.
<TABLE>
<CAPTION>
U.K. GAAP HISTORICAL U.S.
-------------------------------- ADJUSTMENTS GAAP
3/31/98 TO AS
(Pounds) RATE US$ U.S. GAAP ADJUSTED
-------------- ------- -------- ----------- --------
ASSETS
- ------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash.................. (Pounds) 1,224 0.593 $ 2,064 $ -- $ 2,064
Trade account
receivable, net...... 12,557 0.593 21,175 -- 21,175
Other receivables..... 792 0.593 1,336 -- 1,336
Inventories........... 4,677 0.593 7,887 -- 7,887
Prepaid expenses...... 454 0.593 766 -- 766
Other current assets.. 204 0.593 344 -- 344
-------------- -------- ------- --------
Total current assets.... 19,908 33,572 -- 33,572
Long-term assets:
Property, plant and
equipment, net....... 26,291 0.593 44,336 (1,771)(a) 42,565
Goodwill.............. -- 0.593 -- 24,543 (b) 24,543
-------------- -------- ------- --------
Total assets............ (Pounds)46,199 $ 77,908 $22,772 $100,680
============== ======== ======= ========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY
- --------------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Bank overdraft........ (Pounds) 77 0.593 $ 130 $ -- $ 130
Trade payables........ 4,959 0.593 8,363 -- 8,363
Bank loans............ 3,100 0.593 5,228 -- 5,228
Obligations under
capital leases....... 2,257 0.593 3,806 -- 3,806
Accrued expenses...... 7,810 0.593 13,170 -- 13,170
-------------- -------- ------- --------
Total current
liabilities............ 18,203 30,697 -- 30,697
-------------- -------- ------- --------
Long-term debt.......... 7,015 0.593 11,830 -- 11,830
Obligations under
capital leases......... 6,261 0.593 10,558 -- 10,558
Deferred liabilities.... 1,315 0.593 2,218 2,867 (c) 5,085
-------------- -------- ------- --------
Total liabilities....... 32,794 55,303 2,867 58,170
-------------- -------- ------- --------
Shareholders' equity:
Outstanding capital... 1,864 0.593 3,143 -- 3,143
Paid in capital in
excess of par........ 16,730 0.593 28,212 -- 28,212
Goodwill reserve...... (14,554) 0.593 (24,543) 24,543 (b) --
Retained earnings..... 9,365 0.593 15,793 (4,638)(a)(c) 11,155
-------------- -------- ------- --------
Total shareholders'
equity................. 13,405 22,605 19,905 42,510
-------------- -------- ------- --------
Total liabilities and
shareholders' equity... (Pounds)46,199 $ 77,908 $22,772 $100,680
============== ======== ======= ========
</TABLE>
- --------
(a) Reverses prior revaluations of fixed assets per U.K. GAAP
(b) Reflects goodwill as an asset rather than an equity reserve
(c) Fully recognizes deferred tax liabilities which were only partially
recognized under U.K. GAAP
40
<PAGE>
IMPAC GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(2) Reflects adjustments for the estimated sources and uses of funds in
connection with the assumed acquisition as of March 31, 1998, computed as
follows:
<TABLE>
<S> <C> <C>
Sources of funds:
Issuance of Senior Debt:
New Term A........................................... $12,000
New Term B........................................... 70,000
Loan Notes........................................... 25,000
-------
107,000
Equity contributions................................... 60,000
--------
Total Sources.......................................... $167,000
========
Uses of funds:
Purchase of Tinsley equity............................. $138,000
Retirement of Tinsley indebtedness:
Bank loans........................................... 5,228
Long-term debt....................................... 11,830
-------
17,058
Estimated financing fees............................... 3,700
Estimated acquisition expenses......................... 5,500
Cash for working capital............................... 2,742
--------
Total Uses............................................. $167,000
========
</TABLE>
(3) Reflects management's preliminary estimate of the write-up to fair value
of the fixed assets acquired and related deferred tax liabilities.
(4) Reflects the excess of the purchase price over the fair value of the net
assets acquired ("Excess Purchase Price") computed as follows:
<TABLE>
<S> <C>
Purchase price:
Purchase of Tinsley equity..................................... $138,000
Retirement of Tinsley indebtedness............................. 17,058
Estimated acquisition expenses................................. 5,500
--------
Total purchase price......................................... 160,558
Less:
Net assets acquired, including goodwill........................ (59,568)
Net write-up of assets acquired................................ (2,604)
--------
Goodwill adjustment.............................................. $ 98,386
========
</TABLE>
(5) Represents management's estimate of the fees and expenses associated
with the new Senior Debt and the Amended and Restated Multicurrency Credit
Facility.
(6) To record the elimination of Tinsley's historical common stock,
additional paid-in-capital and retained earnings accounts in connection with
the proposed acquisition.
41
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION AND
OTHER DATA--KFI HOLDING CORPORATION
The selected consolidated financial data of KFI Holding set forth below as
of and for the five years ended December 31, 1997 have been derived from the
financial statements of KFI Holding which have been audited by KPMG Peat
Marwick LLP, independent public accountants. The audited consolidated
financial statements of KFI Holding as of December 31, 1996 and 1997 and for
the three years ended December 31, 1997 are included elsewhere herein. The
selected historical financial information and other data presented below for
the three months ended March 31, 1997 and March 31, 1998 are unaudited and are
not necessarily indicative of KFI Holding's results for the full fiscal year.
The selected historical financial information and other data of KFI Holding
includes AGI from March 31, 1998. Upon consummation of the Transactions, KFI
Holding changed its name to "IMPAC Group, Inc." The information contained in
the following table should also be read in conjunction with "Capitalization",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998 (5)
------- ------- ------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales............... $38,309 $47,714 $51,214 $ 54,218 $ 52,493 $10,837 $ 15,801
Cost of goods sold...... 28,186 35,223 36,757 40,094 39,322 7,789 12,418
------- ------- ------- -------- -------- ------- --------
Gross profit............ 10,123 12,491 14,457 14,124 13,171 3,048 3,383
Selling, general and
administrative
expenses............... 6,121 7,029 7,942 7,594 7,589 1,748 2,530
PTP royalty and
commission income(1)... (176) (200) (377) (731) (33) (30) --
------- ------- ------- -------- -------- ------- --------
Operating income........ 4,178 5,662 6,892 7,261 5,615 1,330 853
Interest expense, net... (1,013) (1,020) (1,197) (2,324) (3,469) (766) (1,216)
------- ------- ------- -------- -------- ------- --------
Income (loss) from
continuing operations
before income taxes.... 3,165 4,642 5,695 4,937 2,146 564 (363)
Income (taxes) benefit.. (1,159) (1,616) (2,417) (2,003) (754) (198) 128
------- ------- ------- -------- -------- ------- --------
Income from continuing
operations............. $ 2,006 $ 3,026 $ 3,278 $ 2,934 $ 1,392 $ 366 $ (235)
======= ======= ======= ======== ======== ======= ========
OTHER DATA
EBITDA (as defined)(2).. $ 5,625 $ 6,983 $ 8,289 $ 8,499 $ 7,396 $ 1,704 $ 1,585
Depreciation and
amortization........... 1,623 1,521 1,774 1,969 1,814 459 732
Capital expenditures.... 741 2,980 1,394 1,271 4,144 463 814
Ratio of earnings to
fixed charges(3)....... 3.4x 4.2x 4.2x 2.7x 1.5x 1.4x --
BALANCE SHEET DATA (AT
PERIOD END)(4)
Total assets............ $27,430 $33,602 $38,025 $ 27,275 $ 28,247 $24,926 $142,258
Long-term debt, includ-
ing current portion.... 7,828 9,120 6,623 30,950 33,850 32,591 111,640
Stockholders' equity
(deficit).............. 6,255 8,807 11,511 (15,279) (13,887) (15,048) 4,324
</TABLE>
- --------
(1) Klearfold received commissions and royalties on certain sales made by PTP.
Klearfold owned 51% of PTP prior to the sale of this subsidiary on April
19, 1996. PTP ceased operations in 1997.
42
<PAGE>
(2) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and
excludes, to the extent applicable for the relevant period, (i) gain
(loss) on sale of fixed assets, (ii) stock-based compensation expense, and
(iii) PTP royalty and commission income. EBITDA is not a substitute for
operating income, net earnings and cash flow from operating activities as
determined in accordance with generally accepted accounting principles as
a measure of profitability or liquidity. EBITDA is presented as additional
information because management believes it to be a useful indicator of the
Company's ability to service and/or incur indebtedness.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, plus fixed charges. Fixed
charges consist of interest expense on all indebtedness (including
amortization of deferred financing costs) and a portion of operating lease
rental expense (one-third) that is representative of the interest factor.
IMPAC's earnings were insufficient to cover fixed charges by $363 for the
three months ended March 31, 1998.
(4) Balance sheet data includes amounts related to PTP at December 31, 1993,
1994 and 1995 prior to the sale of PTP on April 19, 1996.
(5) The results of operations for the three months ended March 31, 1998
include an extraordinary loss of $553 (net of tax benefit of $368) due to
the write-off of deferred financing costs.
43
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA--AGI INCORPORATED
The selected financial data of AGI set forth below as of and for the four
years ended December 31, 1996 have been derived from the financial statements
of AGI which have been audited by Arthur Andersen LLP, independent public
accountants. The selected financial data of AGI set forth below as of and for
the year ended December 31, 1997 have been derived from the financial
statements of AGI which have been audited by Price Waterhouse LLP, independent
public accountants. The audited financial statements of AGI as of December 31,
1996 and 1997 and for the three years ended December 31, 1997 are included
elsewhere herein. The information contained in the following table should also
be read in conjunction with "Capitalization", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales....................... $72,354 $74,756 $97,463 $92,834 $108,281
Cost of goods sold.............. 55,259 58,492 74,441 67,860 76,459
------- ------- ------- ------- --------
Gross profit.................... 17,095 16,264 23,022 24,974 31,822
Selling, general and administra-
tive expenses.................. 11,456 12,584 15,374 15,894 19,444
Stock-based compensation ex-
pense(1)....................... -- -- -- 171 2,326
------- ------- ------- ------- --------
Operating income................ 5,639 3,680 7,648 8,909 10,052
Interest expense, net........... (913) (807) (1,365) (1,370) (1,242)
Gain (loss) on sale of fixed as-
sets........................... -- 658 45 (204) 139
------- ------- ------- ------- --------
Income before income taxes...... 4,726 3,531 6,328 7,335 8,949
Income taxes.................... (141) (71) (23) (234) (231)
------- ------- ------- ------- --------
Net income...................... $ 4,585 $ 3,460 $ 6,305 $ 7,101 $ 8,718
======= ======= ======= ======= ========
OTHER DATA
EBITDA (as defined)(2).......... $ 8,261 $ 6,928 $11,613 $13,667 $ 17,140
Depreciation and amortization... 2,622 3,248 3,965 4,587 4,762
Capital expenditures............ 5,430 9,776 9,792 7,644 6,027
Ratio of earnings to fixed
charges(3)..................... 4.9x 3.5x 3.7x 4.2x 5.1x
BALANCE SHEET DATA (AT PERIOD
END)
Total assets.................... $37,506 $44,550 $54,418 $56,928 $ 58,919
Long-term debt, including cur-
rent portion................... 13,183 16,084 18,242 18,241 16,040
Stockholders' equity............ 11,718 13,284 17,276 20,911 24,756
</TABLE>
- --------
(1) Stock-based compensation relates to stock appreciation rights held by
certain executives of AGI.
(2) EBITDA is defined as income from continuing operations before deducting
interest expense, income taxes, depreciation and amortization and
excludes, to the extent applicable for the relevant period, (i) gain
(loss) on sale of fixed assets, (ii) stock-based compensation expense, and
(iii) PTP royalty and commission income. EBITDA is not a substitute for
operating income, net earnings and cash flow from operating activities as
determined in accordance with generally accepted accounting principles as
a measure of profitability or liquidity. EBITDA is presented as additional
information because management believes it to be a useful indicator of the
Company's ability to service and/or incur indebtedness.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, plus fixed charges. Fixed
charges consist of interest expense on all indebtedness (including
amortization of deferred financing costs) and a portion of operating lease
rental expense (one-third) that is representative of the interest factor.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On March 12, 1998, KFI Holding completed its acquisition of AGI as part of
the Transactions. Upon consummation of the Transactions KFI Holding changed
its corporate name to "IMPAC Group, Inc." References below to the "Company"
mean IMPAC Group, Inc. and its consolidated subsidiaries. As a result of the
Transactions, the Company's consolidated financial statements for the three
months ended March 31, 1997 and 1998 are not comparable due to the Offering
and the inclusion in the consolidated financial statements of AGI's assets,
liabilities and operating results from the date of acquisition. As such, the
discussion and analysis of the results of operations and financial condition
for the three months ended March 31, 1997 and 1998 are presented on a pro
forma basis as if the Offering and acquisition of AGI occurred on January 1,
1997. The discussion below should be read in conjunction with "Unaudited Pro
Forma Combined Financial Data." The discussion and analysis of the results of
operations and financial condition for the years ended December 31, 1995, 1996
and 1997 are based on the separate financial statements of KFI Holding (the
predecessor of IMPAC Group, Inc.) and AGI prior to the consummation of the
transactions in March 1998 and should be read in conjunction with the
consolidated financial statements of KFI Holding and the financial statements
of AGI, including the notes thereto, included elsewhere in this Prospectus.
The discussion and analysis set forth below does not take into account the
proposed Tinsley Acquisition.
IMPAC GROUP, INC.
Overview
IMPAC is a leading designer, manufacturer and marketer of high-end, value-
added specialty packaging for various consumer products markets including
entertainment, cosmetics and personal care. Through its creative design work,
specialized manufacturing techniques and diverse printing capabilities, the
Company offers innovative specialty packaging solutions for customers that
seek to differentiate their products in the consumer marketplace. In addition,
unlike most of its competitors, the Company utilizes a broad range of paper,
paperboard and transparent rigid plastic materials for its products.
PRO FORMA THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) COMPARED TO PRO FORMA
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
RESULTS OF OPERATIONS
The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the three months ended March 31,
1997 (the "1997 period") and the three months ended March 31, 1998 (the "1998
period") on a pro forma basis as if the Combination and the Offering occurred
on January 1, 1997.
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS
ENDED MARCH 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales............................................. 100.0% 100.0%
Cost of goods sold.................................... 72.4% 74.7%
------- -------
Gross profit.......................................... 27.6% 25.3%
Selling, general and administrative expenses.......... 18.9% 20.3%
------- -------
Operating income...................................... 8.6% 5.1%
Interest expense, net................................. 8.4% 9.2%
------- -------
Income (loss) before income taxes..................... 0.2% (4.1%)
Income taxes (benefit)................................ 0.4% (1.3%)
------- -------
Net (loss)............................................ (0.2%) (2.8%)
======= =======
</TABLE>
45
<PAGE>
Net Sales for the 1998 period were $31.3 million compared to $33.8 million
for the 1997 period, a decrease of 7.5%. This decline was due primarily to a
decrease of $2.4 million in sales to the Company's entertainment customers.
The 1997 period was a particularly strong quarter in sales of specialty music
packaging and of CD-ROM packaging. Specialty music packaging sales decreased
$1.1 million and CD-ROM packaging sales decreased $1.3 million in the 1998
period.
Gross Profit for the 1998 period was $7.9 million compared to $9.3 million
for the 1997 period, a decrease of 15.0%. The resulting decline in gross
margin from 27.5% to 25.3% was due to additional expenses associated with the
start-up of a new printing press and less favorable absorption of fixed costs
due to the reduction in sales volume. Additionally, the 1997 period benefited
from a supply contract termination settlement of $0.4 million.
Selling, General and Administrative Expenses for the 1998 period were $6.3
million compared to $6.4 million for the 1997 period, a decrease of 0.9%. The
increase in SG&A as a percentage of sales from 18.9% to 20.2% was due to the
reduction in sales volume.
Operating Income for the 1998 period was $1.6 million compared to $2.9
million for the 1997 period, a decrease of 45.7% due to the factors discussed
above.
Net Interest Expense for the 1998 period was $2.9 million compared to $2.8
million for the 1997 period, an increase of 1.4% due to the issuance of $4.0
million of IRBs by Klearfold in August, 1997.
Income Taxes for the 1998 period were a benefit of $0.4 million compared to
a provision of $0.1 million for 1997. The Company's effective tax rates for
the periods are not meaningful due to the effects of non-deductible goodwill
amortization of approximately $0.3 million in each period relative to the
amounts of income (loss) before income taxes.
Net Loss for the 1998 period was $0.9 million compared to $0.1 million for
the 1997 period due to the factors discussed above. The pro forma net loss for
the 1998 period does not include an extraordinary charge of $553, net of tax,
related to the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
On March 12, 1998, KFI Holding acquired all of the common stock of AGI for
$69.0 million including $54.6 million of cash and $14.4 million of newly
issued common stock, plus acquisition costs. Concurrently, the Company funded
the retirement of $8.3 million of indebtedness outstanding under AGI's credit
facility immediately prior to the transaction. The acquisition was funded by
the proceeds (net of $4.3 million in debt issuance costs) from the issuance of
$100.0 million aggregate principal amount of Notes and $4.6 million of new
common stock. The balance of the proceeds of the Notes were used to retire all
outstanding indebtedness of $29.9 million under KFI Holding's prior bank
credit agreement. At the same time, KFI Holding entered into a new five year
Credit Agreement which provides for a $40.0 million revolving credit facility
and a $13.0 million letter of credit facility. Upon consummation of the
Transactions KFI Holding changed its corporate name to "IMPAC Group, Inc".
References below to the "Company" mean IMPAC Group, Inc. and its consolidated
subsidiaries.
In connection with the consummation of the proposed Tinsley Acquisition, the
Company has entered into the Amended and Restated Multicurrency Credit
Facility with Bank of America, as agent, and certain other financial
institutions parties thereto. Although the Company has entered into the
Amended and Restated Multicurrency Credit Facility, the Amended and Restated
Multicurrency Credit Facility will not become operative until the funding of
the Tinsley Acquisition. The Amended and Restated Multicurrency Credit
Facility provides for up to $53.0 million of revolving credit borrowings and
letter of credit facilities by IMPAC, up to $37.0 million of term loan A
borrowings and up to $70.0 million term loan B borrowings. The Revolver will
have a five-year maturity. The Term Loan A will have a five and one-half year
maturity. The Term Loan B will have a six and one-half year maturity. The
Revolver will include a $20.0 million letter of credit subfacility.
46
<PAGE>
The Company's primary cash requirements historically have related to capital
expenditures, working capital and debt service. The Company has historically
funded these requirements through internally generated cash flow, borrowings
under bank credit arrangements and the issuance of industrial revenue bonds.
Net cash used by operating activities for the 1998 period was $1.3 million
compared to net cash provided by operating activities of $2.8 million for the
1997 period. Income from operations before non-cash charges decreased to $0.4
million from $0.7 million due to decreased income from operations. In the 1998
period, income from operations before non-cash charges of $.4 million, the
issuance of the Notes and Common Stock and $0.2 million of proceeds from the
Company's industrial revenue bonds were used to fund the acquisition of AGI,
the repayment of bank borrowings, a $1.7 million increase in working capital
requirements and $0.8 million of capital expenditures. In the 1997 period,
income from operations before non-cash charges of $0.7 million and a $2.2
million decrease in working capital requirements were used to fund a net
decrease of $2.4 million in outstanding borrowings under the Company's bank
credit facility and $0.5 million of capital expenditures. The Company expects
to spend approximately $14.5 million on capital projects on a combined basis
in 1998, with approximately $1.9 million of that amount representing
maintenance-related capital expenditures. The Company currently has no
commitments for significant capital expenditures beyond 1998.
The Company believes that, based on current levels of operations and
anticipated growth, its cash from operations, together with other available
sources of liquidity, including borrowings under the Amended and Restated
Multicurrency Credit Facility, will be sufficient over the next several years
to make required payments of principal and interest on its debt, permit
anticipated capital expenditures and fund working capital requirements.
ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. Statement No. 131 establishes standards for
reporting information about operating segments and related disclosures about
products and services, geographic areas and major customers in annual
financial statements and interim financial reports. The Company is currently
evaluating Statement No. 131 and plans to adopt the standard during the year
ending December 31, 1998.
In March 1998 and April 1998, the AcSEC (Accounting Standards Executive
Committee) issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" and SOP 98-
5, "Reporting on the Costs of Start-Up Activities," respectively. Both
Statements are effective for fiscal years beginning after December 15, 1998,
and early adoption is encouraged. SOP 98-1 provides guidance on accounting for
the costs of computer software developed or obtained for internal use. SOP 98-
5 requires that entities expense start-up costs and organization costs as they
are incurred. The Company is currently evaluating the new Statements and does
not expect the adoption of either to have a material effect on the results of
operations.
YEAR 2000 ISSUES
The Company has conducted a review of its computer systems to identify those
areas that could be affected by the "Year 2000" issue and is developing an
implementation plan to resolve the issue. The Company presently believes, with
modification to existing software and converting to new software, the Year
2000 problem will not pose significant operational problems and is not
anticipated to be material to its financial position or results of operations
in any given year.
47
<PAGE>
KFI HOLDING CORPORATION
RESULTS OF OPERATIONS
Overview
KFI Holding, through its wholly-owned subsidiary Klearfold, is a supplier of
visual packaging solutions to the cosmetics, personal care, food and beverage,
and other consumer products markets. High quality, innovative packaging that
attractively displays the enclosed product, enhances the consumer's perception
of product value and encourages impulse purchases is an important element of
the marketing strategies of Klearfold's customers. Klearfold has a strong
reputation for developing creative packaging designs with superior structural
integrity. Klearfold believes it is a leader in quality, service and
innovation of creative, visual, value-added packaging.
On June 7, 1996, a merger between Klearfold and KFI/Heritage Acquisition
Corporation, a wholly owned subsidiary of KFI Holding was consummated. KFI
Holding and KFI/Heritage Acquisition Corporation were formed to accomplish the
acquisition of all of the capital stock of Klearfold by certain affiliates of
Heritage together with existing Klearfold shareholders and key management
members.
The following discussion should be read in conjunction with the audited
financial statements and related notes thereto of KFI Holding included
elsewhere in this Prospectus. The following table sets forth for the periods
indicated certain historical income statement data, derived from KFI Holding's
income statements, expressed as a percentage of net sales.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... 100.0% 100.0% 100.0%
Cost of goods sold...... 71.8% 73.9% 74.9%
----- ----- -----
Gross profit............ 28.2% 26.1% 25.1%
Selling, general and
administrative
expenses............... 15.5% 14.0% 14.5%
PTP royalty and
commission income...... (0.7)% (1.3)% (0.1)%
----- ----- -----
Operating income........ 13.4% 13.4% 10.7%
Interest expense, net... (2.3)% (4.3)% (6.6)%
----- ----- -----
Income from continuing
operations before
income taxes........... 11.1% 9.1% 4.1%
Income taxes............ (4.7)% (3.7)% (1.4)%
----- ----- -----
Income from continuing
operations............. 6.4% 5.4% 2.7%
===== ===== =====
</TABLE>
48
<PAGE>
1997 COMPARED TO 1996
Net Sales for 1997 were $52.5 million compared to $54.2 million for 1996, a
decrease of 3.2%. This decrease was due to a decrease in sales in the
cosmetics market of approximately $4.3 million. This decrease in cosmetics
sales was due primarily to a decision by Klearfold's largest customer for
cosmetics packaging to begin to manufacture certain of its packaging
internally. In 1998, Klearfold expects this customer to continue to purchase
higher value-added packaging from Klearfold while completing its transition to
internal production of certain packaging, which may further impact Klearfold's
sales during 1998. The decrease in sales to this customer was partially offset
by an approximately $2.6 million increase in sales of windowed packaging to
other cosmetics customers. The increased sales to other consumer products
markets was due largely to increased demand for Klearfold's visual packaging,
particularly with customers in the personal care and undergarment markets.
Gross Profit for 1997 was $13.2 million compared to $14.1 million for 1996,
a decrease of 6.7%. The decrease in gross margin from 26.1% to 25.1% was due
primarily to additional expenses experienced in the fourth quarter of 1997
associated with the installation and start-up of a new printing press and a
less favorable absorption rate of fixed costs at the lower sales volume.
Klearfold expects to incur additional expenses in connection with the
installation and start-up of this press, particularly in the first quarter of
1998, and expects this press to be on line in the first half of 1998. Gross
profit in 1997 also reflects the effect of the termination of a packaging
purchase arrangement for which Klearfold received $0.8 million as compensation
for manufacturing costs incurred.
Selling, General and Administrative Expenses for both 1997 and 1996 were
$7.6 million. Selling, general and administrative expenses as a percentage of
net sales were 14.5% in 1997 compared to 14.0% in 1996.
PTP Royalty and Commission Income for 1997 were $33,000 compared to $0.7
million for 1996, a decrease of 95.5%. The decrease was due to PTP closing
operations in February.
Operating Income for 1997 was $5.6 million compared to $7.3 million for
1996, a decrease of 22.7%.
Net Interest Expense for 1997 was $3.5 million compared to $2.3 million for
1996, an increase of 49.3%. The increase was due to higher average debt levels
in 1997 due to the June 1996 recapitalization and the associated debt which
includes $58,000 of interest expense with respect to the Klearfold IRBs.
Income Taxes for 1997 were $0.8 million compared to $2.0 million for 1996
reflecting an effective tax rate of approximately 35% and 41%, for 1997 and
1996, respectively, which includes the effect of reduced state income taxes.
Income from Continuing Operations for 1997 was $1.4 million compared to $2.9
million for 1996.
1996 COMPARED TO 1995
Net Sales for 1996 were $54.2 million compared to $51.2 million for 1995, an
increase of 5.9%. This increase was due primarily to a $6.2 million increase
in sales to the cosmetics market partially offset by a $3.0 million decrease
in sales to other consumer products markets. The increase in cosmetics sales
was largely due to improved market penetration. The decreased sales to other
consumer products markets was due primarily to the year-to-year change in one
significant food and beverage customer's promotional program, along with
decreased demand due to a one-time inventory reduction effort by a significant
apparel customer.
49
<PAGE>
Gross Profit for 1996 was $14.1 million compared to $14.5 million for 1995,
a decrease of 2.3%. The resulting decrease in gross margin was from 28.2% to
26.1%. In 1995, large manufacturing efficiency savings were realized in the
production of packaging for the cosmetics market. To generate increased 1996
cosmetics sales, a portion of the savings were passed through to certain
cosmetic customers, impacting 1996 gross profit by $0.5 million. In addition
in 1996, the Virginia manufacturing facility was expanded to meet increased
production levels, adding fixed costs of $0.8 million.
Selling, General and Administration Expenses for 1996 were $7.6 million
compared to $7.9 million in 1995, a decrease of 4.4%. Selling, general and
administrative expenses as a percentage of sales were 14.0% in 1996 compared
to 15.5% in 1995.
PTP Royalty and Commission Income for 1996 were $0.7 million compared to
$0.4 million for 1995, an increase of 93.9%. This increase is due to higher
PTP sales levels in 1996, which generated royalties and commissions.
Operating Income for 1996 was $7.3 million compared to $6.9 million for
1995, an increase of 5.4%.
Net Interest Expense for 1996 was $2.3 million compared to $1.2 million for
1995, an increase of 94.2%. The increase was due to higher average debt levels
due to the June, 1996 recapitalization and the associated debt.
Income Taxes for 1996 were $2.0 million compared to $2.4 million for 1995, a
decrease of 17.1%, reflecting an effective tax rate of approximately 41% and
42% for 1996 and 1995, respectively.
Income from Continuing Operations for 1996 was $2.9 million compared to $3.3
million for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Klearfold's primary cash requirements historically have related to capital
expenditures, working capital and debt service. Klearfold has funded these
requirements through internally generated cash flow, borrowings under its bank
credit facilities and the issuance of industrial revenue bonds.
Net cash provided by operating activities for 1997 was $6.2 million compared
to $4.2 million for 1996. Income from continuing operations before non-cash
charges/income decreased to $2.6 million from $5.2 million due to decreased
income from operations. In 1997, income from operations before non-cash
charges, $3.3 million of proceeds from the issuance of industrial revenue
bonds net of $0.2 million of deferred financing costs and $3.6 million
generated from decreased working capital requirements were used to fund $4.1
million of capital expenditures and $5.1 million net payments under
Klearfold's bank credit facility. In 1996, income from operations before non-
cash charges, the $1.9 million proceeds of the sale of PTP, the $34.2 million
proceeds of Klearfold's bank credit facility and the issuance of $1.0 million
of common stock and $19.0 million of preferred stock as part of Klearfold's
recapitalization were used to fund $0.7 million of working capital
requirements, $1.3 million of capital expenditures, $49.7 million to
repurchase common stock, the retirement of $8.1 million of existing pre-
recapitalization debt and $1.2 million of deferred financing costs.
Net cash provided by operating activities for 1996 was $4.2 million compared
to $3.8 million for 1995. Income from continuing operations before non-cash
charges/income was $5.2 million for each of 1996 and 1995. In 1996, income
from operations before non-cash charges, the $1.9 million proceeds of the sale
of PTP, the $34.2 million proceeds of Klearfold's bank credit facility and the
issuance of $1.0 million of common stock and $19.0 million of preferred stock
as part of Klearfold's recapitalization were used to fund $0.7 million of
working capital requirements, $1.3 million of capital expenditures, $49.7
million to repurchase common stock, the retirement of $8.1 million of existing
pre-recapitalization debt and $1.2 million of deferred financing costs. In
1995, income from operations before non-cash charges was used to fund $1.3
million of working capital requirements, $1.4 million of
50
<PAGE>
capital expenditures, a $0.5 million dividend to shareholders and net
borrowings under Klearfold's bank credit facility of $1.9 million.
Klearfold's prior bank credit facility (with a bank group consisting of
BankBoston N.A., National Westminster Bank PLC and Mellon Bank) provided for
term loans and a revolving line of credit bearing interest, at Klearfold's
option, at prime plus 1.75% or the London International Bank Offer 30, 60, 90
or 180-day Rate plus 3.0% or 3.5%. Klearfold also has $4.0 million aggregate
principal amount of industrial revenue bonds outstanding, which were issued to
fund the purchase of a printing press in its Warrington, Pennsylvania plant in
1997. The variable rate bonds mature on August 1, 2007 and remain outstanding.
The bank credit facility was refinanced as part of the Transactions.
During 1997 KFI Holding and the bank group for its revolving credit line and
term loans amended the related loan agreement to enable KFI Holding to
maintain compliance with its loan covenants through December 31, 1997. Prior
to the consummation of the Transactions, KFI Holding had projected, however,
that it would have been in default on certain financial loan covenants when
next calculated as of February 28, 1998. Therefore, all amounts due under the
term loans have been classified as current liabilities. Management of KFI
Holding did not seek to further amend or restructure the loan agreement to
maintain compliance with such covenants due to the planned Transactions.
AGI INCORPORATED
RESULTS OF OPERATIONS
Overview
AGI Incorporated is a supplier of high quality, value-added packaging
solutions to the entertainment, cosmetics, personal care and other consumer
products markets. Since its founding in 1968 as Album Graphics, Inc., AGI has
evolved from a designer and manufacturer of quality LP record jackets to a
provider of a wide range of printed packaging, high-end specialty packaging,
creative design services and production services. The marketing strategies of
AGI's customers rely on high quality, innovative packaging that enhances the
consumer's perception of product value and encourages impulse purchases. AGI
has established a strong reputation for developing creative designs and
utilizing innovative manufacturing techniques to provide its customers with
extremely high quality products with short turnaround times.
The following discussion should be read in conjunction with the audited
financial statements and related notes thereto of AGI included elsewhere in
this Prospectus. The following table sets forth for the periods indicated
certain historical income statement data, derived from AGI's income
statements, expressed as a percentage of net sales.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... 100.0% 100.0% 100.0%
Cost of goods sold...... 76.4% 73.1% 70.6%
-------- -------- --------
Gross profit............ 23.6% 26.9% 29.4%
Selling, general and ad-
ministrative expenses.. 15.8% 17.1% 18.0%
Stock-based compensation
expense................ 0.0% 0.2% 2.1%
-------- -------- --------
Operating income........ 7.8% 9.6% 9.3%
Interest expense, net... (1.4)% (1.5)% (1.1)%
Gain (loss) on sale of
fixed assets........... 0.0% (0.2)% 0.1%
-------- -------- --------
Income before income
taxes.................. 6.4% 7.9% 8.3%
Income taxes............ (0.0)% (0.3)% (0.2)%
-------- -------- --------
Net income.............. 6.4% 7.6% 8.1%
======== ======== ========
</TABLE>
51
<PAGE>
1997 COMPARED TO 1996
Net Sales for 1997 were $108.3 million compared to $92.8 million for 1996,
an increase of 16.6%. Of this increase, approximately $18.8 million was due
largely to additional sales to AGI's entertainment customers. AGI experienced
strong sales of specialty video packaging resulting in an increase of $15.2
million in that category related primarily to the successful releases by AGI's
existing customers of several popular titles. In addition, approximately $3.6
million of the increase in entertainment sales was due to additional volume of
standard and specialty CD packaging. These increases were partially offset by
a $5.5 million decrease in sales of CD-ROM packaging.
Gross Profit for 1997 was $31.8 million compared to $25.0 million for 1996,
an increase of 27.4%. The improvement in gross margin from 26.9% to 29.4% was
due to an increase in sales of higher value-added packaging products to the
entertainment industry, as discussed above. Gross margin also benefited from
the increased absorption rate of fixed costs at the higher overall sales
volume and improved operating efficiencies at AGI's Melrose Park facility as a
result of shifting the focus of this facility to the manufacturing of
packaging products for the cosmetics industry.
Selling, General and Administrative Expenses for 1997 were $19.4 million
compared to $15.9 million for 1996, an increase of 22.3%. The increase in
selling, general and administrative expenses as a percentage of sales from
17.1% to 18.0% was due primarily to a $1.7 million increase in payouts under
various compensation programs tied to AGI's sales and profitability.
Stock-Based Compensation Expense for 1997 was $2.3 million compared to $0.2
million in 1996. This amount relates to stock appreciation rights held by
certain executives of AGI. The increase in expense related to increases in
AGI's equity value and vesting of certain awards during 1997.
Operating Income for 1997 was $10.1 million compared to $8.9 million for
1996, an increase of 12.8%.
Net Interest Expense for 1997 was $1.2 million compared to $1.4 million for
1996, a decrease of 9.3%. This decrease was due largely to lower average debt
levels resulting from an increase in cash provided by operating activities.
Income Taxes were $0.2 million for each of 1997 and 1996. During the 1997
and 1996 periods, AGI was treated as an S corporation for Federal income tax
purposes and, accordingly, the related Federal tax liabilities were the
obligations of its individual shareholders.
Net Income for 1997 was $8.7 million compared to $7.1 million for 1996 an
increase of 22.8%.
1996 COMPARED TO 1995
Net Sales for 1996 were $92.8 million compared to $97.5 million for 1995, a
decrease of 4.7%. Of this decrease, approximately $8.9 million was due to year
to year variation in the performance of AGI's customers' video titles and a
general decline in CD-ROM based products offset partially by a $4.7 million
increase in sales of standard CD packaging. The increased volume of standard
CD packaging related to additional market share resulting primarily from new
customer relationships.
Gross Profit for 1996 was $25.0 million compared to $23.0 million for 1995,
an increase of 8.5%. The improvement in gross margin from 23.6% to 26.9%
resulted largely from improved margins on standard CD packaging realized at
AGI's Jacksonville facility, which completed its first full year of operations
in 1996.
Selling, General and Administrative Expenses for 1996 were $15.9 million
compared to $15.4 million for 1995, an increase of 3.4%. Of the resulting
increase in selling, general and administrative
52
<PAGE>
expenses as a percentage of sales from 15.8% to 17.1%, approximately $1.0
million was due to increased administrative costs related to the first full
year of operations at both the Jacksonville and Franklin Park facilities along
with the impact of lower overall 1996 sales.
Stock-Based Compensation Expense for 1996 of $0.2 million related to stock
appreciation rights awarded to certain executives of AGI. The increase in
expense related primarily to vesting of certain awards during 1996.
Operating Income for 1996 was $8.9 million compared to $7.6 million for
1995, an increase of 16.5%.
Net Interest Expense was $1.4 million for 1996 and 1995 due to consistent
levels of debt in each of the periods.
Income Taxes for 1996 were $0.2 million and less than $0.1 million in 1995.
During the 1996 and 1995 periods, AGI was treated as an S corporation for
Federal income tax purposes and, accordingly, the related Federal tax
liabilities were the obligations of its individual shareholders.
Net Income for 1996 was $7.1 million compared to $6.3 million for 1995, an
increase of 12.6%.
LIQUIDITY AND CAPITAL RESOURCES
AGI's primary cash requirements historically have related to capital
expenditures, working capital and distributions to shareholders to fund the
portion of their tax liabilities related to their distributive share of AGI's
S Corporation taxable income. AGI has funded these requirements through
internally generated cash flow, borrowings under its bank credit facility and
the issuance of industrial revenue bonds.
Net cash provided by operating activities for 1997 was $14.7 million
compared to $9.9 million for 1996. Income from operations before non-cash
charges increased to $13.3 million from $11.9 million due to increased income
from operations. In 1997, income from operations before non-cash charges and a
$1.3 million decrease in working capital requirements were used to fund $5.6
million of net capital expenditures, $4.9 million of distributions to
shareholders, a net decrease of $2.2 million in outstanding borrowings under
AGI's bank credit facility and a decrease of $0.9 million in installment
notes. In 1996, income from operations before non-cash charges, along with
increased net borrowings under AGI's bank credit facility of $1.1 million,
were used to fund $2.0 million of working capital requirements, $6.8 million
of net capital expenditures, $3.5 million of distributions to shareholders and
a decrease of $0.7 million in installment notes.
Net cash provided by operating activities for 1996 was $9.9 million compared
to $8.2 million for 1995. Income from operations before non-cash charges
increased to $11.9 million from $10.2 million due to increased income from
operations. In 1996, income from operations before non-cash charges, along
with increased net borrowings under AGI's bank credit facility of $1.1
million, were used to fund $2.0 million of working capital requirements, $6.8
million of net capital expenditures, distributions to shareholders of $3.5
million and a decrease of $0.7 million in installment notes. In 1995, income
from operations before non-cash charges, $6.6 million of industrial revenue
bond proceeds and a $1.7 million increase in installment notes were used to
fund $5.4 million of net payments under AGI's bank credit facility, $8.8
million of net capital expenditures, distributions to shareholders of $2.2
million, $2.0 million of working capital requirements and a repurchase of
common stock of $0.1 million.
AGI entered into a credit agreement with Bank of America, Illinois, dated
November 22, 1993, for a bank term note and line or credit (the "AGI Credit
Facility"). The agreement was amended on July 30, 1996, increasing the term
note to $10 million. The available line of credit was the lower of $11 million
or the borrowing base, which was a percentage of eligible accounts receivable
and
53
<PAGE>
inventories, reduced by amounts outstanding under certain letters of credit.
Borrowings under the AGI Credit Facility, at AGI's election, bore interest at
prime or the London International Bank Offer Rate (30, 60 or 90-day) plus
2.25%. At December 31, 1997, the interest rate on all borrowings were at LIBOR
rates ranging from 8.125% to 8.15625%. The line of credit agreement extended
through October 1998. AGI paid a commitment fee of 1/2 of 1% per annum on the
amount of available credit over the amount outstanding, plus any outstanding
letters of credit available at December 31, 1997. The AGI Credit Facility had
certain restrictions which, among other things, required that AGI maintain a
specified amount of tangible net worth, as defined. Also, the AGI Credit
Facility imposed substantial limitations on AGI's ability to, among other
things, pay dividends, incur liens, incur additional indebtedness, make other
restricted payments, issue guaranties, enter into transactions with related
parties and dispose of or acquire assets. AGI was in compliance with the AGI
Credit Facility at December 31, 1997 and 1996. The agreements with Bank of
America, Illinois, were collateralized by substantially all of the assets of
AGI. All obligations under the AGI Credit Facility were repaid and such
agreement was terminated on March 12, 1998.
On January 19, 1995, the City of Jacksonville, Illinois issued an aggregate
principal amount of $7.6 million of Multi-Mode Industrial Project Revenue
Bonds. The Bonds were issued to fund a loan, under a loan agreement, dated
January 1, 1995, between the City of Jacksonville and AGI to finance the cost
of acquiring land and construction and equipping AGI's manufacturing facility
in Jacksonville, Illinois, which became operational during the second quarter
of 1995. The variable rate bonds mature on February 1, 2026. Interest rates on
the bonds ranges from 3.4741% to 4.3938% during 1997. The interest rate at
December 31, 1997 was 4.2%. Prior to the consummation of the Transactions, the
bonds were secured by an irrevocable letter of credit issued by Bank of
America, Illinois, under an agreement with AGI. The debt agreements had
certain restrictions which, among other things, required that AGI maintain a
specified amount of tangible net worth, as defined. AGI was in compliance with
the debt agreements at December 31, 1997 and 1996. The agreements with Bank of
America, Illinois, were collateralized by substantially all of the assets of
AGI. Since the consummation of the Transactions, this letter of credit is now
issued pursuant to the New Credit Facility.
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BUSINESS
THE COMPANY
The Company is a designer, manufacturer and marketer of high-end, value-
added specialty packaging for various consumer products markets including
entertainment, cosmetics and personal care. Through its creative design work,
specialized manufacturing techniques and diverse printing capabilities, the
Company offers innovative specialty packaging solutions for customers that
seek to differentiate their products in the consumer marketplace. In addition,
unlike most of its competitors, the Company utilizes a broad range of paper,
paperboard and transparent rigid plastic materials for its products. As a
result, the Company believes that it is well-positioned to supply the growing
demand for distinctive consumer product packaging resulting from increased
competition and consolidation in the retail marketplace. For the twelve months
ended December 31, 1997, the Company had pro forma net sales and EBITDA of
$160.8 million and $24.5 million, respectively.
The Company has built strong relationships with marketing-driven customers
in diverse industries, including Avon Products and Revlon in the cosmetics
industry, EMI (including the Capitol and Virgin Records labels), PolyGram
(including the Mercury and Motown labels) and 20th Century Fox Home
Entertainment in the entertainment industry, and Procter & Gamble and Colgate
in the personal care industry. In the entertainment industry, examples of the
Company's products include printed paper inserts for standard compact disc
("CD") packaging as well as specialty paperboard-based CD packaging and
specialty packaging for home videos and digital versatile discs ("DVD"). In
the cosmetics and personal care industries, the Company offers products such
as paperboard folding cartons, transparent rigid plastic toothbrush packages
and windowed boxes made of paperboard and transparent rigid plastic for face
creams, lipsticks and other skin care products.
IMPAC was formed through the combination of AGI and Klearfold. Management
believes the packaging industry has not historically had a participant that
offers manufacturers of consumer products the broad range of unique and
innovative specialty packaging solutions that are available from the Company.
The combination of AGI and Klearfold allows management to build upon the
strengths of each company. For example, AGI's creative capabilities and fast
turnaround times, which are continually refined by the intensive demands of
the entertainment industry, complement Klearfold's innovative packaging
technology and product development expertise. In addition, while AGI and
Klearfold each have a well-established customer base, the Company believes
there are significant cross-selling opportunities.
COMPANY HISTORY
AGI, founded in 1968 as Album Graphics, Inc., established its position in
the packaging business as a specialized commercial print broker engaged in the
design and manufacture of high quality LP record jackets for the music
industry. As the LP format was replaced by the CD and cassette tape in the
early 1980s, AGI adapted quickly and solidified its position as a leading
supplier of CD packaging. AGI also diversified into other markets, such as the
premium cosmetics packaging business, by applying the successful techniques
developed in building its position in the entertainment industry. In 1987, a
group led by Richard Block effected a recapitalization of AGI, whereby Mr.
Block became the principal shareholder and president. Since the
recapitalization, AGI has implemented a long-term investment strategy designed
to enhance its product offerings and service capabilities and broaden its
markets served to include home video as well as the emerging DVD market.
Klearfold was founded in 1977 by Melvin B. Herrin. Klearfold's original
product was its all-plastic transparent folding carton, followed in the early
1980s with the introduction of its proprietary line of specialty windowed
folding cartons ("Duofold"), which combine rigid plastic film with paperboard.
Initially, both types of products were predominately used by customers for the
packaging of promotional items. In the early 1990s, management began a
strategic initiative to broaden Klearfold's
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customer base by reducing product cost through capital investment and process
improvement, thereby making Klearfold's packaging solutions more accessible to
its customers for their core product lines. In 1996, Klearfold became
privately held after ten years of trading publicly on the London Stock
Exchange through a recapitalization whereby Heritage acquired approximately
54% of KFI Holding, which had been established as a holding company of
Klearfold. Melvin Herrin and Scott Herrin, the chairman and president of
Klearfold, respectively, along with certain key members of management retained
ownership of approximately 46% of KFI Holding.
KF-Delaware, Inc. was incorporated in Delaware in 1993 to hold certain
intellectual property related to Klearfold's business. KF-International, Inc.
was incorporated in the U.S. Virgin Islands in 1994 to effect certain types of
international sales on behalf of Klearfold.
CONSUMER PRODUCTS PACKAGING INDUSTRY OVERVIEW
Management believes that recent trends in the consumer products industry
suggest a migration towards high-quality specialty packaging. Management
believes that as the retail sales environment continues to consolidate, the
demand for innovative, value-added packaging will increase. Management
believes that products that have historically been sold through distinct
retail distribution channels, such as cosmetics, CDs and sell-through videos,
are currently being distributed through a wider variety of outlets. As a
result, management believes that competition for the consumer's attention has
increased the importance of visually attractive packaging. Additionally, many
of these products sell at premium price points and distinctive packaging is an
important element in enhancing the perceived value of the product to the
customer. Moreover, management believes that the emergence of self-select
retail outlets, such as Wal-Mart, K-Mart and Rite-Aid, and the decline in the
use of dedicated sales assistants, have heightened the demand for specialty
packaging that (i) attracts the consumer to the product, (ii) allows the
retailer to maximize shelf space by displaying the product in a variety of
formats (i.e., stacked, hanging or shelved), and (iii) distinguishes products
not only from competitors within the same market segment, but also from other
types of products.
COMPANY STRENGTHS
The Company has achieved a significant position in the high-end, value-added
specialty packaging market. Management believes that the Company will further
develop this significant position by capitalizing on the following competitive
strengths:
Significant Market Positions Strong Customer Relationships. In the
entertainment industry, the Company has established a significant market
position through strong relationships with PolyGram Group Distribution, Inc.
("PolyGram"), EMI Records Group North America ("EMI"), Universal Studios, Inc.
("Universal"), BMG Music ("BMG") and Sony Music Entertainment ("Sony"), the
five largest music distributors that outsource their packaging needs. The
Company has contracts to supply standard CD packaging inserts to Universal,
PolyGram and BMG. In the cosmetics and personal care industries, the Company
is a significant supplier of high-end, value-added specialty packaging
products to a number of well-known consumer product companies including Avon,
Chesebrough-Pond's(R), Cosmair, Mary Kay and Revlon. The Company is the
primary supplier of its products to a number of its customers with respect to
certain product lines, such as Revlon's specialty windowed boxes for its
Colorstay(R) line of cosmetics and Procter & Gamble's Crest(R) toothbrushes.
Provider of Creative Packaging Solutions. Utilizing its strong design
capabilities, the Company seeks to proactively provide its customers with
creative packaging solutions. Aided by a number of proprietary products as
well as design and manufacturing expertise with a variety of materials,
including paper, paperboard and transparent rigid plastic, the Company often
provides customers with several distinct packaging alternatives for any single
job. Management believes that it is the only company that manufactures this
broad line of specialty packaging solutions and provides strong design
services, which it believes represent a unique competitive advantage.
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Established Reputation for Product Innovation. The Company's structural
design capabilities and culture of innovation enable it to develop creative
packaging solutions in response to specific customer needs. By integrating its
design, sales and manufacturing groups, the Company has become an important
member of many of its customers' product development teams. Examples of
innovative packaging solutions offered by the Company include the DIGIPAK(R),
a paperboard-based CD package, and Duofold(R), a patented folding carton that
integrates paperboard and transparent rigid plastic film, each of which have
become leading products in their market niches. Many of the Company's
customers have been nominated for Grammy awards in the categories of "Best
Retail Package" and "Best Box Set", which recognize outstanding creative
design of entertainment packaging, including both the form of packaging and
the artwork. Some of these nominations have included CD packages for Pearl
Jam's Vitalogy album and Frank Zappa's Civilization Phaze III album. The
Company collaborates with its customers in the creative design process of such
entertainment packaging to integrate each customer's artwork into the entire
packaging solution. In addition, through its participation in the Diginet, an
international network of leading specialty packaging companies, the Company
has worldwide access to new design concepts, manufacturing techniques and
marketing information principally relating to the specialty music packaging
industry.
Strong Manufacturing Capabilities. The Company has invested significantly to
modernize its facilities and equipment. Since 1995, the Company has placed
into service $22.1 million of new printing capacity such that over 50% of the
Company's current printing capacity is less than three years old. The Company
utilizes its modern machinery to lower turnaround time while reducing staffing
requirements and maintaining "just-in-time" manufacturing capabilities.
Management believes that the Company was one of the first packaging
manufacturers to use web production technology with rigid plastic (i.e., using
rolls of plastic versus separate plastic sheets). This technology has
increased production speeds and lowered material costs for its products
utilizing rigid plastic. The Company intends to maintain this level of
commitment by continuing to develop innovative manufacturing processes and
investing in modern manufacturing equipment.
Proven Management Team with Significant Equity Ownership. The Company has
assembled a strong management team with an average of 25 years of experience
in the packaging industry. Management's proven track record is demonstrated by
the strong financial performance of the combined Company. Since 1993, the
Company's net sales and EBITDA have grown at compound annual rates of 9.8% and
15.3%, respectively. Senior management is heavily invested in the Combination.
Their ownership of approximately 55% of the outstanding Common Stock of IMPAC
will be coupled with a management equity incentive plan that is based
primarily upon the future operating performance of the Company.
POST-COMBINATION STRATEGY
The Company intends to enhance its market position and maximize
profitability and cash flow by implementing the following business strategies:
Capitalize on Cross-Selling Opportunities. The Company believes that it will
create significant additional revenue opportunities with existing customers by
marketing its expanded array of high-end packaging solutions. The Company
believes that this strategy will have its most powerful impact initially in
the cosmetics industry, where currently Revlon represents the only customer
with significant purchases from both AGI and Klearfold. Further, as a result
of AGI's long-standing relationships with customers in the entertainment
industry, the Company believes that it will be able to realize additional
revenue opportunities by successfully offering an enhanced line of products
based on Klearfold's proprietary rigid plastic technology.
Further Integrate with Key Customers. Historically, the Company has enjoyed
cooperative integrated relationships with its key customers. The Combination
broadens the Company's product line and increases its creative design
capabilities, which the Company believes will allow it to further
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integrate with its customers. This ability to integrate with customers'
product design operations is important as the general trend in the industry is
to limit the number of outside suppliers. In an effort to enhance its service
and turnaround time, the Company built a facility in Jacksonville, Illinois in
1995 and is currently building a facility in Grover, North Carolina, which is
expected to be completed in the second quarter of 1998, in each case in close
proximity to several of its major music customers.
Pursue New Market Opportunities. The Company intends to expand into related
product lines that serve new markets, which will provide an opportunity for
additional revenue growth. As a result of the Combination, the Company's
creative design team has an enhanced capability to develop new packaging
products based on the most suitable type of materials or combinations. The
Company believes that its innovative product development experience positions
it to capture additional customers in new and existing markets.
Increase Operating Efficiencies. The Company believes that combining the
operations of AGI and Klearfold presents opportunities to effectively
capitalize on economies of scale in the areas of manufacturing,
transportation, general and administrative functions and management
information systems. A portion of AGI's and Klearfold's printing capacity is
interchangeable, allowing work to be processed wherever capacity is available
during times of peak demand. The Company expects that this interchangeability
will allow it to increase its utilization rate without creating bottlenecks or
otherwise compromising service. The Company will utilize the most efficient
practices currently used in the facilities of AGI and Klearfold to enhance
manufacturing capabilities and improve cost structures.
Pursue Strategic Acquisitions. The Company may pursue other strategic
acquisitions within the specialty packaging industry. The Company believes
that significant opportunities exist to acquire distinctive businesses that
would enable the Company to further broaden its product offerings as well as
to expand its operations both domestically and internationally. Except for the
Tinsley Acquisition, the Company currently has no agreements or commitments
with respect to any acquisitions.
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PRODUCTS
The Company designs, manufactures and markets high-end specialty packaging
for a variety of applications in the consumer products industry. The Company
believes it offers its customers one of the most extensive product lines in
the specialty packaging industry. Principal product areas include (i) standard
music packaging, (ii) specialty music packaging, (iii) specialty video
packaging, (iv) paperboard folding cartons, (v) plastic folding cartons, (vi)
specialty windowed folding cartons, and (vii) rigid paperboard set-up boxes.
The following table details the proprietary products sold by the Company:
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION SAMPLE APPLICATIONS
------- ----------- -------------------
<C> <S> <C>
DIGIPAK(R) A paperboard-based Music releases by leading artists
package that can fold such as Pearl Jam, Eric Clapton, The
open in a variety of Beatles, Indigo Girls, George
ways and hold single or Michael, David Bowie, Soundgarden
multiple CDs as well as and Blind Melon.
DVDs.
Digilite(TM) A lighter version of the Music releases by leading artists
DIGIPAK typically such as Kenny G, Carly Simon and
utilized for packaging Duran Duran.
CD singles.
DIGI-BOKS(R) A rigid one-piece Multi-CD boxed releases by The
paperboard set-up box Police and Crosby Stills & Nash and
used in a wide variety multi-product cosmetics packages
of applications licensed including Ralph Lauren(R) and Polo
through the Diginet. Sport(R).
Klearfold(R) Plastic folding cartons Procter & Gamble's Crest(R)
produced from toothbrush line, Jockey(R)
transparent rigid International, Inc. brand underwear
plastic, offering and Totes(R) umbrellas.
maximum visibility for
the consumer product at
the retail level.
Duofold(R) Durable, windowed boxes Chesebrough-Pond's(R) skin care
made from paperboard and products and Revlon's Colorstay(R)
scored rigid film. lipsticks and mascara.
Because the Company's
rigid film can wrap
around any edge, Duofold
cartons allow far more
visibility than
conventional windowed
cartons.
KlearPOP(TM) Plastic folding cartons BIC(R) writing instruments, Andes(R)
which utilize Klearfold candies and other products
transparent packaging to frequently sold at impulse purchase
provide multi-unit locations.
dispensers and displays
that can be hung or
placed on shelves.
KlearForm(TM) An alternative type of Small consumer products such as
plastic folding carton pocket knives and personal care
which combines products.
thermoformed plastic
parts with printed film.
The result is a striking
package that holds the
packaged product
securely.
Hologravure(TM) Licensed three- Point-of-sale posters, computer
dimensional printing mouse pads and packaging for CDs and
technology that provides candy.
a cost-effective means
of adding three-
dimensional visual
effects to standard
transparent plastic
materials.
</TABLE>
Set forth below is a description of the categories of products sold by the
Company utilizing the proprietary products described above as well as various
other products.
Standard Music Packaging. The Company's standard music packaging products
for CDs and cassette tapes include paper inlay cards, folders and booklets for
CD jewel boxes and insert cards for cassette tape boxes, as well as the
Company's patented DIGIPAK and Digilite products. The Company provides
standard CD and cassette packaging components to a wide variety of customers
in the recorded music industry and also provides standard CD packaging to
customers in the CD-ROM multimedia industry. These products are manufactured
in a variety of size configurations and process
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printing color combinations. Examples of the Company's recent standard music
packaging include the CD inserts for Elton John's Candle in the Wind 1997,
Spice Girls' Spice and Garth Brooks' Sevens.
Specialty Music Packaging. The Company's creative staff often works in close
collaboration with music customers to create and develop ideas for unique or
unusual custom packaging. These packages are designed to be highly distinctive
and often incorporate a variety of materials and advanced manufacturing
processes into a single package. The Company's patented DIGIPAK and Digilite
and its licensed DIGIBOKS have provided the recorded music industry with the
flexibility to create innovative and interesting CD packaging. Specialty music
packages have been used for music releases by The Smashing Pumpkins, Pearl
Jam, Pink Floyd, Janet Jackson and the Rolling Stones.
Specialty Video Packaging. In the home video market, the Company provides
paperboard packaging for major event titles and multi-title collections
combined for re-release principally directed to the sell-through market. The
Company manufactures specialty video packaging utilizing any combination of
its innovative manufacturing processes and its well-developed network of
specialized outside suppliers. Recent creative specialty video packages have
included the Star Wars and Die Hard multi-title video collections as well as
the Men in Black release.
Paperboard Folding Cartons. Premium paperboard folding cartons are
manufactured using a variety of production and design techniques including
special prints and coatings, foil stamping, laminates and other special
materials which help customers achieve product differentiation and add to the
perceived value of the product. Premium paperboard folding cartons are used to
package a wide variety of products for the Company's cosmetics and personal
care customers and are frequently included in packaging solutions for CD-ROM
multimedia industry customers.
Plastic Folding Cartons. The Company manufacturers plastic folding cartons
under the Klearfold, KlearPOP and KlearForm brand names. The vast majority of
such cartons are produced from transparent rigid plastic film, offering
maximum visibility of the product packaged in the carton. Like more
conventional folding cartons produced from paperboard, Klearfold cartons ship
and store in flat form, minimizing storage space. The Company's patented Soft
Crease feature enables Klearfold cartons to be used easily and effectively in
manual or automatic filling of its cartons on its customers' packaging lines.
In addition, the Company's manufacturing process produces a Smooth Edge
feature, which minimizes sharp edges along the perimeter of the cartons and
provides safer handling than most competitive products.
The Company prints the plastic film used in the manufacture of its products,
offering a variety of printing processes to enhance the package's appearance.
Klearfold cartons are also manufactured from tinted, opaque, or embossed
plastic film, increasing the options available to customers. The Company
believes that few, if any, of its competitors possess the range of printing
options that the Company has in its manufacturing facilities. The trend toward
value-added packaging in the personal care industry has resulted in the
increased use of Klearfold, KlearForm and KlearPOP packaging for products
including Procter & Gamble's Crest(R) toothbrush lines, writing instruments
and candy.
Specialty Windowed Folding Cartons. The Company has created its line of
Duofold cartons in order to offer many of the benefits of its fully
transparent cartons, in combination with the advantages of additional graphics
capabilities and rigidity offered by incorporating paperboard into the
package. In addition, by substituting less expensive paperboard for plastic in
a portion of the carton, Duofold is more cost efficient than all-plastic
cartons. Unlike the typical thin film in windowed cartons, the rigid film used
in Duofold cartons resists tearing and puncturing and contributes to the
stability of the carton. Additionally, the Duofold manufacturing process
allows the transparent rigid plastic film to wrap around any edge of the
carton without compromising structural strength. Duofold cartons are available
in a wide variety of structures that can be stacked, racked or hung in
virtually any configuration without
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sacrificing visual impact or display density. Also, as with Klearfold
transparent cartons, Duofold cartons are shipped flat, can be easily set up
manually or automatically, and can be enhanced using a wide variety of
processes, including printing directly on the transparent film portion of the
package. Examples of products utilizing Duofold cartons include Chesebrough-
Pond's(R) Skin Cream and Revlon's Colorstay(R) lipsticks and mascara.
Rigid Paperboard Set-Up Boxes. The Company's licensed DIGIBOKS product and
the Company's two-piece rigid setup boxes are used to provide creative
packaging solutions for special music releases, special promotions and
cosmetics boxed sets which include multiple products. Most notably, these
products have been used to package multi-CD boxed releases by The Police and
Crosby Stills & Nash and to package Ralph Lauren Safari(R) and Polo Sport(R)
multi-product sets.
MARKETS AND CUSTOMERS
The Company's markets are divided into three principal categories: (i)
entertainment, (ii) cosmetics, and (iii) other consumer products. The
following chart illustrates the Company's combined historical sales in each of
these markets for each of the last three fiscal years:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
MARKET 1995 1996 1997
- ------ ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Entertainment........................ $ 69.5 46.7% $ 64.9 44.1% $ 78.9 49.0%
Cosmetics............................ 39.2 26.4 46.9 31.9 44.5 27.7
Other Consumer Products.............. 40.0 26.9 35.3 24.0 37.4 23.3
------ ----- ------ ----- ------ -----
Total............................... $148.7 100.0% $147.1 100.0% $160.8 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
ENTERTAINMENT INDUSTRY
Music. In recent years, the strong economy, widening demographic base of
music consumers and the popularity of the CD have propelled music industry
sales to record levels. From 1991 to 1996, industry sources estimate that CD
sales grew at a compound annual growth rate of over 18%. The packaging market
for CDs is currently comprised of standard jewel box packaging and specialty
packaging. The jewel box, a clear plastic container which holds a single CD,
contains a printed insert or booklet that serves as its cover and may provide
additional information such as song titles or lyrics. Management estimates
that the jewel box, the industry standard for CD distribution, currently
represents over 90% of the U.S. market. However, the Company believes the
jewel box provides limited options for enhanced product differentiation at the
retail level. This factor, combined with the emergence of retail superstores
and the desire of certain artists to differentiate their releases, has created
demand for other types of CD packaging.
Over the last several years, alternative or specialty CD packaging has grown
as artists and recording studios seek to differentiate their products,
particularly for higher priced items such as boxed sets or anthologies. In
addition, the demand for specialty CD packaging has grown in response to
perceived disadvantages of the jewel box format, such as uniformity and
breakage. Management estimates that approximately 10% of industry CD sales are
in the specialty package format and that this proportion is growing. Certain
artists, such as Pearl Jam, Pink Floyd, Janet Jackson, Bonnie Raitt, Sting and
the Rolling Stones, often request that specialty packaging be used for a
particular release. These industry dynamics create a substantial opportunity
for high quality, value-added packaging sales as premium packaging attracts
the consumer's attention and provides greater perceived value.
The recorded music industry is currently dominated by Time-Warner, PolyGram,
EMI, Universal, BMG and Sony, all of which, with the exception of Time-Warner,
fulfill their packaging requirements through third party suppliers. Typically,
these companies enter into contracts for a portion of their
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packaging requirements with a limited number of providers of CD packaging and
related components. Contracts are utilized in order to assure the availability
of sufficient manufacturing capacity on extremely short notice, because a hit
CD can require rapid printing of a large number of units. In recent years, the
supplier/customer relationship has increasingly evolved into a just-in-time
production model, thereby placing additional emphasis on integrated product
design and manufacturing. Short cycle times have become a critical service
element for the major record companies, as just-in-time delivery eliminates
the need to carry large packaging inventory without incurring production
delays.
Home Video. The home video market includes both the rental and sell-through
sectors. The rental sector generally utilizes low-end, commodity packaging.
The sell-through sector consists of three principal segments: (i) titles that
generally produced average theatrical results, are not heavily promoted and
utilize low-end packaging, (ii) event titles that generally produced strong
theatrical results, are heavily promoted and utilize value-added packaging
(such as the Men in Black release), and (iii) multi-title collections combined
for re-release (such as the Star Wars and Die Hard trilogies), are also
heavily promoted and utilize specialty packaging. Market analysts estimate
that the home video sell-through market grew at a 15.2% compound annual growth
rate during the period 1991-1996, greatly exceeding the overall growth in
video sales during this period.
Management believes the growing necessity to differentiate sell-through
event titles has increased the need for specialty packaging. For example,
growth in multi-tape sets and anthologies has fueled demand for value-added
specialty packaging, because the packaging expense is often small relative to
the high price points of the product. Furthermore, with the proliferation of
theatrical releases threatening the prospects for box office success,
management believes that the demand for specialty packaging will increase as
the movie studios place heightened emphasis on revenue potential available
through the video markets. Finally, specialty packaging is also deemed
important for the growing direct to video market as these movies do not
benefit from the same investment in promotional spending as theatrical
releases.
Digital Versatile Discs (DVD). The introduction of DVDs, which is expected
to capture a significant percentage of the current market for VHS tapes,
represents a meaningful growth opportunity for the home video market. Much as
the CD expanded the market for recorded music in the mid-1980s, the DVD format
has the potential to expand the home video market in coming years as consumers
take advantage of its superior technical features relative to videocassettes,
such as improved picture and sound quality. In order to gain market acceptance
for the premium price of DVDs, and to minimize the well-publicized impact of
cheaper duplication expenses, the Company believes that the major movie
studios are likely to provide added value to the consumer in the form of
higher quality packaging. Therefore, the DVD market is expected to offer
significant opportunities for packaging companies focused on this new product.
See "Risk Factors--Effects of Industry Shifts".
COSMETICS
The skin care, makeup and fragrance industries are characterized by vigorous
competition on a worldwide scale. In order to maintain market share, companies
in the cosmetics industry must continually develop innovative new brands and
products, promote a compelling brand image and maintain a high degree of
consumer awareness. Because a premium is often charged for their products,
cosmetics companies often utilize specialty packaging to promote higher price
points and to serve as a powerful marketing tool at the point of purchase.
Cosmetics packages are generally based on premium paperboard box technology or
a paperboard and plastic windowed folding carton. These packages often utilize
value-added enhancements, such as special coatings, embossing, foil stamping
and laminates to improve the package's appearance.
The high-end of the cosmetics industry is dominated by companies such as
Avon Products, Cosmair, Estee Lauder, Mary Kay and Revlon. These companies
have historically marketed their
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products either through high-end retail outlets including department stores
and boutiques or through direct, personalized selling. Each of these two
channels has historically relied upon sales assistants, such as a counter
person in a retail outlet or a knowledgeable direct salesperson. Recently,
however, cosmetics sales have begun to take advantage of the sales potential
increasingly offered by self-select retail outlets such as Wal-Mart and K-
Mart. This change in distribution from assisted sales to self-select has
caused cosmetics companies to place even greater emphasis on packaging in
order to attract the consumer to the product with minimal sales assistance.
ADDITIONAL CONSUMER PRODUCTS MARKETS
Similar to the entertainment and cosmetics markets, the Company's customers
in other consumer product markets are facing competitive pressures at the
retail level and are increasingly utilizing high-end, specialty packaging to
market their products at the point of purchase. The Company sells its products
to leading consumer products manufacturers in a wide range of industries
including personal care, liquor, fine candies, undergarments and
pharmaceuticals. Some of the Company's key customers in these markets include
Totes(R) and Jockey(R) International, Inc.
Management believes that the liquor and the pharmaceutical markets, in
particular, are experiencing strong trends toward the increased usage of high-
end, specialty packaging. Major liquor companies are combating flat sales by
aggressively introducing new products and encouraging consumers to switch from
generic to premium brands in part through specialty packaging. Pharmaceutical
manufacturers are focusing their efforts on providing consumers with over-the-
counter products that were previously prescription items. Management believes
that pharmaceutical companies will increasingly utilize high-end, specialty
packaging in order to differentiate their products and, moreover, to promote
higher price points for their products.
SALES AND MARKETING
Customer relationships in the specialty packaging industry are generally
developed and maintained over extended periods. These relationships develop
because of the high degree of coordination necessary between packaging
suppliers and their customers to ensure that packaging conforms precisely to
the needs of the customer. The integration of product design and manufacturing
along with inventory management and distribution systems provide the Company
with a competitive advantage in maintaining and expanding business with
established customers. This integrated marketing, design and manufacturing
operation also represents an important source of new business opportunities
through the modification of existing packaging and the development of new
applications. The Company has approximately 25 sales professionals each
offering the combined product lines of AGI and Klearfold allowing for broader
product offerings and creating opportunities for significant cross-selling to
existing customers.
The Company has entered into supply contracts with three key customers.
These contracts represented approximately 11% of the Company's business in
fiscal 1997. The supply contracts are typically terminable for any material
breach or events of insolvency. While the Company has no reason to believe
otherwise, there can be no assurance that these contracts will be renewed. See
"Risk Factors--Dependence on Key Contracts". In fiscal 1997, a single customer
of the Company accounted for 11.6% of net sales.
INDUSTRY AND CUSTOMER CONCENTRATIONS
Industry Concentrations
Although the Company markets its packaging to various consumer products, a
substantial portion of its products are sold to the entertainment industry and
the cosmetics and personal care industry. In
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1997, approximately 49.0% of the Company's total sales represented sales to
the entertainment industry and approximately 51.0% of the Company's total
sales represented sales to the cosmetic and personal care industry.
Customer Concentration
In fiscal 1997, BMG, PolyGram and Universal accounted for 11.6% of the
Company's net sales. The Company has entered into supply contracts with three
key customers, BMG, PolyGram and Universal. These supply contracts are
generally terminable for any material breach or events of insolvency. Three of
these contracts expire in 1999 and one expires in 2004. These contracts also
provide for minimum levels of purchases by the customer, with these minimums
expressed either in dollars of sales or percentages of the customer's
requirements for packaging. While the Company believes that the contracts
expiring in 1999 will be renewed, there can be no assurance that these
contracts will be renewed. The Company does not have a long term contract with
either EMI or Sony. See "Risk Factors--Dependence on Key Contracts."
Geographic Concentration
The Company's customers are primarily large consumer products companies with
national markets. Accordingly, the Company's markets have not historically
been geographically concentrated.
THE DIGINET
The Company has licensed the use of its DIGIPAK technology to members of the
Diginet, a worldwide network of packaging and design companies located in
Japan, the United Kingdom, the Netherlands, Australia, Canada and Italy.
Tinsley has been a member of the Diginet since 1990. The Diginet provides the
Company with a competitive advantage relative to its domestic competitors as
it offers the Company some of the benefits of a large international
organization. The Company regularly meets with these partners to discuss new
design advances, manufacturing techniques and trade and marketing information.
In addition, members of the Diginet share industry, marketing and product
reports and samples of new products with each other on a quarterly basis. This
cross-border cooperation provides the Company with research and development
cost savings as well as new business leads. Recently, in conjunction with
other Diginet members, the Company participated in the worldwide release of
Pearl Jam's Vitalogy, which was made possible by the coordinated effort of the
Diginet members. Similarly, the Diginet is also expected to give the Company
an advantage as the DVD market emerges. The Company's licenses to the other
Diginet members are generally for a period of three years and are exclusive
with respect to the licensed territory.
DISTRIBUTION
A significant amount of the Company's products are shipped directly from the
Company's manufacturing facilities to customer's facilities. Because of this,
the proximity of the manufacturing facility to the customer's plant can
significantly affect the price of products. The Company believes that its
manufacturing facilities are well-positioned to serve national markets. In an
effort to enhance its service and turnaround time, the Company built a
facility in Jacksonville, Illinois in 1995 and is currently building a
facility in Grover, North Carolina, which is expected to be completed in the
second quarter of 1998, in each case in close proximity to several of its
major music customers. In part because of the foregoing factors, the Company
does not have significant warehouse facilities.
COMPETITION
The Company's business is highly competitive. Major competitive factors
include product quality, service and price. In addition, as more of the
Company's customers adopt "just-in-time" inventory systems, delivery lead time
has taken on increasing importance. The Company believes that its
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manufacturing facilities are well-positioned to serve national markets. See
"--Distribution" above. Foreign competition has not been an important factor
to date, which the Company believes is due primarily to the speed to market
and flexibility required to adequately service its customers.
The Company believes that some of its primary competitors are Ivy Hill
Corporation, Queens Group, Inc. and Shorewood Packaging Corporation, some of
which are larger than the Company and may have substantially greater financial
resources.
TECHNOLOGY, PRODUCT DEVELOPMENT AND PATENTS
The Company produces high-quality, value-added, specialized packaging
products through the development of creative designs and innovative
manufacturing techniques. The Company's technical and product development
centers that support the Company's marketing efforts are staffed with 20 full-
time personnel as of March 31, 1998 and feature extensive in-house design,
engineering, tooling, prototype production, graphics and processing
capabilities. The Company's in-house design and production engineers work
closely with existing and potential customers in the preliminary stages of
product design and development, in many instances producing real-time
prototypes. The Company believes that its in-house design, engineering and
graphics capabilities, which utilize CAD/CAM technology, are among the more
extensive and sophisticated in the industry and enhance the Company's ability
to better integrate its creative design capabilities with its customers'
conceptual design process.
The Company has patented some of its various technology and processes. The
Company currently owns approximately 49 patents and patent applications, with
its patents expiring on various dates between 1998 and 2016. However, the
Company believes that the design, innovation and quality of its products and
its relationships with its customers are substantially more important to the
maintenance and growth of its business than its patents. Accordingly, the
Company does not believe that its business is dependent to any material extent
upon any single patent. Certain of the Company's patents are expiring in the
next few years.
MANUFACTURING AND SUPPLIES
Since 1995, the Company has placed into service $22.1 million of new
printing capacity such that over 50% of the Company's current printing
capacity is less than three years old. The Company intends to continue this
level of commitment by investing in equipment. The Company utilizes its modern
machinery to lower turnaround time while reducing staffing requirements and
maintaining "just-in- time" manufacturing.
The Company, like its competitors, is subject to rigorous quality control
standards imposed by its customers. The Company has implemented a
comprehensive quality assurance program, which includes computer-aided testing
of parts for size, color and strength. Using advanced measurement technology,
the Company is able to satisfy and exceed the most demanding customer
requirements. Statistical quality control methods are also used to promote
total customer satisfaction.
The Company believes that it is generally able to pass raw material price
increases on to its customers, given the customized and high-end nature of its
packaging and the relatively low proportion of packaging cost in relation to
the cost of the end-product. In addition, the Company's customer contracts for
longer production runs generally include provisions for raw material cost
escalation.
ENVIRONMENTAL MATTERS AND GOVERNMENTAL REGULATIONS
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment,
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<PAGE>
the handling and disposition of wastes, the recycling, composition and
recycled content of packaging, or otherwise relating to the protection of the
environment. These laws include, but are not limited to, the Comprehensive
Environmental Response Compensation and Liability Act, the Water Pollution
Control Act, the Clean Air Act and the Resource Conservation and Recovery Act,
as those laws have been amended and supplemented, the regulations promulgated
thereunder, and any applicable state analogs. The Company's operations are
also governed by laws and regulations relating to employee health and safety.
Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines or the entry of
injunctions or both. The Company believes that it is in material compliance
with such applicable laws and regulations and that its current environmental
controls are adequate to address existing regulatory requirements.
As is the case with other companies engaged in similar businesses, the
Company could incur costs relating to environmental compliance, including
remediation costs related to historical hazardous materials handling and
disposal practices at certain facilities. In the past the Company has
undertaken remedial activities to address on-site soil contamination caused by
historic operations. None of these cleanups has resulted in any material
liability. It is possible that future developments (e.g., new regulations or
stricter regulatory requirements) could result in the Company incurring
material costs to comply with applicable environmental laws and regulations.
In addition, the Company has not undertaken an independent investigation of
all of its facilities; accordingly, there can be no assurance that in the
future conditions requiring remediation will not be identified.
EMPLOYEES
As of March 31, 1998, the Company had 949 employees, of which 813 were
engaged in production or product support, 20 in research, development and
engineering, 49 in marketing and sales and 67 in corporate management and
administration. The 199 member hourly workforce at the Company's Warrington,
Pennsylvania facility is represented by the United Paperworkers International
Union under a collective bargaining agreement which expires on November 30,
2002. The Company believes that its relations with employees are good, and it
has not experienced any strikes or work stoppages.
PROPERTIES
The Company's operations are conducted through 11 facilities (one of which
is currently under construction) in six states, within the United States. The
Company's principal executive offices are located in Melrose Park, Illinois
and are leased by the Company. The leases for the Warrington, Pennsylvania and
Louisa, Virginia facilities provide the Company with an option to renew for an
additional five year period. The Company's 22,000 square foot office space in
its Melrose Park, Illinois facility underwent a major renovation in 1993. The
Company's facilities are designed to provide for efficient manufacturing,
material handling and storage of its products and no facility is materially
underutilized. The Company believes that substantially all of its property and
equipment is in good condition and that it has sufficient capacity to meet its
current manufacturing and distribution requirements.
The Company provides its multi-media customers with complete turnkey
fulfillment solutions, which often includes the purchase of materials as well
as assembly, warehousing and distribution of finished product, from its
Franklin Park, Illinois facility. The Company's long-range plans for this
operation are currently under review by management. See--"Certain
Relationships and Related Transactions".
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<PAGE>
The following table provides certain information regarding the Company's
operating facilities.
<TABLE>
<CAPTION>
BUILDING
FACILITY OWNERSHIP SQ. FEET FUNCTION LEASE EXPIRATION
- -------- --------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Franklin Park, IL Leased 40,650 Fulfillment Center/Office September 30, 2000
Horsham, PA Leased 3,000 Corporate office December 31, 1998
Jacksonville, IL Owned 76,000 Manufacturing/Office N/A
Los Angeles, CA Leased 3,000 Sales August 31, 1999
Louisa, VA Leased 77,500 Manufacturing December 31, 2005
Melrose Park, IL Leased 256,629 Manufacturing/Office September 30, 2002
Melrose Park, IL Leased 40,650 Warehouse March 31, 1999
New York, NY Leased 5,000 Sales July 31, 1998
Warrington, PA Leased 100,000 Manufacturing December 31, 2005
Warrington, PA Leased 86,000 Warehouse/Manufacturing December 31, 1999
Grover, NC
(under construction) Owned 51,400 Manufacturing N/A
</TABLE>
LEGAL PROCEEDINGS
The Company is a party to various legal actions arising in the ordinary
course of its business. The Company believes that the resolution of these
legal actions will not have a material adverse effect on the Company's
financial position or results of operation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of IMPAC, AGI and Klearfold are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Melvin B. Herrin................ 63 Director and Chairman
Richard H. Block................ 57 Director and Chief Executive Officer
H. Scott Herrin................. 41 Director, President of Klearfold and
Executive Vice President of the Company
Michel Reichert................. 47 Director
Michael F. Gilligan............. 42 Director
David C. Underwood.............. 38 Chief Financial Officer
James H. Oppenheimer............ 55 Executive Vice President--Sales
Richard L. Oppenheimer.......... 49 Executive Vice President--Sales
Dean J. Henkel.................. 45 Executive Vice President--Manufacturing of
AGI Incorporated
Zenas Block..................... 81 Director
David H. Horowitz............... 69 Director
</TABLE>
Mr. Melvin B. Herrin founded Klearfold and has been Chairman of Klearfold
since its incorporation in 1977 and a Director of KFI Holding since 1996. Mr.
Herrin graduated from Temple University. Mr. Herrin is the father of Scott
Herrin.
Mr. Richard H. Block has served as the President and Chief Executive Officer
of AGI since October 1987. He began his career at AGI in 1970 as a salesman;
he was subsequently promoted to Sales Manager and Executive Vice President.
Prior to 1970, he served as a Sales Manager for Westvaco Corporation in New
York and Chicago. Mr. Block graduated from Alfred University. Mr. Block is the
son of Zenas Block.
Mr. H. Scott Herrin has been a Director of Klearfold since 1981 and a
Director of KFI Holding since 1996. Mr. Herrin graduated from Amherst College
and has a law degree from Harvard Law School. Mr. Herrin is the son of Melvin
Herrin.
Mr. Michel Reichert has been a Director of KFI Holding and Klearfold since
1996. Since 1994, Mr. Reichert has been a Managing General Partner of Heritage
Partners, Inc. a Boston-based private investment company. Prior to 1994, Mr.
Reichert was a Managing Director of BancBoston Capital Inc., a private equity
investment firm. Mr. Reichert graduated from the University of Bourges,
France.
Mr. Michael F. Gilligan has been a Director of KFI Holding since 1996. Since
1994, Mr. Gilligan has been a General Partner of Heritage Partners, Inc., a
Boston-based private investment company. Prior to 1994, Mr. Gilligan was a
Director of BancBoston Capital Inc., a private equity investment firm. Mr.
Gilligan graduated from Boston College.
Mr. James H. Oppenheimer is responsible for sales, marketing and
administration for the packaging and multimedia markets, as well as the
Franklin Park fulfillment center. Mr. Oppenheimer joined AGI in 1983 as the
East Coast Sales Manager, and subsequently served as Vice President of East
Coast Sales. Prior to joining the AGI, he served as Executive Vice President
of Sales for the Walter Frank Organization, a packaging company specializing
in cosmetics. Mr. Oppenheimer graduated from the University of Illinois,
Champaign-Urbana. Mr. Oppenheimer is the brother of Richard Oppenheimer.
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<PAGE>
Mr. Richard L. Oppenheimer is responsible for sales, marketing and
administration for the music and video markets. Mr. Oppenheimer joined AGI in
1977 as Chicago Sales Representative, and subsequently served in positions
including California Sales Representatives for Music, Sales Manager for
Packaging and Vice President of West Coast Sales. Prior to joining the AGI, he
spent six years selling custom injection molding designs, specializing in the
cosmetics industry. Mr. Oppenheimer graduated from Southern Illinois
University. Mr. Oppenheimer is the brother of James Oppenheimer.
Mr. David C. Underwood has been with AGI since 1990 and has been responsible
for AGI's finance, information technologies and human resources functions.
Prior to joining AGI, Mr. Underwood was a manager in the audit and financial
consulting division of Arthur Andersen & Company's Chicago office. Mr.
Underwood graduated from the University of Wisconsin and is a Certified Public
Accountant.
Mr. Dean J. Henkel is responsible for the manufacturing operations at AGI's
Melrose Park and Jacksonville plants. Mr. Henkel has worked at AGI since 1975
in a number of positions, including as a machine operator, finishing
superintendent, plant superintendent and plant manager in AGI's Melrose Park
facility and most recently as Executive Vice President--Manufacturing. He
graduated from Illinois Benedictine College.
Mr. Zenas Block has been a director of AGI since 1988. Since 1991, Mr. Block
has been an adjunct professor at the New York University Stern School of
Business and was a founder of its Center for Entrepreneurial Studies. Mr.
Block graduated from the City College of New York. Mr. Block is the father of
Richard Block.
Mr. David H. Horowitz has been a director of AGI since 1988. Mr. Horowitz is
a consultant and investor in the media and communications industry. Mr.
Horowitz graduated from Columbia College and has a law degree from Columbia
Law School.
STOCKHOLDER AGREEMENT
On March 12, 1998, IMPAC and its stockholders entered into a stockholders'
agreement (the "Stockholder Agreement"). The Stockholder Agreement provides
that IMPAC's board of directors (the "Board") will in most circumstances
consist of seven members to be elected as follows: (i) two individuals
designated by the holders of a majority of the shares of the Common Stock to
be purchased by Heritage (the "Heritage Holders"); (ii) two individuals
designated by the holders of a majority of the shares of Common Stock to be
purchased by or on behalf of Melvin Herrin and Scott Herrin (the "Klearfold
Holders"); and (iii) three individuals designated as follows: (A) if Richard
Block is both chief executive officer of IMPAC and continues to hold at least
75% of his shares of Common Stock, Richard Block and two individuals
designated by Richard Block; (B) if Richard Block is both chief executive
officer of IMPAC and continues to hold at least 50% but less than 75% of his
shares of Common Stock, Richard Block, one individual designated by Richard
Block, and one individual designated by the holders of a majority of the
shares of the Common Stock held by the holders of the Common Stock then
employed by IMPAC and who had been employed by AGI prior to the Combination
(the "AGI Holders"); (C) if Richard Block is both chief executive officer of
IMPAC and continues to hold less than 50% of his shares of Common Stock held
by him after the closing of the Combination, Richard Block and two individuals
designated by the AGI Holders; (D) if Richard Block is not chief executive
officer of IMPAC and continues to hold more than 50% of his shares of Common
Stock, one individual designated by Richard Block and two individuals
designated by the AGI Holders; and (E) if Richard Block is not chief executive
officer of IMPAC and continues to hold less than 50% of his shares of Common
Stock, three individuals designated by the AGI Holders.
In the event that IMPAC fails to achieve certain operating earnings targets
(testing will commence after September 30, 1999), IMPAC fails at any time
after June 7, 2002 to appoint a sale committee under the control of the
directors designated by the Heritage Holders when required to do so in
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accordance with the Stockholder Agreement, or certain events of default occur
under the Notes or under the New Credit Facility, then the Board will consist
of: (A) four individuals designated by the
Heritage Holders; (B) two individuals designated by the AGI Holders; and (C)
one individual designated by the Klearfold Holders.
Board vacancies will be filled by a designee of the individual or group who
originally designated the vacating director. Each individual or group entitled
to designate a director will also be entitled to direct the removal of such
director and designate a replacement director.
Executive officers of IMPAC will be appointed by the Board upon the
President's recommendations, subject to the provisions of such officers'
respective employment agreements.
At any time after June 7, 2002 the Heritage Holders will have the right to
request IMPAC to repurchase the shares of Common Stock held by them at a
repurchase price based on fair market value. In such event, IMPAC will have
the right to elect to (i) repurchase the shares held by the Heritage Holders,
(ii) defer such repurchase, and use commercially reasonable efforts to
complete within 180 days a sale of the Company or an initial public offering
of IMPAC's Common Stock or (iii) elect neither (i) nor (ii), in which case (or
in the case of a failure to complete either (i) or (ii)) the Heritage Holders
will have the right to create a sale committee of the Board, to be comprised
of two Heritage appointees, which shall have the right to cause a sale of the
Company over the subsequent two years. In the event such a sale does not occur
within such period, the Heritage Holders shall thereafter have the right to
re-exercise their right to cause IMPAC to repurchase shares of Common Stock.
The Stockholder Agreement also contains each of a (i) registration rights
provisions, which will provide certain demand registration rights, to become
effective upon the earlier to occur of June 7, 2002 and six months following
the consummation of an initial public offering of IMPAC's Common Stock, and
certain piggyback registration rights, (ii) transfer restrictions, (iii)
piggy-back and co-sale rights, (iv) rights of first refusal with respect to
certain transfers of Common Stock, (v) rights of first refusal with respect to
certain proposed sales of the Company and (vi) certain pre-emptive rights with
respect to certain equity issuances.
It is anticipated that the Stockholder Agreement will be amended in
connection with the Tinsley Acquisition to provide for the election of Shaun
Lawson and Lee Newbon to the Board and to make certain other changes to
reflect that affiliates of Heritage will hold a majority of the shares of
Common Stock.
EMPLOYMENT, NON-COMPETITION AND STOCK REPURCHASE AGREEMENTS
At the closing of the Combination, IMPAC entered into Employment, Non-
Competition and Stock Repurchase Agreements with each of Richard H. Block,
Melvin B. Herrin, H. Scott Herrin, David C. Underwood, James H. Oppenheimer,
Richard L. Oppenheimer and Dean J. Henkel, as well as with certain other
employees who are officers of one or more of its Subsidiaries, but will not be
officers of IMPAC.
Each employment agreement with one of the employees named above provides a
term of employment through June 2001, specifies a base salary and a package of
benefits and provides for participation in IMPAC's Bonus Plan (as defined
below). Each such employment agreement (except as noted below) gives such
individual (or his estate) the right to offer his or her shares back to IMPAC
in the event of death, disability, retirement, upon his termination of his
employment for good reason, or upon termination of his employment by IMPAC
without cause, and, except in the instance of retirement or, if insurance
proceeds are not available to complete the repurchase, death or disability,
IMPAC shall be required to complete such repurchase, in each case at fair
market value calculated in accordance with such employment agreements. Each of
Melvin Herrin's and Scott Herrin's employment agreement will give such
individual's estate the right, following the death of both Melvin
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<PAGE>
Herrin and Scott Herrin, to offer such estate's shares of Common Stock back to
IMPAC. In the event that a repurchase offer following an employee's death,
disability or retirement is rejected by IMPAC, and the offered shares are not
repurchased by those of the employee's fellow managers who may also have
rights to repurchase the employee's shares, then such shares will become
freely transferable. Any repurchase is subject to compliance with the terms of
the New Credit Facility and the Indenture, and if IMPAC is unable to complete
a purchase in compliance with such terms, the purchase may be delayed until
compliance is possible.
The employment agreements provide base salaries for the year ending December
31, 1998, as follows: Richard H. Block--$350,000; Melvin B. Herrin--$325,000;
H. Scott Herrin--$325,000; David C. Underwood--$225,000; James H.
Oppenheimer--$325,000; Richard L. Oppenheimer--$325,000; and Dean J. Henkel--
$225,000. Such base salaries are subject to cost of living adjustments for
each year thereafter.
Each of the employment agreements also provides for severance pay upon
termination by IMPAC without cause or by the employee for good reason. IMPAC
must pay the employee his base salary as in effect prior to any such
termination, together with benefits and a variable compensation element
calculated with reference to IMPAC's payments under the Bonus Plan, until the
later of (i) the end of the term of the employment contract, or (ii) if so
elected by IMPAC, the first anniversary of termination, provided that the
period during which severance pay is payable may be extended for up to one
additional year by notice to the employee from IMPAC. If the employee is
terminated by IMPAC without cause, or the employee terminates his employment
for good reason, at any time after the end of the term of the employment
agreement, IMPAC may by written notice to the employee elect to pay the
employee his base salary as in effect prior to any such termination, together
with benefits and a variable compensation element calculated with reference to
IMPAC's payments under the Bonus Plan, for a period of one year from the date
of termination, provided that such period may be extended for up to one
additional year by notice to the employee from IMPAC. No severance is payable
in the event of a termination of employment as a result of death, disability
or retirement, or a termination by the employee without good reason or by
IMPAC with cause.
Each of the employment agreements with the employees named above also
contains non-competition covenants pursuant to which the employee is
prohibited, during the term of his employment and for a "Restricted Period"
thereafter, from competing with the Company in any place where the Company now
or during the employee's employment does business, and, subject to certain
exceptions, from soliciting or encouraging any employee, contractor, customer,
vendor or supplier of the Company to terminate or materially reduce its
relationship with the Company. The applicable "Restricted Period" will, with
certain exceptions, be that period following the employee's termination during
which severance pay is being paid to the employee, and if no severance pay is
payable, the "Restricted Period" shall be the longer of (i) one year from the
date of termination, and (ii) two years from March 12, 1998. In addition, the
"Restricted Period" shall be extended by any period in which the employee is
in breach of his non-competition and non-solicitation obligations.
Each of the employment agreements also provides that IMPAC and certain "co-
managers", taken together (in the case of Richard H. Block, David C.
Underwood, James H. Oppenheimer, Richard L. Oppenheimer and Dean J. Henkel,
the "co-managers" include each such person (other than himself), as well as
Dennis L. McGuin, Mary Frances Griffin and Jacqueline M. Barry) have the right
to repurchase the employee's shares of IMPAC's Common Stock following
termination of the employee's employment, as well as providing the rights
described above for the employee to require the repurchase of his stock. The
Company will obtain insurance policies on the life of each of Richard H.
Block, David C. Underwood, James H. Oppenheimer, Richard L. Oppenheimer and
Dean J. Henkel, and on the life of the survivor of Melvin Herrin and Scott
Herrin in order to assist in the financing of its obligations to repurchase
their stock. IMPAC will finance any stock repurchase, first, out of cash if
and to the extent available under the terms of the New Credit Facility and the
Indenture and if IMPAC is
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unable to complete a purchase at any time because no cash is then available
under such terms, the purchase may be delayed until cash becomes available to
permit IMPAC to complete the purchase in compliance with such terms.
BONUS PLAN
The Company has adopted a cash bonus plan that will provide for annual cash
bonuses based on achievement of Company and individual performance objectives.
DIRECTOR COMPENSATION
Directors of the Company do not receive compensation from the Company for
their service in such capacities.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by Klearfold
and AGI for services rendered during fiscal 1997 to their seven most highly-
compensated executive officers (determined on a combined basis).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION FOR FISCAL 1997
----------------------------------------
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION(1) SALARY BONUS (2)
- ------------------------------ ------------ ---------------------------
<S> <C> <C> <C>
Melvin B. Herrin......................... $297,429 $ -- $ 6,708
Chairman of Klearfold
Richard H. Block......................... $224,124 $ 420,244 $ 30,434
President and Chief Executive Officer of
AGI
H. Scott Herrin.......................... $312,426 $ -- $ 9,685
President of Klearfold
James H. Oppenheimer..................... $143,774 $ 406,293 $ 14,671
Vice President of Sales of AGI
Richard L. Oppenheimer................... $140,000 $ 365,153 $ 59,421
Vice President of Entertainment Sales of
AGI
Dean J. Henkel........................... $126,000 $ 347,083 $ 12,643
Vice President of Manufacturing of AGI
David C. Underwood....................... $126,000 $ 347,083 $ 11,671
Vice President of Finance of AGI
</TABLE>
- --------
(1) Position held before the Combination.
(2) Reflects automobile allowances paid to each executive and housing
allowances paid to Richard Block and Richard Oppenheimer.
MANAGEMENT EQUITY INCENTIVE PLAN
The Company intends to adopt one or more management equity incentive plans
to attract, retain and incentivize its management and employees. These plans
may include a stock option plan to make stock options available to employees,
directors and consultants. Stock options granted may be qualified or non-
qualified. The Company expects that vesting of stock options may be subject to
certain conditions, including achievement of Company and individual
performance objectives. In addition, these plans may include a restricted
stock plan providing for the grant of restricted stock that would be subject
to vesting based on the achievement of operating and financial goals. In
connection with a restricted stock plan, the Company may decide to adopt a
separate class of voting common stock with terms reflecting the management
incentive plan.
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BENEFICIAL OWNERSHIP
The following table sets forth, after giving effect to the Combination,
certain information regarding ownership of the Common Stock of IMPAC by (i)
each director of IMPAC, (ii) each of the executive officers of IMPAC named in
the "Summary Compensation Table", (iii) each of the directors and executive
officers of IMPAC as a group, and (iv) each person who beneficially owns more
than 5% of the outstanding shares of IMPAC's Common Stock.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENT OF CLASS(1)
- ---- ---------------- -------------------
<S> <C> <C>
Heritage Partners Fund I Investment Cor-
poration................................ 40,000 40.0%
c/o Heritage Partners, Inc.
30 Rowes Wharf
Boston, MA 02110
Michel Reichert(2)....................... 40,000 40.0%
c/o Heritage Partners, Inc.
30 Rowes Wharf
Boston, MA 02110
Michael Gilligan(3)...................... 40,000 40.0%
c/o Heritage Partners, Inc.
30 Rowes Wharf
Boston, MA 02110
Richard H. Block......................... 18,100 18.1%
c/o AGI Incorporated
1950 North Ruby St.
Melrose Park, IL 60160
H. Scott Herrin, Arthur S. Keyser and
Matthew H. Kamens,...................... 7,958 8.0%
as Trustees under an Irrevocable Deed of
Trust dated August 12,
1992 f/b/o H. Scott Herrin
c/o Klearfold, Inc.
364 Valley Road
Warrington, PA 18976
H. Scott Herrin(4)....................... 7,958 8.0%
James H. Oppenheimer..................... 6,227 6.2%
Melvin B. Herrin......................... 4,964 5.0%
Richard L. Oppenheimer................... 4,440 4.4%
Arthur S. Keyser and Matthew H. Kamens,
as Trustees under....................... 3,916 4.0%
an Indenture of Trust of Melvin B. Herrin
dated June 4, 1996
c/o Klearfold, Inc.
364 Valley Road
Warrington, PA 18976
Dean J. Henkel........................... 3,782 3.8%
David C. Underwood....................... 3,072 3.1%
David Horowitz........................... 588 0.6%
Zenas Block.............................. 147 0.2%
All Directors and executive officers as a
group (9 persons)....................... 92,459 92.5%
</TABLE>
- --------
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared
power to dispose, or direct the disposition of, a security.
(2) The shares shown as beneficially owned by Mr. Reichert represent 40,000
shares owned of record by Heritage. Mr. Reichert through one or more
intermediaries may be deemed to control the voting
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and disposition of the securities owned by Heritage, and accordingly may be
deemed to have shared voting and investment power with respect to all
shares held by Heritage. However, Mr. Reichert disclaims beneficial
ownership of the securities held by Heritage.
(3) The shares shown as beneficially owned by Mr. Gilligan represent 40,000
shares owned of record by Heritage. Mr. Gilligan through one or more
intermediaries may be deemed to control the voting and disposition of the
securities owned by Heritage, and accordingly may be deemed to have shared
voting and investment power with respect to all shares held by Heritage.
However, Mr. Gilligan disclaims beneficial ownership of the securities
held by Heritage.
(4) Includes 7,958 shares held by H. Scott Herrin, Arthur S. Keyser and
Matthew H. Kamens, as Trustees under an Irrevocable Deed of Trust dated
August 12, 1992 f/b/o H. Scott Herrin, and over which H. Scott Herrin
shares investment and voting control.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INVESTMENT AGREEMENT AND RELATED TRANSACTIONS
Investment Agreement
In February 1998, KFI Holding, each of Heritage Fund I Investment
Corporation (an affiliate of Heritage, "Fund I"), Matthew H. Kamens, as
Trustee under Indenture of Trust dated 06/04/96 of Melvin B. Herrin ("Kamens")
and Arthur S. Keyser, as Trustee under an Irrevocable Deed of Trust dated
08/12/92 f/b/o H. Scott Herrin ("Keyser", and, together with Fund I and
Kamens, each a security holder who owns more than 5% of the outstanding shares
of IMPAC's Common Stock, the "Major Stockholders"), each of Zenas Block and
David Horowitz (each a director of IMPAC and, collectively, the "Outside
Directors"), each of Melvin B. Herrin, H. Scott Herrin, Richard Block, James
Oppenheimer, Richard Oppenheimer, David Underwood and Dean Henkel (each an
executive officer of IMPAC and, collectively, the "Executive Officers") and
other IMPAC shareholders entered into an Investment Agreement, pursuant to
which (i) the existing stockholders of KFI Holding (the "Klearfold
Contributing Parties") agreed to contribute to KFI Holding the entire
outstanding capital stock of KFI Holding and a warrant to purchase KFI Holding
capital stock and to invest approximately $4.6 million in cash, and (ii)
certain stockholders and holders of stock appreciation rights of AGI (the "AGI
Contributing Parties") agreed to contribute to KFI Holding shares of common
stock and to invest the proceeds of their stock appreciation rights, totaling
an aggregate of $14.4 million. In exchange for these contributions and cash
investments, KFI Holding will issue to each contributing or investing party
shares of KFI Holding's common stock.
In addition, immediately prior to completion of the Transactions, Melvin B.
Herrin and H. Scott Herrin, and other shareholders of KFI Holding surrendered
to KFI Holding shares of its outstanding capital stock in exchange for the
cancellation of certain promissory notes representing approximately $35,000 in
unpaid purchase price for such shares. Such employees and certain other
employees of KFI Holding will receive options to purchase shares of IMPAC's
Common Stock.
Pursuant to the Investment Agreement, each of the Executive Officers and
other managers of IMPAC entered into Employment, Non-Competition and Stock
Repurchase Agreements and each recipient of stock options as described above
entered into an Agreement relating to Employment and Stock Ownership. See
"Management--Employment, Non-Competition and Stock Repurchase Agreements".
Pursuant to the Investment Agreement, each of the contributing or investing
parties made representations and warranties to KFI Holding as to their title
to the shares being contributed and as to their authority to enter into the
Investment Agreement and the related transactions, and KFI Holding made
customary representations and warranties to the contributing or investing
parties. From and after the closing of the Combination, Heritage and Messrs.
Herrin and their affiliates (the "KFI Indemnitors") will indemnify the AGI
Contributing Parties for any breach by the Company of its representations,
warranties and covenants in the Investment Agreement ("Holding Indemnified
Claims").
The aggregate amount payable by the KFI Indemnitors with respect to all
claims for indemnification after the closing of the Combination will not
exceed approximately $2.3 million, except with respect to claims arising from
breaches of representations as to KFI Holding's equity capitalization,
authority to consummate the Combination, taxes and brokers, as to which
indemnification will be limited to the value to the KFI Indemnitors of their
investment in KFI Holding pursuant to the Investment Agreement, immediately
after the Combination (the "Share Value").
Each of the contributing or investing parties will indemnify KFI Holding for
breach of such party's representations and warranties in the Investment
Agreement, up to such party's Share Value.
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Pursuant to the Investment Agreement KFI Holding will agree to comply with a
number of operating covenants that will survive the completion of the
Transactions, including the maintenance of corporate existence and insurance,
compliance with applicable laws and contracts and the provision of financial
information and similar matters.
AGI Dividend
Prior to the consummation of the Combination the AGI stockholders received a
dividend in the form of promissory notes aggregating approximately $22.5
million, which is approximately the amount of AGI's undistributed accumulated
S corporation earnings. These notes were paid in full concurrently with the
consummation of the Combination.
Agreement and Plan of Merger
In February 1998, KFI Holding, its wholly-owned subsidiary AGI Acquisition
Corp., AGI and Klearfold, and Richard Block, James Oppenheimer, Richard
Oppenheimer, Donald W. Kosterka, James A. Ladwig, Dean Henkel, Gary Mankoff
and David Underwood (the "Principal AGI Stockholders") and Melvin B. Herrin,
H. Scott Herrin and the Major Stockholders entered into an Agreement and Plan
of Merger under which AGI Acquisition Corp. agreed to merge with and into AGI,
with AGI as the surviving corporation. In this merger, the shares of AGI not
contributed to KFI Holding under the Investment Agreement, together with
certain outstanding stock appreciation rights of AGI and an outstanding option
for the purchase of AGI's common stock, were converted into a right to receive
cash in the aggregate amount of $30.5 million, net of fees. Of this amount,
approximately $813,000 was placed in escrow to secure certain indemnification
obligations described below.
The payment of the foregoing cash consideration was funded from the proceeds
of the Offering and the cash investments made pursuant to the Investment
Agreement.
In the Agreement and Plan of Merger, AGI and the Principal AGI Stockholders
made customary representations and warranties to KFI Holding, the existing
stockholders of KFI Holding, and AGI Acquisition Corp., and KFI Holding,
Klearfold and AGI Acquisition Corp. made customary representations and
warranties to AGI. From and after the closing of the Combination, all of the
existing stockholders of AGI (the "AGI Indemnitors") will indemnify the
Company for any breach of certain representations, warranties and covenants in
the Agreement and Plan of Merger. From and after the closing of the
Combination, the KFI Indemnitors will indemnify the former AGI investors for
any breaches of certain representations, warranties and covenants in the
Agreement and Plan of Merger.
The aggregate amount payable by the AGI Indemnitors with respect to all
claims for indemnification after the closing of the Combination will not
exceed $3.5 million, except with respect to claims arising from breaches of
representations as to equity capitalization, authority to consummate the
Transaction, taxes and brokers, as to which indemnification will be limited to
the combined after-tax value to the indemnifying party of its proceeds from
the merger and related transactions. The aggregate amount payable by the KFI
Indemnitors with respect to all claims for indemnification after the closing
of the Combination will not exceed approximately $2.3 million, except with
respect to claims arising from breaches of representations as to equity
capitalization, authority to consummate the Transactions, taxes and brokers,
and certain other specified claims, as to which indemnification will be
limited to the KFI Indemnitors' Share Value.
Charter
At the time of the closing of the Transactions, IMPAC amended its
Certificate of Incorporation to provide for one class of common stock, par
value $.001 per share ("Common Stock"). The holders of
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Common Stock have one vote per share. However, in connection with the adoption
of a restricted stock incentive plan IMPAC may adopt a separate class of
voting common stock with terms reflecting the management incentive plan.
Payments to Management Shareholders
In connection with the Combination and certain related transactions, Richard
Block, James Oppenheimer, Richard Oppenheimer and Dean Henkel received an
aggregate of approximately $18.3 million in cash payments for the repurchase
of equity and cancellation of stock appreciation rights, net of amounts
reinvested in the Company, including approximately $16.9 million paid to Mr.
Richard Block, the Chief Executive Officer of the Company.
PRE-ACQUISITION TRANSACTIONS
The Company's manufacturing facility in Warrington, Pennsylvania is leased
directly from Melvin B. Herrin for an annual rent of approximately $336,000,
and the Louisa, Virginia facility is also leased directly from Mr. Herrin
through an entity controlled by Mr. Herrin for an annual rent of approximately
$273,000. The leases expired on December 31, 1995 and, pursuant to option
clauses, were renewed effective January 1, 1996. The leases contain escalation
clauses based on the producer price index increase and expire on December 31,
2005 with an option to renew for a further five year period. The Company
believes the terms of these leases to be at fair market value.
The Company's Melrose Park, Illinois facility is leased to the Company by a
partnership which includes the founder of AGI and Richard Block for an annual
rent of approximately $475,000. The term of the lease expires on September 30,
2002. AGI has options to extend the lease for several additional five year
terms. The Company believes that the terms of these leases were at fair market
value at the time entered into by the Company.
For fiscal 1997, the Company paid approximately $114,000 to Freya Block
Design, Inc. for consulting services. Freya Block Design, Inc. is a
corporation wholly-owned by Freya Block, the wife of Richard Block.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
The Company entered into a credit facility with Bank of America, National
Trust and Savings Association ("Bank of America") that provides for up to
$40.0 million of revolving credit borrowings by IMPAC and up to $13.0 million
in letters of credit by Klearfold and AGI (the "New Credit Facility"). The New
Credit Facility has a five-year maturity. Bank of America issued up to $13.0
million of letter of credit accommodations to provide credit enhancement to
outstanding AGI and Klearfold municipal variable rate demand bonds. The New
Credit Facility ranks senior to the Notes and the Company's obligations under
the New Credit Facility are guaranteed by each of the Company's existing and
future subsidiaries on a senior basis and secured by substantially all of the
assets of the Company and its subsidiaries. Interest on the Company's loan
balance will be payable quarterly at Bank of America's base rate (plus an
applicable margin), with IBOR (plus an applicable margin) options on customary
terms. The applicable margins for base rate loans will range between 0.50% and
1.25% based upon the Company's ratio of Funded Debt to EBITDA and the
applicable margin for IBOR loans will range between 1.50% and 2.25% based upon
the Company's ratio of Funded Debt to EBITDA. The Company paid and expects to
pay customary fees in connection with the execution of the New Credit
Facility, with respect to any unused portion of the revolving loan commitment
and with respect to the maintenance of the letter of credit accommodations. In
addition to customary covenants, the New Credit Facility imposes substantial
limitations on the Company's ability to incur additional indebtedness, incur
liens, pay dividends, make other restricted payments, issue guaranties, make
advances to affiliates and dispose of assets. The New Credit Facility
constitutes Senior Debt for purposes of the Notes and the Indenture. The
Company expects to use the proceeds from borrowings under the New Credit
Facility to provide for working capital and other general corporate purposes.
IRB FINANCINGS
Both AGI and Klearfold have entered into certain industrial revenue bond
financing arrangements (the "IRB Financings"), as described below. The IRB
Financings remain outstanding and the Company's obligations thereunder are
fully secured by letters of credit issued under the New Credit Facility.
Bucks County Industrial Development Authority. Pursuant to a loan agreement
(the "Bucks Loan Agreement") between the Bucks County Industrial Development
Authority ("Bucks County") and Klearfold, Klearfold borrowed $4.0 million from
Bucks County to finance certain costs of the acquisition and installation of
an offset printing press and related equipment for its facility in Warrington,
Pennsylvania. In connection with the loan, Bucks County issued $4.0 million
aggregate principal amount of Bucks County Industrial Development Authority
Variable Rate Demand Revenue Bonds, Series 1997 (Klearfold, Inc. Project) (the
"Klearfold IRBs"). The Klearfold IRBs mature on August 1, 2007 and accrued
interest at 4.35% per annum as of December 31, 1997.
City of Jacksonville, Illinois. Pursuant to a loan agreement (the
"Jacksonville Loan Agreement") between the City of Jacksonville, Illinois
("Jacksonville") and AGI, AGI borrowed $7.6 million from Jacksonville to
finance certain costs of the acquisition of land, and construction and
equipping of AGI's manufacturing facility in Jacksonville, Illinois in 1995.
In connection with the loan, Jacksonville issued $7.6 million aggregate
principal amount of City of Jacksonville, Illinois Multi-Mode Industrial
Project Revenue Bonds, Series 1995 (AGI Incorporated Project) (the "AGI
IRBs"). The AGI IRBs mature on February 1, 2026 and accrued interest at 4.2%
per annum as of December 31, 1997.
AMENDED AND RESTATED MULTICURRENCY CREDIT FACILITY
In connection with the consummation of the proposed Tinsley Acquisition, the
Company has entered into the Amended and Restated Multicurrency Credit
Facility with Bank of America, as agent,
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and certain other financial institutions parties thereto. Although the Company
has entered into the Amended and Restated Multicurrency Credit Facility, the
Amended and Restated Multicurrency Credit Facility will not become operative
until the funding of the Tinsley Acquisition. The Amended and Restated
Multicurrency Credit Facility provides for up to $53.0 million of revolving
credit borrowings and letter of credit facilities by IMPAC, up to $37.0
million of term loan A borrowings and up to $70.0 million term loan B
borrowings. The Revolver will have a five-year maturity. The Term Loan A will
have a five and one-half year maturity. The Term Loan B will have a six and
one-half year maturity. The Revolver will include a $20.0 million letter of
credit subfacility.
The Amended and Restated Multicurrency Credit Facility will rank senior to
the Notes, and the Company's obligations under the Amended and Restated
Multicurrency Credit Facility will be guaranteed by each of the Company's
existing and future domestic Subsidiaries on a senior basis and secured by
substantially all of the assets of the Company and its domestic Subsidiaries.
In addition, the Amended and Restated Multicurrency Credit Facility will in
certain instances be guaranteed by certain existing and future foreign
Subsidiaries on a senior basis and secured by substantially all of the assets
of certain foreign subsidiaries of the Company. Any foreign Subsidiary that
provides a guarantee with respect to the Amended and Restated Multicurrency
Credit Facility will also be required to deliver a guarantee with respect to
the Notes. Interest on the Company's loan balance will be payable at Bank of
America's base rate (plus an applicable margin), with an IBOR (plus an
applicable margin) option on customary terms. The applicable margins for base
rate loans will range between 0.50% and 1.75% based upon the Company's ratio
of Senior Debt to EBITDA (as defined in the Amended and Restated Multicurrency
Credit Facility) and the applicable margin for IBOR loans will range between
1.50% and 2.75% based upon the Company's ratio of Senior Debt to EBITDA. The
Revolver will include a $20.0 million swing line subfacility denominated in
Pounds Sterling. The Company will pay customary fees in connection with the
execution of the Amended and Restated Multicurrency Credit Facility, with
respect to any unused portion of the Revolver, Term Loan A and Term Loan B
commitment and with respect to the maintenance of the letter of credit
accommodations. In addition to customary covenants, the Amended and Restated
Multicurrency Credit Facility will impose substantial limitations on the
Company's ability to incur additional indebtedness, incur liens, pay
dividends, make other restricted payments, issue guaranties, make advances to
affiliates and dispose of assets. The Amended and Restated Multicurrency
Credit Facility will constitute Senior Debt for purposes of the Notes and the
Indenture. The Company expects to use the proceeds from borrowings under the
Amended and Restated Multicurrency Credit Facility for making loans and equity
contributions for use in financing the Tinsley Acquisition and refinancing
existing Tinsley indebtedness and to provide for working capital, other
acquisitions and general corporate purposes.
LOAN NOTES
As part of the Offer, Tinsley shareholders will have the option to elect to
receive all or a portion of the purchase price in the form of Loan Notes, not
to exceed (Pounds)15.0 million in the aggregate for all Tinsley shareholders.
The Loan Notes mature in 2003, subject to earlier redemption at the option of
the holder or, subject to certain conditions, Newco, and will bear interest at
a rate of per annum based on LIBOR less 1%. The Loan Notes will be guaranteed
as to principal and interest, up to an aggregate of (Pounds)15.4 million, by
Bank of America. Drawings under this guarantee will be converted into
borrowings under the Amended and Restated Multicurrency Credit Facility. The
Company is providing Tinsley shareholders the option of receiving Loan Notes
as part of the purchase price in order to permit Tinsley shareholders in the
United Kingdom to defer a portion of any capital gain that may be applicable
to the Offer.
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EXCHANGE OFFER
GENERAL
IMPAC hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $100.0 million
aggregate principal amount of New Notes for a like aggregate principal amount
of Existing Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to all of the Existing Notes; the
total aggregate principal amount of Existing Notes and New Notes will in no
event exceed $100.0 million.
A copy of the Registration Rights Agreement referred to below has been filed
as an exhibit to the Registration Statement of which this Prospectus is a
part. See "Available Information".
PURPOSE OF THE EXCHANGE OFFER
On March 12, 1998, IMPAC issued $100.0 million aggregate principal amount of
Existing Notes. The issuance of the Existing Notes was not registered under
the Securities Act in reliance upon the exemption provided in Section 4(2) of
the Securities Act.
IMPAC, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the Closing Date. Pursuant to the
Registration Rights Agreement, IMPAC and the Guarantors agree to use
commercially reasonable efforts to file with the Commission the Exchange Offer
Registration Statement (as defined under "Description of Notes") on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, IMPAC and
the Guarantors will offer notes of IMPAC which will have terms substantially
identical in all material respects to the Notes, including the Existing
Guarantees (the "Exchange Notes") (except that the Exchange Notes will not
contain terms with respect to transfer restrictions). If (i) IMPAC and the
Guarantors are not required to file the Exchange Offer Registration Statement
or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of
Transfer Restricted Securities (as defined under "Description of Notes")
notifies IMPAC within 20 days after the Exchange Offer has been consummated
(A) that it is prohibited by applicable law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) that such Holder is a broker-dealer and holds Notes acquired directly from
IMPAC or one of its affiliates, then IMPAC and the Guarantors will use
commercially reasonable efforts to file a shelf registration statement
pursuant to Rule 415 under the Securities Act, which may be an amendment to
the Existing Offer Registration Statement (in either event, the "Shelf
Registration Statement") on or prior to the earliest to occur of (1) the 60th
day after the date on which IMPAC determines that it is not required to file
the Exchange Offer Registration Statement or (2) the 60th day after the date
on which IMPAC receives notice from a Holder of Transfer Restricted Securities
as contemplated by clause (ii) above (such earliest date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities the Holders of which shall
provide certain information to IMPAC. IMPAC and the Guarantors will use
commercially reasonable efforts to cause such Shelf Registration Statement to
be declared effective by the Commission on or before the 135th day after the
obligation to file the Shelf Registration Statement arises. For purposes of
the foregoing, "Transfer Restricted Securities" means each Note until the
earliest of (i) the date on which such Note is exchanged in the Exchange Offer
and the Note for which it is exchanged is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) the date on which such Note has
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been disposed of in accordance with a Shelf Registration Statement, or (iii)
the date on which such Note is permitted to be distributed to the public
pursuant to Rule 144 under the Securities Act or by a broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of a copy of this prospectus).
The Registration Rights Agreement provides that unless the Exchange Offer
shall not be permissable under applicable law or Commission policy (i) IMPAC
and the Guarantors shall cause to be filed an Exchange Offer Registration
Statement with the Commission as soon as practicable after March 12, 1998 (the
"Closing Date"), but in no event later than 90 days after the Closing Date,
(ii) IMPAC and the Guarantors shall use commercially reasonable efforts to
cause the Exchange Offer Registration Statement to become effective at the
earliest possible time, but in no event later than 150 days after the Closing
Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to
cause such Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Registration Statement pursuant to Rule 430A
under the Securities Act and (C) cause all necessary filings in connection
with the registration and qualification of the Exchange Notes to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit the
Exchange Offer to be consummated, and (iv) upon the effectiveness of such
Registration Statement, commence the Exchange Offer. IMPAC will be entitled to
suspend the use of a prospectus under the Exchange Offer Registration
Statement or any Shelf Registration Statement for certain limited periods
under certain prescribed circumstances. If (a) any of the Registration
Statements required by the Registration Rights Agreement is not filed with the
Commission on or prior to the date specified for such filing; (b) any of such
Registration Statements has not been declared effective by the Commission on
or prior to the date specified for such effectiveness (the "Effectiveness
Target Date"); (c) an Exchange Offer Registration Statement becomes effective
but IMPAC and the Guarantors fail to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement; or (d) subject to certain exceptions, the Shelf
Registration Statement or the Exchange Offer Registration Statement is filed
and is declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose prior to the expiration of the time period
specified in the Registration Rights Agreement without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each
such event referred to in clauses (a) through (d) above, a "Registration
Default," and each period during which a Registration Default has occurred and
is continuing, a "Registration Default Period"), IMPAC and Guarantors jointly
and severally agree that the liquidated damages ("Liquidated Damages"), in
addition to the base interest that would otherwise accrue on the Transfer
Restricted Securities, shall accrue at a per annum rate of 0.25% of the
aggregate principal amount of such Transfer Restricted Securities for the
first 90 days of the Registration Default Period, increasing by 0.25% per
annum every 90 days up to a maximum of 1.0% per annum until such Registration
Default has been cured. All accrued Liquidated Damages will be paid by IMPAC
to the Record Holders (as defined under "Description of Notes") by wire
transfer of immediately available funds or by federal funds check on each
Damages Payment Date (as defined under "Description of Notes") at the office
or agency of IMPAC maintained for such purpose in the Borough of Manhattan,
The City of New York. Following the cure of all Registration Defaults relating
to any particular Transfer Restricted Securities, the accrual of Liquidated
Damages with respect to such Transfer Restricted Securities will cease
immediately.
Holders of such Notes will be required to make certain representations to
IMPAC and the Guarantors (as described in the Registration Rights Agreement)
in order to participate in the Exchange Offer and will be required to deliver
information to be used in connection with the Shelf Registration Statement
within the time periods set forth in the Registration Rights Agreement in
order to have their Notes included in the Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages set forth above.
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EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, unless the Company, in its sole discretion, has extended the period of
time (as described below) for which the Exchange Offer is open (such date, as
it may be extended, is referred to herein as the "Expiration Date"). The
Expiration Date will be at least 30 days after the commencement of the
Exchange Offer (or longer if required by applicable law). IMPAC expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Existing Notes by giving oral notice (confirmed in writing) or
written notice to the Exchange Agent (as defined herein) and by giving written
notice of such extension to the holders thereof or by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release through the Dow Jones News Service, in each
case, no later than 9:00 a.m. New York City time, on the next business day
after the previously scheduled Expiration Date. Such announcement may state
that IMPAC is extending the Exchange Offer for a specified period of time.
During any such extension, all Existing Notes previously tendered will remain
subject to the Exchange Offer.
In addition, IMPAC expressly reserves the right to terminate or amend the
Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Certain Conditions to the Exchange Offer". If any
such termination or amendment occurs, IMPAC will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the
holders of the Existing Notes as promptly as practicable.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to IMPAC of Existing Notes by a holder thereof as set forth below
and the acceptance thereof by IMPAC will constitute a binding agreement
between the tendering holder and IMPAC upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references
in this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Existing Notes being tendered, if any, and any
required signature guarantees, to the Exchange Agent at its address set forth
below on or prior to 5:00 p.m., New York City time, on the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND DELIVERY SERVICE, BE
USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY
DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO IMPAC.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Existing Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Existing Notes
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined herein). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a participant
in a recognized signature guaranty medallion program (each an "Eligible
Institution"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal,
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the Existing Notes surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by IMPAC in its sole discretion, duly executed
by the registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Existing Notes at the
book-entry transfer facility, The Depository Trust Company, for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Existing Notes by causing
such book-entry transfer facility to transfer such Existing Notes into the
Exchange Agent's account with respect to the Existing Notes in accordance with
the book- entry transfer facility's procedures for such transfer. Although
delivery of Existing Notes may be effected through book-entry transfer in the
Exchange Agent's account at the book-entry transfer facility, an appropriate
Letter of Transmittal with any required signature guarantee and other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
at its address or facsimile number set forth below on or prior to the
Expiration Date a letter, telegram or facsimile from an Eligible Institution
setting forth the name and address of the tendering holder, the name in which
the Existing Notes are registered and, if possible the certificate number or
numbers of the certificate or certificates representing the Existing Notes to
be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the book-
entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal
(and any other required documents). Unless Existing Notes being tendered by
the above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents), IMPAC may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by an Eligible Institution for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry
transfer facility) is received by the Exchange Agent, or (ii) a Notice of
Guaranteed Delivery or letter, telegram or facsimile to similar effect (as
provided above) from an Eligible Institution is received by the Exchange
Agent. Issuances of New Notes in exchange for Existing Notes tendered pursuant
to a Notice of Guaranteed Delivery or letter, telegram or facsimile to similar
effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by IMPAC in its sole discretion, which determination will be final
and binding on all parties. IMPAC reserves the right to reject any and all
tenders of any particular Existing Notes not properly tendered or reject any
particular shares of Existing Notes the acceptance of which might, in the
judgment of IMPAC or its counsel, be unlawful. IMPAC also reserves the
absolute right to waive any defects or irregularities or condition of the
Exchange Offer as to any particular Existing Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Existing Notes in the Exchange Offer). The
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interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) by IMPAC shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Existing Notes for exchange must be cured within
such time as IMPAC shall determine. Neither IMPAC nor any other person shall
be under any duty to give notification of defects or irregularities with
respect to tenders of Existing Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the Letter of Transmittal or any Existing Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
IMPAC, proper evidence satisfactory to IMPAC of their authority to so act must
be submitted.
By tendering, each holder that is not a broker-dealer or is a broker-dealer
but is not receiving New Notes for its own account will represent to IMPAC
that, among other things, the New Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of such holder's business,
that such holder has no arrangement or understanding with any person to
participate in the distribution of such New Notes and that such holder is not
an "affiliate" of IMPAC as defined in Rule 405 under the Securities Act or, if
it is an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Each broker-dealer that is receiving New Notes for its own account
in exchange for Existing Notes that were acquired as a result of market-making
or other trading activities will represent to IMPAC that it will deliver a
prospectus in connection with any resale of such Existing Notes.
In addition, IMPAC reserves the right in its sole discretion to (a) purchase
or make offers for any Existing Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "--Certain Conditions to the
Exchange Offer", to terminate the Exchange Offer and (b) to the extent
permitted by applicable law, purchase Existing Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such
purchases or offers may differ from the terms of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the business day prior to the Expiration Date. For a
withdrawal to be effective, a written notice of withdrawal sent by letter,
telegram or facsimile must be received by the Exchange Agent at any time prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date at its address or facsimile number set forth below. Any such notice of
withdrawal must (i) specify the name of the person having tendered the
Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing
Notes to be withdrawn (including the certificate number of numbers of the
certificate or certificates representing such Existing Notes and the aggregate
principal amount of such Existing Notes), (iii) be signed by the holder in the
same manner as the original signature on the Letter of Transmittal by which
such Existing Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to permit
the Transfer Agent with respect to the Existing Notes to register the transfer
of such Existing Notes into the name of the person withdrawing the tender and
(iv) specify the name in which any such Existing Notes are to be registered,
if different from that of the Depositor. All questions as to the validity,
form and eligibility (including time of receipt) of such withdrawal notices
will be determined by IMPAC in its sole discretion, which determination will
be final and binding on all parties. Any Existing Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer
and no New Notes will be issued with respect thereto unless the Existing Notes
so withdrawn are validly retendered. Any Existing Notes which have been
tendered but which are withdrawn will be returned to the holder thereof
without cost to such holder as soon as practicable after such withdrawal.
Properly withdrawn Existing Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering Existing Notes"
at any time prior to the Expiration Date.
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ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
IMPAC will accept, promptly after the Expiration Date, all Existing Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Exchange Offer. See "--Certain Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, IMPAC will be deemed to have accepted
properly tendered Existing Notes for exchange when IMPAC has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of the New Notes in exchange for Existing Notes
pursuant to the Exchange Offer will be made only after timely receipt by IMPAC
of such Existing Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Existing Notes
are not accepted for exchange for any reason set forth in the terms and
conditions of the Exchange Offer, such unaccepted Existing Notes will be
returned without expense to the tendering holder thereof as promptly as
practicable after the rejection of such tender or the expiration or
termination of the Exchange Offer.
UNTENDERED EXISTING NOTES
Holders of Existing Notes whose Existing Notes are not tendered or are
tendered but not accepted in the Exchange Offer will continue to hold such
Existing Notes and will be entitled to all the rights and preferences and
subject to the limitations applicable thereto. Following consummation of the
Exchange Offer, the holders of Existing Notes will continue to be subject to
the existing restrictions upon transfer thereof and, except as provided
herein, IMPAC will have no further obligation to such holders to provide for
the registration under the Securities Act of the Existing Notes held by them.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Existing
Notes could be adversely affected.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, IMPAC will not be
required to accept for exchange, or issue New Notes in exchange for, any
Existing Notes, and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Existing Notes for exchange, any of the
following events shall occur:
(A) an injunction, order or decree shall have been issued by any court or
governmental agency that would prohibit, prevent or otherwise materially
impair the ability of IMPAC to proceed with the Exchange Offer; or
(B) there shall occur a change in the current interpretation of the staff
of the Commission which current interpretation permits the New Notes issued
pursuant to the Exchange Offer in exchange for the Existing Notes to be
offered for resale, resold and otherwise transferred by holders thereof
(other than (i) a broker-dealer who purchases such New Notes directly from
IMPAC to resell pursuant to Rule 144A, Regulation S or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of
IMPAC within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with
any person to participate in the distribution of New Notes.
The foregoing conditions are for the sole benefit of IMPAC and may be
asserted by IMPAC regardless of the circumstances giving rise to any such
condition or may be waived by IMPAC in whole or in part at any time and from
time to time in its sole discretion. The failure by IMPAC at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
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If IMPAC determines that it may terminate the Exchange Offer, as set forth
above, IMPAC may (i) refuse to accept any Existing Notes and return any
Existing Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Existing Notes tendered prior to the Expiration
Date, subject to the rights of such holders of tendered shares of Existing
Notes to withdraw their tendered Existing Notes, or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Existing Notes that have not been withdrawn. If such waiver
constitutes a material change in the Exchange Offer, IMPAC will disclose such
change by means of a supplement to this Prospectus that will be distributed to
each registered holder of Existing Notes, and IMPAC will extend the Exchange
Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Existing Notes, if the Exchange Offer would otherwise expire
during such period.
In addition, IMPAC will not accept for exchange any Existing Notes tendered,
and no New Notes will be issued in exchange for any such Existing Notes, if at
any time any stop order shall be threatened by the Commission or in effect
with respect to the Registration Statement.
The Exchange Offer is not conditioned on any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions regarding Exchange Offer procedures and requests
for additional copies of this Prospectus or the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Mail: By Hand or Overnight Delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
Two International Place Corporate Two International Place Corporate
Trust Department, 4th Floor Boston, Trust Department, 4th Floor Boston,
MA 02110 MA 02110
Attention: Kellie Mullen Re: IMPAC Attention: Kellie Mullen Re: IMPAC
Group, Inc. Group, Inc.
By Facsimile:
(617) 664-5290 Confirm by Telephone:
(617) 664-5587
State Street Bank and Trust Company is also the Transfer Agent for the
Existing Notes and New Notes.
SOLICITATION OF TENDERS; FEES AND EXPENSES
IMPAC has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or other persons
soliciting acceptance of the Exchange Offer. IMPAC, however, will pay the
Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The cash expenses to be incurred by IMPAC in connection
with the Exchange Offer will be paid by IMPAC.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by IMPAC.
Neither the delivery of this Prospectus nor any exchange made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of IMPAC since the
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respective dates as of which information is given herein. The Exchange Offer
is not being made to (nor will tenders be accepted from or on behalf of)
holders of Existing Notes in any jurisdiction in which the making of the
Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction.
TRANSFER TAXES
IMPAC will pay all transfer taxes, if any, applicable to the exchange of
Existing Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Existing Notes not tendered or accepted for exchange
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Existing Notes tendered, or if
tendered Existing Notes are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of New Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holders.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by IMPAC upon the
consummation of the Exchange Offer. Expenses incurred in connection with the
issuance of the New Notes will be amortized by IMPAC over the term of the New
Notes under generally accepted accounting principles.
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PLAN OF DISTRIBUTION
Based on no-action letters issued by the staff of the Commission to third
parties, IMPAC believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Existing Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than (i) a broker-dealer who
purchases such New Notes directly from IMPAC to resell pursuant to Rule 144A
or any other available exemption under the Securities Act or (ii) a person
that is an affiliate of IMPAC within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act provided that New Notes are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of such
New Notes. Any holder of Existing Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes could not rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Thus, any New Notes acquired by such
holders will not be freely transferable except in compliance with the
Securities Act.
Each broker-dealer that receives New Notes for its own account in exchange
for Existing Notes acquired as a result of market-making or other trading
activities must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. For a period of 180 days after the
Expiration Date, this Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
such New Notes. During such 180-day period, IMPAC will use its reasonable best
efforts to make this Prospectus available to any broker-dealer for use in
connection with such resale, provided that such broker-dealer indicates in the
Letter of Transmittal that it is a broker-dealer.
IMPAC will not receive any proceeds from any sale of New Notes by broker-
dealers. New Notes received by broker-dealers for their own account pursuant
to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through broker-dealers who
may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any person that participates in the
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commissions or concessions received by any such broker-dealers may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that a broker-dealer, by acknowledging that it will deliver
and by delivering a prospectus, will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
IMPAC will indemnify the holders of the New Notes (including any broker-
dealers) against certain liabilities, including liabilities under the
Securities Act.
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DESCRIPTION OF NOTES
GENERAL
Except as otherwise indicated, the following description relates both to the
Existing Notes issued in the Offering and the New Notes, together with the New
Guarantees, to be issued in exchange for the Existing Notes in the Exchange
Offer. The form and terms of the New Notes are the same as the form and terms
of the Existing Notes, except that the New Notes have been registered under
the Securities Act and therefore will not bear legends restricting the
transfer thereof. The New Notes will be obligations of IMPAC evidencing the
same indebtedness as the Existing Notes. The Existing Notes were issued, and
the New Notes offered hereby will be issued, pursuant to an Indenture between
IMPAC, the Guarantors and State Street Bank and Trust Company, as trustee (the
"Trustee"), in a private transaction that is not subject to the registration
requirements of the Securities Act.
The following description also gives effect to the amendments made to the
Indenture pursuant to the First Supplemental Indenture, dated July 21, 1998
(the "First Supplemental Indenture"), although these amendments will not
become operative unless and until the Company or one of its subsidiaries
acquires at least 50% of the capital stock of Tinsley. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
Indenture and Registration Rights Agreement are available as set forth below
under "--Additional Information". The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions".
The Notes are general unsecured obligations of IMPAC and are subordinated in
right of payment to the prior payment in full in cash of all current and
future Senior Debt including borrowings under the New Credit Facility and the
IRB Financings. As of March 31, 1998, approximately $11.6 million in Senior
Debt was outstanding, fully secured by approximately $12.6 million in letters
of credit, and IMPAC and its Subsidiaries had additional liabilities
(including trade payables) aggregating approximately $26.3 million. The
Indenture permits the incurrence of additional Senior Debt in the future.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount of $100.0 million and
will mature on March 15, 2008. Interest on the Notes accrues at the rate of 10
1/8% per annum and will be payable semi-annually in arrears on March 15 and
September 15, commencing on September 15, 1998, to Holders of record on the
immediately preceding March 1 and September 1 (each a "Record Date"). Interest
on the Notes accrues from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of original issuance. Interest
is computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages on the Notes
is payable at the office or agency of IMPAC maintained for such purpose or, at
the option of IMPAC, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given wire transfer instructions to IMPAC prior to the
Record Date are required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof. Until otherwise
designated by IMPAC, IMPAC's office or agency for payment is the office of the
Trustee maintained for such purpose. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
IMPAC's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Guarantors. All of IMPAC's
Subsidiaries are Restricted Subsidiaries
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and Guarantors. The Subsidiary Guarantee of each Guarantor are unsecured and
subordinated to the prior payment in full in cash of all Senior Debt of such
Guarantor. At March 31, 1998, approximately $11.6 million in Senior Debt was
outstanding, fully secured by approximately $12.6 million in letters of credit
issued under the New Credit Facility. The Obligations (as defined under "--
Certain Definitions") of each Guarantor under its Subsidiary Guarantee are
limited so as not to constitute a fraudulent conveyance under applicable law.
See, however, "Risk Factors--Effect of Fraudulent Transfer Statutes on
Validity of Notes and Guarantees".
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person (as defined
under "-- Certain Definitions")), another corporation, Person or other entity
whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture, in form
and substance reasonably satisfactory to the Trustee, under the Notes, the
Indenture and the Registration Rights Agreement; (ii) immediately after giving
effect to such transaction, no Default (as defined under "--Certain
Definitions") or Event of Default exists; and (iii) except in the case of a
merger of a Guarantor with or into another Guarantor or a merger of a
Guarantor with or into IMPAC, IMPAC would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio (as defined under "--Certain
Definitions"), immediately after giving effect to such transaction, to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant described below under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock".
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor (other than to IMPAC or another Guarantor),
by way of merger, consolidation or otherwise, or a sale or other disposition
of all of the Capital Stock (as defined under "--Certain Definitions") of any
Guarantor (other than to IMPAC or another Guarantor), then such Guarantor (in
the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the Capital Stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee and any such
acquiring corporation will not be required to assume any obligations of such
Guarantor under the applicable Subsidiary Guarantee; provided that such sale
or other disposition complies with all applicable provisions of the Indenture
including, without limitation, the covenant described below under the caption
"--Repurchase at the Option of Holders--Asset Sales". See "--Repurchase at the
Option of Holders--Asset Sales".
Under the terms of the Indenture certain Foreign Subsidiaries will not be
required to deliver a Guarantee with respect to the Notes. See "--Additional
Subsidiary Guarantee."
SUBORDINATION
The payment of principal of, premium, if any, interest and all other amounts
or obligations due under or on the Notes is subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full in cash of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of IMPAC or any Guarantor in a
liquidation or dissolution of the Company or any Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
IMPAC or its property, an assignment for the benefit of creditors or any
marshaling of IMPAC's or any Guarantor's assets and liabilities, the holders
of Senior Debt will be entitled to receive payment in full in cash of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt whether or not allowed as a claim in any such proceeding) before
the Holders of Notes will be entitled to receive any payment with respect to
the Notes, and until all Obligations with respect to Senior Debt are paid in
full in cash, any distribution to which the Holders of Notes would be entitled
shall be made to the holders of Senior Debt (except that Holders of Notes may
receive and retain Permitted Junior Securities (as defined under "--Certain
Definitions") and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
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IMPAC and the Guarantors also may not make any payment upon or in respect of
the Notes or the Subsidiary Guarantees (except in Permitted Junior Securities
or from the trust described under "--Legal Defeasance and Covenant
Defeasance") if (i) a default in the payment of the principal of, premium, if
any, or interest on Senior Debt occurs and is continuing or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt (as
defined under "--Certain Definitions") that currently, or with the passage of
time or giving of notice, permits holders of the Designated Senior Debt as to
which such default relates to accelerate its maturity and, in the case of any
such default described in this clause (ii), the Trustee receives a notice of
such default of the type referred to in this clause (ii) (a "Payment Blockage
Notice") from IMPAC or the holders of any Designated Senior Debt. Payments on
the Notes may and shall be resumed (a) in the case of a payment default, upon
the date on which such default is cured or waived in writing by the holders of
the applicable Senior Debt and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived in
writing by the holders of Designated Senior Debt or 179 days after the date on
which the applicable Payment Blockage Notice is received by the Trustee,
unless the maturity of any Designated Senior Debt has been accelerated. No new
period of payment blockage may be commenced under clause (ii) above unless and
until (i) 360 days have elapsed since the initial effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal of, premium, if any, and interest on the Notes that have come due
have been paid in full in cash. No nonpayment default that existed and was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived in writing or cured for a
period of not less than 90 days. In the event that IMPAC or any Guarantor
makes any payment to the Trustee or any Holder of any Note prohibited by the
foregoing, such payment will be required to be held in trust for and paid over
to the holders of Senior Debt (or the representative thereof). The Trustee and
the Holders of the Notes will agree not to challenge or contest the
enforceability or validity of the New Credit Facility or any obligation, Lien
(as defined under "--Certain Definitions") or encumbrance thereunder.
The Indenture further requires that IMPAC promptly notify holders of Senior
Debt if payment of the Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of IMPAC and the Guarantors including creditors who are holders of
Senior Debt. At March 31, 1998, approximately $11.6 million in Senior Debt was
outstanding, fully secured by approximately $12.6 million in letters of credit
issued under the New Credit Facility. The Indenture limits, subject to certain
financial tests, the amount of additional Indebtedness (as defined under "--
Certain Definitions"), including Senior Debt, that IMPAC and its Subsidiaries
can incur. See "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock".
OPTIONAL REDEMPTION
The Notes will not be redeemable at IMPAC's option prior to March 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option
of IMPAC, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated
Damages thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003............................................................ 105.062%
2004............................................................ 103.375
2005............................................................ 101.687
2006 and thereafter............................................. 100.000
</TABLE>
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Notwithstanding the foregoing, at any time prior to March 15, 2001, IMPAC
may on any one or more occasions redeem up to $35.0 million in aggregate
principal amount of Notes at a redemption price of 110.125% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the redemption date, with the net cash proceeds of public
equity offerings by IMPAC; provided that at least $65.0 million in aggregate
principal amount of Notes remain outstanding immediately after the occurrence
of such redemption (excluding Notes held by IMPAC and its Subsidiaries); and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of such public equity offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
MANDATORY REDEMPTION
IMPAC is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control each Holder of Notes will have
the right to require IMPAC to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within fifteen Business Days (as
defined under "--Certain Definitions") following any Change of Control, IMPAC
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture
and described in such notice. IMPAC will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of
Control.
On the Change of Control Payment Date, IMPAC will, to the extent lawful, (1)
accept for payment all Notes or portions thereof properly tendered pursuant to
the Change of Control Offer, (2) deposit with the Paying Agent an amount equal
to the Change of Control Payment in respect of all Notes or portions thereof
so tendered and (3) deliver or cause to be delivered to the Trustee the Notes
so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being repurchased by IMPAC. The
Paying Agent will promptly mail to each Holder of
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Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unrepurchased portion of the Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture will provide that, prior to complying with the
provisions of this covenant, but in any event within 90 days following a
Change of Control, IMPAC will either repay all outstanding Senior Debt or
obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Notes required by this
covenant. IMPAC will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that IMPAC
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility currently prohibits IMPAC from purchasing any Notes
and also provides that certain change of control events including, without
limitation, a Change of Control, with respect to IMPAC would constitute a
default thereunder. Any future credit agreements or other agreements relating
to Senior Debt to which IMPAC becomes a party may contain similar restrictions
and provisions. In the event a Change of Control occurs at a time when IMPAC
is prohibited from purchasing Notes, IMPAC could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If IMPAC does not obtain such a consent or
repay such borrowings, IMPAC will remain prohibited from purchasing Notes. In
such case, IMPAC's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute a
default under the New Credit Facility. In such circumstances, the
subordination provisions in the Indenture restrict payments to the Holders of
Notes.
IMPAC will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner,
at the times and otherwise in compliance with the requirements set forth in
the Indenture applicable to a Change of Control Offer made by IMPAC and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of "Change of Control" includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of IMPAC and its Subsidiaries taken as a
whole. Although there is case law interpreting the phrase "substantially all",
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require IMPAC to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of IMPAC and its Subsidiaries taken
as a whole to another Person or group may be uncertain.
Asset Sales
The Indenture provides that IMPAC will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale (as defined under "--
Certain Definitions") unless (i) IMPAC (or the Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Equity Interests (as defined under "--Certain Definitions")
issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by IMPAC or such Restricted Subsidiary is in
the form of cash; provided that the amount of (x) any liabilities (as shown on
IMPAC's or such Restricted Subsidiary's most recent balance sheet) of IMPAC or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or the Subsidiary
Guarantees) that are
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assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases IMPAC or such Restricted Subsidiary from further
liability and (y) in the case of any Asset Sale constituting the transfer (by
merger or otherwise) of all of the Capital Stock of a Restricted Subsidiary,
any liabilities (as shown on such Restricted Subsidiary's most recent balance
sheet) of such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or the
Subsidiary Guarantees) that will remain outstanding after such transfer and
will not be a liability of IMPAC or any other Restricted Subsidiary of IMPAC
following such transfer and (z) any securities, notes or other obligations
received by IMPAC or any such Restricted Subsidiary from such transferee that
are contemporaneously (subject to ordinary settlement periods) converted by
IMPAC or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds (as defined under "--
Certain Definitions") from an Asset Sale, IMPAC may apply such Net Proceeds,
at its option, (a) to repay Senior Debt, or (b) to the acquisition of a
majority of the assets of, or a majority of the Voting Stock of, another
business, the making of a capital expenditure or the acquisition of other
long-term assets, in each case, in, or used or useful in, the same or a
similar line of business as IMPAC or one of its Subsidiaries was engaged in on
the date of the Indenture or any reasonable extension or expansion thereof.
Pending the final application of any such Net Proceeds, IMPAC may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in
any manner that is not prohibited by the Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Excess Proceeds". When the
aggregate amount of Excess Proceeds exceeds $5.0 million, IMPAC will be
required to make an offer to all Holders of Notes and all holders of other
Indebtedness ranking at the same level containing provisions similar to those
set forth in the Indenture with respect to offers to purchase or redeem with
the proceeds of sales of assets an "Asset Sale Offer" to purchase the maximum
principal amount of Notes and such other Indebtedness ranking at the same
level that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture and
such other Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, IMPAC may use such Excess Proceeds for
any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other Indebtedness tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that IMPAC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of IMPAC's or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving IMPAC or any of its Restricted Subsidiaries) or to the direct or
indirect holders of IMPAC's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock (as defined under
"--Certain Definitions") of IMPAC or to IMPAC or a Restricted Subsidiary of
IMPAC); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving IMPAC) any Equity Interests of IMPAC or any direct or indirect
parent of IMPAC; (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except a payment of interest or principal at
Stated Maturity (as defined
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under "--Certain Definitions"); or (iv) make any Restricted Investment (as
defined under "--Certain Definitions") (all such payments and other actions
set forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default (as defined under "--Event of Default
and Remedies") shall have occurred and be continuing or would occur as a
consequence thereof; and
(b) IMPAC would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by IMPAC and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv) and (vi) of the next succeeding paragraph), is
less than the sum, without duplication, of (i) 50% of the Consolidated Net
Income (as defined under "--Certain Definitions") of IMPAC for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the end of IMPAC's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by
IMPAC since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of IMPAC
(other than Disqualified Stock) or from the issue or sale of Disqualified
Stock or debt securities of IMPAC that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of IMPAC), plus (iii) to
the extent that any Restricted Investment (as defined under "--Certain
Definitions" that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) $1.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness that is subordinated to the Notes or Equity
Interests of IMPAC in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of IMPAC) of, other
Equity Interests of IMPAC (other than any Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of Indebtedness that
is subordinated to the Notes with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness (as defined under "--Certain Definitions");
(iv) the payment of any dividend (in cash or otherwise) by a Subsidiary of
IMPAC to the holders of its common Equity Interests on a pro rata basis; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of IMPAC or any Subsidiary of IMPAC held by any member of
IMPAC's (or any of its Subsidiaries') management pursuant to any management
equity subscription agreement, stock option agreement or employment agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $2.5 million in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; or (vi) the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of IMPAC or any Subsidiary of IMPAC held by any member of IMPAC's
(or any of its Subsidiaries') management pursuant to any management equity
subscription agreement, stock option agreement or
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employment agreement, provided that the purchase price is paid with the
proceeds to IMPAC of key man life insurance or disability insurance policies
purchased by IMPAC specifically to finance any such repurchase, redemption or
other acquisition.
The Board of Directors of IMPAC may designate any Restricted Subsidiary
(other than Klearfold, Inc. or AGI Incorporated) to be an Unrestricted
Subsidiary (as defined under "--Certain Definitions") if such designation
would not cause a Default. For purposes of making such determination, all
outstanding Investments by IMPAC and its Restricted Subsidiaries (except to
the extent repaid in cash) in the Subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under clause (c) of the first
paragraph of this covenant. All such outstanding investments will be deemed to
constitute Investments (as defined under "--Certain Definitions") in an amount
equal to the greatest of (x) the net book value of such Investments at the
time of such designation, (y) the fair market value of such Investments at the
time of such designation and (z) the original fair market value of such
Investments at the time they were made. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by IMPAC or such Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value
of any non-cash Restricted Payment shall be determined by the Board of
Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $5.0 million. Not later than the date of making
any Restricted Payment, IMPAC shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting
forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that IMPAC will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt (as defined under "--Certain Definitions")) and that IMPAC will
not issue any Disqualified Stock and will not permit any of its Subsidiaries
to issue any shares of preferred stock; provided, however, that IMPAC may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for IMPAC's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by IMPAC of Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
stated amount thereof) and other obligations under Credit Facilities (as
defined under "--Certain Definitions") in an aggregate principal amount
that does not exceed at any one time $40.0 million less the aggregate
amount of all Net Proceeds of Asset Sales applied to repay Indebtedness
under a Credit Facility pursuant to the covenant described above under the
caption "--Asset Sales" (other than temporary paydowns pending final
application of such Net Proceeds);
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(ii) the incurrence by IMPAC and the Guarantors of the Existing
Indebtedness (as defined under "--Certain Definitions") and letters of
credit (including reimbursement obligations with respect thereto)
supporting Existing Indebtedness whether such letters of credit are
incurred under the New Credit Facility or otherwise;
(iii) the incurrence by IMPAC of Indebtedness represented by the Notes;
(iv) the incurrence by IMPAC or any of the Guarantors or Non-Guarantor
Foreign Subsidiaries of Indebtedness represented by Capital Lease
Obligations (as defined under "--Certain Definitions"), mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of IMPAC
or such Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (iv), not to exceed
$5.0 million at any time outstanding;
(v) the incurrence by IMPAC or any of the Guarantors of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred under the
first paragraph hereof or clauses (ii) or (iv) or (xi) of this paragraph;
(vi) the incurrence by IMPAC or any of the Restricted Subsidiaries of
intercompany Indebtedness between or among IMPAC and any Restricted
Subsidiary; provided, however, that (i) if IMPAC is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than IMPAC or
a Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either IMPAC or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by IMPAC or such Restricted Subsidiary, as
the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by IMPAC or any of the Guarantors of Hedging
Obligations (as defined under "--Certain Definitions") that are incurred
for the purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this Indenture
to be outstanding;
(viii) the guarantee by IMPAC or any of its Subsidiaries or any of the
Guarantors of Indebtedness of IMPAC or another Subsidiary that was
permitted to be incurred by another provision of this covenant;
(ix) the incurrence by IMPAC's Unrestricted Subsidiaries of Non-Recourse
Debt (as defined under "--Certain Definitions"), provided, however, that if
any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of IMPAC that was not permitted by
this clause (ix), and the issuance of preferred stock by Unrestricted
Subsidiaries;
(x) the incurrence by IMPAC or any of the Guarantors or Non-Guarantor
Foreign Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (x),
not to exceed $5.0 million; and
(xi) the incurrence by Bidco of Indebtedness under the Loan Notes and the
incurrence by the Company of Indebtedness with respect to its reimbursement
obligation to the issuer of any Loan Notes Guarantees.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in
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clauses (i) through (xi) above or is entitled to be incurred pursuant to the
first paragraph of this covenant, IMPAC shall, in its sole discretion,
classify such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or
an issuance of Disqualified Stock for purposes of this covenant; provided, in
each such case, that the amount thereof is included in Fixed Charges (as
defined under "--Certain Definitions") of IMPAC as accrued (to the extent not
already included in Fixed Charges).
Liens
The Indenture provides that IMPAC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, securing Indebtedness or trade payables, except for Permitted Liens
(as defined under "--Certain Definitions").
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that IMPAC will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to IMPAC or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to IMPAC or any
of its Restricted Subsidiaries, (ii) make loans or advances to IMPAC or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to IMPAC or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the New Credit Facility as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are not
materially more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the New Credit Facility
as in effect on the date of the Indenture as determined in good faith by
IMPAC's Board of Directors, (c) the Indenture and the Notes, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by IMPAC or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was incurred
in connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) customary non-
assignment provisions in leases and other contracts, (g) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale of a Subsidiary or a
substantial portion of such Subsidiary's assets that restricts distributions
by that Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are not materially more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced as determined in good faith by IMPAC's Board of Directors,
(j) secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described above under the caption "--Liens" that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business and (l) restrictions on cash
or
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other deposits or net worth imposed by customers under contracts entered into
in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that IMPAC may not consolidate or merge with or into
(whether or not IMPAC is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) IMPAC is the surviving corporation or
the entity or the Person formed by or surviving any such consolidation or
merger (if other than IMPAC) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia; (ii) except in the case of a merger or
consolidation of IMPAC with or into a Wholly Owned (as defined under "--
Certain Definitions") Restricted Subsidiary of IMPAC, the entity or Person
formed by or surviving any such consolidation or merger (if other than IMPAC)
or the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the
obligations of IMPAC under the Registration Rights Agreement, the Notes and
the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no
Default or Event of Default exists; and (iv) except in the case of a merger or
consolidation of IMPAC with or into a Wholly Owned Restricted Subsidiary of
IMPAC, IMPAC or the entity or Person formed by or surviving any such
consolidation or merger (if other than IMPAC), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth (as defined under "--Certain
Definitions") immediately after the transaction equal to or greater than the
Consolidated Net Worth of IMPAC immediately preceding the transaction and (B)
will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock".
Transactions with Affiliates
The Indenture provides that IMPAC will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (as defined under "--Certain Definitions") (each
of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to IMPAC or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by IMPAC or such Restricted Subsidiary with an unrelated Person
and (ii) IMPAC delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing. Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate
Transactions: (i) any employment agreement entered into by IMPAC or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of IMPAC or such Subsidiary, (ii) transactions between or among IMPAC
and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of IMPAC, (iv) Restricted Payments that are
permitted by the provisions of the Indenture described above under the caption
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"--Restricted Payments" and (v) Existing Affiliate Transactions (as defined
under "--Certain Definitions").
Senior Subordinated Debt
The Indenture provides that (i) IMPAC will not incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt and senior in any respect in
right of payment to the Notes, and (ii) no Guarantor will incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to Senior Debt of such Guarantor
and senior in any respect in right of payment to the Subsidiary Guarantees.
Payments for Consent
The Indenture provides that neither IMPAC nor any of its Subsidiaries will,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Additional Subsidiary Guarantees
The Indenture provides that if IMPAC or any of its Restricted Subsidiaries
shall acquire or create another Guarantor Subsidiary after the date of this
Indenture, or if any Subsidiary of the Company becomes a Guarantor Subsidiary
then such newly acquired or created Guarantor Subsidiary shall become a
Guarantor and execute a Supplemental Indenture and deliver an Opinion of
Counsel, in accordance with the terms of this Indenture; provided, that all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries
in accordance with this Indenture (i) shall not be subject to the requirements
of this covenant and (ii) shall be released from all Obligations under any
Subsidiary Guarantee, in each case for so long as they continue to constitute
Unrestricted Subsidiaries. With respect to any Foreign Subsidiary that is not
permitted under applicable law to deliver an unlimited Guarantee of the Notes
and all Senior Debt of the Company and its Subsidiaries or if the delivery of
such a Guarantee would have significant adverse tax or accounting effects on
such Foreign Subsidiary or the Company and its other Subsidiaries as
determined in good faith by the Board of Directors ("Adverse Effects"), (i)
the Company will use commercially reasonable and lawful efforts to overcome
the restrictions imposed by applicable law on the delivery of such a Guarantee
or the Adverse Effects caused by the delivery of such a Guarantee and (ii) if
the delivery by a Foreign Subsidiary of an unlimited Guarantee of the Notes
and Senior Debt of the Company and its Subsidiaries would not be permitted
under applicable law or would have Adverse Effects but the delivery of a
partial Guarantee would be permitted by applicable law and would not have
Adverse Effects, the Company will, if first consented to in writing by the
agent and all appropriate lenders under the New Credit Facility and other
holders of Senior Debt under Credit Facilities, cause such Foreign Subsidiary
to deliver a partial Guarantee of the Notes and Senior Debt of the Company and
its Subsidiaries (based on percentages of principal amount or such other
methodology as the Board of Directors determines in good faith treats the
Holders and holders of Senior Debt as similarly as practicable under the
circumstances). With respect to any Foreign Subsidiary that is or becomes a
Guarantor Subsidiary, the Company shall cause such Guarantor Subsidiary to
become a Guarantor as described above as promptly as practicable under the
circumstances.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, IMPAC
will furnish to the Holders of Notes (i) all
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quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if IMPAC were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by IMPAC's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if IMPAC were required to file such reports,
in each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, IMPAC will file a copy of all
such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, IMPAC and the Guarantors have agreed that, for so long
as any Notes remain outstanding, they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. Any materials required to be furnished to Holders of Notes by
this covenant shall discuss, in reasonable detail, either on the face of the
financial statements included therein or in the footnotes thereto and in any
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of IMPAC and its
Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of IMPAC.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
IMPAC or any of its Subsidiaries for 30 days after notice to comply with the
provisions described under the captions "--Change of Control", "--Asset
Sales", "--Restricted Payments" or "--Incurrence of Indebtedness and Issuance
of Preferred Stock"; (iv) failure by IMPAC or any of its Subsidiaries for 60
days after notice to comply with any other agreements in the Indenture or the
Notes; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by IMPAC or any of its Restricted Subsidiaries
(or the payment of which is guaranteed by IMPAC or any of its Restricted
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created
after the date of the Indenture, which default results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness the maturity of which has been so accelerated,
aggregates $5.0 million or more (other than Existing Indebtedness to the
extent it is secured by or paid by the drawing against a letter of credit
permitted to be issued under the Indenture); (vi) failure by IMPAC or any of
its Restricted Subsidiaries to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) certain events of bankruptcy or insolvency with respect to
IMPAC or any of its Significant Subsidiaries (as defined under "--Certain
Definitions"); and (viii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid in any material respect or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to IMPAC, any Significant Subsidiary or
any group of
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Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of IMPAC with the
intention of avoiding payment of the premium that IMPAC would have had to pay
if IMPAC then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law upon
the acceleration of the Notes. If an Event of Default occurs prior to March
15, 2003 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of IMPAC with the intention of avoiding the prohibition on
redemption of the Notes prior to March 15, 2003, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
IMPAC is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and IMPAC is required, upon becoming aware of
any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
IMPAC may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) IMPAC's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and IMPAC's obligations
in connection therewith and (iv) the Legal Defeasance provisions of the
Indenture. In addition, IMPAC may, at its option and at any time, elect to
have the obligations of IMPAC released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
IMPAC must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the Stated Maturity (as defined
under "--Certain Definitions") or on the applicable redemption date, as the
case may be, and IMPAC must specify whether the Notes are being defeased to
maturity or to a particular redemption date; (ii) in the case of Legal
Defeasance, IMPAC shall have delivered to the Trustee an opinion of counsel in
the United States reasonably acceptable to the Trustee confirming that (A)
IMPAC has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the Indenture, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, IMPAC shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which IMPAC or any of its Subsidiaries is a party or by which
IMPAC or any of its Subsidiaries is bound, including, without limitation, the
New Credit Facility; (vi) IMPAC must have delivered to the Trustee an opinion
of counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) IMPAC must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by IMPAC with the intent of preferring
the Holders of Notes over the other creditors of IMPAC with the intent of
defeating, hindering, delaying or defrauding creditors of IMPAC or others; and
(viii) IMPAC must deliver to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and IMPAC may require
a Holder to pay any taxes and fees required by law or permitted by the
Indenture. IMPAC is not required to transfer or exchange any Note selected for
redemption. Also, IMPAC is not required to transfer or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a
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purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for,
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of
or premium, if any, or interest on the Notes, (vii) waive a redemption payment
with respect to any Note (other than a payment required by one of the
covenants described above under the caption "--Repurchase at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 of the
Indenture (which relate to subordination) will require the consent of the
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
IMPAC and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of IMPAC's obligations to Holders of Notes in the case of a merger
or consolidation or sale of all or substantially all of IMPAC's assets, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of IMPAC, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to IMPAC Group, Inc.,
1950 North Ruby Street, Melrose Park, Illinois 60160, Attention: Chief
Financial Officer.
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BOOK-ENTRY, DELIVERY AND FORM
The Existing Notes were offered and sold to qualified institutional buyers
in reliance on Rule 144A ("Rule 144A Notes"). Notes were also offered and sold
in offshore transactions in reliance on Regulation S ("Regulation S Notes").
Except as set forth below, Notes are issued in registered, global form in
minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof. Notes are issued at the closing of the Offering (the "Closing") only
against payment in immediately available funds.
Rule 144A Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Notes"). Regulation S Notes initially will be represented by one or
more Notes in registered, global form without interest coupons (collectively,
the "Regulation S Global Notes" and, together with the Rule 144A Global Notes,
the "Global Notes"). The Global Notes are deposited with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below. Through
and including the 40th day after the later of the commencement of the Offering
and the Closing (such period through and including such 40th day, the
"Restricted Period"), beneficial interests in the Regulation S Global Notes
may be held only through the Euroclear System ("Euroclear") and Cedel, S.A.
("Cedel") (as indirect participants in DTC), unless transferred to a person
that takes delivery through a Rule 144A Global Note in accordance with the
certification requirements described below. Beneficial interests in the Rule
144A Global Notes may not be exchanged for beneficial interests in the
Regulation S Global Notes at any time except in the limited circumstances
described below. See "--Exchanges between Regulation S Notes and Rule 144A
Notes".
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes". Except in
the limited circumstances described below, owners of beneficial interests in
the Global Notes are entitled to receive physical delivery of Certificated
Notes (as defined below).
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) are subject to certain restrictions on transfer and bear a restrictive
legend as described under "Notice to Investors". Regulation S Notes also bear
the legend as described under "Notice to Investors". In addition, transfers of
beneficial interests in the Global Notes are subject to the applicable rules
and procedures of DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Cedel), which may change from time to time.
Initially, the Trustee acts as Paying Agent and Registrar. The Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. IMPAC takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised IMPAC that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book- entry
changes in accounts of its Participants. The Participants include securities
brokers and dealers
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(including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised IMPAC that, pursuant to procedures established by it,
(i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are Participants
in such system. Investors in the Regulation S Global Notes must initially hold
their interests therein through Euroclear or Cedel, if they are participants
in such systems, or indirectly through organizations that are participants in
such systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Notes through
Participants in the DTC system other than Euroclear and Cedel. Euroclear and
Cedel will hold interests in the Regulation S Global Notes on behalf of their
participants through customers' securities accounts in their respective names
on the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of Cedel. All interests in a Global Note, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also
be subject to the procedures and requirements of such systems. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, IMPAC and the Trustee
will treat the persons in whose names the Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
IMPAC, the Trustee nor any agent of IMPAC or the Trustee has or will have any
responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised IMPAC that its current practice, upon receipt of
any payment in respect
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of securities such as the Notes (including principal and interest), is to
credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive
payment on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the responsibility
of DTC, the Trustee or IMPAC. Neither IMPAC nor the Trustee will be liable for
any delay by DTC or any of its Participants in identifying the beneficial
owners of the Notes, and IMPAC and the Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Notes are expected to be eligible to trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its Participants. See "--Same
Day Settlement and Payment".
Subject to the transfer restrictions set forth under "Notice to Investors",
transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on
the one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Cedel, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositories for
Euroclear or Cedel.
DTC has advised IMPAC that it will take any action permitted to be taken by
a Holder of Notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the Notes as to which
such Participant or Participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC reserves the right to
exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Global Notes and in the
Rule 144A Global Notes among Participants in DTC, Euroclear and Cedel, they
are under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither IMPAC nor the
Trustee nor any of their respective agents will have any responsibility for
the performance by DTC, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies IMPAC that it
is unwilling or unable to continue as depositary for the
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Global Notes and IMPAC thereupon fails to appoint a successor depositary or
(y) has ceased to be a clearing agency registered under the Exchange Act, (ii)
IMPAC, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Certificated Notes or (iii) there shall have occurred and
be continuing an Event of Default with respect to the Notes. In addition,
subject to certain limitations, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon request but only upon prior written
notice given to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in exchange for any
Global Note or beneficial interests therein will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures) and will bear the
applicable restrictive legend referred to in "Notice to Investors", unless
IMPAC determines otherwise in compliance with applicable law.
Transfer of Notes Held through DTC
The Trustee and DTC have confirmed that the Exchange Offer is eligible for
the DTC Automated Tender Offer Program ("ATOP"). DTC has authorized DTC
participants that hold Notes on behalf of beneficial owners of Notes through
DTC to tender their Notes as if they were Holders. To effect a tender, DTC
participants should transmit their acceptance to DTC through ATOP by causing
DTC to transfer Notes to the Trustee for such Notes in accordance with ATOP's
procedures for transfer. DTC will then send an Agent's Message (as defined
below) to the Trustee. Delivery of tendered Notes by a DTC participant must be
made to the Trustee pursuant to the procedure for book-entry transfer set
forth below or the tendering DTC participant must comply with the guaranteed
delivery procedures set forth below.
Except as provided below, unless the Notes being tendered are deposited with
the Trustee for such Notes prior to 5:00 p.m., New York City time, on the
Expiration Date (accompanied by a properly completed and duly executed Letter
of Transmittal or a properly transmitted Agent's Message relating to such
Notes), IMPAC may, at its option, treat such tender as defective.
Book-Entry Delivery Procedures
The Trustee has established or will establish within two Business Days (as
defined below) after the date of this Prospectus an account at DTC under the
ATOP program with respect to the Notes, as the case may be, for purposes of
the Exchange Offer in respect of such Notes, and any financial institution
that is a participant in DTC may make book-entry delivery of the Notes, as the
case may be, by causing DTC to transfer such Notes to the DTC for such Notes
in accordance with DTC's procedures for such transfer. A "Business Day"
includes any day which is not a Saturday, Sunday or federal holiday. However,
although delivery of Notes may be effected through book-entry transfer to the
Trustee through DTC, an Agent's Message in connection with a book-entry
transfer or, if a Letter of Transmittal is utilized, the applicable Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, the
certificates representing the Notes and any other documents required by the
applicable Letter of Transmittal, must, in any case, be transmitted to and
received by the Trustee at its address set forth herein prior to 5:00 p.m.,
New York City time, on the Expiration Date, or, to be validly tendered prior
to 5:00 p.m., New York City time, on the Expiration Date, the guaranteed
delivery procedures described below must be complied with. Delivery of
documents to DTC does not constitute delivery to the Trustee. The confirmation
of a book-entry transfer to the Trustee through DTC via DTC's ATOP procedures
as described above in referred to herein as "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Trustee and forming a part of the Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from each
participant in DTC tendering the Notes that such participant has received the
applicable Letter of Transmittal and agrees to be bound by the terms of such
Letter of Transmittal and that IMPAC may enforce such agreement against such
participants.
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Exchange of Certificated Notes for Book-Entry Notes
Prior to the consummation of the Exchange Offer, Notes issued in
certificated form may not be exchanged for beneficial interests in any Global
Note unless the transferor first delivers to the Trustee a written certificate
(in the form provided in the Indenture) to the effect that such transfer will
comply with the appropriate transfer restrictions applicable to such Notes.
See "Notice to Investors".
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if such exchange occurs in connection with a
transfer of the Notes pursuant to Rule 144A and the transferor first delivers
to the Trustee a written certificate (in the form provided in the Indenture)
to the effect that the Notes are being transferred to a person who the
transferor reasonably believes to be a qualified institutional buyer within
the meaning of Rule 144A, purchasing for its own account or the account of a
qualified institutional buyer in a transaction meeting the requirements of
Rule 144A and in accordance with all applicable securities laws of the states
of the United States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
only if the transferor first delivers to the Trustee a written certificate (in
the form provided in the Indenture) to the effect that such transfer is being
made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if
available) and that, if such transfer occurs prior to the expiration of the
Restricted Period, the interest transferred will be held immediately
thereafter through Euroclear or Cedel.
Transfers involving an exchange of a beneficial interest in the Regulation S
Global Note for a beneficial interest in a Rule 144A Global Note or vice versa
will be effected in DTC by means of an instruction originated by the Trustee
through the DTC Deposit/Withdraw at Custodian system. Accordingly, in
connection with any such transfer, appropriate adjustments will be made to
reflect a decrease in the principal amount of the Regulation S Global Note and
a corresponding increase in the principal amount of the Rule 144A Global Note
or vice versa, as applicable. Any beneficial interest in one of the Global
Notes that is transferred to a person who takes delivery in the form of an
interest in the other Global Note will, upon transfer, cease to be an interest
in such Global Note and will become an interest in the other Global Note and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interest in such other Global Note for so
long as it remains such an interest. The policies and practices of DTC may
prohibit transfers of beneficial interests in the Regulation S Global Note
prior to the expiration of the Restricted Period.
Same Day Settlement and Payment
The Indenture requires that principal, premium, if any, and interest and
Liquidated Damages on the Notes are payable at the office or agency of IMPAC
maintained for such purpose within the City and State of New York or, at the
option of IMPAC, payment of interest and Liquidated Damages may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments of
principal, premium, interest and Liquidated Damages with respect to Notes the
Holders of which have given wire transfer instructions to IMPAC will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. The Notes represented by the Global
Notes are expected to be eligible to trade in the PORTAL market and to trade
in the DTC's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the DTC
to be settled in immediately available funds. IMPAC expects that secondary
trading in any certificated Notes will also be settled in immediately
available funds.
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Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. DTC has advised IMPAC that
cash received in Euroclear or Cedel as a result of sales of interests in a
Global Note by or through a Euroclear or Cedel participant to a Participant in
DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or Cedel cash account only as of the
business day for Euroclear or Cedel following DTC's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person but in any event excluding the agent and
lenders under the New Credit Facility. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of IMPAC and its
Restricted Subsidiaries taken as a whole will be governed by the provisions of
the Indenture described above under the caption "--Change of Control" and/or
the provisions described above under the caption "--Merger, Consolidation, or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and
(ii) the issue or sale by IMPAC or any of its Restricted Subsidiaries of
Equity Interests of any of IMPAC's Restricted Subsidiaries, in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by IMPAC to a Restricted Subsidiary or by a Restricted
Subsidiary to IMPAC or to another Restricted Subsidiary, (ii) an issuance of
Equity Interests by a Restricted Subsidiary to IMPAC or to another Restricted
Subsidiary, and (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "--Restricted Payments".
"Bidco" means the Subsidiary formed by IMPAC to acquire Tinsley.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any lender
party to the New Credit Facility or with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within six months after the
date of acquisition and (vi) money market funds at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (i)-(v) of
this definition.
"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 IMPAC and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than one or more Principals (as defined herein) or
Related Parties (as defined herein) of one or more Principals or a Management
Group, (ii) 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 one or more Principals and their
Related Parties or a Management Group, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of
IMPAC (measured by voting power rather than number of shares), (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 a Management Group becomes the "beneficial owner" (as defined
above), directly or indirectly, of 35% or more of the Voting Stock of IMPAC
(measured by voting power rather than number of shares) and the Principals and
their Related Parties in the aggregate "beneficially own" (as defined above)
less than 35% of the Voting Stock of IMPAC (measured by voting power rather
than number of shares) or (iv) the first day on which a majority of the
members of the Board of Directors of IMPAC are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent
that such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts
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and other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing
such Consolidated Net Income for such period, in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to IMPAC by such
Restricted Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor or a Non-Guarantor Foreign Subsidiary,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded, (v) the Net Income of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to IMPAC
or one of its Restricted Subsidiaries, and (vi) the Net Income of any
Restricted Subsidiary shall be calculated after deducting preferred stock
dividends payable by such Restricted Subsidiary to Persons other than IMPAC
and its other Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) effected subsequent to the date
of the Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
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"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of IMPAC who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was elected to such Board of Directors
pursuant to a designation made pursuant to the Stockholder Agreement, provided
that at such time the Principals, any Management Group and their Related
Parties own more than 50% of the Voting Stock of IMPAC.
"Credit Facilities" means, with respect to IMPAC and its Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
New Credit Facility) or commercial paper facilities with banks, insurance
companies, commercial finance companies or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit or Hedging Obligations, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Damages Payment Date" means with respect to the Notes, March 15 and
September 15 of each year, or if any such day is not a Business Day, on the
next succeeding Business Day (and each such day an "Interest Payment Date").
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
New Credit Facility (ii) any other Senior Debt permitted under the Indenture
the principal amount of which is $10.0 million or more and that has been
designated by IMPAC as "Designated Senior Debt"; provided, however, that so
long as the New Credit Facility remains in effect, lenders holding a majority
in aggregate amount of the loan commitments thereunder shall have consented,
in writing, to such designation of additional Indebtedness as Designated
Senior Debt.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require IMPAC to repurchase such Capital Stock upon the occurrence of
a Change of Control or an Asset Sale shall not constitute Disqualified Stock
if the terms of such Capital Stock provide that IMPAC may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "--Certain Covenants--Restricted Payments".
"Domestic Subsidiary" means, with respect to the Company, any Restricted
Subsidiary of the Company that was formed under the laws of the United States
of America or any state or territory thereof.
"Employment Agreement" means any of the employment agreements, dated the
date of the Indenture between IMPAC and Richard Block, Melvin Herrin, H. Scott
Herrin, David Underwood, James Oppenheimer, Richard Oppenheimer or Dean
Henkel.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Offer Registration Statement" means the Registration Statement
relating to the Exchange Offer, including the related Prospectus.
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"Existing Affiliate Transactions" means any transaction contemplated by any
of (i) the Stockholder Agreement, (ii) the Employment Agreements, (iii) the
Agreement and Plan of Merger, dated as of February 19, 1998, among IMPAC, AGI
Acquisition Corp., AGI Incorporated and certain individuals named therein,
(iv) the Investment Agreement, dated as of February 19, 1998, among IMPAC, the
Principals and certain other individuals named therein, (v) the lease of
Klearfold's Warrington, Pennsylvania facility, dated as of June 7, 1996,
between Klearfold, Inc. and Melvin B. Herrin, (vi) the lease of Klearfold's
Louisa, Virginia facility, dated as of June 7, 1996, between Klearfold, Inc.
and Dena Corp. and (vii) the lease of AGI's Melrose Park, Illinois facility,
dated as of May 29, 1985, between AGI and Chicago Title and Trust Company, as
lessor and trustee to Ruby North Partnership, L.P., a real estate trust, in
each case as in effect on the date of the Indenture.
"Existing Indebtedness" means up to $11.6 million in aggregate principal
amount of Indebtedness of IMPAC and its Restricted Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of IMPAC (other than
Disqualified Stock) or to IMPAC or a Restricted Subsidiary of IMPAC, times (b)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person and its Restricted Subsidiaries for such
period. In the event that the referrent Person or any of its Restricted
Subsidiaries incurs, assumes, guarantees or redeems or prepays any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
redemption or prepayment of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. In addition, for purposes of making
the computation referred to above, (i) acquisitions that have been made by
IMPAC or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first
day of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with
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GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges will not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means, with respect to the Company, any Restricted
Subsidiary of the Company that is not a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantor Subsidiary" means any Domestic Subsidiary and any Foreign
Subsidiary if such Foreign Subsidiary no longer qualifies as a Non-Guarantor
Foreign Subsidiary.
"Guarantors" means each of (i) AGI Incorporated, Klearfold, Inc., KF-
International, Inc. and KF-Delaware, Inc. and (ii) any other Guarantor
Subsidiary that executes a Guarantee in accordance with the provisions of the
Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency changes.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof in the case of
any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If IMPAC or any Restricted Subsidiary of IMPAC sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary of IMPAC
such that, after giving effect to any
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such sale or disposition, such Person is no longer a Subsidiary of IMPAC,
IMPAC shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments".
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in such and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Loan Notes" means up to (Pounds)15 million aggregate principal amount of
promissory notes of Bidco issued to shareholders of Tinsley in connection with
the acquisition of Tinsley by Bidco.
"Loan Notes Guarantee" means any letter of credit or guarantee issued by
Bank of America National Trust and Savings Association or its affiliates or
another financial institution guaranteeing amounts outstanding under the Loan
Notes.
"Management Group" means a group consisting of Richard Block and his Related
Parties and any other Person that is a member of IMPAC's management as of the
date of the Indenture and each of their Related Parties; provided that Richard
Block, together with his Related Parties, owns at least 25% of the Voting
Stock of IMPAC.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received directly or
indirectly by IMPAC or any of its Restricted Subsidiaries in respect of any
Asset Sale (including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof (after taking into account any available
tax credits or deductions and any tax sharing arrangements), amounts required
to be applied to the repayment of Indebtedness (other than Indebtedness under
the New Credit Facility) secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as of the
date of the Indenture, by and among IMPAC and its Subsidiaries and Bank of
America National Trust and Savings Association, as agent and lender, and the
other lenders named therein, providing for up to $40.0 million of revolving
credit borrowings and $13.0 million of letters of credit, including any
related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
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"Non-Guarantor Foreign Subsidiary" means any Foreign Subsidiary which (i) at
the time of determination is not permitted under applicable law to deliver an
unlimited Guarantee of the Notes and all Senior Debt of the Company and its
Subsidiaries or if the delivery of such a Guarantee is permitted by applicable
law but would have significant adverse tax or accounting effects on such
Foreign Subsidiary or the Company and its other Subsidiaries, as determined in
good faith by the Board of Directors, and (ii) does not guarantee any
Indebtedness of the Company or otherwise provide credit support directly to
the holder of any Indebtedness of the Company.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither IMPAC nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes being offered hereby) of IMPAC or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of IMPAC or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in IMPAC or in a Restricted
Subsidiary of IMPAC; (b) any Investment in Cash Equivalents; (c) any
Investment by IMPAC or any Restricted Subsidiary of IMPAC in a Person, if as a
result of such Investment (i) such Person becomes a Restricted Subsidiary of
IMPAC or (ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, IMPAC or a Restricted Subsidiary of IMPAC; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of IMPAC; (f) Hedging Obligations; and (g)
other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect
to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (g) that are at the time outstanding,
not to exceed $1.0 million.
"Permitted Junior Securities" means Equity Interests in IMPAC or any
Guarantor or debt securities that are unsecured and subordinated to all Senior
Debt (and any debt securities issued in exchange for Senior Debt) to at least
the same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to the Indenture (without limiting the forgoing, such
Permitted Junior Securities shall have no required principal payments or
equity redemption requirements until after the final maturity of all Senior
Debt).
"Permitted Liens" means (i) Liens on assets of IMPAC, any of its Restricted
Subsidiaries or any of the Guarantors securing Senior Debt that was permitted
by the terms of the Indenture to be incurred; (ii) Liens in favor of IMPAC;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with IMPAC or any Restricted Subsidiary of IMPAC;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of
the Person merged into or consolidated with IMPAC; (iv) Liens on property or
assets existing at the time of acquisition thereof or the acquisition of a
Person owning such property or assets by IMPAC or any Restricted Subsidiary of
IMPAC, provided that such Liens were in existence prior to the contemplation
of such acquisition; (v) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature
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incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of the covenant entitled "--Incurrence of Indebtedness and Issuance
of Preferred Stock" covering only the assets acquired or financed with such
Indebtedness; (vii) Liens existing on the date of the Indenture; (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (ix) Liens incurred in the ordinary course
of business of IMPAC or any Restricted Subsidiary of IMPAC with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the
operation of business by IMPAC or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of IMPAC or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of IMPAC or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at
least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by IMPAC or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business).
"Principals" means Heritage Partners, Inc., Heritage Fund I Investment
Corporation, Melvin B. Herrin, Richard Block and H. Scott Herrin.
"Record Holder" means with respect to any Damages Payment Date relating to
the Notes, each Person who is a Holder of Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
"Related Party" with respect to any Principal or member of a Management
Group means (A) any controlling stockholder, 80% (or more) owned Subsidiary,
or spouse or ex-spouse or immediate family member (in the case of an
individual) of such Principal or member of a Management Group or (B) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal or Member of a
Management Group and/or such other Persons referred to in the immediately
preceding clause (A) or (C) any investment fund, whether a limited
partnership, limited liability corporation or corporation, managed and
controlled by Heritage Partners Management Co., Inc. d/b/a Heritage Partners,
Inc.
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, with respect to any Person, each Subsidiary
of such Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (i) all principal, premium, interest, fees, expenses and
other obligations or liabilities of any kind together with available undrawn
amounts under letters of credit issued or guaranteed under the New Credit
Facility (including, without limitation, post-petition interest whether or not
allowed as a claim in any bankruptcy, reorganization, insolvency, receivership
or similar proceeding) with respect to Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred by IMPAC under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes and (iii) all Obligations with respect to the foregoing.
Senior Debt will not include (w) any liability for federal, state, local or
other taxes owed or owing by IMPAC, (x) any Indebtedness of IMPAC to any of
its Subsidiaries or other Affiliates excluding, any Indebtedness owed to any
Affiliate that was incurred prior to such Person becoming an Affiliate in
connection with the acquisition by IMPAC or any Subsidiary of a business or
Person from such Affiliate, (y) any trade payables or (z) any Indebtedness
that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Stockholder Agreement" means the Stockholder Agreement, dated as of the
date of the Indenture, among the Company and its stockholders, as in effect on
the date of the Indenture, and as thereafter amended from time to time;
provided for purposes of the definition of "Continuing Director" that no such
amendment alters the provision relating to the designation and election of
members of IMPAC's Board of Directors.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Transfer Restricted Securities" means each Note, until the earliest to
occur of (a) the date on which such Note is exchanged in the Exchange Offer
and the Note for which it is exchanged is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (b) the date on which such Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (c) the date on which such Note is
permitted to be distributed to the public pursuant to Rule 144 under the
Securities Act or by a broker-dealer pursuant to the "Plan of Distribution"
section.
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"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (i) has no
Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement,
contract, arrangement or understanding with IMPAC or any Restricted Subsidiary
of IMPAC unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to IMPAC or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of IMPAC; (iii) is a Person with respect to which neither IMPAC nor
any of its Restricted Subsidiaries has any direct or indirect obligation (A)
to subscribe for additional Equity Interests or (B) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; (iv) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of IMPAC
or any of its Restricted Subsidiaries; and (v) has at least one director on
its board of directors that is not a director or executive officer of IMPAC or
any of its Restricted Subsidiaries and has at least one executive officer that
is not a director or executive officer of IMPAC or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation compiled with the foregoing
conditions and was permitted by the covenant described above under the caption
"Certain Covenants- -Restricted Payments". If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of IMPAC as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock", IMPAC shall be in default of
such covenant). The Board of Directors of IMPAC may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of IMPAC of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the caption
"Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock", calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned" means, when used with respect to any Subsidiary or Restricted
Subsidiary of a Person, a Subsidiary (or Restricted Subsidiary, as
appropriate) of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned
Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such
Person and one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted
Subsidiaries, as appropriate) of such Person.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of the Existing Notes for New Notes and of the
purchase at original issue, ownership, and disposition of the New Notes is
based upon the provisions of the Internal Revenue Code of l986, as amended
(the "Code"), the final, temporary, and proposed regulations promulgated
thereunder, and administrative rulings and judicial decisions now in effect,
all of which are subject to change (possibly with retroactive effect) or
different interpretations. This summary does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor, nor any tax consequences arising under the laws of any state,
locality, or foreign jurisdiction, and it is not intended to be applicable to
all categories of investors, some of which, such as dealers in securities,
banks, insurance companies, tax-exempt organizations, foreign persons, persons
that hold New Notes as part of a straddle or conversion transactions, persons
that purchase the New Notes from other Holders at a discount or a premium or
holders subject to the alternative minimum tax, may be subject to special
rules. In addition, the summary is limited to persons that will hold the New
Notes as "capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the Code.
ALL INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE AND THE
OWNERSHIP AND DISPOSITION OF NEW NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Subject to the limitation set forth above, an exchange of Existing Notes for
New Notes will not be a taxable event to holders of Existing Notes, and
holders will not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a holder would have the same adjusted basis and holding
period in the New Notes as it had in the Existing Notes immediately before the
exchange. Further, the tax consequences of ownership and disposition of any
New Notes will be the same as the tax consequences of ownership and
disposition of Existing Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A "U.S. Holder" is any holder who or which is (i) a citizen or resident of
the United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States; (iii) an estate the
income of which is subject to United States Federal income taxation regardless
of its source; (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust; (v) a former citizen or resident of the United States
whose income and gain on the Notes will be subject to United States Federal
income taxation; or (vi) a person otherwise included within the definition of
United States person under the Code and the regulations thereunder.
Taxation of Stated Interest. In general, a U.S. Holder of the Notes will be
required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for federal income tax purposes.
Effect of Optional Redemption and Repurchase. Under certain circumstances
the Company may be entitled to redeem a portion of the Notes. In addition,
under certain circumstances, each holder of Notes will have the right to
require the Company to repurchase all or any part of such holder's Notes.
Treasury Regulations contain special rules for determining the yield to
maturity and maturity on a debt instrument in the event the debt instrument
provides for a contingency that could result in the acceleration or deferral
of one or more payments. The Company does not believe that these rules should
apply to either the Company's right to redeem Notes or to the holders' rights
to require the
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Company to repurchase Notes. Therefore, the Company has no present intention
of treating such redemption and repurchase provisions of the Notes as
affecting the computation of the yield to maturity or maturity date of the
Notes.
Sale or other Taxable Disposition of the Notes. The sale, exchange,
redemption, retirement or other taxable disposition of a Note will result in
the recognition of gain or loss to a U.S. Holder in an amount equal to the
difference between (a) the amount of cash and fair market value of property
received in exchange therefor (except to the extent attributable to the
payment of accrued but unpaid stated interest) and (b) the holder's adjusted
tax basis in such Note.
A holder's tax basis in a Note purchased by such holder will be equal to the
price paid for the Note, less any principal payments received by such holder.
Any gain or loss on the sale or other taxable disposition of a Note
generally will be capital gain or loss and will be long-term capital gain or
loss if the Note had been held for more than one year and otherwise will be
short-term capital gain or loss. Long-term capital gain realized by an
individual U.S. Holder is generally subject to a maximum tax rate of 28% in
respect of property held for more than one year and to a maximum rate of 20%
in respect of property held in excess of 18 months. Payments on such sale or
other taxable disposition for accrued interest not previously included in
income will be treated as ordinary interest income.
If Liquidated Damages are paid, although not free from doubt, such payment
should be taxable to a U.S. Holder as ordinary income at the time it accrues
or is received in accordance with such holder's regular method of accounting.
It is possible, however, that the IRS may take a different position, in which
case the timing and amount of income inclusion may be different. A U.S. Holder
will not recognize any gain or loss on the exchange of Notes for Exchange
Notes pursuant to the exchange offer.
Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if (i) the payee fails to furnish a taxpayer identification
number ("TIN") in the prescribed manner, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) the payee has failed to
report properly the receipt of "reportable payments" and the IRS has notified
the payor that withholding is required, or (iv) the payee fails to certify
under the penalty of perjury that such payee is not subject to backup
withholding. If any one of the events discussed above occurs with respect to a
holder of Notes, the Company, its paying agent or other withholding agent will
be required to withhold a tax equal to 31% of any "reportable payment" made in
connection with the Notes of such holder. A "reportable payment" includes,
among other things, payments of principal, premium, if any, and interest on a
Note. Any amount withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or credit against such holder's
federal income tax, provided that the required information is furnished to the
IRS. Certain holders (including, among others, corporations and certain tax-
exempt organizations) are not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses special rules applicable to a Non-U.S. Holder of
Notes. This summary does not address the tax consequences to stockholders,
partners or beneficiaries in a Non-U.S. Holder. For purposes hereof, a "Non-
U.S. Holder" is any person who is neither (i) a U.S. Holder nor (ii) a person
whose income with respect to a Note is subject to U.S. federal income tax on a
net basis because such income is effectively connected with the conduct of a
U.S. trade or business.
Interest. Payments of interest to a Non-U.S. Holder that do not qualify for
the portfolio interest exception discussed below will be subject to
withholding of U.S. federal income tax at a rate of 30%
122
<PAGE>
unless a U.S. income tax treaty applies to reduce the rate of withholding. To
claim a treaty reduced rate, the Non-U.S. Holder must provide a properly
executed Form 1001.
Interest that is paid to a Non-U.S. Holder on a Note will not be subject to
U.S. income or withholding tax if the interest qualifies as "portfolio
interest". Generally, interest on the Notes that is paid by the Company will
qualify as portfolio interest if (i) the Non-U.S. Holder does not own,
actually or constructively, 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote; (ii) the Non-U.S. Holder
is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership for U.S. federal income tax
purposes; (iii) the Non-U.S. Holder is not a bank receiving interest on a loan
entered into in the ordinary course of business; and (iv) either (x) the
beneficial owner of the Note provides the Company or its paying agent a
properly executed certification on IRS Form W-8 (or a suitable substitute
form) signed under penalties of perjury that the beneficial owner is not a
"U.S. person" for U.S. federal income tax purposes and that provides the
beneficial owner's name and address, or (y) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its business (a "financial institution")
holds the Note and certifies to the Company or its agent under penalties of
perjury that the IRS Form W-8 (or a suitable substitute) has been received by
it from the beneficial owner of the Note or from a financial institution
acting for the beneficial owner and furnishes the Company or its agent a copy
thereof.
Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. federal income tax or withholding unless (i) the Non-U.S.
Holder is an individual who was present in the U.S. for 183 days or more in
the taxable year of the disposition and meets certain other requirements; or
(ii) the Non- U.S. Holder is subject to tax pursuant to certain provisions of
the Code applicable to certain individuals who renounce their U.S. citizenship
or terminate long-term U.S. residency. If a Non-U.S. Holder falls under (ii)
above, the holder will be taxed on the net gain derived from the sale under
the graduated U.S. federal income tax rates that are applicable to U.S.
citizens and resident aliens, and may be subject to withholding under certain
circumstances. If a Non-U.S. Holder falls under (i) above, the holder
generally will be subject to U.S. federal income tax at a rate of 30% on the
gain derived from the sale (or reduced treaty rate) and may be subject to
withholding in certain circumstances. Such gains may also be subject to U.S.
federal income tax if the Non-U.S. Holder has a present or former status as a
personal holding company, a foreign personal holding company with respect to
the United States, a controlled foreign corporation, a passive foreign
investment company, or a foreign private foundation or foreign tax exempt
entity for United States tax purposes, or a corporation which accumulates
earnings to avoid United States federal income tax.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
and information reporting generally will not apply to a Note issued in
registered form that is beneficially owned by a Non-U.S. Holder if the
certification of Non-U.S. Holder status is furnished to the Company or its
agent as described above in "Certain Federal Income Tax Consequences to Non-
U.S. Holders--Interest," provided that the payor does not have actual
knowledge that the holder is a U.S. person. The Company may be required to
report annually to the IRS and to each Non-U.S. Holder the amount of interest
paid to, and any tax withheld from, such Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent
of such beneficial owner, or if the proceeds of the sale of Note are paid to
the beneficial owner of a Note through a foreign office of a "broker" (as
defined in the pertinent Regulations), the proceeds will not be subject to
backup withholding (absent actual knowledge that the payee is a U.S. person).
Information reporting (but not backup withholding) will apply, however, to a
payment by a foreign office of a custodian, nominee, agent or broker that is
(i) a U.S. person, (ii) a controlled foreign corporation for U.S. federal
income tax purposes, or (iii) derives 50% or more of its gross income from the
conduct of a U.S. trade or business for a specified
123
<PAGE>
three-year period, unless the broker has in its records documentary evidence
that the holder is a Non-U.S. Holder, has no actual knowledge to the contrary,
and certain other conditions are met, or unless the holder otherwise
establishes an exemption. Payment through the U.S. office of a custodian,
nominee, agent or broker is subject to both backup withholding at a rate of
31% and information reporting, unless the holder certifies that it is a Non-
U.S. Holder under penalties of perjury or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such
holder's U.S. federal income tax liability, provided that certain information
is provided by the holder to the IRS.
Recently finalized Treasury regulations (the "Withholding Regulations") will
change the methods for satisfying the certification requirements discussed
above. The Withholding Regulations also will require, in the case of Notes
held by a foreign partnership, that (a) this certification generally be
provided by the partners rather than the foreign partnership and (b) the
partnership provide certain information, including a United States employer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Withholding Regulations are generally effective for payments
made after December 31, 1998, subject to certain transition rules. NON-UNITED
STATES HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
IMPACT, IF ANY, OF THE NEW WITHHOLDING REGULATIONS.
124
<PAGE>
INTELLECTUAL PROPERTY
DIGI-BOKS(R), DIGIPAK(R), Klearfold(R) and Duofold(R) are registered
trademarks of the Company and Digilite/TM/, KlearPOP/TM/, Klearform/TM/ and
Hologravure/TM/ are trademarks of the Company. Chesebrough-Pond's(R) is a
registered trademark of Chesebrough-Pond's, Inc. BIC(R) is a registered
trademark of BIC Corporation. Andes(R) is a registered trademark of Jacobs
Suchard S.A.; Jacobs Suchard AG; and Jacobs Suchard Ltd. Totes(R) is a
registered trademark of 'Totes', Incorporated. Safari(R) is a registered
trademark of Polo Ralph Lauren, L.P. Polo Sport(R) is a registered trademark
of PRL USA Holdings, Inc. Crest(R) is a registered trademark of Procter &
Gamble. Colorstay(R) is a registered trademark of Revlon. Jockey(R) is a
registered trademark of Jockey International, Inc. Ralph Lauren(R) is a
registered trademark of The Ralph Lauren Trust of 9/21/76 and The Polo/Lauren
Company.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Bingham Dana LLP, Boston, Massachusetts.
AVAILABLE INFORMATION
IMPAC has agreed that whether or not required by the rules and regulations
of the Commission so long as any Notes are outstanding, IMPAC shall deliver to
each holder of the Notes (i) all annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in a filing with the Commission on Forms 10-Q and 10-K, if IMPAC were required
to file such Forms, including, with respect to annual information only, a
report thereon by IMPAC's certified independent public accountants as such
would be required in such reports to the Commission, and, in each case,
together with a management's discussion and analysis of financial condition
and results of operations which would be so required and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
IMPAC were required to file such Forms. In addition, following the
consummation of the Exchange Offer contemplated by the Registration Rights
Agreement, whether or not required by the rules and regulations of the
Commission, IMPAC will file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
Once the Registration Statement has been declared effective by the
Commission, IMPAC will become subject to the informational requirements of the
Exchange Act and in accordance therewith will be required to file reports and
other information with the Commission. The Registration Statement and the
exhibits thereto, as well as such reports and other information to be filed by
IMPAC with the Commission, may be inspected, without charge, at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, as well as the regional offices of the
Commission at the Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such documents can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, IMPAC will be
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site, located at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
125
<PAGE>
EXPERTS
The consolidated financial statements of KFI Holding as of December 31, 1996
and 1997 and for each of the years in the three-year period ended December 31,
1997 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing. The financial statements of AGI as of
and for the four years ended December 31, 1996 have been audited by Arthur
Andersen LLP, independent public accountants. The financial statements of AGI
as of and for the year ended December 31, 1997 have been audited by Price
Waterhouse LLP, independent accountants. The consolidated financial statements
for AGI as of December 31, 1996 and 1997 and for each of the years in the
three year period ended December 31, 1997 together with the respective reports
of independent accountants are included elsewhere herein in reliance upon the
authority of said firms as experts in accounting and auditing.
On May 29, 1998, IMPAC's Board of Directors voted to appoint Price
Waterhouse LLP as IMPAC's independent accountants for fiscal 1998, dismissing
KPMG Peat Marwick LLP who had served as the independent auditors of KFI
Holding and its subsidiaries since December 1990. Price Waterhouse LLP had
served as the independent accountants of AGI Incorporated since 1997. During
the fiscal years ended December 31, 1996 and 1997 and through May 29, 1998,
there were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting principles or practices, financial statement disclosures, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of KPMG Peat Marwick LLP would have caused them to make reference
thereto in their report on the financial statements of KFI Holding and its
subsidiaries for such years. Further, no "reportable events" (as defined in
Regulation S-K Item 304) occurred within KFI Holding and its subsidiaries' two
most recent fiscal years. None of the audit reports of KPMG Peat Marwick LLP
for any period, including the fiscal years ended December 31, 1996 and 1997,
contained an adverse opinion or disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles.
In 1997, AGI appointed Price Waterhouse LLP as AGI's independent accountants
for fiscal 1997, dismissing Arthur Andersen LLP who had served as AGI's
independent auditors since prior to December 1990. During the fiscal year
ended December 31, 1996 and through their dismissal, there were no
disagreements with Arthur Andersen LLP on any matter of accounting principles
or practices, financial statement disclosures, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Arthur Andersen LLP
would have caused them to make reference thereto in their report on AGI's
financial statements for such years. Further, no "reportable events" (as
defined in Regulation S-K Item 304) occurred within AGI's fiscal year ended
December 31, 1996. None of the audit reports of Arthur Andersen LLP for any
period, including the fiscal year ended December 31, 1996, contained an
adverse opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was not recommended or approved by any audit or similar committee
of AGI's board of directors or AGI's board of directors.
126
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that may be considered "forward-
looking." Such forward-looking statements include, among other things,
management's expectations about consumer products industry trends including,
without limitation, industry revenue and profit growth rates, industry
migration toward high quality specialty packaging, consolidation of retail
sales companies, increased demand for innovative, value-added packaging,
content distribution moving toward a disk-based format, the emergence of the
DVD market and the opportunities therefrom and shifts in distribution channels
toward self- select outlets. Forward-looking statements are also made
concerning the Company's expectations regarding the growth of the music
industry and CD sales, growth of the home video sell-through market, ability
to consummate the Tinsley Acquisition, synergies resulting from the Tinsley
Acquisition, impact upon the Company's position in the music packaging
industry as a result of the Tinsley Acquisition, opportunity to leverage the
Klearfold product line in Europe as a result of the Tinsley Acquisition,
synergies resulting from the Combination, reductions in the Company's
manufacturing, transportation, general and administrative and management
information costs, expansion of the Company's product lines, expansion of
relationships with existing customers, increased operating efficiencies as a
result of the Combination, the success of its acquisition strategy, the
continued acceptance of the DIGIPAK, the advantage of the Diginet in the
emerging DVD market, the maintenance of relationships with existing customers,
the Company's ability to pass raw material price increases on to its customers
and the Company's ability to generate cash flow or make borrowings sufficient
to pay interest and principal on the Notes, the Company's ability to
anticipate and respond to technological change in manufacturing processes, the
Company's ability to create additional revenue opportunities, the Company's
ability to meet changing customer needs, the Company's initial marketing
impact in the cosmetics industry, the Company's ability to develop new
packaging products, the Company's ability to capture additional customers in
new and existing markets, the Company's acquisition strategy, the costs and
time frame associated with the installation of the new printing press, the
liquidity demands of the Company, the amount of future capital expenditures,
the Company's ability to meet its liquidity needs, the resolution of Year 2000
issues, the ability of the Company's manufacturing facilities to serve
national markets. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements of the Company expressed or
implied by such forward-looking statements. Prospective investors in the Notes
offered hereby are cautioned that although the Company believes that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, any of those assumptions could prove to be inaccurate and, as
a result, the forward- looking statements based on those assumptions also
could be materially incorrect. The uncertainties in this regarding include,
but are not limited to, those identified in the section of this Prospectus
entitled "Risk Factors". In light of these and other uncertainties, the
inclusion of a forward-looking statement herein should not be regarded as a
representation by the Company that the Company's plans and objectives will be
achieved and prospective investors in the Notes should not place undue
reliance on such forward-looking statements.
127
<PAGE>
INDEX OF DEFINED TERMS
The following is an index of defined terms and the page at which such defined
term is first defined:
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Acquired Debt.............................................................. 110
Affiliate.................................................................. 110
Affiliate Transaction...................................................... 99
Agent's Message............................................................ 108
AGI........................................................................ 1
AGI Credit Facility........................................................ 53
AGI Holders................................................................ 69
AGI Indemnitors............................................................ 76
AGI IRBs................................................................... 78
Agreement and Plan of Merger............................................... 4
Amended and Restated Multicurrency Credit Facility......................... 28
Asset Sale................................................................. 110
Asset Sale Offer........................................................... 94
ATOP....................................................................... 108
Bank of America............................................................ 29
BMG........................................................................ 56
Board...................................................................... 69
Book-Entry Confirmation.................................................... 108
Bucks County............................................................... 78
Bucks Loan Agreement....................................................... 78
Business Day............................................................... 108
Calculation Date........................................................... 114
Capital Lease Obligation................................................... 110
Capital Stock.............................................................. 111
Cash Equivalents........................................................... 111
CD......................................................................... 55
Cedel...................................................................... 105
Certificated Notes......................................................... 107
Change of Control.......................................................... 111
Change of Control Offer.................................................... 92
Change of Control Payment.................................................. 92
Change of Control Payment Date............................................. 92
Closing.................................................................... 105
Code....................................................................... 121
Combination, the........................................................... 4
Commission................................................................. 102
Common Stock............................................................... 4
Company.................................................................... 1
Consolidated Cash Flow..................................................... 111
Consolidated Net Income.................................................... 112
Consolidated Net Worth..................................................... 112
Continuing Directors....................................................... 113
Covenant Defeasance........................................................ 102
Credit Facilities.......................................................... 113
Damages Payment Date....................................................... 113
Default.................................................................... 113
Depositor.................................................................. 84
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Designated Senior Debt............................. 113
Diginet............................................ 27
DIGIPAK(R)......................................... 27
Disqualified Stock................................. 113
DTC................................................ 105
Duofold............................................ 55
DVD................................................ 55
Effectiveness Target Date.......................... 81
Eligible Institution............................... 82
EMI................................................ 56
Employment Agreement............................... 113
Equity Interests................................... 113
Euroclear.......................................... 105
Event of Default................................... 101
Excess Proceeds.................................... 94
Excess Purchase Price.............................. 41
Exchange Act....................................... 23
Exchange Agent..................................... 86
Exchange Notes..................................... 80
Exchange Offer..................................... Cover Page of the Prospectus
Exchange Offer Registration Statement.............. 113
Executive Officers................................. 75
Existing Affiliate Transactions.................... 114
Existing Guarantees................................ Cover Page of the Prospectus
Existing Indebtedness.............................. 114
Existing Notes..................................... Cover Page of the Prospectus
Expiration Date.................................... Cover Page to the Prospectus
Fixed Charge Coverage Ratio........................ 114
Fixed Charges...................................... 114
Fund I............................................. 75
GAAP............................................... 115
Global Notes....................................... 105
Guarantee.......................................... 115
Guarantees......................................... Cover Page of the Prospectus
Guarantors......................................... Cover Page of the Prospectus
Hedging Obligations................................ 115
Heritage........................................... 4
Heritage Holders................................... 69
Holder............................................. 115
Holding Indemnified Claims......................... 75
IMPAC.............................................. Cover Page of the Prospectus
Indebtedness....................................... 115
Indenture.......................................... Cover Page to the Prospectus
Indirect Participants.............................. 106
Initial Purchasers................................. 6
Interest Payment Date.............................. 113
Investment Agreement............................... 4
Investments........................................ 115
IRB Financings..................................... 78
Jacksonville....................................... 78
Jacksonville Loan Agreement........................ 78
</TABLE>
129
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Kamens..................................... 75
Keyser..................................... 75
KFI Holding................................ 1
KFI Indemnitors............................ 75
Klearfold.................................. 1
Klearfold Contributing Parties............. 75
Klearfold Holders.......................... 69
Klearfold IRBS............................. 78
Legal Defeasance........................... 102
Letter of Transmittal...................... Cover Page of the Prospectus
Lien....................................... 116
Liquidated Damages......................... 81
Loan Notes................................. 28
Major Stockholders......................... 75
Management Group........................... 116
Net Income................................. 116
Newco...................................... 28
Net Proceeds............................... 116
New Credit Facility........................ Cover Page of the Prospectus
New Guarantees............................. Cover Page of the Prospectus
New Notes.................................. Cover Page of Registration Statement
Non-Recourse Debt.......................... 117
Non-U.S. Holder............................ 122
Notes...................................... Cover Page of the Prospectus
Obligations................................ 117
Offer...................................... 28
Offering................................... 4
Outside Directors.......................... 75
Participants............................... 105
Payment Blockage Notice.................... 91
Permitted Debt............................. 96
Permitted Investments...................... 117
Permitted Junior Securities................ 117
Permitted Liens............................ 117
Permitted Refinancing Indebtedness......... 117
Person..................................... 117
PolyGram................................... 55
Principal AGI Stockholders................. 76
Principals................................. 118
PTP........................................ 14
Record Date................................ 89
Record Holder.............................. 118
Registration Default....................... 81
Registration Default Period................ 81
Registration Rights Agreement.............. 6
Regulation S Global Notes.................. 105
Regulation S Notes......................... 105
Related Party.............................. 118
Restricted Investment...................... 119
Restricted Payments........................ 95
Restricted Period.......................... 105
</TABLE>
130
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C> <C>
Restricted Subsidiaries.......... 10
Restricted Subsidiary............ 119
Revolver......................... 29
Revolving Credit and Term Loan
Agreement....................... 25
Revolving Loans.................. 25
Rule 144A Global Notes........... 105
Rule 144A Notes.................. 105
Securities Act................... Cover Page of the Prospectus
Senior Debt...................... 119
Share Value...................... 75
Shelf Filing Deadlines........... 80
Shelf Registration Statement..... 80
Significant Subsidiary........... 119
Sony............................. 56
Stated Maturity.................. 119
Stockholder Agreement............ 69
Subsidiary....................... 119
Subsidiary Guarantees............ Cover Page to the Registration Statement
Term Loans....................... 25
TIN.............................. 122
Tinsley.......................... 1
Tinsley Acquisition.............. 1
Transactions..................... 4
Transfer Agent................... 86
Transfer Restricted Securities... 80
Trust Indenture Act.............. 89
Trustee.......................... 89
Universal........................ 56
Unrestricted Subsidiaries........ 10
Unrestricted Subsidiary.......... 120
U.S. Holder...................... 121
Voting Stock..................... 120
Weighted Average Life to Maturi-
ty.............................. 120
Wholly Owned..................... 120
Witholding Regulations........... 124
</TABLE>
131
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPAC GROUP, INC.
Condensed Consolidated Balance Sheets as of December 31, 1997 and March
31, 1998 (unaudited) ................................................... F-2
Unaudited Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 1997 and 1998.................................... F-3
Unaudited Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1998.................................... F-4
Notes to Unaudited Condensed Consolidated Financial Statements........... F-5
KFI HOLDING CORPORATION AND SUBSIDIARIES
Independent Auditors' Report............................................. F-8
Consolidated Balance Sheets as of December 31, 1996 and 1997............. F-9
Consolidated Statements of Income for the Years Ended December 31, 1995,
1996 and 1997........................................................... F-10
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended
December 31, 1995, 1996 and 1997........................................ F-11
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996 and 1997..................................................... F-12
Notes to Consolidated Financial Statements............................... F-13
</TABLE>
<TABLE>
<S> <C>
AGI INCORPORATED
Report of Independent Accountants........................................ F-21
Report of Independent Public Accountants................................. F-22
Balance Sheets as of December 31, 1996 and 1997.......................... F-23
Statements of Income for the Years Ended December 31, 1995, 1996 and
1997.................................................................... F-24
Statements of Shareholders' Equity for the Years Ended December 31, 1995,
1996 and 1997........................................................... F-25
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997.................................................................... F-26
Notes to the Financial Statements........................................ F-27
</TABLE>
<TABLE>
<S> <C>
TINSLEY ROBOR PLC
Summarised Financial Information on Tinsley Robor.......................... F-32
Notes to the Accounts...................................................... F-36
</TABLE>
F-1
<PAGE>
IMPAC GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 194 $ 5,175
Trade accounts receivable, net....................... 5,986 16,316
Other receivables.................................... 439 2,676
Inventories.......................................... 6,957 15,508
Prepaid expenses..................................... 510 1,122
Deferred income taxes................................ 661 2,351
Other current assets................................. 156 156
------- --------
Total current assets.................................. 14,903 43,304
Long-term assets:
Property, plant and equipment, net................... 11,100 51,681
Goodwill............................................. 0 40,547
Deferred financing costs, net........................ 1,024 4,731
Restricted cash...................................... 625 404
Other assets......................................... 641 1,591
------- --------
Total assets.......................................... $28,293 $142,258
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft....................................... $ 0 $ 789
Trade payables....................................... 5,098 8,782
Accrued expenses..................................... 1,925 9,910
------- --------
Total current liabilities............................. 7,023 19,481
------- --------
Long-term debt........................................ 33,850 111,640
Deferred income taxes................................. 1,307 6,813
------- --------
Total liabilities..................................... 42,180 137,934
------- --------
Shareholders' (deficit) equity:
Common stock, voting, $.001 par value; authorized
135,813 shares, 90,500 shares issued and outstanding
at December 31, 1997................................ 0 --
Common stock, nonvoting, $.001 par value; 9,500
shares authorized, issued and outstanding at
December 31, 1997................................... 0 --
Common stock, series A, $.001 par value; 150,000
shares authorized, 100,000 shares issued and
outstanding at March 31, 1998....................... -- 0
Common stock, series B, $.001 par value; 50,000
shares authorized, 0 shares issued and outstanding
at March 31, 1998................................... -- 0
Preferred stock nonvoting, $.001 par value; 100,000
shares authorized, issued and outstanding at
December 31, 1997................................... 0 --
Paid in capital...................................... 20,000 38,964
Notes receivable..................................... (35) 0
Carryover basis adjustment........................... (37,142) (37,142)
Retained earnings.................................... 3,290 2,502
------- --------
Total shareholders' (deficit) equity.................. (13,887) 4,324
------- --------
Total liabilities & shareholders' (deficit) equity.... $28,293 $142,258
======= ========
</TABLE>
F-2
<PAGE>
IMPAC GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31.
----------------
1997 1998
------- -------
<S> <C> <C>
Net sales.................................................... $10,837 $15,801
Costs of goods sold.......................................... 7,789 12,418
------- -------
Gross profit................................................. 3,048 3,383
Selling, general and administrative expenses................. 1,718 2,530
------- -------
Operating income............................................. 1,330 853
Other income (expense):
Interest income............................................ 0 6
Interest expense........................................... (766) (1,222)
------- -------
Income (loss) before income taxes and extraordinary item..... 564 (363)
Income (taxes) benefit....................................... (198) 128
------- -------
Income (loss) before extraordinary item...................... 366 (235)
Extraordinary charge for early retirement of debt,
net of tax benefit of $368.................................. 0 (553)
------- -------
Net income (loss)............................................ $ 366 $ (788)
======= =======
</TABLE>
F-3
<PAGE>
IMPAC GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss)....................................... $ 366 $ (788)
Adjustments to reconcile net income to net cash provided
by (used for) operating activities--
Extraordinary charge for early retirement of debt..... 0 553
Depreciation and amortization......................... 459 793
Deferred income taxes................................. 7 (188)
Changes in assets and liabilities--
Trade accounts receivable, net....................... 2,965 628
Inventories.......................................... (1,115) (1,553)
Accounts payable and bank overdraft.................. 551 654
Accrued compensation and profit sharing.............. (327) 89
Other assets and liabilities......................... (64) (1,515)
-------- ---------
Net cash provided by (used for) operating
activities......................................... 2,842 (1,327)
-------- ---------
Cash flows from investing activities:
Capital expenditures.................................... (463) (814)
Acquisitions, net of cash acquired...................... 0 (63,551)
-------- ---------
Net cash used for investing activities.............. (463) (64,365)
-------- ---------
Cash flows from financing activities:
Net change in borrowings under revolving credit line.... (2,330) 0
Repayment of long term debt............................. (25) (29,850)
Proceeds from senior subordinated notes................. 0 100,000
Decrease in restricted cash............................. 0 221
Proceeds from issuance of common stock.................. 0 4,600
Change in deferred financing costs...................... 0 (4,298)
-------- ---------
Net cash provided by (used for) financing
activities......................................... (2,355) 70,673
-------- ---------
Increase in cash.......................................... 24 4,981
Cash, beginning of period................................. 6 194
-------- ---------
Cash, end of period....................................... $ 30 $ 5,175
======== =========
Supplemental disclosures:
Cash payments (receipts) for--
Interest $ 787 $ 731
Income taxes (43) 161
Details of acquisitions--
Fair market value of assets acquired.................... $ 102,917
Fair market value of liabilities assumed................ 24,945
Common stock issued..................................... 14,400
---------
Cash paid............................................... 63,572
Cash acquired........................................... 21
---------
Acquisitions, net of cash acquired..................... $ 63,551
=========
</TABLE>
F-4
<PAGE>
IMPAC GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BASIS OF PRESENTATION
In the opinion of IMPAC Group, Inc. ("IMPAC"), the accompanying unaudited
condensed consolidated financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial position, results of operations and the changes in cash flows at
March 31, 1998 and for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should
be read in conjunction with the audited financial statements as of and for the
year ended December 31, 1997 of KFI Holding Corporation and AGI Incorporated
included elsewhere in this Prospectus.
NOTE 2--ACQUISITION
On March 12, 1998, KFI Holding Corporation acquired all of the common stock
of AGI Incorporated for $69.0 million including $54.6 million of cash and
$14.4 million of newly issued common stock, plus acquisition costs. Upon
consummation of this acquisition, KFI Holding Corporation changed its name to
"IMPAC Group, Inc." Concurrently, IMPAC funded the retirement of $8.3 million
of indebtedness outstanding under AGI Incorporated's credit facility
immediately prior to the transaction. The acquisition was funded by the
proceeds from the issuance of $100.0 million of 10 1/8% Senior Subordinated
Notes Due 2008 and $4.6 million of new common stock.
This acquisition was accounted for as a purchase and, accordingly, the
operating results of AGI Incorporated have been included in IMPAC's
consolidated financial statements from the date of acquisition. A summary of
IMPAC's preliminary purchase price allocation follows:
<TABLE>
<S> <C>
Receivables..................................................... $ 11,555
Inventories..................................................... 6,998
Deferred incomes taxes.......................................... 1,501
Property, plant and equipment................................... 40,550
Other assets.................................................... 1,723
Accounts payable and accrued liabilities........................ (11,799)
Long-term debt.................................................. (7,640)
Deferred income taxes........................................... (5,505)
--------
Net assets acquired......................................... $ 37,383
========
</TABLE>
The excess of the purchase price over the fair market value of the net
assets acquired is being amortized over 40 years.
The following pro forma information presents certain operating data
calculated to reflect the acquisition as if it occurred on January 1, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Net sales........................................... $ 33,849 $ 31,306
Net loss............................................ (58) (880)
</TABLE>
This pro forma data does not purport to represent what actual operating
results would have been had the acquisition been consummated on the date
indicated or what such results will be for any future period.
F-5
<PAGE>
NOTE 3--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Raw materials...................................... $3,658 $ 5,660
Work in process and finished goods................. 1,530 6,732
------ -------
$6,957 $15,508
====== =======
</TABLE>
NOTE 4--LONG-TERM DEBT
On March 12, 1998, IMPAC completed the issuance of $100.0 million in 10 1/8%
Senior Subordinated Notes Due 2008 (the "Notes"). The Notes bear interest at
10 1/8% and mature in 2008. The Indenture governing the Notes contains certain
covenants that, among other things, limit the ability of IMPAC to incur
additional indebtedness, pay dividends, distributions or make investments or
certain restricted payments, enter into certain transactions with affiliates,
dispose of certain assets, incur liens securing subordinated indebtedness and
engage in mergers and consolidations. The Notes are general, unsecured
obligations of IMPAC and are guaranteed by all current and future subsidiaries
of IMPAC. They will be senior to any future subordinated debt of IMPAC. The
proceeds of the Notes were used to fund the acquisition of AGI Incorporated
and to retire all outstanding indebtedness under IMPAC's prior credit
agreement. As a result of the refinancing, IMPAC recorded an extraordinary
item of $553 (net of tax), reflecting the write-off of deferred financing
costs.
On March 12, 1998, IMPAC entered into a new five year Credit Agreement which
provides for a $40.0 million revolving credit facility (the "Revolver") and a
$13.0 million letter of credit facility (the "L/C Facility"). The facilities
rank senior to the Notes and are guaranteed by each of IMPAC's existing and
future subsidiaries on a senior basis and are secured by substantially all of
the assets of IMPAC and its subsidiaries. Currently, there are no outstanding
borrowings under the Revolver. IMPAC currently has $12.6 million in letters of
credit outstanding under the L/C Facility securing its industrial revenue bond
("IRB") borrowings. The interest rate on the Revolver is based on either the
IBOR or Base Rate plus the applicable margin. The interest rate on the L/C
Facility is based on the Base Rate plus the applicable margin. IMPAC currently
pays a commitment fee of 1/2 of 1% per annum on the amount of the available
credit over the amount outstanding, plus any outstanding letters of credit
available.
The Credit Agreement includes covenants requiring IMPAC to maintain (i)
maximum leverage ratios, (ii) maximum senior leverage ratios, (iii) minimum
interest coverage ratios, (iv) minimum net assets ratios, and (v) minimum net
worth levels. The Credit Agreement also contains covenants limiting additional
indebtedness, liens, dividends, restricted payments, guaranties, advances to
affiliates, investments, mergers, creation of subsidiaries, assets sales and
dispositions.
In connection with the acquisition of AGI Incorporated, IMPAC assumed $7.6
million of variable rate IRB borrowings which mature on February 1, 2026.
Long-term debt as of December 31, 1997 and March 31, 1998, consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Bank borrowings.................................... $29,850 $ --
Senior subordinated notes.......................... -- 100,000
Industrial revenue bonds........................... 4,000 11,640
------- --------
Total long-term debt............................. $33,850 $111,640
======= ========
</TABLE>
F-6
<PAGE>
NOTE 5--NEW STOCK ISSUANCE
In connection with the acquisition of AGI Incorporated on March 12, 1998,
IMPAC (i) exchanged 44,118 shares of new Common Stock, Series A for all
previously issued and outstanding shares of non-voting Common Stock, voting
Common Stock and Preferred Stock of KFI Holdings, (ii) 13,529 shares of new
Common Stock, Series A were issued for $4.6 million, and (iii) 42,353 shares
of new Common Stock, Series A were issued as partial consideration to former
shareholders of AGI Incorporated.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
KFI Holding Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of KFI Holding
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of KFI
Holding Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 6, 1998
F-8
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 6 $ 194
Trade receivables, less allowances of $226 in 1996 and
$560 in 1997............................................ 8,185 5,986
Receivable from PTP Industries, Inc...................... 37 (46)
Inventories (note 6)..................................... 7,033 6,957
Prepaid expenses......................................... 768 401
Prepaid income taxes..................................... -- 109
Deferred income taxes (note 13).......................... 385 661
Other assets............................................. 909 595
-------- --------
Total current assets....................................... 17,323 14,857
LONG-TERM ASSETS:
Property, plant, and equipment, net (note 7)............... 8,568 11,100
Deferred financing costs, net.............................. 1,066 1,024
Restricted cash (note 11).................................. -- 625
Other assets............................................... 318 641
-------- --------
Total assets............................................... $ 27,275 $ 28,247
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Borrowings under line of credit agreement (notes 3 and
10)..................................................... $ 3,996 $ --
Current installments of long-term debt (notes 3 and 11).. 1,100 33,850
Trade accounts payable................................... 4,049 5,098
Income taxes payable (note 13)........................... 52 --
Accrued expenses......................................... 1,777 1,821
-------- --------
Total current liabilities.................................. 10,974 40,769
Long-term debt, excluding current installments (notes 3 and
11)....................................................... 29,850 --
Deferred compensation (note 16)............................ 104 58
Deferred income taxes (note 13)............................ 1,626 1,307
-------- --------
Total liabilities.......................................... 42,554 42,134
-------- --------
Commitments and contingencies (note 14)
Stockholders' deficit (note 3):
Common stock, voting, $.001 par value; authorized
135,813 shares, 90,500 shares issued and outstanding.... -- --
Common stock, nonvoting, $.001 par value; authorized,
issued and outstanding 9,500 shares..................... -- --
Preferred stock, nonvoting $.001 par value; authorized,
issued, and outstanding 100,000 shares.................. -- --
Additional paid-in-capital............................... 20,000 20,000
Notes receivable......................................... (35) (35)
Carryover basis adjustment............................... (37,142) (37,142)
Retained earnings........................................ 1,898 3,290
-------- --------
Total stockholders' deficit................................ (15,279) (13,887)
-------- --------
Total liabilities and stockholders' deficit................ $ 27,275 $ 28,247
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net sales............................................ $51,214 $54,218 $52,493
Cost of goods sold................................... 36,757 40,094 39,322
------- ------- -------
Gross profit......................................... 14,457 14,124 13,171
------- ------- -------
Selling, general and administrative expenses......... 7,942 7,594 7,589
PTP royalty and commission (income).................. (377) (731) (33)
------- ------- -------
Operating income..................................... 6,892 7,261 5,615
Interest expense, net................................ (1,197) (2,324) (3,469)
------- ------- -------
Income from continuing operations before income
taxes............................................... 5,695 4,937 2,146
Income taxes (note 13)............................... (2,417) (2,003) (754)
------- ------- -------
Income from continuing operations.................... 3,278 2,934 1,392
------- ------- -------
Discontinued operations (note 4):
Loss from operations of PTP Industries, Inc. (net
of applicable income tax benefit of $192)......... (34) -- --
Gain on disposal of PTP Industries, Inc. (less
applicable income taxes of $140).................. -- 35 --
------- ------- -------
Net income........................................... $ 3,244 $ 2,969 $ 1,392
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------- ---------------- CARRYOVER
NUMBER OF NUMBER OF PAID-IN NOTES BASIS RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE ADJUSTMENT EARNINGS TOTAL
----------- ------ --------- ------ ------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 13,500,000 $ 135 -- $-- $ 3,983 $-- $ -- $4,689 $ 8,807
Net income.............. -- -- -- -- -- -- -- 3,244 3,244
Dividends............... -- -- -- -- -- -- -- (540) (540)
----------- ----- ------- ---- ------- ---- -------- ------ --------
Balance at December 31,
1995................... 13,500,000 135 -- -- 3,983 -- -- 7,393 11,511
Net income from January
1, 1996 to June 7,
1996................... -- -- -- -- -- -- -- 1,071 1,071
Redemption of common
stock.................. (13,500,000) (135) -- -- (3,983) -- (37,142) (8,464) (49,724)
Sale of common stock.... 100,000 -- -- -- 1,000 -- -- -- 1,000
Issuance of notes
receivable............. -- -- -- -- -- (35) -- -- (35)
Sale of preferred
stock.................. -- -- 100,000 -- 19,000 -- -- -- 19,000
Net income from June 8,
1996 to December 31,
1996................... -- -- -- -- -- -- -- 1,898 1,898
----------- ----- ------- ---- ------- ---- -------- ------ --------
Balance at December 31,
1996................... 100,000 -- 100,000 -- 20,000 (35) (37,142) 1,898 (15,279)
Net income.............. -- -- -- -- -- -- -- 1,392 1,392
----------- ----- ------- ---- ------- ---- -------- ------ --------
Balance at December 31,
1997................... 100,000 $ -- 100,000 $-- $20,000 $(35) $(37,142) $3,290 $(13,887)
=========== ===== ======= ==== ======= ==== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $3,244 $ 2,969 $ 1,392
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 1,774 1,969 1,814
Deferred income taxes............................ 133 253 (595)
Net cash (used in) provided by discontinued
operations........................................ 34 (250) --
Changes in assets and liabilities:
(Increase) decrease in trade receivables......... (195) (423) 2,199
(Increase) decrease in receivable from PTP
Industries, Inc................................ (81) 118 83
(Increase) decrease in inventories............... (1,108) 1,014 76
(Increase) decrease in prepaid expenses.......... (135) 266 367
(Increase) decrease in prepaid income taxes...... (202) 152 (109)
Increase in other assets......................... (448) (117) (9)
Increase (decrease) in trade accounts payable.... 1,216 (2,079) 1,049
Increase (decrease) in payable to PTP Industries,
Inc............................................. 90 (316) --
Increase (decrease) in income taxes payable...... -- 52 (52)
Increase (decrease) in accrued expenses.......... (473) 495 44
Increase (decrease) in deferred compensation..... -- 104 (46)
------ ------- -------
Net cash provided by operating activities............ 3,849 4,207 6,213
------ ------- -------
Cash flows from investing activities:
Capital expenditures............................... (1,394) (1,271) (4,144)
Proceeds from sale of investment in PTP Industries,
Inc............................................... -- 1,860 --
------ ------- -------
Net cash provided by (used in) investing activities.. (1,394) 589 (4,144)
------ ------- -------
Cash flows from financing activities:
Increase in deferred financing costs............... (4) (1,171) (160)
Net borrowings under line of credit agreements..... 301 833 (3,996)
Proceeds from issuance of bonds.................... -- -- 4,000
Increase in restricted cash........................ -- -- (625)
Proceeds from issuance of credit facilities........ -- 34,200 --
Proceeds from issuance of common stock............. -- 1,000 --
Proceeds from issuance of preferred stock.......... -- 19,000 --
Payments to acquire stock of previous
shareholders...................................... -- (49,724) --
Principal payments on long-term debt............... (2,215) (8,942) (1,100)
Dividends paid..................................... (540) -- --
------ ------- -------
Net cash used in financing activities................ (2,458) (4,804) (1,881)
------ ------- -------
Net increase (decrease) in cash...................... (3) (8) 188
Cash at beginning of year............................ 17 14 6
------ ------- -------
Cash at end of year.................................. $ 14 $ 6 $ 194
====== ======= =======
Supplemental disclosures of cash flows information:
Interest paid...................................... $1,148 $ 2,147 $ 3,474
====== ======= =======
Income taxes paid.................................. $2,428 $ 1,630 $ 1,479
====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the financial
statements of KFI, Klearfold, Inc., KFI International Inc., and KFI Delaware,
Inc. (referred to collectively as Klearfold or the Company). All balances and
transactions among these parties have been eliminated in the accompanying
financial statements.
(2) DESCRIPTION OF BUSINESS AND BUSINESS CONCENTRATIONS
The Company manufactures innovative display packaging using folding cartons
that are produced either in part or entirely of rigid film. Customers are
located primarily throughout the United States and are comprised of users in
the cosmetics, pharmaceutical, and other consumer products industries. Sales
to two customers accounted for approximately 27% and 23% of the Company's net
sales for the years ended December 31, 1996 and 1997. Sales to one customer
accounted for approximately 14% of the Company's net sales for the year ended
December 31, 1995.
(3) LEVERAGED RECAPITALIZATION
On June 7, 1996, a merger between Klearfold and KFI/Heritage Acquisition
Corporation (Acquisition), a wholly-owned subsidiary of KFI, was consummated.
KFI and Acquisition were formed for the purpose of acquiring all the capital
stock of Klearfold by certain affiliates of Heritage Partners Management
Company (Heritage) together with certain existing Klearfold shareholders and
key members of Klearfold management (Management Investors) in a leveraged
transaction.
The Management Investors have maintained the majority voting interest in KFI
and no change in control as described in Emerging Issue Task Force Issue 88-16
occurred as a result of the merger. Therefore, the merger has been accounted
for as a leveraged recapitalization with the accounting basis of Klearfold's
assets and liabilities being carried over after the merger. The difference
between the accounting basis of Klearfold's assets and liabilities and their
fair values is $34,831, which has been recorded in stockholders' deficit as a
carryover basis adjustment. Management Investors own 50.3% and 46.5% of the
outstanding voting common stock and total outstanding common stock,
respectively. Heritage owns 49.7% and 53.5% of the outstanding voting common
stock and total outstanding common stock, respectively. Management Investors
and Heritage own 23.7% and 76.3% of the outstanding preferred stock.
Of the funds required to effect the recapitalization, $20,000 was provided
in the form of common and preferred stock by Heritage ($15,035) and Management
Investors ($4,965). Certain Management Investors borrowed $35 in the form of
notes receivable to the Company to acquire common stock. The notes receivable
have been recorded as a reduction to stockholders' deficit on the Company's
balance sheet. The balance of the funding was provided under the $43,000
Senior Secured Credit Facilities (Facilities) through a bank syndication. The
Facilities consist of (1) $12,000 six-year Revolving Credit, with availability
subject to a borrowing base of accounts receivable and inventory (note 10);
and (2) $21,000 six-year Term Loan A and $10,000 seven-year Term Loan B (note
11). The total source of funds obtained for the recapitalization as of June 7,
1996 was $54,900, of which $20,000 was received from the issuance of capital
stock, $34,200 from the Facilities, and $700 from Company cash on hand. The
total use of these funds was as follows: $45,203 to pay a substantial portion
of the purchase price to acquire all of the outstanding stock of Klearfold's
previous shareholders, $7,763 to repay existing bank loans, and $1,934 to pay
merger and financing costs, which consisted primarily of financial and
F-13
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
legal fees. An additional $3,652 of funds was required subsequent to June 7,
1996 to pay the remaining costs in connection with the recapitalization. The
remaining funds to be paid consisted of $2,116 to Klearfold's previous
shareholders and $1,536 for remaining merger and financing costs relating to
the recapitalization. At December 31, 1997, previous shareholders are due
$153.
Total merger and financing costs relating to the recapitalization were
$3,470, of which $2,341 was recorded as a carryover basis adjustment and
$1,129 was recorded as deferred financing costs.
The preferred stock provided by Heritage and Management Investors have no
fixed repayment date and will be redeemed only upon liquidation of Heritage's
common stock investment. The preferred stock carries a 10% dividend rate, to
be accrued during the first three years following closing, and thereafter, to
be paid from available earnings. Dividends not paid will accumulate. The
aggregate amount of arrearages in cumulative preferred dividends is $2,777 at
December 31, 1997.
Heritage has warrants attached to its preferred stock that entitle the
holder to an additional 14.5% of economic value of the Company if certain
valuation parameters are not achieved upon disposition of all or a portion of
Heritage's interest in the Company.
(4) DISCONTINUED OPERATIONS
On April 19, 1996, the Company sold its 51% interest in its thermoform
packaging operations--PTP Industries, Inc. (PTP). Accordingly, PTP is
accounted for as discontinued operations in the accompanying consolidated
financial statements. There are no net assets of PTP recorded on the balance
sheet at December 31, 1997 and December 31, 1996. Proceeds from the sale of
PTP were $1,860 and a gain of $35 (net of taxes of $140) was recognized in
1996.
(5) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Sales
Sales, which arise primarily within the United States, represent the net
invoiced value of goods supplied to customers. Sales are generally recognized
when goods are shipped to customers. In certain instances, sales are
recognized prior to shipment if the goods are completed and held by the
Company at the request of the customer.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost.
Machinery and equipment depreciation is calculated on the straight-line
method over the estimated useful lives of the assets. Leasehold improvements
are amortized straight-line over the shorter of the lease term or estimated
useful life of the related asset. Equipment under construction is not
depreciated until placed in full-time production. The useful lives of property
and equipment are summarized as follows:
<TABLE>
<S> <C>
Leasehold improvements......................................... 5-10 years
Machinery and equipment........................................ 10 years
Furniture and fixtures......................................... 6-10 years
</TABLE>
F-14
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred Financing Costs
The Company incurred various financing costs relating to the Facilities as
previously described in the notes to the consolidated financial statements.
The Company is amortizing these deferred costs over seven years, which
represents the life of the Facilities agreement.
The premium paid for the purchased interest rate cap agreement is amortized
to interest expense over the term of the cap. The unamortized premium is
included in deferred financing costs in the consolidated balance sheet.
Amounts receivable under the cap agreement are accrued as a component of
interest expense.
Income Taxes
Income taxes are accounted for under the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the recording of reported amounts of revenues and expenses and the disclosure
of contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
Fair Values of Financial Instruments
The carrying value of the Company's financial instruments consisting of
cash, trade receivables, trade payables, borrowings under line of credit
agreement, and long-term debt are estimated to approximate fair value due to
the short-term maturity of cash, trade receivables, and trade payables, and
due to the line of credit and long-term debt agreements having a variable
interest rate.
(6) INVENTORIES
Components of inventories at December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Raw materials.................................................. $3,138 $3,658
Work in process................................................ 1,233 1,530
Finished goods................................................. 2,662 1,769
------ ------
$7,033 $6,957
====== ======
</TABLE>
F-15
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Machinery and equipment................................... $20,026 $ 24,244
Furniture and fixtures.................................... 1,826 2,034
Leasehold improvements.................................... 1,841 1,916
Construction in progress.................................. 532 176
------- --------
24,225 28,370
Less accumulated depreciation and amortization............ (15,657) (17,270)
------- --------
$ 8,568 $ 11,100
======= ========
</TABLE>
(8) LEASES
The Company has several noncancelable operating leases, primarily for
buildings and equipment that expire over the next 6 years. Future minimum
lease payments under noncancelable operating leases as of December 31, 1997
were as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998............................................................... $1,925
1999............................................................... 1,599
2000............................................................... 1,107
2001............................................................... 701
2002............................................................... 625
Thereafter......................................................... 1,719
------
Total minimum lease payments....................................... $7,676
======
</TABLE>
Total rent expense for the years ended December 31, 1995, 1996 and 1997 was
$1,732, $1,995 and $2,034, respectively.
(9) PENSION AND EMPLOYEES SAVINGS PLAN
The Company is required, on behalf of union-registered employees, to
contribute to a union-managed multi-employer pension plan. If the Company
completely or partially withdraws from the pension plan, the Company may be
required to pay its share of the pension plan's unfunded vested liability.
There was no unfunded vested liability at December 31, 1997. The cost incurred
for the union pension plan was $113, $118 and $121 in 1995, 1996 and 1997,
respectively.
The Company operates an employees savings plan for the benefit of all non-
union employees upon retirement, disability, death, or departure from the
companies. The Company is not required to fund a minimum level of benefits for
such employees' and employer contributions are at the discretion of the
Company. The cost incurred for the savings plan in 1995, 1996 and 1997 was
$27, $24 and $28, respectively.
(10) LINE OF CREDIT
The Company has a six-year revolving bank line of credit agreement that is
subject to a maximum amount of $12,000 ($0 outstanding at December 31, 1997).
Borrowings under the line bear interest at LIBOR plus applicable margin, or
bank base rate plus applicable margin (9.75% at December 31, 1997). Maximum
borrowings under the line are limited to the sum of 85% of the Company's
eligible
F-16
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accounts receivable plus 50% of eligible inventory. As a result, the maximum
borrowings under the line of credit were limited to $4,590 at December 31,
1997. A commitment fee is payable at the end of each quarter, equal to 0.5%
per annum on the average daily amount of the unborrowed portion of the
revolving credit agreement.
(11) LONG-TERM DEBT
Outstanding long-term debt consists of the following
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Secured term loan A....................................... $21,000 $ 20,000
Secured term loan B....................................... 9,950 9,850
Industrial Development Demand Revenue Bonds............... -- 4,000
------- --------
30,950 33,850
Less current installments................................. (1,100) (33,850)
------- --------
$29,850 $ --
======= ========
</TABLE>
Term Loan A matures by June 30, 2002. Term Loan B matures by June 30, 2003.
Term Loans A and B bear interest at the bank's base rate plus applicable
margins. The effective rate at December 31, 1997 was 8.5% and 9.0% for Term
Loans A and B, respectively. The effect of a .25% increase in interest rates
would increase interest expense on the term loans by approximately $77 in
1997.
In connection with the term loans, the Company entered into an interest cap
agreement with the same bank, effective December 1996, for a notional amount
of $20,000, with a cap rate of 7.68% per annum. The cost of the agreement,
which expires in June 1998, was $42. In exchange, the Bank will reimburse the
Company interest costs in excess of 7.68% plus the Bank's applicable margins.
The fair value of the interest rate cap agreement approximated its carrying
value at December 31, 1997.
On August 1, 1997, the Bucks County Industrial Development Authority issued
$4,000 of Variable Rate Demand Revenue Bonds. The Company borrowed the
proceeds of the issuance from the Authority. The principal balance is due in
full on August 1, 2007. Interest accrues on the bonds at 4.35% . The Company
is required to maintain a letter of credit supporting the outstanding balance
of the bonds. The outstanding letter of credit balance as of December 31, 1997
is $4,064. The fee charged for the letter of credit is 3% of the outstanding
balance. The Bond Trust Indenture Agreement requires the Company to use the
proceeds for the acquisition and installation of an offset printing press and
related equipment. All proceeds not used immediately for these costs are to be
kept in a restricted cash account. The balance of restricted cash at December
31, 1997 is $625.
The aggregate scheduled annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
TERM TERM
LOAN A LOAN B BONDS TOTAL
------- ------ ----- ------
<S> <C> <C> <C> <C>
1998........................................... $ 3,000 $ 100 $ -- $3,100
1999........................................... 4,500 100 -- 4,600
2000........................................... 5,000 100 -- 5,100
2001........................................... 5,000 1,550 -- 6,550
2002........................................... 2,500 4,750 -- 7,250
Thereafter..................................... -- 3,250 4,000 7,250
------- ------ ----- ------
Total long-term debt........................... 20,000 9,850 4,000 33,850
Less current installments...................... 20,000 9,850 4,000 33,850
------- ------ ----- ------
Long-term debt, excluding current
installments.................................. $ -- $ $ -- $ --
======= ====== ===== ======
</TABLE>
F-17
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's line of credit and term loan agreements include various
financial covenants with which the Company must comply. These covenants
generally restrict the amount of capital expenditures and dividend
distributions, and require the Company to meet minimum requirements for
earnings, leverage, and fixed charge coverage. All borrowings under the line
of credit and the term loans are secured by substantially all of the Company's
assets.
During 1997 the Company and the bank group for the credit line and term
loans amended the related loan agreement to enable the Company to maintain
compliance with its loan covenants through December 31, 1997. The Company
projects, however, that it will be in default on certain financial loan
covenants (related to earnings before income taxes, depreciation and
amortization) when next calculated as of February 28, 1998. Therefore, all
amounts due under the term loans have been classified as current.
Additionally, the industrial revenue bonds are supported by a letter of credit
issued by the bank group which is subject to the same financial loan covenants
as the line of credit and term loan. Therefore, the industrial revenue bonds
have also been classified as current. Management of the Company has not sought
to further amend or restructure the loan agreement to maintain compliance with
such covenants due to the planned merger discussed in note 16 and related
senior note financing. Management's plan should the Company not consummate the
merger and related financing is to commence negotiations with the bank group
to amend or restructure the loan agreement. Management believes that it would
be able to reach mutually agreeable terms with the bank lending group to allow
repayment of the debt on a long-term basis.
(12) CUSTOMER TERMINATION OF PURCHASE ARRANGEMENT
During 1997, a customer terminated its packaging purchase arrangement with
the Company. As a result of this termination the Company received $840 as
compensation for manufacturing costs incurred. This credit was recorded as a
reduction of cost of goods sold.
(13) INCOME TAXES
Income tax expense attributable to income from continuing operations for the
years ended December 31, 1995, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current tax expense:
U.S. federal........................................ $1,962 $1,616 $1,292
U.S. state and local................................ 322 134 57
------ ------ ------
2,284 1,750 1,349
------ ------ ------
Deferred tax expense:
U.S. federal........................................ 113 215 (504)
U.S. state and local................................ 20 38 (91)
------ ------ ------
133 253 (595)
------ ------ ------
Total income tax expense.............................. $2,417 $2,003 $ 754
====== ====== ======
</TABLE>
F-18
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total income tax expense for the years ended December 31, 1995, 1996 and
1997 differed from the amount computed by applying the U.S. Federal income tax
rate of 34 percent to income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ----
<S> <C> <C> <C>
Computed "expected" tax expense.......................... $1,936 $1,679 $730
State income taxes, net of federal benefit............... 225 113 --
Other, net............................................... 256 211 24
------ ------ ----
Total income tax expense................................. $2,417 $2,003 $754
====== ====== ====
</TABLE>
The tax effects of temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities that give rise to
significant portions of the net deferred tax liability were as follows at
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Gross deferred tax assets:
Accounts receivable..................................... $ 101 $ 212
Inventories............................................. 235 362
Other................................................... 49 87
------- -------
Total gross deferred tax assets........................... 385 661
------- -------
Gross deferred tax liabilities:
Property, plant and equipment........................... (1,428) (1,245)
Prepaid expenses........................................ (198) (62)
------- -------
Total gross deferred tax liabilities...................... (1,626) (1,307)
------- -------
Net deferred tax liability................................ $(1,241) $ (646)
======= =======
</TABLE>
(14) COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain employee-
shareholders which expire at the end of the year 2000. The aggregate
commitment for future salaries, excluding bonuses, under these employment
agreements at December 31, 1997 is approximately $1,926.
(15) RELATED PARTY TRANSACTIONS
The Company leases manufacturing and warehouse premises in Warrington,
Pennsylvania, from Melvin B. Herrin for $336 annually and is adjustable for
inflation beginning in 2001. Melvin B. Herrin is Chairman of the Board of
Directors and CEO of the Company. The Company leases manufacturing and
warehouse premises in Louisa, Virginia, from Dena Corporation, a company
wholly-owned by Melvin B. Herrin, for $273 annually and is adjustable for
inflation beginning in 2001. Both leases expire in 2005 and may be extended
for an additional five years at the option of the Company.
Arthur S. Keyser, a director of the Company, is a senior managing partner in
the firm of Kleinbard, Bell & Brecker, which received professional fees of
$346, $120 and $83 in 1995, 1996 and 1997, respectively, for legal advice
provided in the normal course of business.
Certain key members of management signed $5 promissory notes with the
Company in exchange for their common stock shares. These promissory notes
which total $35 are interest-free and have no stated maturity date.
F-19
<PAGE>
KFI HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16) STOCK OPTION PLANS
Stock options which were granted in the past to members of executive
management have been terminated as of June 7, 1996. The value of the options
to be paid was $243 as of June 7, 1996. As of December 31, 1997, $58 was the
remaining obligation and has been recorded as deferred compensation. Deferred
compensation is payable in five equal installments beginning in June 1997,
only if the individual is working for the Company at the time the installment
becomes payable. The value of the options recorded in accrued expenses is
payable upon demand.
(17) SUBSEQUENT EVENTS
The Company, in the first quarter of 1998, plans to enter into a merger with
AGI Incorporated (AGI) whereby the shareholders of the Company will make a
contribution of equity which, along with the proceeds from a contemporaneous
offering of senior subordinated notes, will be used to acquire shares of AGI
and repay amounts outstanding under the secured term loans described in note
11.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS
OF AGI INCORPORATED:
We have audited the accompanying balance sheet of AGI Incorporated as of
December 31, 1997, and the related statements of income, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of AGI Incorporated for the years ended December 31, 1996 and 1995
were audited by other independent accountants whose reports dated February 25,
1997 and March 1, 1996, respectively, expressed unqualified opinions on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements audited by us present fairly, in
all material respects, the financial position of AGI Incorporated at December
31, 1997, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
Price Waterhouse LLP
Chicago, Illinois
February 9, 1998
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
AGI INCORPORATED:
We have audited the accompanying balance sheet of AGI Incorporated (an
Illinois corporation) as of December 31, 1996, and the related statements of
income, shareholders' equity and cash flows for the years ended December 31,
1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AGI Incorporated as of
December 31, 1996, and the results of its operations and its cash flows for
the years ended December 31, 1996 and 1995 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Milwaukee, Wisconsin
February 25, 1997.
F-22
<PAGE>
AGI INCORPORATED
BALANCE SHEETS AS OF DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT FOR COMMON STOCK DATA)
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash.......................................................... $ 17 $ 1,029
Trade accounts receivable--
Net of reserves of $513 and $388 in 1996 and 1997,
respectively............................................... 15,189 15,921
Other receivables............................................. 752 831
Inventories (Notes 2 and 3)................................... 7,540 6,407
Prepaid expenses.............................................. 452 803
------- -------
Total current assets............................................ 23,950 24,991
------- -------
Long-term assets:
Property, plant and equipment, net (Notes 2 and 4)............ 31,788 32,785
Other assets.................................................. 1,190 1,143
------- -------
Total assets.................................................... $56,928 $58,919
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft................................................ $ 2,493 $ --
Current maturities of long-term debt (Note 8)................. 2,407 1,980
Accounts payable and accrued liabilities (Note 5)............. 14,105 18,067
Installment note payable...................................... 1,007 56
------- -------
Total current liabilities....................................... 20,012 20,103
------- -------
Long-term debt, less current maturities (Note 8)................ 15,834 14,060
Other long-term liabilities..................................... 171 --
Shareholders' equity:
Common stock, par value $1 per share; authorized 1,500,000
shares; 909,714 issued and outstanding in both 1997 and 1996
(Notes 11
and 12)...................................................... 910 910
Paid-in capital............................................... 565 565
Retained earnings............................................. 19,436 23,281
------- -------
Total shareholders' equity...................................... 20,911 24,756
------- -------
Total liabilities and shareholders' equity...................... $56,928 $58,919
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE>
AGI INCORPORATED
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net sales........................................... $97,463 $92,834 $108,281
Cost of goods sold.................................. 74,441 67,860 76,459
------- ------- --------
Gross profit........................................ 23,022 24,974 31,822
------- ------- --------
Selling, general and administrative expenses........ 15,374 15,894 19,444
Stock-based compensation expense (Note 12).......... -- 171 2,326
------- ------- --------
Operating income.................................... 7,648 8,909 10,052
Other income (expense):
Interest income................................... 135 36 31
Interest expense (Note 8)......................... (1,500) (1,406) (1,273)
Gain (loss) on sale of fixed assets............... 45 (204) 139
------- ------- --------
Income before income taxes.......................... 6,328 7,335 8,949
State income taxes (Note 6)......................... (23) (234) (231)
------- ------- --------
Net income.......................................... $ 6,305 $ 7,101 $ 8,718
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
AGI INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED SUBSCRIPTIONS
STOCK CAPITAL EARNINGS RECEIVABLE TOTAL
------ ------- -------- ------------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994.... $916 $592 $11,787 $(11) $13,284
---- ---- ------- ---- -------
Net income for the year....... -- -- 6,305 -- 6,305
Distributions to
shareholders................. -- -- (2,144) -- (2,144)
Payments received for
subscribed stock............. -- -- -- 11 11
Repurchase of common stock.... (6) (27) (147) -- (180)
---- ---- ------- ---- -------
Balance, December 31, 1995.... 910 565 15,801 -- 17,276
Net income for the year....... -- -- 7,101 -- 7,101
Distributions to
shareholders................. -- -- (3,466) -- (3,466)
---- ---- ------- ---- -------
Balance, December 31, 1996.... 910 565 19,436 -- 20,911
Net income for the year....... -- -- 8,718 -- 8,718
Distributions to
shareholders................. -- -- (4,873) -- (4,873)
---- ---- ------- ---- -------
Balance, December 31, 1997.... $910 $565 $23,281 $-- $24,756
==== ==== ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
AGI INCORPORATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, BRACKETS DENOTE CASH DECREASES)
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $6,305 $7,101 $ 8,718
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization..................... 3,965 4,587 4,762
Loss (gain) on sale of fixed assets............... (45) 204 (139)
Changes in assets and liabilities--
Trade accounts receivable, net.................. (3,811) 605 (732)
Inventories..................................... 492 (1,661) 1,133
Accounts payable and accrued liabilities........ 1,981 (124) 2,558
Bank overdrafts................................. (419) (1,316) (2,493)
Other, net...................................... (224) 506 849
------ ------ -------
Net cash provided by operating activities..... 8,244 9,902 14,656
------ ------ -------
Cash flows from investing activities:
Capital expenditures................................ (9,792) (7,644) (6,027)
Proceeds from sale of fixed assets.................. 981 822 408
------ ------ -------
Net cash used in investing activities........... (8,811) (6,822) (5,619)
------ ------ -------
Cash flows from financing activies:
Net change in borrowings under revolving line-of-
credit agreement................................... (4,000) (3,000) --
Proceeds from issuance of industrial revenue bonds.. 7,640 -- --
Payments on long-term debt.......................... (1,421) (1,494) (2,201)
Proceeds from term note............................. -- 4,536 --
Payments received on subscriptions receivable....... 11 -- --
Bond funds held in trust............................ (1,069) 1,069 --
Distributions to shareholders....................... (2,144) (3,467) (4,873)
Repurchase of common stock.......................... (180) -- --
Proceeds from installment note...................... 1,735 -- --
Payment of installment note......................... -- (728) (951)
------ ------ -------
Net cash provided by (used in) financing
activities..................................... 572 (3,084) (8,025)
------ ------ -------
Increase (decrease) in cash........................... 5 (4) 1,012
Cash, beginning of year............................... 16 21 17
------ ------ -------
Cash, end of year..................................... $ 21 $ 17 $ 1,029
====== ====== =======
Supplemental disclosures:
Cash payments for--
Interest, net of capitalization................... $1,589 $1,475 $ 1,304
State income taxes................................ 62 103 69
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
AGI INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
NOTE 1--BUSINESS DESCRIPTION
AGI Incorporated (the "Company") is engaged in the manufacturing of high-
quality printed packaging products for customers primarily in the
entertainment, cosmetics, multimedia and tobacco industries.
Sales to a significant customer amounted to 11% of total sales in 1995.
Sales to two significant customers amounted to 21% and 28% of total sales in
1996 and 1997, respectively.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
Net revenues are recognized upon shipment to a customer pursuant to specific
purchase orders.
Cash equivalents
The Company defines cash equivalents as highly liquid short-term investments
with an original maturity of three months or less when purchased. The carrying
amount of short-term investments approximates fair value because of the short
maturity of these investments.
Inventories
Inventories are stated at the lower of cost or market and include the
appropriate elements of material, labor and manufacturing overhead costs. Cost
is determined using the last-in, first-out ("LIFO") method for the paper
component of inventory and the first-in, first-out ("FIFO") method for all
other components of inventory.
Property, plant and equipment
Property, plant and equipment are stated at cost and depreciated over their
estimated useful lives using the straight-line method (3 to 10 years for
machinery and equipment and 10 to 19 years for buildings and leasehold
improvements).
The Company capitalized interest expense incurred of $155, $73 and $16 in
1995, 1996 and 1997, respectively, during the construction and installation of
certain facilities and equipment.
Depreciation expense included in the statements of income was $3,965, $4,587
and $4,762 for the years ended December 31, 1995, 1996 and 1997, respectively.
Bond issuance costs
Costs associated with the issuance of Multi-Mode Industrial Project Revenue
Bonds have been capitalized and are included in Other Assets. These costs are
being amortized over the term of the bonds.
Employee stock awards
The Company accounts for employee stock awards in accordance with the
provisions of APB No. 25, "Accounting for Stock Issued to Employees," and
related interpretations (APB No. 25). There were no differences between
applying APB No. 25 and the accounting that would have resulted had the
Company applied the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation".
F-27
<PAGE>
AGI INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Fair value of financial instruments
Management believes that the fair value of all financial instruments
approximates their carrying value.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and related disclosures. Actual
results could differ from these estimates.
NOTE 3--INVENTORIES
Inventories at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Raw materials................................................. $1,426 $1,748
Work in process and finished goods............................ 6,114 4,659
------ ------
$7,540 $6,407
====== ======
</TABLE>
Inventories accounted for under the LIFO method at December 31, 1995, 1996
and 1997 were $2,179, $3,109 and $2,748, respectively. Under the FIFO method
of accounting, such inventories would have been $463, $377 and $249 higher
than those reported at December 31, 1995, 1996 and 1997, respectively. During
1997, LIFO inventory quantities were reduced resulting in a partial
liquidation of inventory at LIFO costs, the effect of which increased net
income by $128.
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net at December 31, 1997 and 1996 consisted
of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Land..................................................... $ 67 $ 218
Building and leasehold improvements...................... 10,331 10,981
Machinery and equipment.................................. 47,345 50,965
Construction in progress................................. 145 1,306
-------- --------
57,888 63,470
Less--Accumulated depreciation........................... (26,100) (30,685)
-------- --------
Net property, plant and equipment........................ $ 31,788 $ 32,785
======== ========
</TABLE>
NOTE 5--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at December 31, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Trade accounts payable...................................... $ 5,048 $ 3,606
Rebates payable............................................. 3,112 4,039
Employee compensation and withholdings...................... 4,391 8,562
Other....................................................... 1,554 1,860
------- -------
$14,105 $18,067
======= =======
</TABLE>
F-28
<PAGE>
AGI INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--INCOME TAXES
No provision has been made for amounts representing current or deferred
Federal tax liabilities as the Company is treated as an S-Corporation.
Accordingly, any such tax liabilities are the obligation of the individual
shareholders.
The Company is a tax-paying entity in the states of Illinois, California and
New York. The provision for these taxes is included in the accompanying
statements of income.
NOTE 7--EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution plan covering substantially all
employees. The Company contribution is discretionary and is determined each
year by the Company's Board of Directors. The Company recorded a provision for
this plan of $450, $622 and $738 for 1995, 1996 and 1997, respectively.
The Company also sponsors a retirement savings plan in which all employees
may voluntarily elect to participate. Under this plan, the Company matches a
portion of the amounts contributed by employees. The Company recorded expense
related to this plan of $131, $212 and $211 in 1995, 1996 and 1997,
respectively.
NOTE 8--LONG-TERM DEBT
Long-term debt as of December 31, 1996 and 1997, consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
City of Jacksonville, Illinois Multi-Mode Industrial Project
Revenue Bonds, variable interest, due on February 1,
2026....................................................... $ 7,640 $ 7,640
Bank term note, interest at prime or LIBOR plus 2.25%, due
in quarterly installments of $358,000 through March 2001
with the remaining balance due June 2001................... 9,284 7,852
Subordinated notes payable to two current and one former
shareholder(s), interest at prime not to exceed 10% over
the life of the notes, 8.5% at December 31, 1997, due in
annual installments through 1998........................... 1,302 548
Capitalized lease obligations, 6.2% to 7.9%, due in varying
installments through September 1997........................ 15 --
------- -------
18,241 16,040
Less--Current portion....................................... 2,407 1,980
------- -------
Total long-term debt...................................... $15,834 $14,060
======= =======
</TABLE>
Future maturities of long-term debt including line-of-credit borrowings as
of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998................................................................ $ 1,980
1999................................................................ 1,432
2000................................................................ 1,432
2001................................................................ 3,556
2002................................................................ --
Thereafter.......................................................... 7,640
-------
$16,040
=======
</TABLE>
F-29
<PAGE>
AGI INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The Company has a credit agreement with Bank of America, Illinois, dated
November 22, 1993, for a bank term note and line of credit (the "Credit
Facility"). The agreement was amended on July 30, 1996, increasing the term
note to $10,000. The available line of credit is the lower of $11,000 or the
borrowing base, which is a percentage of eligible accounts receivable and
inventories, reduced by amounts outstanding under certain letters of credit.
Borrowings under the Credit Facility may, at the Company's election, bear
interest at prime or the London International Bank Offer Rate (30, 60 or 90-
day) plus 2.25%. At December 31, 1997, the interest rate on all borrowings
were at LIBOR rates ranging from 8.125% to 8.15625%. The line of credit
agreement extends through October 1998. The Company pays a commitment fee of
1/2 of 1% per annum on the amount of available credit over the amount
outstanding, plus any outstanding letters of credit available at December 31,
1997.
On January 19, 1995, the City of Jacksonville, Illinois issued an aggregate
principal amount of $7,640 of Multi-Mode Industrial Project Revenue Bonds. The
Bonds were issued to fund a loan, under a loan agreement, dated January 1,
1995, between the City of Jacksonville and the Company to finance the cost of
acquiring land and constructing and equipping the Company's manufacturing
facility in Jacksonville, Illinois, which became operational during the second
quarter of 1995. The variable rate bonds mature on February 1, 2026. Interest
rates on the bonds ranged from 3.4741% to 4.3938% during 1997. The interest
rate at December 31, 1997 was 4.2%. The bonds are secured by an irrevocable
letter of credit issued by Bank of America, Illinois, under an agreement with
the Company.
The debt agreements have certain restrictions which, among other things,
require that the Company maintain a specified amount of tangible net worth, as
defined. The Company was in compliance with the debt agreements at December
31, 1997 and 1996. The agreements with Bank of America, Illinois, are
collateralized by substantially all of the assets of the Company.
NOTE 9--LEASES
The Company leases a significant portion of its real estate, including the
Melrose Park and Franklin Park facilities and various sales offices under
operating leases which expire over the next four years. The lease for the
Melrose Park facility is with a related party as described in Note 10.
Minimum future rental commitments under noncancellable operating leases
having initial or remaining terms in excess of one year as of December 31,
1997, are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 2,594
1999.............................................................. 2,266
2000.............................................................. 2,051
2001.............................................................. 1,577
2002.............................................................. 1,350
Thereafter........................................................ 297
-------
Total minimum payments............................................ $10,135
=======
</TABLE>
Rental expense was $1,814, $2,230 and $2,556 for 1995, 1996 and 1997,
respectively.
NOTE 10--RELATED PARTY TRANSACTIONS
The Company leases its primary operating location under an operating lease
which expires in September 2002. The Company has the option to renew the lease
for up to an additional five years. The lessor is a partnership that includes
certain executives of the Company. The Company has paid a deposit to the
partnership of approximately $340 which is reflected in the accompanying
balance sheets as part of Other Assets. Rents under this lease amounted to
approximately $475 in 1997, 1996 and 1995.
F-30
<PAGE>
AGI INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
In connection with a recapitalization in 1987, the Company signed notes with
two current shareholders to finance a portion of the purchase price of the
reacquired stock. These notes are subordinated to the term loan, line of
credit and the revenue bonds and bear interest at the prime rate, not to
exceed 10% over the life of the notes.
NOTE 11--SHAREHOLDERS' AGREEMENT
Under the terms of the shareholders' agreement, the Company may be required
to repurchase at fair value, as determined by the Board of Directors, any
shareholder's common stock upon death, disability or, in the case of
management employees, resignation from the Company.
NOTE 12--EQUITY INCENTIVE PLAN
The Company sponsors an equity incentive plan that allows the Board of
Directors to grant key employees stock awards up to an aggregate amount of
100,000 shares in the form of stock options and stock appreciation rights
(SARs). The terms of the awards may not exceed 12 years and vesting generally
occurs ratably over a four year period with acceleration of vesting in the
event of a change in control of the Company.
There were grants of SARs in 1995 and 1996, all of which had 10 year terms.
All benefits for the SARs will be paid in cash. There have been no grants of
options. Details relating to the SAR units for the three years ended December
31, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------------- --------------- ---------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
RIGHTS PRICE RIGHTS PRICE RIGHTS PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year......................... -- -- 16,000 $30.16 95,454 $29.98
Granted....................... 16,000 $30.16 79,454 29.94 -- --
------ ------ ------ ------ ------ ------
Outstanding at end of year.... 16,000 $30.16 95,454 $29.98 95,454 $29.98
====== ====== ====== ====== ====== ======
Vested at end of year......... 694 29,808 65,223
====== ====== ======
</TABLE>
The expense recorded associated with the SARs was $171 and $2,326 in 1996
and 1997, respectively. The expense in 1995 was not significant.
NOTE 13--RECENT DEVELOPMENTS
The Company plans to merge with AGI Acquisition Corp., a subsidiary of KFI
Holding Corporation ("KFI Holding"), in the first quarter of 1998. Klearfold,
Inc., a wholly-owned subsidiary of KFI Holding, is a manufacturer of high
quality clear packaging for various consumer products. Under the terms of the
merger, the stockholders of KFI Holding agreed to contribute the entire
outstanding capital stock of KFI Holding and a warrant to purchase KFI Holding
capital stock and to invest approximately $4.6 million in cash; and certain
stockholders and holders of stock appreciation rights of AGI agreed to
contribute to KFI Holding shares of common stock and to invest the proceeds of
their stock appreciation rights, totalling an aggregate of $14.4 million. In
exchange for these contributions and cash investments, KFI Holding agreed to
issue to the contributing or investing parties shares of its common stock.
Concurrently with the transactions, KFI Holding will change its name to IMPAC
Group, Inc. AGI and Klearfold will be wholly-owned subsidiaries of IMPAC
Group, Inc.
F-31
<PAGE>
TINSLEY ROBOR PLC
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
----- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Turnover............................ 2 64,992 50,637 47,065
Cost of sales....................... 45,020 35,135 33,165
------ ------ ------
Gross profit........................ 19,972 15,502 13,900
------ ------ ------
Distribution costs.................. 4,969 4,301 3,919
Administrative expenses............. 7,343 6,156 5,732
------ ------ ------
12,312 10,457 9,651
------ ------ ------
Operating profit.................... 3,4,5 7,660 5,045 4,249
Interest............................ 6 1,048 489 739
------ ------ ------
Profit on ordinary activities before
taxation........................... 6,612 4,556 3,510
Tax on profit on ordinary
activities......................... 7 2,233 1,582 1,220
------ ------ ------
Profit on ordinary activities after
taxation........................... 8 4,379 2,974 2,290
Dividends........................... 9 1,226 1,037 617
------ ------ ------
Retained profit for the year........ 21 3,153 1,937 1,673
====== ====== ======
Earnings per ordinary share......... 10 11.8p 8.8p 8.5p
====== ====== ======
</TABLE>
F-32
<PAGE>
TINSLEY ROBOR PLC
STATEMENT OF RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 MARCH
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Profit on ordinary activities after taxa-
tion..................................... 4,379 2,974 2,290
Revaluation of freehold properties........ -- -- (552)
Exchange difference on retranslation of
net assets of subsidiary undertakings.... (665) (566) 11
----- ----- -----
Total recognised gains and losses relating
to the year.............................. 3,714 2,408 1,749
===== ===== =====
</TABLE>
NOTE OF HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR ENDED 31 MARCH
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Reported profit on ordinary activities be-
fore taxation............................. 6,612 4,556 3,510
Difference between a historical cost depre-
ciation charge and the actual charge cal-
culated on the revalued amount............ 16 38 40
Revaluation realised on disposal of free-
hold property............................. -- 366 --
----- ----- -----
Historical cost profit on ordinary activi-
ties before taxation...................... 6,628 4,960 3,550
===== ===== =====
Historical cost retained profit for the
year...................................... 3,169 2,341 1,713
===== ===== =====
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 MARCH
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Total recognised gains and losses......... 3,714 2,408 1,749
Dividends................................. (1,226) (1,037) (617)
Issue of shares........................... 103 11,492 1,386
Goodwill arising on acquisitions (note
13)...................................... (11,484) (1,282) (1,788)
Shareholders' funds at April 1............ 22,298 10,717 9,987
------- ------ ------
Shareholders' funds at March 31........... 13,405 22,298 10,717
======= ====== ======
</TABLE>
F-33
<PAGE>
TINSLEY ROBOR PLC
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net cash inflow from operating activities...... 3 9,199 7,162
------- ------
Returns on investments and servicing of fi-
nance:
Interest received.............................. 330 70
Interest paid.................................. (510) (166)
Interest paid relating to finance leases and
hire purchase
contracts..................................... (629) (526)
------- ------
Net cash outflow from returns on investments
and servicing of
finance....................................... (809) (622)
------- ------
Taxation:
Corporation tax paid........................... (2,684) (1,085)
------- ------
Capital expenditure: Payments to acquire tangi-
ble fixed assets.............................. (4,161) (8,084)
Proceeds of disposal of tangible fixed assets.. 816 1,632
------- ------
Net cash outflow from capital expenditure...... (3,345) (6,452)
------- ------
Acquisitions and disposals:
Payments to acquire subsidiary undertakings.... (13,455) (1,069)
------- ------
Equity dividends paid.......................... (1,113) (747)
------- ------
Management of liquid resources:
7 day deposits................................. 4,025 (4,025)
------- ------
Net cash outflow before financing.............. (8,182) (6,838)
======= ======
Financing:
Issue of ordinary share capital................ 12 11,973
Expenses in connection with issue of shares.... 20, 21 -- (481)
Net movement in bank loans..................... 17, 18 5,083 1,548
Net movement in hire purchase loans and capital
element of
finance leases................................ 17, 18 (359) (109)
------- ------
Net cash inflow from financing................. 4,736 12,931
------- ------
(Decrease)/increase in cash.................... 18 (3,446) 6,093
======= ======
</TABLE>
F-34
<PAGE>
TINSLEY ROBOR PLC
GROUP BALANCE SHEET
AT 31 MARCH
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C> <C>
Fixed assets:
Tangible assets................................. 11 26,291 24,218
------- ------
Current assets:
Stocks.......................................... 14 4,677 3,508
Debtors......................................... 15 14,007 12,581
Cash at bank and in hand........................ 1,224 7,168
------- ------
19,908 23,257
Creditors: amounts falling due within one year.. 16 18,203 15,799
------- ------
Net current assets.............................. 1,705 7,458
------- ------
Total assets less current liabilities........... 27,996 31,676
------- ------
Creditors: amounts falling due after more than
one year....................................... 17 13,276 8,374
Provision for liabilities and charges........... 19 1,315 1,004
------- ------
14,591 9,378
------- ------
13,405 22,298
======= ======
Shareholders' funds--equity interests:
Called up share capital......................... 20 1,864 1,853
Share premium account........................... 21 16,730 16,638
Revaluation reserve............................. 21 1,040 1,056
Capital redemption reserve...................... 21 89 89
Capital reserve................................. 21 121 121
Goodwill reserve................................ 21 (14,554) (3,070)
Profit and loss account......................... 21 8,115 5,611
------- ------
13,405 22,298
======= ======
</TABLE>
F-35
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The accounts are prepared under the historical cost convention, modified to
include the revaluation of freehold land and buildings, and in accordance with
applicable accounting standards.
BASIS OF CONSOLIDATION
The consolidated accounts include the results of Tinsley Robor plc and all
its subsidiary undertakings for the year to March 31. The results of
subsidiary undertakings acquired and disposed of during the year are
consolidated from or up to the effective date of acquisition or disposal.
Goodwill, being the excess of fair value of consideration over fair value of
net assets acquired, arising from the consolidation of subsidiary
undertakings, is set off against reserves. Where consideration is to be paid
over a number of years contingent on future events it is determined and
adjusted on the basis of the current best estimates of the ultimate outcome.
DEPRECIATION
Depreciation is provided on tangible fixed assets at rates calculated to
write off the cost or valuation, less estimated residual value based on prices
prevailing at date of acquisition or revaluation, of each asset evenly over
its expected useful life, as follows:
<TABLE>
<S> <C>
Freehold buildings.................................. --over 25 to 50 years
Factory improvements................................ --over 3 to 5 years
Plant and equipment................................. --over 3 to 10 years
Commercial vehicles................................. --over 4 years
Cars................................................ --over 5 years
</TABLE>
STOCKS
Raw materials, work-in-progress and finished goods are stated at the lower
of cost and net realisable value as follows:
Cost incurred in bringing each product to its present location and condition:
<TABLE>
<S> <C>
Raw materials --purchase cost on a first-in, first-out basis
Work-in-progress and --cost of direct materials and labour plus attributable overheads
finished goods based on normal level of activity
</TABLE>
Net realisable value is based on estimated selling price less further costs
expected to be incurred to completion and disposal.
DEFERRED TAXATION
Deferred taxation is provided on the liability method on all timing
differences, including those relating to pensions, to the extent that they are
expected to reverse without being replaced, calculated at the rate at which it
is estimated that tax will be payable.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction or at the contract rate if the transaction is covered
by a forward exchange contract. The results of
F-36
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
overseas branches and subsidiary undertakings are translated at the average
rates of exchange prevailing during the year and their financial positions at
the year end are translated at the rates of exchange then ruling. The exchange
difference arising on the retranslation of opening net assets is taken
directly to reserves. All other translation differences are taken to the
profit and loss account with the exception of differences on foreign currency
borrowings and inter company loans to the extent that they are used to finance
or provide a hedge against group equity investments in foreign enterprises,
which are taken directly to reserves together with the exchange difference on
the net investment in these enterprises.
LEASING AND HIRE PURCHASE COMMITMENTS
Assets obtained under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligations is charged direct to the profit
and loss account over the period of the leases and contracts.
Rentals paid under operating leases are charged to income on a straight line
basis.
PENSION SCHEMES
The group operates two types of pension scheme, a defined benefit scheme and
a number of defined contribution schemes.
Contributions relating to the defined contribution schemes are charged to
the profit and loss account as they become payable, in accordance with the
rules of the schemes.
Contributions relating to the defined benefit scheme are charged to the
profit and loss account so as to spread the cost of pensions over the
employees' working lives within the group. The regular cost is attributed to
individual years using the attained age aggregate method. Variations in the
pension cost, which are identified as a result of actuarial valuations, are
amortised over the average expected remaining working lives of employees in
proportion to their expected payroll costs. Differences between the amounts
funded and the amounts charged to the profit and loss account are treated as
either provisions or prepayments in the balance sheet.
2. TURNOVER AND GROUP RESULTS
Turnover represents the amount of goods sold and services provided which
fall within the group's ordinary activities, all of which are continuing,
stated net of value added tax.
Turnover and profit before taxation were attributable to the group's
principal activity of printing and packaging. Turnover and net assets by
geographical source are analysed as follows:
<TABLE>
<CAPTION>
TURNOVER NET ASSETS
----------------------------------- -----------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 40,517 38,748 36,138 7,582 18,708 8,233
Other European.......... 24,475 11,889 10,927 5,823 3,590 2,484
------ ------ ------ ------ ------ ------
64,992 50,637 47,065 13,405 22,298 10,717
====== ====== ====== ====== ====== ======
</TABLE>
An analysis of profits before taxation are not given as the information is
considered to be commercially sensitive.
F-37
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
An analysis of turnover by geographical
market is given below:
United Kingdom.......................... 38,971 37,738 35,129
Europe.................................. 26,000 12,861 11,796
Rest of world........................... 21 38 140
------ ------ ------
64,992 50,637 47,065
====== ====== ======
</TABLE>
3. OPERATING PROFIT
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
(A) OPERATING PROFIT IS STATED AFTER
CHARGING/(CREDITING):
Auditors' remuneration
--audit services......................... 116 103 90
--non audit services..................... 74 79 37
Depreciation of owned fixed assets........ 2,818 2,290 1,613
Depreciation of assets held under finance
leases and hire purchase contracts....... 1,313 851 753
Profit on disposal of tangible fixed as-
sets..................................... (55) (375) (97)
Operating lease rentals
--plant and machinery.................... 366 304 229
--land and buildings..................... 919 794 409
====== ====== =====
(B) RECONCILIATION OF OPERATING PROFIT TO
NET CASH INFLOW FROM OPERATING
ACTIVITIES:
Operating profit.......................... 7,660 5,045
Depreciation.............................. 4,131 3,141
Profit on disposal of tangible fixed as-
sets..................................... (55) (375)
(Increase)/decrease in debtors............ (118) 693
Decrease in creditors..................... (1,180) (1,040)
Increase in deferred bonus creditor....... -- 66
Reorganisation provision.................. -- --
Increase in stock......................... (982) (183)
Exchange difference....................... (257) (185)
------ ------
Net cash inflow from operating activi-
ties..................................... 9,199 7,162
====== ======
</TABLE>
4. DIRECTORS
<TABLE>
<CAPTION>
1998 1997 1996
(A) REMUNERATION ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Fees....................................... 65 55 35
Salaries................................... 689 546 503
Performance related bonus--current......... 116 77 96
- --deferred................................. -- 66 80
Benefits................................... 43 43 69
----- --- ---
Aggregate emoluments....................... 913 787 783
Pension contributions--money purchase...... 47 47 53
----- --- ---
960 834 836
Pension contributions--final salary........ 69 49 48
----- --- ---
1,029 883 884
===== === ===
</TABLE>
F-38
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
<TABLE>
<CAPTION>
MONEY
INDIVIDUAL DIRECTOR'S BONUS PURCHASE 1998 1997
EMOLUMENTS SALARY/FEES PAYABLE BENEFITS PENSION TOTAL TOTAL
- --------------------- ----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Executive directors
L Newbon................ 134 37 8 -- 179 172
A T Garnish............. 99 27 7 -- 133 132
P E Judd................ 110 7 2 20 139 138
H H Smit................ 82 18 -- -- 100 --
A J Smith............... 99 -- 11 27 137 136
N Toms.................. 110 27 2 -- 139 135
Non-executive directors
M S Lawson (chairman)... 50 -- 4 -- 54 43
J M M Rose (president).. 55 -- 9 -- 64 63
J M Woodgate............ 15 -- -- -- 15 15
--- --- --- --- --- ---
754 116 43 47 960 834
=== === === === === ===
</TABLE>
The executive directors participate in a performance-related bonus scheme
based on profitability, the bonuses arising out of which are partly payable
immediately following the announcement of the group's results and partly
deferred. The bonuses are payable only if a dividend is payable to
shareholders in respect of the year and are subject to a maximum of 50% of
salary. The deferred element may be used to purchase shares which are held for
a minimum of three years within an employee benefit trust. The directors may
subscribe for the shares at the expiry of the three years at the price paid,
at which stage the deferred element of the bonus is paid. The dividends in
respect of these shares are waived and an additional bonus equivalent to the
amount of the dividend is payable to the participants. Expenses of the
employee benefit trust are borne by the company. At March 31, 1998 cumulative
deferred bonuses earned by the directors amounted to (Pounds)223,000.
(B) PENSION ENTITLEMENTS
The executive directors participate in the group's final salary pension
scheme. This is a contributory scheme and the normal retirement age for the
directors is 60. Directors can achieve the maximum pension of two-thirds of
their salary after 35 years service.
For death before retirement, a capital sum equal to three times basic salary
is payable, together with a spouse's pension of 50% of the member's
prospective pension at normal retirement date. For death in retirement, a
spouse's pension of 50% of the member's pre-commutation pension is payable
together with a lump sum if death is within five years of retirement.
Post retirement increases are purely discretionary and in practice have not
exceeded 3% per annum.
F-39
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
<TABLE>
<CAPTION>
TRANSFER VALUE
INCREASE IN OF THE INCREASE
ACCRUED ACCRUED PENSION IN ENTITLEMENT
YEARS OF PENSION DURING THE DURING THE
AGE AT SERVICE AT ENTITLEMENT AT YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
NAME 1998 1998 1998* 1998+ 1998++
- ---- --------- ---------- -------------- --------------- ---------------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
L Newbon................ 54 20 41 5 58
A T Garnish............. 51 4 10 2 27
P E Judd................ 43 10 17 2 13
A J Smith............... 52 15 25 3 35
N Toms.................. 46 19 27 3 29
</TABLE>
- --------
* The pension entitlement shown is that which would be paid annually on
retirement based on service to the end of the year (or earlier date of
exit), but excluding any future statutory entitlement to increases prior to
retirement which would be due after the year end.
+ The increase in accrued pension during the year excludes the increase for
inflation. The inflation rate used is that published by the Secretary of
State for Social Security in accordance with Schedule 3 of the Pension
Schemes Act 1993.
++The transfer value of the increase in entitlement is shown net of the
directors' own contributions to the scheme over the year. The transfer value
has been calculated in accordance with Actuarial Guidance Note GN11. This
value represents the cash equivalent of the increase in accrued benefit. For
this purpose it is assumed that the benefit entitlement is increased until
the normal retirement age in accordance with the statutory levels on the
notional basis that each director left the scheme at the end of the year.
F-40
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
5. EMPLOYEES
The average number of employees during the year was made up as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
NO. NO. NO.
<S> <C> <C> <C>
Office and management..................... 244 180 170
Manufacturing............................. 462 412 357
------ ------ ------
706 592 527
====== ====== ======
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Employee costs:
Wages and salaries...................... 18,084 14,996 13,360
Social security costs................... 2,323 1,613 1,534
Other pension costs..................... 382 273 260
------ ------ ------
20,789 16,882 15,154
====== ====== ======
6. INTEREST
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Interest payable:
Bank loans and overdrafts............... 448 108 175
Other loans............................. 818 563 564
------ ------ ------
1,266 671 739
Interest receivable....................... 218 182 --
------ ------ ------
1,048 489 739
====== ====== ======
Amounts included in the above relating to
finance leases and hire purchase
contracts................................ 647 542 364
====== ====== ======
7. TAXATION
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Tax on profit on ordinary activities:
Based on the profit for the year:
Corporation tax......................... 1,273 1,020 679
Deferred taxation....................... (16) 72 174
------ ------ ------
1,257 1,092 853
Overseas taxation....................... 991 497 304
------ ------ ------
2,248 1,589 1,157
Corporation tax (over)/under provided in
previous years......................... (15) (7) 63
------ ------ ------
2,233 1,582 1,220
====== ====== ======
8. PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Dealt with in the accounts of the parent
undertaking.............................. 82 1,149 1,758
====== ====== ======
</TABLE>
F-41
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
9. DIVIDENDS
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Ordinary:
Interim paid.............................. 409 333 203
Final proposed............................ 817 704 414
----- ----- ---
1,226 1,037 617
===== ===== ===
</TABLE>
Dividends in respect of 134,651 shares held by TR ESOP Limited have been and
will continue to be waived while the shares are held under the terms of the
performance related bonus scheme referred to in note 4(a) above.
10. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on profit on
ordinary activities after taxation of (Pounds)4,379,000 (1997--
(Pounds)2,974,000, 1996--(Pounds)2,290,000) and on 37,208,767 (1997--
33,592,213, 1996--26,799,124 being the weighted average number of ordinary
shares in issue throughout the year.
11. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD PLANT,
LAND AND FACTORY EQUIPMENT GROUP
BUILDINGS IMPROVEMENTS AND VEHICLES TOTAL
----------- ------------ ------------ -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Cost or valuation:
At April 1, 1997............ 2,297 983 33,519 36,799
On acquisition.............. 2,085 -- 8,249 10,334
Exchange rate adjustment.... (22) (77) (1,299) (1,398)
Additions................... 243 7 3,422 3,672
Disposals................... -- -- (2,592) (2,592)
----- --- ------ ------
At March 31, 1998........... 4,603 913 41,299 46,815
----- --- ------ ------
Depreciation:
At April 1, 1997............ 246 536 11,799 12,581
On acquisition.............. 680 -- 5,504 6,184
Exchange rate adjustment.... (3) (37) (276) (316)
Provided during the year.... 96 128 3,907 4,131
Disposals................... -- -- (2,056) (2,056)
----- --- ------ ------
At March 31, 1998........... 1,019 627 18,878 20,524
----- --- ------ ------
Net book value:
At March 31, 1998........... 3,584 286 22,421 26,291
===== === ====== ======
At March 31, 1997........... 2,051 447 21,720 24,218
===== === ====== ======
</TABLE>
The historical cost of the freehold land and buildings is (Pounds)3,451,800
(1997--(Pounds)1,136,300). Accumulated depreciation on an historical cost
basis is (Pounds)902,100 (1997--(Pounds)140,800).
The freehold land and buildings were last revalued in the year to March 31,
1996. The directors consider that the valuation remains in line with current
conditions in the commercial property market.
F-42
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
The net book values of plant, equipment and vehicles include the following
amounts relating to assets held under finance leases and hire purchase
contracts:
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Cost.................................................... 13,599 11,688
Accumulated depreciation................................ 3,038 1,828
------ ------
Net book value.......................................... 10,561 9,860
====== ======
</TABLE>
12. SUBSIDIARY UNDERTAKINGS
The accounts include the results of the following operating subsidiary
undertakings. The holdings are of ordinary shares.
<TABLE>
<CAPTION>
REGISTERED AND PRINCIPALLY OPERATING IN ENGLAND PERCENTAGE
AND WALES NATURE OF BUSINESS OWNED
- ----------------------------------------------- ------------------ ----------
<S> <C> <C>
Tinsley Robor Labels Label printing 100%
Limited (formerly Arun
Labels Limited).........
Howards Labels Limited... Label printing 100%
James Upton Limited...... Printing and finishing 100%
Pinepoint Limited........ Design and litho reproduction 100%
Sonicon Limited.......... Design and litho reproduction 100%
Tinsley Robor Audio and Packaging and fulfilment services 100%
Computer Services
Limited.................
Tinsley Robor Sales Obtaining orders for fellow subsidiary 100%
Limited................. undertakings
Tophurst Properties Holding of group properties 100%
Limited.................
<CAPTION>
INCORPORATED AND PRINCIPALLY OPERATING IN THE
NETHERLANDS
- ---------------------------------------------
<S> <C> <C>
James Upton Holding BV... Holding of shares in overseas subsidiaries 100%
James Upton BV*.......... Printing and finishing 100%
Van de Steeg Packaging Printing and finishing
BV*(formerly Holding
Lenteweg BV)............ 100%
<CAPTION>
REGISTERED AND PRINCIPALLY OPERATING IN THE
REPUBLIC OF IRELAND
- -------------------------------------------
<S> <C> <C>
Printing Resources Printing and finishing
Limited*................ 100%
<CAPTION>
REGISTERED AND PRINCIPALLY OPERATING IN AUSTRIA
- -----------------------------------------------
<S> <C> <C>
James Upton GmbH*........ Printing and finishing 100%
</TABLE>
*Shares held by a subsidiary company.
13. ACQUISITIONS DURING THE YEAR
On July 30, 1997 the company completed the acquisition of Holding Lenteweg
BV (Lenteweg (now renamed Van de Steeg Packaging BV)), a major European
supplier of specialist printed packaging to the music and multimedia industry,
for an initial cash consideration of NLG37.8 million ((Pounds)11.2 million). A
further NLG1 million ((Pounds)0.3 million) was paid on December 22, 1997. The
additional consideration was the maximum amount payable under the acquisition
agreement whereby the initial consideration was subject to adjustment by
reference to the post-tax profits of Lenteweg for its financial year ended
September 30, 1997.
F-43
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
Lenteweg's net assets at September 30, 1996 were NLG5,410,000 and its
profits after taxation tax for the year to September 30, 1996 were
NLG2,924,000.
Lenteweg's summarised profit and loss account for the period from October 1,
1996 to July 30, 1997, the effective date of acquisition, is as follows:
<TABLE>
<CAPTION>
NLG000
------
<S> <C>
Turnover................................................................. 31,883
------
Operating profit......................................................... 5,883
Interest................................................................. 228
------
Profit before tax........................................................ 5,655
Taxation................................................................. 1,983
------
Profit for the ten months ended July 30, 1997............................ 3,672
------
</TABLE>
There were no recognised gains and losses in the ten months ended July 30,
1997 other than the profit of NLG3,672,000.
On August 21, 1997 the company acquired the whole of the issued share
capital of Pinepoint Limited (Pinepoint), a pre-press company, for an initial
cash consideration of (Pounds)1.7 million. A maximum total of (Pounds)1
million of additional cash may be paid over the next three years dependant on
Pinepoint achieving certain performance criteria, for which provision has been
made in these accounts.
In the year to April 30, 1997 Pinepoint made a profit on ordinary activities
after taxation of (Pounds)49,000, on turnover of (Pounds)2 million. At April
30, 1997 Pinepoint had net assets of (Pounds)300,000. In the period from May
1, 1997 to August 21, 1997 Pinepoint made a profit after taxation of
(Pounds)51,000.
Details of the two acquisitions are as follows:
<TABLE>
<CAPTION>
HOLDING LENTEWEG BV PINEPOINT LIMITED TOTAL
(Pounds)000 (Pounds)000 (Pounds)000
------------------- ----------------- -----------
<S> <C> <C> <C>
Fixed assets................ 3,391 884 4,275
Fair value adjustments...... (235) 110 (125)
Stock....................... 249 44 293
Debtors..................... 1,863 456 2,319
Cash........................ 775 (159) 616
Creditors due in one year... (2,443) (735) (3,178)
Creditors due in over one
year....................... (1,125) (108) (1,233)
Provision for liabilities
and charges................ (32) (30) (62)
------ ----- ------
Net assets.............. 2,443 462 2,905
------ ----- ------
Consideration:
Cash...................... 11,500 1,700 13,200
Other acquisition costs... 132 57 189
Maximum further
consideration............ -- 1,000 1,000
------ ----- ------
Total cost of
investments............ 11,632 2,757 14,389
------ ----- ------
Goodwill on
acquisition............ 9,189 2,295 11,484
====== ===== ======
</TABLE>
The fair value adjustments are in respect of the revaluation of freehold
land and buildings.
F-44
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
14. STOCK
<TABLE>
<CAPTION>
1998 1997
(Pounds)000 (Pounds)000
----------- -----------
<S> <C> <C>
Raw materials........................................... 2,627 1,751
Work-in-progress........................................ 722 1,068
Finished goods.......................................... 1,328 689
----- -----
4,677 3,508
===== =====
</TABLE>
In the opinion of the directors there is no material difference between book
value and replacement cost.
15. DEBTORS
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Trade debtors........................................... 12,557 10,262
Amount due from debt factors............................ -- 106
Amounts owed by subsidiary undertakings................. -- --
Other debtors........................................... 792 1,417
Other prepayments....................................... 432 407
Pension scheme prepayment............................... 22 29
ACT recoverable......................................... 204 360
------ ------
14,007 12,581
====== ======
</TABLE>
The pension scheme prepayment and the advance corporation tax are
recoverable over more than one year.
16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Bank loans (note 17).................................. 1,565 482
Obligations under finance leases and hire purchase
contracts (note 17).................................. 2,257 1,975
Bank overdraft........................................ 77 39
Advances under debt factoring and invoice discounting
arrangements......................................... 1,535 --
Trade creditors....................................... 4,959 6,337
Amounts owed to subsidiary undertakings............... -- --
Current corporation tax............................... 1,583 1,571
ACT payable........................................... 306 257
Other taxes and social security costs................. 1,209 866
Other creditors....................................... 1,656 1,948
Accruals.............................................. 2,239 1,620
Dividend.............................................. 817 704
------ ------
18,203 15,799
====== ======
</TABLE>
Advances under debt factoring and invoice discounting arrangements are
secured upon certain of the group's trade debtors which at March 31, 1998
amounted to (Pounds)7,413,500 (1997--(Pounds)6,293,000). Included in creditors
are amounts totalling (Pounds)190,000 (1997--(Pounds)1,600,000) due in respect
of plant and equipment.
F-45
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
17. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Bank loans............................................. 7,015 1,788
Obligations under leases and hire purchase contracts... 6,261 6,586
------ -----
13,276 8,374
====== =====
</TABLE>
(a) Bank loans
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Amounts due at March 31 are repayable as follows:
Over five years......................................... 1,869 --
Between two and five years.............................. 3,581 1,268
Between one and two years............................... 1,565 520
----- -----
7,015 1,788
Within one year......................................... 1,565 482
----- -----
8,580 2,270
===== =====
</TABLE>
Of the total bank loans (Pounds)6,077,000 is in respect of instalment loans
wholly or partly repayable after five years at fixed rates of interest varying
from 5.25% to 7.70%.
(b) Finance leases and hire purchase contracts
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Amounts due at March 31 are repayable as follows:
Over five years......................................... 129 353
Between two and five years.............................. 4,050 4,749
Between one and two years............................... 2,082 1,484
----- -----
6,261 6,586
Within one year......................................... 2,257 1,975
----- -----
8,518 8,561
===== =====
</TABLE>
F-46
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
18. CASH FLOW AND NET DEBT
Analysis of net debt:
<TABLE>
<CAPTION>
OTHER AT
AT APRIL ARISING ON NON-CASH EXCHANGE MARCH 31,
1, 1997 CASH FLOW ACQUISITION CHANGES MOVEMENTS 1998
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
Cash available on demand
and in hand............ 3,143 (1,876) -- -- (43) 1,224
Overdrafts.............. (39) (34) -- -- (4) (77)
Advances under debt fac-
toring and
invoice discounting ar-
rangements............. -- (1,536) -- -- -- (1,536)
------ ------- ------ ---- --- -------
3,104 (3,446) -- -- (47) (389)
Bank loans.............. (2,270) (5,083) (1,490) -- 263 (8,580)
Hire purchase and fi-
nance leases........... (8,561) 359 -- (819) 503 (8,518)
Seven day deposits...... 4,025 (4,025) -- -- -- --
------ ------- ------ ---- --- -------
(3,702) (12,195) (1,490) (819) 719 (17,487)
====== ======= ====== ==== === =======
</TABLE>
Additions to fixed assets totalling (Pounds)819,000 were financed by hire
purchase loans, under the terms of which payments were made by the lenders,
direct to the suppliers and consequently do not appear in the cash flow
statement.
Reconciliation of net cash flow to movement in net debt:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
(Decrease)/increase in
cash in the year....... (3,446) 6,093
Cash inflow from
increase in debt and
lease financing........ (4,724) (1,439)
Cash (inflow)/outflow
from change in liquid
resources.............. (4,025) 4,025
------- ------
Change in net debt
arising from cash
flows.................. (12,195) 8,679
Loans and finance leases
acquired with
subsidiaries........... (1,490) --
New hire purchase loans
and finance leases..... (819) (3,111)
Exchange difference..... 719 199
------- ------
Movement in net debt in
the year............... (13,785) 5,767
Net debt at April 1..... (3,702) (9,469)
------- ------
Net debt at March 31.... (17,487) (3,702)
======= ======
</TABLE>
19. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
DEFERRED DEFERRED DEFERRED TOTAL TOTAL
TAXATION CONSIDERATION BONUS 1998 1997
----------- ------------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Balance at April 1...... 251 530 223 1,004 1,366
Arising on acquisition.. 57 -- -- 57 --
Arising during the
year................... (16) 1,000 -- 984 438
Utilised or released.... 7 -- -- 7 --
Transfer to current
liabilities............ -- (660) (77) (737) (800)
--- ----- --- ----- -----
Balance at March 31..... 299 870 146 1,315 1,004
=== ===== === ===== =====
</TABLE>
F-47
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
Deferred taxation provided in the accounts and the unprovided amounts are as
follows:
<TABLE>
<CAPTION>
PROVIDED UNPROVIDED
----------------------- -----------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Capital allowances in advance
of depreciation.............. 299 251 1,513 1,470
Taxation on property valuation
surplus...................... -- -- 82 111
Gains deferred by rollover
relief....................... -- -- 129 137
--- --- ----- -----
299 251 1,724 1,718
Less:
Short term timing
differences.................. -- -- 45 102
--- --- ----- -----
299 251 1,679 1,616
=== === ===== =====
</TABLE>
No provision has been made for deferred taxation in respect of the property
valuation surplus as no disposals are anticipated.
20. SHARE CAPITAL
<TABLE>
<CAPTION>
ORDINARY SHARES OF 5P EACH
---------------------------------------
NUMBER NOMINAL VALUE
--------------- -----------------------
1998 1997 1998 1997
------- ------- ----------- -----------
000 000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Authorised............................. 200,000 200,000 10,000 10,000
======= ======= ====== ======
Allotted, called up and fully paid..... 37,285 37,056 1,864 1,853
======= ======= ====== ======
</TABLE>
Movements in ordinary shares during the year:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
At April 1, 1997............................................... 37,056,388
Exercise of share options during the year...................... 144,242
Issued......................................................... 84,258
----------
At March 31, 1998.............................................. 37,284,888
==========
</TABLE>
The nominal value of shares issued in the period was (Pounds)11,425. The
consideration received in respect of these shares was (Pounds)103,300.
SHARE OPTIONS:
In addition to the options referred to in paragraph 3(b) of Appendix V there
are options to subscribe for 140,618 ordinary shares at 108.5p each and
464,382 ordinary shares at 109.5p each exercisable before November 22, 2006,
26,129 ordinary shares at 109p each exercisable before July 16, 2007 and
20,000 shares at 139p each exercisable before November 28, 2007.
F-48
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
21. RESERVES
<TABLE>
<CAPTION>
CAPITAL PROFIT
SHARE REVALUATION REDEMPTION CAPITAL GOODWILL AND LOSS
PREMIUM RESERVE RESERVE RESERVE RESERVE ACCOUNT
----------- ----------- ----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
At April 1, 1997........ 16,638 1,056 89 121 (3,070) 5,611
Shares issued during
year................... 92 -- -- -- -- --
Goodwill on acquisitions
(note 13).............. -- -- -- -- (11,484) --
Transfer................ -- (16) -- -- -- 16
Exchange differences.... -- -- -- -- -- (665)
Retained profit for
year................... -- -- -- -- -- 3,153
------ ----- --- --- ------- -----
At March 31, 1998....... 16,730 1,040 89 121 (14,554) 8,115
====== ===== === === ======= =====
</TABLE>
22. CAPITAL COMMITMENTS
Capital commitments not provided for in the accounts:
<TABLE>
<CAPTION>
GROUP
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Contracted........................................... 1,062 427
===== ===
</TABLE>
23. CONTINGENT LIABILITIES
(a) Guarantees
The parent company is a party to a guarantee in respect of bank advances to
subsidiary undertakings. The parent company is also a party to guarantees in
respect of advances under finance leases, invoice discounting arrangements,
bank loans, overdrafts and hire purchase loans to subsidiary undertakings. The
amounts outstanding under these guarantees were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
<S> <C> <C>
Bank overdrafts......................................... 77 39
Bank loans.............................................. 7,478 2,270
Finance leases and hire purchase loans.................. 8,518 8,442
Invoice discounting arrangements........................ 1,536 --
------ ------
17,609 10,751
====== ======
</TABLE>
(b) The annual commitments under non-cancellable operating leases are as
follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
----------- ----------- ----------- -----------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Operating leases which expire:
Over five years.............. 393 -- 229 --
Between two and five years
inclusive................... 346 160 562 181
Within one year.............. 35 81 -- 57
--- --- --- ---
774 241 791 238
=== === === ===
</TABLE>
F-49
<PAGE>
TINSLEY ROBOR PLC
NOTES TO THE ACCOUNTS--(CONTINUED)
24. PENSION COMMITMENTS
The group operates two types of pension scheme. A defined benefit scheme and
a number of defined contribution schemes. The schemes are fully funded and the
assets of all these schemes are held separately from those of the group, being
invested either with insurance companies or in managed funds.
The pension charges in respect of the defined contribution schemes were
(Pounds)146,800 (1997--(Pounds)123,800).
Contributions to the defined benefit scheme are assessed in accordance with
the advice of a qualified actuary on the basis of triennial valuations. As at
January 1, 1996 the scheme's actuaries, Abbey National Benefit Consultants
Limited, carried out a valuation of this fund and established that the
actuarial value of the fund's assets at that time covered the estimated
liabilities by 122% and that there was a surplus amounting to (Pounds)677,000.
The principal assumptions used in the valuation which was on the attained age
aggregate method were as follows:
<TABLE>
<S> <C>
Rate of return on invest-
ments........................ 9.0% per annum
Rate of increase in salaries.. 7.5% per annum
Rate of pension increases..... 4.5% per annum
</TABLE>
The valuation showed the aggregate market value of the scheme's assets as at
January 1, 1996 was (Pounds)4,520,000.
The pension charge for the period in respect of this scheme was
(Pounds)229,000 (1997--(Pounds)149,000). The reason for the increase in
pension cost is mainly due to the indexation provisions included in the
Pensions Act 1995 which was partly offset by the increase in the members'
contribution rate from 5% per annum to 6% per annum.
F-50
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
Until . , 1998 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
Use of Proceeds.......................................................... 24
Capitalization........................................................... 26
Proposed Acquisition of Tinsley.......................................... 27
Unaudited Pro Forma Combined Financial Data.............................. 31
Selected Historical Financial Information and Other Data-KFI Holding
Corporation............................................................. 42
Selected Historical Financial Information and Other Data-AGI
Incorporated............................................................ 44
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 45
Business................................................................. 55
Management............................................................... 68
Beneficial Ownership..................................................... 73
Certain Relationships and Related Transactions........................... 75
Description of Other Indebtedness........................................ 78
Exchange Offer........................................................... 80
Plan of Distribution..................................................... 88
Description of Notes..................................................... 89
Federal Income Tax Consequences.......................................... 121
Intellectual Property.................................................... 125
Legal Matters............................................................ 125
Available Information.................................................... 125
Experts.................................................................. 126
Special Note Regarding Forward-Looking Statements........................ 127
Index of Defined Terms................................................... 128
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IMPAC GROUP, INC.
OFFER TO EXCHANGE UP TO $100,000,000
OF 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008,
OF WHICH $100,000,000 IN PRINCIPAL AMOUNT IS OUTSTANDING ON THE DATE HEREOF
-----------
PROSPECTUS
-----------
JULY . , 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
other agent if such person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. No
indemnification may be provided, however, for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
With respect to indemnification of directors, Article 6 of the Amended and
Restated Certificate of Incorporation of IMPAC, a copy of which is filed as
Exhibit 3.1, provides as follows:
"The Company shall indemnify, and upon request shall advance expenses to, in
the manner and to the full extent permitted by law, any person (or the estate
of any person) who was or is a party to, or is threatened to be made a party
to, any threatened, pending or completed action, suit or proceeding, whether
or not by or in the right of the Company, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that such
person is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director, officer, partner or trustee of
another company, partnership, joint venture, trust or other enterprise. The
Company may, to the fullest extent permitted by law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against him or her, whether or not the Company would have the power
to indemnify him or her against such liability pursuant to this Article 6. To
the fullest extent permitted by law, the indemnification and advances provided
for herein shall include expenses (including attorney's fees), judgments,
fines and amounts paid in settlement. The indemnification provided herein
shall not be deemed to limit the right of the Company to indemnify any other
person for any such expenses to the full extent permitted by law, nor shall it
be deemed exclusive of any other rights to which any person seeking
indemnification from the Company may be entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
A director shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyalty to the Company
or its stockholders, (b) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware General Corporation Law, or (d) for any
transaction from which the director derived an improper personal benefit."
With respect to indemnification, Article VII of each of the Amended and
Restated By-laws of IMPAC, a copy of which is filed as Exhibit 3.2, provides
as follows:
"Section 7.1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of being or having been a director
or officer
II-1
<PAGE>
of the Corporation or serving or having served at the request of the
Corporation as a director, trustee,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (an "Indemnitee"), whether the basis of such proceeding
is alleged action or failure to act in an official capacity as a director,
trustee, officer, employee or agent or in any other capacity while serving as
a director, trustee, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
permitted prior thereto) (as used in this Article 7, the "Delaware Law"),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith and
such indemnification shall continue as to an Indemnitee who has ceased to be a
director, trustee, officer, employee or agent and shall inure to the benefit
of the Indemnitee's heirs, executors and administrators; provided, however,
that, except as provided in (S)7.2 hereof with respect to Proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
Indemnitee in connection with a Proceeding (or part thereof) initiated by such
Indemnitee only if such Proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Article 7
shall be a contract right and shall include the right to be paid by the
Corporation the expenses (including attorneys' fees) incurred in defending any
such Proceeding in advance of its final disposition (an "Advancement of
Expenses"); provided, however, that, if the Delaware Law so requires, an
Advancement of Expenses incurred by an Indemnitee shall be made only upon
delivery to the Corporation of an undertaking (an "Undertaking"), by or on
behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (a "Final Adjudication") that such Indemnitee is not
entitled to be indemnified for such expenses under this Article 7 or
otherwise.
Section 7.2. Right of Indemnitee to Bring Suit. If a claim under (S)7.1
hereof is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an Advancement of Expenses, in which case the applicable period
shall be twenty days, the Indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an
Advancement of Expenses pursuant to the terms of an Undertaking the
Corporation shall be entitled to recover such expenses upon a Final
Adjudication that, the Indemnitee has not met the applicable standard of
conduct set forth in the Delaware Law. Neither the failure of the Corporation
(including the Board of Directors, its independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware Law, nor an actual determination by the Corporation (including
the Board of Directors, its independent legal counsel, or its stockholders)
that the Indemnitee has not met such applicable standard of conduct, shall
create a presumption that the Indemnitee has not met the applicable standard
of conduct or, in the case of such a suit brought by the Indemnitee, be a
defense to such suit. In any suit brought by the Indemnitee to enforce a right
to indemnification or to an Advancement of Expenses hereunder, or by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the burden of proving that the Indemnitee is not entitled to be
indemnified, or to such Advancement of Expenses, under this Article 7 or
otherwise shall be on the Corporation.
II-2
<PAGE>
Section 7.3 Non-Exclusivity of Rights. The rights to indemnification and to
the Advancement of Expenses conferred in this Article 7 shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 7.4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under this Article 7 or under the Delaware Law.
Section 7.5. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the Advancement of
Expenses, to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article 7 with respect to the indemnification and
Advancement of Expenses of directors and officers of the Corporation."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
(a) The following is a list of exhibits filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated February 19, 1998, between KFI
Holding Corporation (which subsequently changed its name to "IMPAC
Group, Inc." and is sometimes referred to below as "Holding"), AGI
Acquisition Corporation, Heritage, Klearfold, AGI, certain
stockholders of AGI, and certain stockholders of Holding.*
2.2 Investment Agreement, dated February 19, 1998, between Holding,
Heritage Fund I Investment Corporation ("Heritage"), certain
stockholders of Holding, certain stockholders of AGI and certain other
persons.*
3.1 Amended and Restated Certificate of Incorporation of IMPAC Group, Inc.
(the "Company").*
3.2 Amended and Restated By-laws of the Company.*
4.1 Indenture, dated as of March 12, 1998, by and among the Company, AGI
Incorporated ("AGI"), Klearfold, Inc. ("Klearfold"), KF--Delaware,
Inc. ("KFD"), KF--International, Inc. ("International" and,
collectively, with AGI, Klearfold, KFD and International, the
"Guarantors") and State Street Bank and Trust Company, as Trustee.*
4.2 Form of the Company's 10 1/8% Senior Notes due 2008.*
4.3 Registration Rights Agreement, dated as of March 12, 1998, by and
among the Company, the Guarantors, Goldman, Sachs & Co. ("Goldman")
and Donaldson, Lufkin, and Jenrette Securities Corporation ("DLJ").*
4.4 First Supplemental Indenture, dated as of July 21, 1998, between the
Company and the Trustee.**
5.1 Opinion of Bingham Dana LLP, as to legality of securities being
registered.*
10.1 Purchase Agreement, dated as of March 5, 1998, by and among the
Company, Goldman and DLJ.*
10.2 Escrow Agreement, dated March 12, 1998, between AGI, the Company, the
Escrow Agent and the Escrowed Stockholder Representative.*
10.3 Stockholder Agreement, dated as of March 12, 1998, between the
Company, certain Holding stockholders, certain stockholders of AGI and
certain other persons.*
10.4 Labor Agreement between Klearfold and United Paperworker's
International Union Local 286, effective December 1, 1994, as extended
by amendment through November 30, 2002.*
10.5 Second Amendment to Lease dated September 30, 1994 between Norman
Levin and Evelyn F. Levin and Klearfold (Warrington, Pennsylvania).*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.6 Amended and Restated Lease, dated as of June 7, 1996, between Dena
Corp. and Klearfold (Louisa, Virginia).*
10.7 Amended and Restated Lease, dated as of June 7, 1996, between Melvin
B. Herrin and Klearfold (Warrington, Pennsylvania).*
10.8 Lease dated May 29, 1985 by and between Chicago Title and Trust
Company as Trustee under Trust Agreement dated February 1, 1977, and
known as Trust No. 1069185 and AGI re 256,629 sq. ft. at 1950 N. Ruby
Street.*
10.9 Amendment to Lease dated as of October 1, 1987 by and between Chicago
Title and Trust Company, as Trustee under a Trust Agreement dated
February 1, 1977, and known as Trust No. 1069185 and AGI re 256,629
sq. ft. at 1950 Ruby Street.*
10.10 Second Amendment to Lease dated as of April 30, 1992, by and between
Chicago Title and Trust Company as Trustee under a Trust Agreement
dated February 1, 1977 and known as Trust No. 1069185 and AGI re
256,629 sq. ft. at 1950 Ruby Street.*
10.11 Third Amendment to Lease dated July 2, 1997 by and between Chicago
Title and Trust Company as Trustee under Trust Agreement dated
February 1, 1997 and known as Trust No. 1069185 and AGI re 256,629 sq.
ft. at 1950 N. Ruby Street.*
10.12 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and David Underwood.*
10.13 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and James Oppenheimer.*
10.14 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Richard
Oppenheimer.*
10.15 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Dean Henkel.*
10.16 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and H. Scott Herrin.*
10.17 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Melvin Herrin.*
10.18 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Richard Block.*
10.19 Credit Agreement, dated as of March 12, 1998, between Bank of America
NT & SA ("BofA") and the Company.*
10.20 Form of the Company's $40,000,000 Revolving Note, dated as of March
12, 1998.*
10.21 Company Security Agreement, dated as of March 12, 1998 between the
Company and BofA.*
10.22 Borrowers Security Agreement, dated as of March 12, 1998 between AGI,
Klearfold and BofA.*
10.23 Klearfold Subsidiaries Security Agreement, dated as of March 12, 1998
between KFD and International (the "Klearfold Subsidiaries") and
BofA.*
10.24 Company Pledge Agreement, dated as of March 12, 1998 between the
Company and BofA.*
10.25 Borrowers Pledge Agreement, dated as of March 12, 1998 between AGI,
Klearfold and BofA.*
10.26 Klearfold Subsidiaries Pledge Agreement, dated as of March 12, 1998
between the Klearfold Subsidiaries and BofA.*
10.27 Company Guaranty, dated as of March 12, 1998, between the Company and
BofA.*
10.28 Borrowers Guaranty, dated as of March 12, 1998 between AGI, Klearfold
and BofA.*
10.29 Klearfold Subsidiaries Guaranty, dated as of March 12, 1998 between
the Klearfold Subsidiaries and BofA.*
10.30 Company Patent Assignment dated as of March 12, 1998 between the
Company and BofA.*
10.31 AGI Patent Assignment, dated as of March 12, 1998 between AGI and
BofA.*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.32 Klearfold Patent Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.33 International Patent Assignment, dated March 12, 1998, between
International and BofA.*
10.34 KFD Patent Assignment, dated March 12, 1998, between KFD and BofA.*
10.35 Company Trademark Assignment, dated as of March 12, 1998 between the
Company and BofA.*
10.36 AGI Trademark Assignment, dated as of March 12, 1998 between AGI and
BofA.*
10.37 Klearfold Trademark Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.38 International Trademark Assignment, dated March 12, 1998, between
International and BofA.*
10.39 KFD Trademark Assignment, dated March 12, 1998, between KFD and BofA.*
10.40 Company Copyright Assignment, dated as of March 12, 1998 between the
Company and BofA.*
10.41 AGI Copyright Assignment, dated as of March 12, 1998 between AGI and
BofA.*
10.42 Klearfold Copyright Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.43 International Copyright Assignment, dated March 12,, 1998, between
International and BofA.*
10.44 KFD Copyright Assignment, dated March 12, 1998, between KFD and BofA.*
10.45 Promissory Note--L/C Loan Note, dated March 12, 1998, from Klearfold
to BofA.*
10.46 Promissory Note--L/C Loan Note, dated March 12, 1998, from AGI to
BofA.*
10.47 AGI Pledge and Security Agreement, dated March 12, 1998, between AGI,
BofA, Bank One, Illinois, NA and William Blair & Co.*
10.48 Subrogation Agreement, dated March 11, 1998, between Mellon Bank, N.A.
("Mellon"), BofA, the Company and Klearfold.*
10.49 Letter of Credit and Reimbursement Agreement, dated August 1, 1997,
between Klearfold and Mellon.*
10.50 First Amendment to Reimbursement Agreement, dated March 11, 1998,
between Mellon, and Klearfold.*
10.51 AGI Letter of Credit, dated December 15, 1997.*
10.52 Mellon Bank, N.A. Letter of Credit, dated as of August 21, 1997.*
10.53 Back-Up Klearfold Letter of Credit, dated March 11, 1998.*
10.54 Loan Agreement, dated January 1, 1995, between AGI and City of
Jacksonville, Illinois.*
10.55 Loan Agreement, dated August 1, 1997, between Bucks County and
Klearfold.*
10.56 Klearfold Profit Sharing/401(K) Plan*
10.57 Klearfold Flexible Benefits Plan for Salaried Employees*
10.58 Amended and Restated Multicurrency Credit Facility, dated March 12,
1998 and as amended and restated July 7, 1998, among BofA, the
Company, AGI and Klearfold.**
10.59 Commitment Letter, dated July 7, 1998, from Heritage Fund I, L.P. and
Heritage Fund II, L.P.**
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges.**
16.1 Letter of Arthur Andersen LLP re: Change in Certifying Accountant.*
16.2 Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant.*
21.1 List of Subsidiaries.*
23.1 Consent of Bingham Dana LLP, counsel to the Company (included in
Exhibit 5.1).*
23.2 Consent of Arthur Andersen LLP.*
23.3 Consent of KPMG Peat Marwick LLP.*
23.4 Consent of Price Waterhouse LLP.*
24.1 Power of Attorney (included in signature pages to Registration
Statement).*
25.1 Statement re: Eligibility of Trustee.*
99.1 Form of Letter of Transmittal.+
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agency Agreement between the Exchange Agent and the
Company.+
99.4 Form of Letter Regarding Eligibility for use of Form S-4.*
</TABLE>
II-5
<PAGE>
- --------
* Previously filed.
** Filed herewith.
+ To be filed by amendment.
(b)The following is a list of schedules filed as a part of this Registration
Statement:
Schedule II Valuation and Qualifying Accounts and Reserves for the Years Ended
December 31, 1995, 1996 and 1997.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
REGULATION SK ITEM 512(A)
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)2304.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
REGULATION SK ITEM 512(H)
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
the Registrant's counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by the Registrant is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
FORM S-4 ITEM 22(C)
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it went effective.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 4 TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MELROSE
PARK, STATE OF ILLINOIS, ON THIS 28TH DAY OF JULY, 1998.
IMPAC Group Inc.
By /s/ David C. Underwood
-----------------------------------
DAVID C. UNDERWOOD
CHIEF FINANCIAL OFFICER
II-7
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON BEHALF OF IMPAC
GROUP, INC. BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
<TABLE>
<S> <C>
SIGNATURES TITLE
DATE
/s/ Melvin B. Herrin* Chairman and July 28, 1998
- ------------------------------------- Director of IMPAC
MELVIN B. HERRIN Group, Inc.
/s/ Richard Block* Chief Executive July 28, 1998
- ------------------------------------- Officer and
RICHARD BLOCK Director of IMPAC
Group, Inc.
(principal
executive officer)
/s/ H. Scott Herrin* Director of IMPAC July 28, 1998
- ------------------------------------- Group Inc.
H. SCOTT HERRIN
/s/ Michel Reichert* Director of IMPAC July 28, 1998
- ------------------------------------- Group, Inc.
MICHEL REICHERT
/s/ Michael Gilligan* Director of IMPAC July 28, 1998
- ------------------------------------- Group, Inc.
MICHAEL GILLIGAN
/s/ Zenas Block* Director of IMPAC July 28, 1998
- ------------------------------------- Group, Inc.
ZENAS BLOCK
/s/ David Horowitz* Director of IMPAC July 28, 1998
- ------------------------------------- Group, Inc.
DAVID HOROWITZ
/s/ David C. Underwood Chief Financial July 28, 1998
- ------------------------------------- Officer of IMPAC
DAVID C. UNDERWOOD Group, Inc.
(principal
financial and
accounting officer)
*By: /s/ David C. Underwood
- -------------------------------------
DAVID C. UNDERWOOD
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF MELROSE PARK, STATE OF ILLINOIS, ON THIS 28TH DAY OF JULY, 1998.
AGI Incorporated
/s/ David C. Underwood
By: _________________________________
DAVID C. UNDERWOOD
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON BEHALF OF AGI
INCORPORATED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ Melvin B. Herrin* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
MELVIN B. HERRIN
/s/ Richard Block* Chief Executive July 28, 1998
- ------------------------------------- Officer and
RICHARD BLOCK Director of AGI
Incorporated
(principal
executive officer)
/s/ H. Scott Herrin* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
H. SCOTT HERRIN
/s/ Michel Reichert* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
MICHEL REICHERT
</TABLE>
II-9
<PAGE>
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ Michael Gilligan* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
MICHAEL GILLIGAN
/s/ David C. Underwood Chief Financial July 28, 1998
- ------------------------------------- Officer of AGI
DAVID C. UNDERWOOD Incorporated
(principal
financial and
accounting officer)
/s/ Zenas Block* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
ZENAS BLOCK
/s/ David Horowitz* Director of AGI July 28, 1998
- ------------------------------------- Incorporated
DAVID HOROWITZ
*By: /s/ David C. Underwood
- -------------------------------------
DAVID C. UNDERWOOD
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF MELROSE PARK, STATE OF ILLINOIS, ON THIS 28TH DAY OF JULY, 1998.
Klearfold, Inc.
By: /s/ David C. Underwood
-------------------------------------
DAVID C. UNDERWOOD
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON BEHALF OF
KLEARFOLD, INC. BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ Melvin B. Herrin* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
MELVIN B. HERRIN
/s/ Richard Block* Chief Executive July 28, 1998
- ------------------------------------- Officer and Director
RICHARD BLOCK of Klearfold, Inc.
(principal executive
officer)
/s/ H. Scott Herrin* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
H. SCOTT HERRIN
/s/ Michel Reichert* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
MICHEL REICHERT
/s/ Michael Gilligan* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
MICHAEL GILLIGAN
/s/ David C. Underwood Chief Financial July 28, 1998
- ------------------------------------- Officer of
DAVID C. UNDERWOOD Klearfold, Inc.
(principal
financial and
accounting officer)
/s/ Zenas Block* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
ZENAS BLOCK
/s/ David Horowitz* Director of July 28, 1998
- ------------------------------------- Klearfold, Inc.
DAVID HOROWITZ
*By: /s/ David C. Underwood
- -------------------------------------
DAVID C. UNDERWOOD
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF MELROSE PARK, STATE OF ILLINOIS, ON THIS 28TH DAY OF JULY, 1998.
KF-International, Inc.
<TABLE>
<S> <C>
By: /s/ David C. Underwood
--------------------------------
DAVID C. UNDERWOOD
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON BEHALF OF KF-
INTERNATIONAL, INC. BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
SIGNATURE TITLE
DATE
/s/ Melvin B. Herrin* Director of July 28, 1998
- ------------------------------------- KF-International,
MELVIN B. HERRIN Inc.
/s/ H. Scott Herrin* Director of July 28, 1998
- ------------------------------------- KF-International,
H. SCOTT HERRIN Inc.
/s/ Arthur S. Keyser* Director of July 28, 1998
- ------------------------------------- KF-International,
ARTHUR S. KEYSER Inc.
/s/ James Hindels* Director of July 28, 1998
- ------------------------------------- KF-International,
JAMES HINDELS Inc.
</TABLE>
II-12
<PAGE>
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ John deJongh* Director of July 28, 1998
- ------------------------------------- KF-International,
JOHN DEJONGH Inc.
/s/ Richard Block* Chief Executive July 28, 1998
- ------------------------------------- Officer of
RICHARD BLOCK KF-International,
Inc.
(principal
executive officer)
/s/ David C. Underwood Chief Financial July 28, 1998
- ------------------------------------- Officer of
DAVID C. UNDERWOOD KF-International,
Inc.
(principal
financial and
accounting officer)
*By: /s/ David C. Underwood
- -------------------------------------
DAVID C. UNDERWOOD
ATTORNEY-IN-FACT
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF MELROSE PARK, STATE OF ILLINOIS, ON THIS 28TH DAY OF JULY, 1998.
<TABLE>
<S> <C>
KF-Delaware, Inc.
By: /s/ David C. Underwood
--------------------------------
DAVID C. UNDERWOOD
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON BEHALF OF KF-
DELAWARE, INC. BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED:
SIGNATURE TITLE
DATE
/s/ Richard Block* Chief Executive July 28, 1998
- ------------------------------------- Officer of KF-
RICHARD BLOCK Delaware, Inc.
(principal
executive officer)
/s/ David C. Underwood Chief Financial July 28, 1998
- ------------------------------------- Officer and
DAVID C. UNDERWOOD Director of KF-
Delaware, Inc.
(principal
financial and
accounting officer)
/s/ Adam Murphy* Director of KF- July 28, 1998
- ------------------------------------- Delaware, Inc.
ADAM MURPHY
*By: /s/ David C. Underwood
- -------------------------------------
DAVID C. UNDERWOOD
ATTORNEY-IN-FACT
</TABLE>
II-14
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31,
1995, 1996 AND 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT CHARGED BALANCE
BEGINNING TO OTHER AT END
OF YEAR EXPENSE CHANGES(1) OF YEAR
--------- ------- ---------- -------
<S> <C> <C> <C> <C>
Klearfold
Allowance for Doubtful Accounts
1995...................................... $150 $37 ($40) $147
1996...................................... $147 $44 ($91) $100
1997...................................... $100 ($3) $43 $140
Credit Memo Reserve
1995...................................... $655 $416 ($665) $406
1996...................................... $406 $463 ($703) $166
1997...................................... $166 $454 ($200) $420
</TABLE>
- --------
(1) Net accounts (written-off)/recovered to the Allowance for Doubtful
Accounts; Credit memos issued against the Credit Memo Reserve.
S-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated February 19, 1998, between KFI
Holding Corporation (which subsequently changed its name to "IMPAC
Group, Inc." and is sometimes referred to below as "Holding"), AGI
Acquisition Corporation, Heritage, Klearfold, AGI, certain
stockholders of AGI, and certain stockholders of Holding.*
2.2 Investment Agreement, dated February 19, 1998, between Holding,
Heritage Fund I Investment Corporation ("Heritage"), certain
stockholders of Holding, certain stockholders of AGI and certain other
persons.*
3.1 Amended and Restated Certificate of Incorporation of IMPAC Group, Inc.
(the "Company").*
3.2 Amended and Restated By-laws of the Company.*
4.1 Indenture, dated as of March 12, 1998, by and among the Company, AGI
Incorporated ("AGI"), Klearfold, Inc. ("Klearfold"), KF--Delaware,
Inc. ("KFD"), KF--International, Inc. ("International" and,
collectively, with AGI, Klearfold, KFD and International, the
"Guarantors") and State Street Bank and Trust Company, as Trustee.*
4.2 Form of the Company's 10 1/8% Senior Notes due 2008.*
4.3 Registration Rights Agreement, dated as of March 12, 1998, by and
among the Company, the Guarantors, Goldman, Sachs & Co. ("Goldman")
and Donaldson, Lufkin, and Jenrette Securities Corporation ("DLJ").*
4.4 First Supplemental Indenture, dated as of July 21, 1998, between the
Company and the Trustee.**
5.1 Opinion of Bingham Dana LLP, as to legality of securities being
registered.*
10.1 Purchase Agreement, dated as of March 5, 1998, by and among the
Company, Goldman and DLJ.*
10.2 Escrow Agreement, dated March 12, 1998, between AGI, the Company, the
Escrow Agent and the Escrowed Stockholder Representative.*
10.3 Stockholder Agreement, dated as of March 12, 1998, between the
Company, certain Holding stockholders, certain stockholders of AGI and
certain other persons.*
10.4 Labor Agreement between Klearfold and United Paperworker's
International Union Local 286, effective December 1, 1994, as extended
by amendment through November 30, 2002.*
10.5 Second Amendment to Lease dated September 30, 1994 between Norman
Levin and Evelyn F. Levin and Klearfold (Warrington, Pennsylvania).*
10.6 Amended and Restated Lease, dated as of June 7, 1996, between Dena
Corp. and Klearfold (Louisa, Virginia).*
10.7 Amended and Restated Lease, dated as of June 7, 1996, between Melvin
B. Herrin and Klearfold (Warrington, Pennsylvania).*
10.8 Lease dated May 29, 1985 by and between Chicago Title and Trust
Company as Trustee under Trust Agreement dated February 1, 1977, and
known as Trust No. 1069185 and AGI re 256,629 sq. ft. at 1950 N. Ruby
Street.*
10.9 Amendment to Lease dated as of October 1, 1987 by and between Chicago
Title and Trust Company, as Trustee under a Trust Agreement dated
February 1, 1977, and known as Trust No. 1069185 and AGI re 256,629
sq. ft. at 1950 Ruby Street.*
10.10 Second Amendment to Lease dated as of April 30, 1992, by and between
Chicago Title and Trust Company as Trustee under a Trust Agreement
dated February 1, 1977 and known as Trust No. 1069185 and AGI re
256,629 sq. ft. at 1950 Ruby Street.*
10.11 Third Amendment to Lease dated July 2, 1997 by and between Chicago
Title and Trust Company as Trustee under Trust Agreement dated
February 1, 1997 and known as Trust No. 1069185 and AGI re 256,629 sq.
ft. at 1950 N. Ruby Street.*
10.12 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and David Underwood.*
10.13 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and James Oppenheimer.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.14 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Richard
Oppenheimer.*
10.15 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Dean Henkel.*
10.16 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and H. Scott Herrin.*
10.17 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Melvin Herrin.*
10.18 Employment, Non-Competition and Stock Repurchase Agreement, dated as
of March 12, 1998, by and between the Company and Richard Block.*
10.19 Credit Agreement, dated as of March 12, 1998, between Bank of America
NT & SA ("BofA") and the Company.*
10.20 Form of the Company's $40,000,000 Revolving Note, dated as of March
12, 1998.*
10.21 Company Security Agreement, dated as of March 12, 1998 between the
Company and BofA.*
10.22 Borrowers Security Agreement, dated as of March 12, 1998 between AGI,
Klearfold and BofA.*
10.23 Klearfold Subsidiaries Security Agreement, dated as of March 12, 1998
between KFD and International (the "Klearfold Subsidiaries") and
BofA.*
10.24 Company Pledge Agreement, dated as of March 12, 1998 between the
Company and BofA.*
10.25 Borrowers Pledge Agreement, dated as of March 12, 1998 between AGI,
Klearfold and BofA.*
10.26 Klearfold Subsidiaries Pledge Agreement, dated as of March 12, 1998
between the Klearfold Subsidiaries and BofA.*
10.27 Company Guaranty, dated as of March 12, 1998, between the Company and
BofA.*
10.28 Borrowers Guaranty, dated as of March 12, 1998 between AGI, Klearfold
and BofA.*
10.29 Klearfold Subsidiaries Guaranty, dated as of March 12, 1998 between
the Klearfold Subsidiaries and BofA.*
10.30 Company Patent Assignment dated as of March 12, 1998 between the
Company and BofA.*
10.31 AGI Patent Assignment, dated as of March 12, 1998 between AGI and
BofA.*
10.32 Klearfold Patent Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.33 International Patent Assignment, dated March 12, 1998, between
International and BofA.*
10.34 KFD Patent Assignment, dated March 12, 1998, between KFD and BofA.*
10.35 Company Trademark Assignment, dated as of March 12, 1998 between the
Company and BofA.*
10.36 AGI Trademark Assignment, dated as of March 12, 1998 between AGI and
BofA.*
10.37 Klearfold Trademark Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.38 International Trademark Assignment, dated March 12, 1998, between
International and BofA.*
10.39 KFD Trademark Assignment, dated March 12, 1998, between KFD and BofA.*
10.40 Company Copyright Assignment, dated as of March 12, 1998 between the
Company and BofA.*
10.41 AGI Copyright Assignment, dated as of March 12, 1998 between AGI and
BofA.*
10.42 Klearfold Copyright Assignment, dated as of March 12, 1998 between
Klearfold and BofA.*
10.43 International Copyright Assignment, dated March 12,, 1998, between
International and BofA.*
10.44 KFD Copyright Assignment, dated March 12, 1998, between KFD and BofA.*
10.45 Promissory Note--L/C Loan Note, dated March 12, 1998, from Klearfold
to BofA.*
10.46 Promissory Note--L/C Loan Note, dated March 12, 1998, from AGI to
BofA.*
10.47 AGI Pledge and Security Agreement, dated March 12, 1998, between AGI,
BofA, Bank One, Illinois, NA and William Blair & Co.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------
<C> <S>
10.48 Subrogation Agreement, dated March 11, 1998, between Mellon Bank, N.A.
("Mellon"), BofA, the Company and Klearfold.*
10.49 Letter of Credit and Reimbursement Agreement, dated August 1, 1997,
between Klearfold and Mellon.*
10.50 First Amendment to Reimbursement Agreement, dated March 11, 1998,
between Mellon, and Klearfold.*
10.51 AGI Letter of Credit, dated December 15, 1997.*
10.52 Mellon Bank, N.A. Letter of Credit, dated as of August 21, 1997.*
10.53 Back-Up Klearfold Letter of Credit, dated March 11, 1998.*
10.54 Loan Agreement, dated January 1, 1995, between AGI and City of
Jacksonville, Illinois.*
10.55 Loan Agreement, dated August 1, 1997, between Bucks County and
Klearfold.*
10.56 Klearfold Profit Sharing/401(K) Plan*
10.57 Klearfold Flexible Benefits Plan for Salaried Employees*
10.58 Amended and Restated Multicurrency Credit Facility, dated March 12,
1998 and as amended and restated July 7, 1998, among BofA, the
Company, AGI and Klearfold.**
10.59 Commitment Letter, dated July 7, 1998, from Heritage Fund I, L.P. and
Heritage Fund II, L.P.**
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges.**
16.1 Letter of Arthur Andersen LLP re: Change in Certifying Accountant.*
16.2 Letter of KPMG Peat Marwick LLP re: Change in Certifying Accountant.*
21.1 List of Subsidiaries.*
23.1 Consent of Bingham Dana LLP, counsel to the Company (included in
Exhibit 5.1).*
23.2 Consent of Arthur Andersen LLP.*
23.3 Consent of KPMG Peat Marwick LLP.*
23.4 Consent of Price Waterhouse LLP.*
24.1 Power of Attorney (included in signature pages to Registration
Statement).*
25.1 Statement re: Eligibility of Trustee.*
99.1 Form of Letter of Transmittal.+
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Exchange Agency Agreement between the Exchange Agent and the
Company.+
99.4 Form of Letter Regarding Eligibility for use of Form S-4.*
</TABLE>
- --------
* Previously filed.
** Filed herewith.
+ To be filed by amendment.
<PAGE>
Exhibit 4.4
_______________________________________________________________________________
IMPAC GROUP, INC.
TO
STATE STREET BANK AND TRUST COMPANY,
as Trustee
____________________
First Supplemental Indenture
Dated as of July 21, 1998
TO
Indenture
Dated as of March 12, 1998
____________________
$100,000,000
10 1/8% Senior Subordinated Notes Due March 15, 2008
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
----
Parties.................................................................... 1
Recitals of the Company.................................................... 1
ARTICLE ONE
Definitions and Other Provisions of
General Application
SECTION 1.1. Definitions.................................................. 1
ARTICLE TWO
Amendments to Indenture
SECTION 2.1. Definitions.................................................. 2
SECTION 2.2. Incurrence of Indebtedness and Issuance of Preferred Stock... 4
SECTION 2.3. Additional Subsidiary Guarantees............................. 6
SECTION 2.4. Amendment Conditions......................................... 7
ARTICLE THREE
Miscellaneous
SECTION 3.1. Miscellaneous................................................ 7
TESTIMONIUM................................................................ 9
SIGNATURES AND SEALS....................................................... 9
ACKNOWLEDGMENTS............................................................ 10
____________________
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the First Supplemental Indenture.
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of July 21, 1998, between IMPAC
Group, Inc., a Delaware corporation (the "Company"), having its principal office
-------
at 1950 North Ruby Street, Melrose Park, Illinois, and State Street Bank and
Trust Company, a Massachusetts trust company, as Trustee (the "Trustee").
-------
RECITALS OF THE COMPANY
The Company has heretofore executed and delivered to the Trustee an
Indenture, dated as of March 12, 1998 (the "Indenture"), providing for the
---------
issuance of the Company's 10 1/8% Senior Subordinated Notes due March 15, 2008
(herein and therein called the "Notes").
-----
SECTION 9.02 of the Indenture provides that, the Company, when authorized
by a resolution of its Board of Directors, and the Trustee may amend or
supplement the Indenture with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding voting as a single class.
The Company, pursuant to the foregoing authority, proposes in and by this
First Supplemental Indenture to supplement and amend certain of the provisions
of the Indenture.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company, and a valid supplement to the Indenture, have been
done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually agreed, for the
equal and proportionate benefit of all Holders of the Notes as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.1. Definitions. For all purposes of this First Supplemental
-----------
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture;
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this First
Supplemental
<PAGE>
Indenture and, where so specified, to the Articles and Sections of the Indenture
as supplemented by this First Supplemental Indenture; and
(3) The terms "hereof," "herein," "hereby," "hereto," "hereunder" and
"herewith" refer to this First Supplemental Indenture.
ARTICLE TWO
Amendments to Indenture
SECTION 2.1. Definitions.
-----------
(a) SECTION 1.01 of the Indenture is hereby amended by adding the
following defined terms in the appropriate alphabetical order:
"Bidco" means the Subsidiary formed by the Company to acquire Tinsley.
"Domestic Subsidiary" means, with respect to the Company, any Restricted
Subsidiary of the Company that was formed under the laws of the United States of
America or any state or territory thereof.
"Foreign Subsidiary" means, with respect to the Company, any Restricted
Subsidiary of the Company that is not a Domestic Subsidiary.
"Guarantor Subsidiary" means any Domestic Subsidiary and any Foreign
Subsidiary if such Foreign Subsidiary no longer qualifies as a Non-Guarantor
Foreign Subsidiary.
"Loan Notes" means up to 15 million aggregate principal amount of
promissory notes of Bidco issued to shareholders of Tinsley in connection with
the acquisition of Tinsley by Bidco.
"Loan Notes Guarantee" means any letter of credit or guarantee issued by
Bank of America National Trust and Savings Association or its affiliates or
another financial institution guaranteeing amounts outstanding under the Loan
Notes.
"Non-Guarantor Foreign Subsidiary" means any Foreign Subsidiary which (i)
at the time of determination is not permitted under applicable law to deliver an
unlimited Guarantee of the Notes and all Senior Debt of the Company or if the
delivery of such a Guarantee is permitted by applicable law but would have
significant adverse tax or accounting effects on such Foreign Subsidiary or the
Company and its other Subsidiaries, as determined in good faith by the Board of
Directors, and (ii) does not guarantee any Indebtedness of the Company or
otherwise provide credit support directly to the holder of any Indebtedness of
the Company.
<PAGE>
"Tinsley " means Tinsley Robor plc.
(b) SECTION 1.01 of the Indenture is hereby amended by amending the
following defined terms in their entirety to read as set forth below:
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or
a Wholly Owned Restricted Subsidiary thereof that is a Guarantor or a Non-
Guarantor Foreign Subsidiary, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) and without direct or
indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded, (v) the Net Income of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or
one of its Restricted Subsidiaries, and (vi) the Net Income of any
Restricted Subsidiary shall be calculated after deducting preferred stock
dividends payable by such Restricted Subsidiary to Persons other than the
Company and its other Restricted Subsidiaries.
"Guarantors" means each of (i) AGI Incorporated, Klearfold, Inc., KF-
International, Inc. and KF-Delaware, Inc. and (ii) any other
Guarantor-Subsidiary that executes a Guarantee in accordance with the
provisions of this Indenture, and their respective successors and assigns.
"Permitted Investments" means (a) any Investment in the Company or in
a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person, if as a result of such Investment (i) such
Person becomes a Restricted Subsidiary of the Company or (ii) such Person
is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company; (d) any Investment made
as a result of
<PAGE>
the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition
of assets solely in exchange for the issuance of Equity Interests (other
than Disqualified Stock) of the Company; (f) Hedging Obligations; and (g)
other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (g) that are at the time
outstanding, not to exceed $1.0 million.
SECTION 2.2. Incurrence of Indebtedness and Issuance of Preferred Stock.
----------------------------------------------------------
Section 4.09 of the Indenture is hereby amended in its entirety to read as set
forth below:
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this Section 4.09 will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the stated amount thereof) and other obligations under Credit
Facilities in an aggregate principal amount that does not exceed at any one
time $40.0 million less the aggregate amount of all Net Proceeds of Asset
Sales applied to repay Indebtedness under a Credit Facility pursuant to
Section 4.10 hereof (other than temporary paydowns pending final
application of such Net Proceeds);
(ii) the incurrence by the Company and the Guarantors of the
Existing Indebtedness and letters of credit (including reimbursement
obligations with respect thereto) supporting Existing Indebtedness whether
such letters of credit are incurred under the New Credit Facility or
otherwise;
<PAGE>
(iii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iv) the incurrence by the Company or any of the Guarantors or Non-
Guarantor Foreign Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each
case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (iv), not to exceed $5.0
million at any time outstanding;
(v) the incurrence by the Company or any of the Guarantors of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that is permitted by this Indenture to be
incurred under the first paragraph hereof or clauses (ii) or (iv) or (xi)
of this paragraph;
(vi) the incurrence by the Company or any of the Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any Restricted Subsidiary; provided, however, that (i) if the Company is
the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Subsidiary thereof and (B) any sale or
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vi);
(vii) the incurrence by the Company or any of the Guarantors of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(viii) the guarantee by the Company or any of its Subsidiaries or any
of the Guarantors of the Indebtedness of the Company or another Subsidiary
that was permitted to be incurred by another provision of this Section
4.09;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to
<PAGE>
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix), and
the issuance of preferred stock by Unrestricted Subsidiaries;
(x) the incurrence by the Company or any of the Guarantors or Non-
Guarantor Foreign Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (x), not to exceed $5.0 million; and
(xi) the incurrence by Bidco of Indebtedness under the Loan Notes
and the incurrence by the Company of Indebtedness with respect to its
reimbursement obligation to the issuer of any Loan Notes Guarantees.
For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest, accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.09; provided, however, in each such case, that the amount thereof is included
in Fixed Charges of the Company as accrued (to the extent not already included
in Fixed Charges).
SECTION 2.3. Additional Subsidiary Guarantees. Section 4.17 of the Indenture
--------------------------------
is hereby amended in its entirety to read as set forth below:
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Guarantor Subsidiary after the date of this Indenture, or if any
Subsidiary of the Company becomes a Guarantor Subsidiary then such newly
acquired or created Guarantor Subsidiary shall become a Guarantor and execute a
Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the
terms of this Indenture; provided, that all Subsidiaries that have properly been
designated as Unrestricted Subsidiaries in accordance with this Indenture (i)
shall not be subject to the requirements of this Section 4.17 and (ii) shall be
released from all Obligations under any Subsidiary Guarantee, in each case for
so long as they continue to constitute Unrestricted Subsidiaries. With respect
to any Foreign Subsidiary that is not permitted under applicable law to deliver
an unlimited Guarantee of the Notes
<PAGE>
and all Senior Debt of the Company and its Subsidiaries or if the delivery of
such a Guarantee would have significant adverse tax or accounting effects on
such Foreign Subsidiary or the Company and its other Subsidiaries as determined
in good faith by the Board of Directors ("Adverse Effects"), (i) the Company
will use commercially reasonable and lawful efforts to overcome the restrictions
imposed by applicable law on the delivery of such a Guarantee or the Adverse
Effects caused by the delivery of such a Guarantee and (ii) if the delivery by a
Foreign Subsidiary of an unlimited Guarantee of the Notes and Senior Debt of the
Company and its Subsidiaries would not be permitted under applicable law or
would have Adverse Effects but the delivery of a partial Guarantee would be
permitted by applicable law and would not have Adverse Effects, the Company
will, if first consented to in writing by the agent and all appropriate lenders
under the New Credit Facility and other holders of Senior Debt under Credit
Facilities, cause such Foreign Subsidiary to deliver a partial Guarantee of the
Notes and Senior Debt of the Company and its Subsidiaries (based on percentages
of principal amount or such other methodology as the Board of Directors
determines in good faith treats the Holders and holders of Senior Debt as
similarly as practicable under the circumstances). With respect to any Foreign
Subsidiary that is or becomes a Guarantor Subsidiary, the Company shall cause
such Guarantor Subsidiary to become a Guarantor as described above as promptly
as practicable under the circumstances.
SECTION 2.4 Amendment Conditions. The amendments to the Indenture contained
--------------------
herein shall not become operative until the acquisition by the Company or one of
its Subsidiaries of at least fifty percent (50%) of the outstanding capital
stock of Tinsley Robor plc.
ARTICLE THREE
Miscellaneous
SECTION 3.1. Miscellaneous.
-------------
(a) The Trustee accepts the trusts created by the Indenture, as
supplemented by this First Supplemental Indenture, and agrees to perform the
same upon the terms and conditions of the Indenture, as supplemented by this
First Supplemental Indenture.
(b) The recitals contained herein shall be taken as statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this First
Supplemental Indenture.
(c) All capitalized terms used and not defined herein shall have the
respective meanings assigned to them in the Indenture.
<PAGE>
(d) Each of the Company and the Trustee makes and reaffirms as of the date
of execution of this First Supplemental Indenture all of its respective
representations, covenants and agreements set forth in the Indenture.
(e) All covenants and agreements in this First Supplemental Indenture by
the Company or the Trustee shall bind its respective successors and assigns,
whether so expressed or not.
(f) In case any provisions in this First Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
(g) Nothing in this First Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
under the Indenture and the Holders of the series of Notes created hereby, any
benefit or any legal or equitable right, remedy or claim under the Indenture.
(h) If any provisions hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act of 1939, as may be amended from time to
time, that is required under such Act to be a part of and govern this First
Supplemental Indenture, the latter provision shall control. If any provision
hereof modifies or excludes any provision of such Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this First
Supplemental Indenture as so modified or excluded, as the case may be.
(i) THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.
(j) All provisions of this First Supplemental Indenture shall be deemed to
be incorporated in, and made a part of, the Indenture; and the Indenture, as
supplemented by this First Supplemental Indenture, shall be read, taken and
construed as one and the same instrument.
------------------------
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed as of the day and year first above written.
IMPAC GROUP, INC.
By: /s/ David C. Underwood
---------------------------
Name: David C. Underwood
Title: Chief Financial Officer
Attest:
[Illegible]
- ---------------------------
STATE STREET BANK AND
TRUST COMPANY,
As Trustee
By: /s/ Arthur J. MacDonald
--------------------------
Name: Arthur J. MacDonald
Title: Assistant Vice President
Attest:
[Illegible]
- ---------------------------
<PAGE>
ACKNOWLEDGEMENT OF GUARANTORS
-----------------------------
The undersigned Guarantors acknowledge and consent to the terms of this
First Supplemental Indenture.
AGI INCORPORATED
By: /s/ David C. Underwood
-------------------------------
Name: David C. Underwood
Title: Chief Financial Officer
KLEARFOLD, INC.
By: /s/ David C. Underwood
-------------------------------
Name: David C. Underwood
Title: Chief Financial Officer
KF-INTERNATIONAL, INC.
By: /s/ David C. Underwood
-------------------------------
Name: David C. Underwood
Title: Chief Financial Officer
KF-DELAWARE, INC.
By: /s/ David C. Underwood
-------------------------------
Name: David C. Underwood
Title: Chief Financial Officer
<PAGE>
Exhibit 10.58
$160,000,000
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
Dated as of March 12, 1998
and as amended and restated
as of July 7, 1998
among
IMPAC GROUP, INC.,
AGI INCORPORATED,
KLEARFOLD, INC.,
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION,
as Agent
and
Letter of Credit Issuing Bank
and
Swing Line Lender,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged By
BANCAMERICA ROBERTSON STEPHENS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I DEFINITIONS....................................................................... 2
1.01 Certain Defined Terms................................................................ 2
1.02 Other Interpretive Provisions........................................................ 38
1.03 Accounting Principles................................................................ 39
ARTICLE II THE CREDITS...................................................................... 40
2.01 Amounts and Terms of Commitment...................................................... 40
(a) Term Loan A..................................................................... 40
(b) Term Loan B..................................................................... 40
(c) The Revolving Credit............................................................ 40
(d) Specified L/C Loans............................................................. 41
(e) Swing Line Loans................................................................ 41
2.03 Procedure for Borrowing.............................................................. 44
2.04 Conversion and Continuation Elections for Revolving Loans............................ 46
2.05 Voluntary Termination or Reduction of Commitments.................................... 48
2.06 Optional Prepayments of Loans........................................................ 48
2.07 Termination of Commitments; Mandatory Prepayments of Loans; Mandatory
Commitment Reductions................................................................ 49
2.08 Repayment of Loans................................................................... 53
2.10 Fees................................................................................. 54
(a) Agency Fees..................................................................... 55
(b) Commitment Fees................................................................. 55
(c) Term Loan Commitment Fees....................................................... 55
2.11 Computation of Fees and Interest..................................................... 56
2.12 Payments by the Credit Parties....................................................... 56
2.13 Payments by the Lenders to the Agent................................................. 57
2.14 Sharing of Payments, Etc............................................................. 57
2.15 Utilization of Commitments in Offshore Currencies.................................... 58
ARTICLE III THE LETTERS OF CREDIT, BANK GUARANTEE........................................... 60
3.01 The Letter of Credit Facility and Bank Guarantee..................................... 60
3.02 Issuance, Amendment and Renewal of Letters of Credit................................. 62
3.03 Risk Participations, Drawings, Specified L/C Loans, L/C Borrowings,
Revolving Loans and Reimbursements................................................... 64
3.04 Repayment of Participations.......................................................... 72
3.05 Role of the Issuing Bank............................................................. 72
3.06 Obligations Absolute................................................................. 73
3.07 Cash Collateral Pledge............................................................... 74
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
3.08 Letter of Credit Fees................................................................ 74
3.09 Uniform Customs and Practice......................................................... 75
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY........................................... 75
4.01 Taxes................................................................................ 75
4.02 Illegality........................................................................... 76
4.03 Increased Costs and Reduction of Return.............................................. 77
4.04 Funding Losses....................................................................... 78
4.05 Inability to Determine Rates......................................................... 79
4.06 Reserves on Offshore Rate Loans...................................................... 79
4.07 Certificates of Lenders.............................................................. 79
4.08 Substitution of Lenders.............................................................. 80
4.09 Survival............................................................................. 80
ARTICLE V CONDITIONS PRECEDENT.............................................................. 81
5.01 Conditions to Announcement Date...................................................... 81
(a) Credit Agreement and Notes...................................................... 81
(b) Resolutions; Incumbency......................................................... 81
(c) Organization Documents; Good Standing........................................... 81
(d) Legal Opinions.................................................................. 82
(e) Payment of Fees................................................................. 82
(f) Certificate..................................................................... 82
(g) Press Release................................................................... 82
(h) Collateral Documents............................................................ 83
(i) Amendments to Prior Loan Document............................................... 83
(j) Consent Solicitation............................................................ 84
(k) Currency Fluctuations Protection................................................ 84
(l) Environment Review.............................................................. 84
(m) Indenture Certificate........................................................... 84
(n) Pro Forma Balance Sheet; Projections; and Financials............................ 84
(o) Equity Documents................................................................ 85
(p) Solvency Certificates........................................................... 85
5.02 Conditions of Initial Funding Date................................................... 85
(a) Bring Down Certificate.......................................................... 85
(b) Lender Payoff Letter............................................................ 85
(c) Solvency Certificates........................................................... 86
(d) Applicable Margin Certificate................................................... 86
(e) Senior Subordinated Note Documents.............................................. 86
(f) Equity Investment............................................................... 86
(g) Completion of Offer............................................................. 87
5.03 Conditions to All Credit Extensions............................................. 87
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
(a) Notice, Application............................................................. 87
(b) Continuation of Representations and Warranties.................................. 87
(c) No Existing Default............................................................. 88
ARTICLE VI REPRESENTATIONS AND WARRANTIES................................................... 88
6.01 Corporate Existence and Power........................................................ 88
6.02 Corporate Authorization; No Contravention............................................ 89
6.03 Governmental Authorization........................................................... 89
6.04 Binding Effect....................................................................... 89
6.05 Litigation........................................................................... 91
6.06 No Default........................................................................... 91
6.07 ERISA Compliance..................................................................... 91
6.08 Use of Proceeds; Margin Regulations.................................................. 92
6.09 Title to Properties.................................................................. 92
6.10 Taxes................................................................................ 92
6.11 Financial Condition.................................................................. 92
6.12 Environmental Matters................................................................ 93
6.13 Collateral Documents................................................................. 93
6.14 Regulated Entities................................................................... 95
6.15 No Burdensome Restrictions........................................................... 95
6.16 Solvency............................................................................. 95
6.17 Labor Relations...................................................................... 95
6.18 Copyrights, Patents, Trademarks and Licenses, etc.................................... 95
6.19 Capitalization; Subsidiaries......................................................... 96
6.20 Broker's; Transaction Fees........................................................... 96
6.21 Insurance............................................................................ 96
6.22 Swap Obligations..................................................................... 96
6.23 Full Disclosure...................................................................... 97
6.24 Subordination Provisions............................................................. 97
6.25 Transaction Agreements............................................................... 97
6.26 Year 2000 Compliance................................................................. 97
ARTICLE VII AFFIRMATIVE COVENANTS........................................................... 98
7.01 Financial Statements................................................................. 98
7.02 Certificates; Other Information...................................................... 99
7.03 Notices.............................................................................. 99
7.04 Preservation of Corporate Existence, etc............................................. 101
7.05 Maintenance of Property.............................................................. 101
7.06 Insurance............................................................................ 101
7.07 Payment of Obligations............................................................... 101
7.08 Compliance with Laws................................................................. 102
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
7.09 Compliance with ERISA................................................................ 102
7.10 Inspection of Property and Books and Records......................................... 102
7.11 Environmental Laws................................................................... 102
7.12 Use of Proceeds...................................................................... 103
7.13 Solvency............................................................................. 103
7.14 Further Assurances................................................................... 103
7.15 Foreign Subsidiaries Security........................................................ 104
7.16 The Offer............................................................................ 105
7.17 Interest Rate Protection............................................................. 108
7.18 Mortgages............................................................................ 108
7.19 Bidco Holding and Bidco Capitalization............................................... 109
ARTICLE VIII NEGATIVE COVENANTS............................................................. 109
8.01 Limitation on Liens.................................................................. 109
8.02 Disposition of Assets................................................................ 111
8.03 Acquisitions, Consolidations and Mergers............................................. 112
8.04 Loans and Investments................................................................ 113
8.05 Limitation on Indebtedness........................................................... 115
8.06 Transactions with Affiliates......................................................... 116
8.07 Use of Proceeds...................................................................... 116
8.08 Contingent Obligations............................................................... 116
8.09 Joint Ventures; Foreign Assets; New Subsidiaries..................................... 117
8.10 Lease Obligations.................................................................... 117
8.11 Restricted Payments; No Permitted Restrictions for Subsidiaries...................... 118
8.12 ERISA................................................................................ 119
8.13 Change in Business................................................................... 119
8.14 Accounting Changes................................................................... 121
8.15 Total Leverage Ratio................................................................. 121
8.16 Senior Leverage Ratio................................................................ 121
8.17 Interest Coverage Ratio.............................................................. 122
8.18 Fixed Charge Coverage Ratio.......................................................... 122
8.19 [Intentionally Omitted].............................................................. 122
8.20 Amendments to Organization Documents, Subordinated Debt, IRB Debt;
Equity Document, Bidco Loan Notes; No Preferred Stock................................ 122
8.21 Intercompany Loans................................................................... 124
8.22 Target Operations.................................................................... 125
ARTICLE IX EVENTS OF DEFAULT................................................................ 125
9.01 Event of Default..................................................................... 125
(a) Non-Payment..................................................................... 125
(b) Representation or Warranty...................................................... 126
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
(c) Specific Defaults............................................................... 126
(d) Other Defaults.................................................................. 126
(e) Cross-Default................................................................... 126
(f) Insolvency...................................................................... 127
(g) Involuntary Proceedings......................................................... 127
(h) ERISA........................................................................... 127
(i) Monetary Judgments.............................................................. 127
(j) Non-Monetary Judgments.......................................................... 128
(k) Collateral...................................................................... 128
(l) Change of Control............................................................... 128
(m) Guaranty Defaults............................................................... 128
(n) Invalidity of Subordination Provisions.......................................... 128
(o) Cross Default to IRBs........................................................... 128
(p) Collateral Documents............................................................ 129
(q) Relevant Event of Default....................................................... 129
9.02 Relevant Events of Default with respect to Offer..................................... 129
9.03 Remedies............................................................................. 130
9.04 Rights Not Exclusive................................................................. 132
9.05 Permitted Swap Contract Remedies..................................................... 132
ARTICLE X THE AGENT......................................................................... 132
10.02 Delegation of Duties................................................................. 133
10.03 Liability of Agent................................................................... 133
10.05 Notice of Default.................................................................... 134
10.06 Credit Decision...................................................................... 134
10.07 Indemnification of Agent............................................................. 135
10.08 Agent in Individual Capacity......................................................... 135
10.09 Successor Agent...................................................................... 137
10.10 Withholding Tax...................................................................... 137
10.11 Collateral Matters................................................................... 138
10.12 Agent as English Trustee............................................................. 139
ARTICLE XI MISCELLANEOUS.................................................................... 140
11.01 Amendments and Waivers............................................................... 140
11.03 No Waiver; Cumulative Remedies....................................................... 142
11.04 Costs and Expenses................................................................... 142
11.05 Company Indemnification.............................................................. 142
11.06 Payments Set Aside................................................................... 143
11.07 Successors and Assigns............................................................... 143
11.08 Assignments, Participations, etc..................................................... 143
11.09 Confidentiality...................................................................... 145
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
11.10 Set-off.............................................................................. 146
11.11 Automatic Debits of Fees............................................................. 146
11.12 Notification of Addresses, Lending Offices, etc...................................... 146
11.13 Counterparts......................................................................... 146
11.14 Severability......................................................................... 147
11.15 No Third Parties Benefited........................................................... 147
11.17 Waiver of Jury Trial................................................................. 148
11.18 Entire Agreement..................................................................... 148
11.19 Agent for Service of Process......................................................... 149
11.20 Judgment Currency.................................................................... 149
11.21 Amendment and Restatement............................................................ 149
</TABLE>
vi
<PAGE>
SCHEDULES
Schedule 1(a) Reserve Asset Costs
Schedule 1(b) Target UK Subsidiaries
Schedule 2.01 Commitments
Schedule 2.08(d) Term Loan Amortization
Schedule 6.05 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.18 Exceptions to Title for Intellectual Property
Schedule 6.19 Capitalization, Subsidiaries and Minority Interest
Schedule 6.20 Brokers' and Transaction Fees
Schedule 8.01 Existing Liens
Schedule 8.04 Existing Investments
Schedule 8.05 Existing Indebtedness
Schedule 8.06 Affiliate Transactions
Schedule 8.08 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Bingham Dana LLP
Exhibit D-2 Form of Legal Opinion of Kleinboard, Bell & Becker LLP
Exhibit D-3 Form of Legal Opinion of Sonnenschein Nath & Rosenthal
Exhibit D-4 Form of Legal Opinion of Simmons & Simmons
Exhibit D-5 Form of Legal Opinion of Allen & Overy
Exhibit E Form of Assignment and Acceptance
Exhibit F-1 Form of Amended and Restated Revolving Note
Exhibit F-2 Form of Amended and Restated Specified L/C Loan Note
Exhibit F-3 Form of Term Loan A Note
Exhibit F-4 Form of Term Loan B Note
Exhibit F-5 Form of Swing Line Note
Exhibit G AGI Letter of Credit
Exhibit H Klearfold Letter of Credit
Exhibit I AGI Pledge and Security Agreement
Exhibit J Form of Special Funding Procedures Letter
Exhibit K Form of Borrowing Base Certificate
Exhibit L-1 Form of Solvency Certificate - Company and L/B Borrowers
Exhibit L-2 Form of Solvency Certificate - Bidco Holding and Bidco
Exhibit M Form of Solvency Certificate - Target and Target Subsidiaries
vii
<PAGE>
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
------------------------------
This AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT is entered into as
of March 12, 1998 and as amended and restated as of July7, 1998, among IMPAC
GROUP, INC., a Delaware corporation (the "Company"), AGI INCORPORATED, an
-------
Illinois corporation ("AGI"), KLEARFOLD, INC., a Pennsylvania corporation
---
("Klearfold", and together with AGI, each a "L/C Borrower" and collectively, the
--------- ------------
"L/C Borrowers"), the several financial institutions from time to time party to
-------------
this Agreement (collectively, the "Lenders"; individually, a "Lender"), and Bank
------- ------
of America National Trust & Savings Association, as letter of credit issuing
bank and as agent for the Lenders.;
RECITALS
WHEREAS, the Company (such term and each other capitalized term used but
not defined in this preamble having the meaning assigned to such terms in
Article I), through IMPAC Europe Public Limited Company, a public limited
- ---------
liability company incorporated under the laws of England and Wales and a Wholly-
Owned Subsidiary of the Company ("Bidco"), intends to acquire Tinsley Robor PLC,
-----
a public limited liability company incorporated under the laws of England and
Wales ("Target"), pursuant to (a) an Offer by Bidco for all the outstanding
------
shares of Target's capital stock, followed by a compulsory squeeze out of the
remaining shareholders of Target pursuant to Section 428-430F of the Companies
Act (the "Squeeze-Out") pursuant to which (i) Target will become a Wholly-Owned
-----------
Subsidiary of Bidco and (ii) all holders of shares of capital stock of Target
(other than those acquired pursuant to the Offer) will be entitled to receive
cash consideration, and in certain circumstances promissory notes, for their
shares.
WHEREAS, in connection therewith, the Company and the L/C Borrowers desire
to amend and restate the terms and provisions of the Credit Agreement dated as
of March 12, 1998 (the "Prior Loan Document"), among the Company, the L/C
-------------------
Borrowers, the existing lenders thereunder and the Agent, in the form hereof in
order, among other things, to permit the Offer and the Transaction and to
provide for the other Loans permitted hereby.
WHEREAS, in connection with the transactions referenced above, the Lenders
have agreed to make available to the Company a multicurrency revolving credit
facility, with a letter of credit and guaranty subfacility and a Sterling swing
line subfacility, and two term loan facilities, and to make available to the L/C
Borrowers a letter of credit facility upon the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS.
1.01 Certain Defined Terms.
---------------------
The following terms have the following meanings:
"Acquisition" means any transaction or series of related transactions
-----------
(other than the Transaction) for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of all or substantially all of the assets of
a Person, or of any business or division of a Person, (b)the acquisition of in
excess of 50% of the capital stock, partnership interests, membership interests
or equity of any Person, or otherwise causing any Person to become a Subsidiary,
or (c)a merger or consolidation or any other combination with another Person
(other than a Person that is a Subsidiary) provided that the Company or its
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise, but shall with respect to a Credit Party specifically exclude
BofA.
"Agent" means BofA in its capacity as agent for the Lenders hereunder,
-----
or any successor agent arising under Section 10.09.
-------------
"Agent-Related Persons" means BofA and any successor agent arising
---------------------
under Section 10.09 or any successor letter of credit issuing bank or Swing Line
-------------
lender hereunder, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in- fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 11.02 or such other address as the Agent may from time to time specify.
- --------------
"AGI" means AGI Incorporated, an Illinois corporation.
---
"AGI-A Drawing (Purchase)" means a demand for payment under the AGI
-----------------------
Letter of Credit made by presentation of a document in the form of Exhibit A-1
(Next Day Purchase) or Exhibit A-2 (Same Day Purchase) to the AGI Letter of
Credit.
"AGI-B Drawing (Principal)" means a demand for payment under the AGI
------------------------
Letter of Credit made by presentation of a document in the form of Exhibit B
(Principal) to the AGI Letter of Credit.
2
<PAGE>
"AGI Bond Documents" means collectively, the AGI Bonds, the AGI
------------------
Indenture, AGI Remarketing Agreement, AGI Pledge and Security Agreement and any
other agreements or instruments relating thereto.
"AGI Bond Issuer" means The City of Jacksonville, Illinois.
---------------
"AGI Bonds" means the Multi-Mode Industrial Project Revenue Bonds,
---------
Series 1995 issued by the AGI Bond Issuer pursuant to the AGI Indenture.
"AGI-C Drawing (Interest)" means a demand for payment under the AGI
-----------------------
Letter of Credit made by presentation of a document in the form of Exhibit C
(Interest) to the AGI Letter of Credit.
"AGI-D Drawing (Premium)" means a demand for payment under the AGI
----------------------
Letter of Credit made by presentation of a document in the form of Exhibit D
(Premium) to the AGI Letter of Credit.
"AGI-E Drawing (Acceleration)" means a demand for payment under the
---------------------------
AGI Letter of Credit made by presentation of a document in the form of Exhibit E
(Acceleration) to the AGI Letter of Credit.
"AGI Indenture" means the Trust Indenture, dated as of January 1,
-------------
1995, between the AGI Bond Issuer and the AGI Trustee.
"AGI L/C Obligations" means at any time the sum of (a) the aggregate
-------------------
undrawn amount of the AGI Letter of Credit then outstanding, plus (b) the amount
of all unreimbursed drawings under the AGI Letter of Credit, including all
outstanding AGI Specified L/C Loans.
"AGI L/C Sublimit" means the commitment of the Issuing Bank to Issue,
----------------
and the commitment of the Revolving Lenders severally to participate in, the AGI
Letter of Credit Issued or outstanding under Article III, in an aggregate amount
-----------
not to exceed on any date $8,571,019, as the same shall be reduced as a result
of a reduction in the Revolving Loan Commitment pursuant to Section 2.07(b).
---------------
"AGI Letter of Credit" means the letter of credit issued by the
--------------------
Issuing Bank in substantially the form of Exhibit G hereto.
---------
"AGI LOC Termination Tender Date" has the meaning specified in the AGI
-------------------------------
Indenture.
"AGI Pledged Bonds" has the meaning specified in Section 3.03(b).
----------------- ---------------
3
<PAGE>
"AGI Pledge and Security Agreement" has the meaning specified in
---------------------------------
Section 3.03(b).
- ---------------
"AGI Reimbursement Agreement" means that certain Reimbursement
---------------------------
Agreement between AGI and BofA (f/k/a Bank of America Illinois) dated as of
January 1, 1995.
"AGI Remarketing Agent" means William Blair & Company.
---------------------
"AGI Remarketing Agreement" means the Remarketing Agreement, dated as
-------------------------
of January 1, 1995, between the Company and the AGI Remarketing Agent.
"AGI Specified L/C Loan" means a Revolving Loan made by the Revolving
----------------------
Lenders to AGI.
"AGI Tender Price" has the meaning specified in the AGI Indenture.
----------------
"AGI Trustee" means Bank One, Springfield.
-----------
"Agreed Alternative Currency" has the meaning specified in Section
--------------------------- -------
2.15(e).
- -------
"Aggregate Commitment" means the sum of (a) the Aggregate Revolving
--------------------
Loan Commitment and (b) the Aggregate Term Loan Commitment.
"Aggregate Revolving Loan Commitment" means the aggregate Revolving
-----------------------------------
Loan Commitments of the Lenders.
"Aggregate Term Loan Commitment" means the aggregate Term Loan
------------------------------
Commitments of the Lenders, equal to One Hundred Seven Million Dollars
($107,000,000).
"Aggregate Term Loan A Commitment" means the aggregate Term Loan A
--------------------------------
Commitments of the Lenders, equal to Thirty Seven Million Dollars ($37,000,000).
"Aggregate Term Loan B Commitment" means the aggregate Term Loan B
--------------------------------
Commitments of the Lenders equal to Seventy Million Dollars ($70,000,000).
"Agreement" means this Amended and Restated Multicurrency Credit
---------
Agreement.
"Agreement Currency" has the meaning specified in Section 11.20.
------------------ -------------
"Announcement Date" means the date on which all conditions precedent
-----------------
set forth in Section 5.01 are satisfied or waived by the Agent.
------------
4
<PAGE>
"Applicable Credit Rating" shall mean the rating level assigned by S&P
------------------------
or Moody's, as the case may be, from time to time on the Senior Subordinated
Notes.
"Applicable Currency" means, as to any particular payment, Loan or
-------------------
Letter of Credit (other than the Bidco Loan Notes Credit Support), Dollars or,
with respect to Revolving Loans (not constituting Specified L/C Loans), Swing
Line Loans and the Bidco Loan Notes Credit Support, the Offshore Currency in
which it is denominated or is payable.
"Applicable Margin" shall mean on any date the applicable percentage
-----------------
set forth below based upon the Level as shown in the Compliance Certificate then
most recently delivered to the Lenders:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Base Rate Loans Offshore Rate Loans
- ---------------------------------------------------------------------------------------------------
Revolving
Commitment
Fee and
Revolving Revolving Term Loan
and Loan and Commitment
Level Term Loan A Term Loan B Term Loan A Term Loan B Fee
----- ----------- ----------- ----------- ----------- ----
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
I 1.25% 1.75% 2.25% 2.75% 0.50%
- ---------------------------------------------------------------------------------------------------
II 1.00% 1.75% 2.00% 2.75% 0.45%
- ---------------------------------------------------------------------------------------------------
III 0.75% 1.75% 1.75% 2.75% 0.40%
- ---------------------------------------------------------------------------------------------------
IV 0.50% 1.75% 1.50% 2.75% 0.35%
- ---------------------------------------------------------------------------------------------------
</TABLE>
; provided, however that for the period from (i) the Announcement Date until but
-------- -------
excluding the Initial Funding Date, the Applicable Margin shall be deemed to be
the Level as determined pursuant to the Prior Loan Document and (ii) the Initial
Funding Date until the date that is the first Business Day after the date the
first Compliance Certificate is delivered to the Lenders pursuant to Section
-------
7.02(b), the Applicable Margin shall be deemed to be the Level determined
- -------
pursuant to the certificate referred to in Section 5.02(d); provided further
--------------- -------- -------
that, if the Company shall have failed to deliver to the Lenders by the date
required hereunder any Compliance Certificate pursuant to Section 7.02(b) or if
---------------
any other Event of Default shall have occurred and be continuing, then from the
date such Compliance Certificate was required to be delivered until the date of
such delivery or the cure or waiver in writing of such other Event of Default,
as the case may be, the Applicable Margin shall be deemed to be Level I; and
provided further that, in the event that S&P reduces its Applicable Credit
- -------- -------
Rating to below B- or Moody's reduces its Applicable Credit Rating to below B3,
then the Applicable Margin for each Level indicated above shall be increased by
25 basis points (5 basis points with respect to the Revolving Commitment Fee and
Term Loan Commitment Fee) until such time as the Applicable Credit Rating
assigned by S&P is B- or higher and the Applicable Credit Rating assigned by
Moody's is B3 or higher. Each change in the Applicable Margin shall take effect
with respect to all outstanding Loans and fees on the first Business Day
immediately succeeding the day on which such Compliance Certificate is received
by the Agent. Notwithstanding the foregoing,
5
<PAGE>
no reduction in the Applicable Margin shall be effected if an Event of Default
shall have occurred and be continuing on the date when such change would
otherwise occur, it being understood that on the first Business Day immediately
succeeding the day on which such Event of Default is either waived or cured
(assuming no other Event of Default shall be then pending), the Applicable
Margin shall be reduced (on a prospective basis) in accordance with the then
most recently delivered Compliance Certificate.
"Asset Disposition" has the meaning specified in Section 8.02.
----------------- ------------
"Assignee" has the meaning specified in Section 11.08(a).
-------- ----------------
"Attorney Costs" means and includes all reasonable and customary fees
--------------
and disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements of
internal counsel.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
---------------
U.S.C. (S)101, et seq.).
-------
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
---------
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by BofA in Chicago, Illinois as
its "reference rate." The "reference rate" is a rate set by BofA based upon
various factors including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the reference rate announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Base Rate Loan" means a Loan or an L/C Advance that bears interest
--------------
based on the Base Rate.
"Bidco" shall mean IMPAC Europe Public Limited Company, a public
-----
limited company incorporated under the laws of England and Wales.
"Bidco Holding" shall mean Levelprompt Limited, a private limited
-------------
company incorporated under the laws of England and Wales;
"Bidco Loan Notes" means, collectively, the Loan Notes to be issued by
----------------
Bidco as constituted by the Bidco Loan Note Instrument and payable to certain
shareholders of the Target; provided, however, that the aggregate outstanding
-------- -------
principal amount of such Bidco Loan Notes shall not at any time exceed the Bidco
Loan Notes Credit Support Commitment (as such amount is reduced as a result of
principal payments thereto).
6
<PAGE>
"Bidco Loan Notes Credit Support Commitment" means the commitment of
------------------------------------------
the Issuing Bank to Issue, and the Revolving Lenders severally to participate
in, the Bidco Loan Notes Credit Support Issued or outstanding under Article III,
-----------
in an aggregate amount not to exceed on any date the Dollar Equivalent of
(Pounds)15,375,000, as the same may be reduced as a result of a reduction in the
Bidco Loan Notes Credit Support pursuant to Section 2.07(f).
---------------
"Bidco Loan Notes Credit Support" has the meaning specified in Section
------------------------------- -------
3.01(d).
- -------
"Bidco Loan Notes Credit Support Advance" means each Revolving
---------------------------------------
Lender's participation in any Bidco Loan Notes Credit Support Borrowing in
accordance with its Pro Rata Revolving Share.
"Bidco Loan Notes Credit Support Borrowing" means an extension of
-----------------------------------------
credit resulting from a drawing under the Bidco Loan Notes Credit Support which
shall not have been reimbursed on the date when made nor converted into a
Borrowing of a Revolving Loan under Section 3.03(e).
---------------
"Bidco Loan Notes Credit Support Obligations" means at any time the
-------------------------------------------
sum of (a) the aggregate undrawn amount of the Bidco Loan Notes Credit Support
then outstanding, plus (b) the amount of all unreimbursed drawings under the
----
Bidco Loan Notes Credit Support, including all outstanding Bidco Loan Notes
Credit Support Borrowings.
"Bidco Loan Note Instrument" means the Loan Note Instrument entered
--------------------------
into on or before the Initial Funding Date with respect to the issuance of the
Bidco Loan Notes and the Bidco Loan Credit Support relating thereto.
"Bidco Loan Notes Payment Date" means any Business Day on which a
-----------------------------
holder of a Bidco Loan Note may demand a payment of principal on such Bidco Loan
Note pursuant to the terms of the Bidco Loan Notes and the Bidco Loan Notes
Instrument.
"Bidco Security Documents" means, collectively, each Guarantee and
------------------------
Debenture to be entered into by each of Bidco Holding and Bidco after the
Initial Funding Date and pursuant to Section 7.16(k) incorporating a guarantee
---------------
of the Obligations and a fixed and floating charge over the assets of Bidco
Holding and Bidco, as the case may be, and any Mortgage of Shares executed by
Bidco Holding and Bidco over the shares of its Subsidiaries, in each case
granted to the Agent, for the benefit of itself, the Issuing Bank and the
Lenders, in form and substance satisfactory to the Agent.
"BofA" means Bank of America National Trust & Savings Association, a
----
national banking association, individually.
"Borrowing" means a borrowing hereunder consisting of Loans of the
---------
same Type and in the same Applicable Currency made to a Credit Party on the same
day by the Lenders under Article II, and, in the case of Offshore Rate Loans,
having the same Interest Period.
7
<PAGE>
"Borrowing Base" means, as at any date on which the amount thereof is
--------------
being determined, an amount equal to the sum of (a)(i) 85% of Eligible
Receivables plus (ii) 65% of Eligible Inventory plus (b) $10,000,000. The
---- ----
Borrowing Base in effect at any given time shall be the Borrowing Base derived
from the Borrowing Base Certificate most recently delivered in compliance with
Section 7.02(g); provided, that so long as the most recent Borrowing Base
- --------------- --------
Certificate required to be delivered has not been so delivered the Borrowing
Base in effect will be zero.
"Borrowing Base Certificate" has the meaning specified in Section
-------------------------- -------
7.02(g).
- -------
"Borrowing Base Deficiency" means, at any time, the amount, if any, by
-------------------------
which the sum of the Effective Amount of Revolving Loans, Swing Line Loans and
L/C Obligations at such time exceeds the Borrowing Base then in effect.
"Borrowing Date" means any date on which a Borrowing occurs under
--------------
Section 2.03.
- ------------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in Chicago or San Francisco are authorized or
required by law to close and (i) with respect to disbursements and payments in
Dollars with respect to any Loan bearing interest based upon the Offshore Rate,
a day on which dealings are carried on in the applicable offshore Dollar
interbank market, and (ii) with respect to any disbursements and payments in and
calculations pertaining to any Offshore Currency Loan, a day on which commercial
banks are open for foreign exchange business in London, England, and on which
dealings in the relevant Offshore Currency are carried on in the applicable
offshore foreign exchange interbank market in which disbursements or payment in
such Offshore Currency will be made or received hereunder.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, for any period and with respect to any
--------------------
Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements during
such period) which should be capitalized under GAAP on a consolidated balance
sheet of such Person and its Subsidiaries.
"Capital Lease" has the meaning specified in the definition of
-------------
"Capital Lease Obligations."
"Capital Lease Obligations" means all monetary obligations of a Credit
-------------------------
Party or any of its Subsidiaries (i.e., the portion that would be treated as
---
principal pursuant to GAAP) under any
8
<PAGE>
leasing or similar arrangement which, in accordance with GAAP, is classified as
a capital lease or a finance lease ("Capital Lease").
-------------
"Cash Collateralize" means to pledge and deposit with or deliver to
------------------
the Agent, for the benefit of the Agent, the Issuing Bank and the Lenders, as
additional collateral for the Obligations, cash or deposit account balances
pursuant to documentation in form and substance satisfactory to the Agent (which
documents are hereby consented to by the Lenders). Derivatives of such term
shall have corresponding meaning.
"Cash Equivalents" means:
----------------
(a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof and backed by the full faith and credit
of the United States having maturities of not more than one year from the date
of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time deposits,
repurchase agreements, reverse repurchase agreements, or bankers' acceptances,
having in each case a tenor of not more than one year, issued by any Lender, or
by any commercial bank having combined capital and surplus of not less than
$100,000,000 and either located in the U.S. or with respect to Foreign
Subsidiaries organized under the laws of an Approved Country (as defined in
clause (d) below) whose short term securities are rated at least A-1 by Standard
& Poor's Corporation and P-1 by Moody's Investors Service, Inc., or with respect
to banks located in an Approved Country the equivalent thereof;
(c) commercial paper of an issuer rated at least A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service Inc. and in either case
having a tenor of not more than six months; and
(d) with respect to Foreign Subsidiaries organized under the laws of
an Approved Country government obligations of Austria, the Republic of Ireland,
The Netherlands, The United Kingdom and of any other country approved by the
Agent or whose debt securities are rated by S&P and Moody's A-1 or P-1, or the
equivalent thereof (if a short-term debt rating is provided by either) or at
least AA or AA2, or the equivalent thereof (if a long-term unsecured debt rating
is provided by either (each such country, an "Approved Country"), in each case
----------------
with maturities of less than 12 months.
"Certain Funds Period" means the period commencing on the Announcement
--------------------
Date and ending on whichever is the earlier of (a) the date on which the
Aggregate Commitment is terminated pursuant to Section 2.07(a) hereof and (b)
the Business Day following the Squeeze-Out Date and (c) four calendar months and
two weeks after the posting of the Offer Documents if Bidco has not by then
acquired or unconditionally agreed to acquire pursuant to the Offer at least 90%
in nominal value of the Target Shares to which the Offer relates within the
meaning of Section 428-430F of the Companies Act.
9
<PAGE>
"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 and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
---------------
Act) other than one or more Principals or Related Parties of one or more
Principals or a Management Group, (ii) 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 one or more Principals and
their Related Parties or a Management Group, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (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 a Management Group becomes the "beneficial owner" (as defined above),
directly or indirectly, of 35% or more of the Voting Stock of the Company
(measured by voting power rather than number of shares) and the Principals and
their Related Parties in the aggregate "beneficially own" (as defined above)
less than 35% of the Voting Stock of the Company (measured by voting power
rather than number of shares), (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors,
(v) Bidco Holding shall cease to be a Wholly-Owned Subsidiary of the Company,
(vi) Bidco shall cease to be a Wholly-Owned Subsidiary of the Company, (vii) at
any time on and after the Squeeze-Out Date, the Target shall cease to be a
Wholly-Owned Subsidiary of Bidco or (viii) any other event or occurrence
constituting a "Change of Control" under the Senior Subordinated Note Indenture.
"City Code" means The City Code on Take-overs and Mergers as issued by
---------
the Panel on Take-overs and Mergers in the United Kingdom.
"Code" means the Internal Revenue Code of 1986, and regulations
----
promulgated thereunder .
"Collateral" means all property and interests in property and proceeds
----------
thereof now owned or hereafter acquired by a Credit Party or any Subsidiary
Guarantor in or upon which a Lien now or hereafter exists in favor of the
Lenders, or the Agent on behalf of the Lenders, whether under this Agreement or
under any other documents executed by any such Persons and delivered to the
Agent.
"Collateral Documents" means, collectively, (if and when each such
--------------------
document is required to be executed and delivered hereunder) (a) the Security
Agreements, the Guaranties, the Pledge Agreements, the AGI Pledge and Security
Agreement, the Intellectual Property Assignments, the Mortgages and all other
security agreements, patent and trademark assignments, guarantees and
10
<PAGE>
other similar agreements between a Credit Party or its Subsidiaries and the
Lenders or the Agent, for the benefit of itself, the Issuing Bank and the
Lenders, now or hereafter delivered to the Lenders or the Agent pursuant to or
in connection with the transactions contemplated hereby, and all financing
statements (or comparable documents now or hereafter filed in accordance with
the Uniform Commercial Code or comparable law) against a Credit Party or any of
its Subsidiaries as debtor in favor of the Lenders or the Agent, for the benefit
of itself, the Issuing Bank and the Lenders, as secured party and (b) any
amendments, supplements, modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Commencement Date" means the first day of the third stage of EMU.
-----------------
"Commitments" means, collectively, the Revolving Loan Commitment, the
-----------
Term Loan Commitment and the Swing Line Loan Commitment.
"Commitment Fee" means, collectively, the Revolving Commitment Fee and
--------------
the Term Loan Commitment Fee.
"Company" means IMPAC Group, Inc., a Delaware corporation.
-------
"Companies Act" means the Companies Act of 1985 of the United Kingdom.
-------------
"Compliance Certificate" means a certificate substantially in the form
----------------------
of Exhibit C.
"Computation Date" has the meaning specified in Section 2.15(a).
---------------- ---------------
"Consent Solicitation" has the meaning specified in Section 5.01(j).
-------------------- ------------
"Consolidated Interest Expense" means, for any period, gross
-----------------------------
consolidated interest expense paid or payable in cash for the period in respect
of borrowed money (including all commissions, discounts, commitment fees and
other charges in connection with standby letters of credit and similar
instruments (but not including one time arrangement commissions and fees) for
the Company and its Subsidiaries.
"Contingent Obligation" means, as to any Person, any direct or
---------------------
indirect liability of that Person, whether or not contingent, with or without
recourse, (a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another Person (the
-------------------
"primary obligor"), including any obligation of that Person (i) to purchase,
---------------
repurchase or otherwise acquire such primary obligations or any security
therefor, (ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation,
11
<PAGE>
or (iv) otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b)
-------------------
with respect to any Surety Instrument (other than any Letter of Credit) issued
for the account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap Contracts, shall be equal
to the maximum reasonably anticipated liability in respect thereof and, in the
case of Contingent Obligations in respect of Swap Contracts, shall be equal to
the Swap Termination Value.
"Continuing Directors" means, as of any date of determination, any
--------------------
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Original Closing Date, (ii) was nominated for election
or elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was elected to such Board of Directors pursuant
to a designation made pursuant to the Stockholder Agreement, provided that at
such time the Principals, any Management Group and their Related Parties own
more than 50% of the Voting Stock of the Company.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section
---------------------------- -------
2.04, the Company (a) converts Loans (other than Swing Line Loans and Specified
- ----
L/C Loans) of one Type to another Type, or (b) continues as Loans (other than
Swing Line Loans and Specified L/C Loans) of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Loans
----------------
hereunder, and (b) the Issuance of any Letters of Credit hereunder.
"Credit Party" means each of the Company and each L/C Borrower.
------------
12
<PAGE>
"Default" means any event or circumstance which, with the giving of
-------
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United
------- ------- -
States.
"Dollar Equivalent" means, at any time, (a) as to any amount
-----------------
denominated in Dollars, the amount thereof at such time and (b) as to any amount
denominated in an Offshore Currency, the equivalent amount in Dollars as
determined by the Agent at such time on the basis of the Spot Rate for the
purchase of Dollars with such Offshore Currency on the most recent Computation
Date.
"Domestic Subsidiary" means each Subsidiary of the Company that is
-------------------
organized under the laws of the United States or any state thereof.
"EBITDA" means, for any period, for the Company and its Subsidiaries
------
on a consolidated basis, determined in accordance with GAAP, the sum of (a) Net
Income for such period plus (b) Consolidated Interest Expenses and all amounts
----
treated as expenses for depreciation and amortization of intangibles of any kind
to the extent deducted in the determination of such Net Income, plus (c) all
----
taxes based on income or profits to the extent such taxes were included in
computing Net Income, plus (d) with respect to any business acquired during the
----
period of determination, an amount equal to the sum of (x) the total
compensation paid to each management equity holder of such acquired business
during the twelve month period immediately preceding the date such business was
acquired less the base compensation (which must, in any event, reflect at least
----
a reasonable market base salary for such types of managers and executives) paid
to each such Person during such twelve month period plus (y) the aggregate
----
amount of management fees paid to management equity holders or Affiliates
thereof during such twelve month period to the extent that such management fee
is no longer required to be paid after the date of such acquisition, plus or
minus (e) such amounts, if any, as from time to time agreed to between the
- -----
Company and the Lenders in connection with an Acquisition related to reasonably
projected savings from such Acquisition applied on a pro forma basis; and
provided further, that for the purpose of computations under Sections 8.15,
- -------- ------- -------------
8.16, 8.17 and 8.18 for any business acquired during the period of
- ---- ---- ----
determination, EBITDA for such period shall be determined on a pro forma basis
as if such acquisition had occurred as of the beginning of such period.
"Effective Amount" means:
----------------
(a) with respect to any Revolving Loans on any date, the Dollar
Equivalent of the aggregate outstanding principal amount thereof after giving
effect to any Borrowing and prepayments or repayments of Revolving Loans
occurring on such date;
(b) with respect to any AGI Specified L/C Loan on any date, the
aggregate outstanding principal amount thereof after giving effect to any
Borrowing and prepayments or repayments of AGI Specified L/C Loans occurring on
such date;
13
<PAGE>
(c) with respect to any outstanding AGI L/C Obligations on any date,
the amount of such AGI L/C Obligations on such date after giving effect to the
Issuance of the AGI Letter of Credit occurring on such date and any other
changes in the aggregate amount of the AGI L/C Obligations as of such date,
including as a result of any reimbursements of outstanding unpaid drawings under
the AGI Letter of Credit or any reductions in the maximum amount available for
drawing under the AGI Letter of Credit taking effect on such date;
(d) with respect to any Klearfold Specified L/C Loan on any date, the
aggregate outstanding principal amount thereof after giving effect to any
Borrowing and prepayments or repayments of Klearfold Specified L/C Loans
occurring on such date;
(e) with respect to any outstanding Klearfold L/C Obligations on any
date, the amount of such Klearfold L/C Obligations on such date after giving
effect to the Issuance of the Klearfold Letter of Credit occurring on such date
and any other changes in the aggregate amount of the Klearfold L/C Obligations
as of such date, including as a result of any reimbursements of outstanding
unpaid drawings under the Klearfold Letter of Credit or any reductions in the
maximum amount available for drawing under the Klearfold Letter of Credit taking
effect on such date;
(f) with respect to any Swing Line Loan on any date, the Dollar
Equivalent of the aggregate outstanding principal amount thereof after giving
effect to any Borrowing and prepayments or repayments of Swing Line Loans
occurring on such date;
(g) with respect to any Term Loan A on any date, the aggregate
outstanding principal amount thereof after giving effect to any Borrowing and
prepayments or repayments of Term Loan A occurring on such dates;
(h) with respect to Term Loan B on any date, the aggregate
outstanding principal amount thereof after giving effect to any Borrowing and
prepayments or repayments of Term Loan B occurring on such date; and
(i) with respect to any outstanding Bidco Loan Notes Credit Support
Obligations on any date, the Dollar Equivalent of the amount of such Bidco Loan
Notes Credit Support Obligations on such date after giving effect to the
Issuance of the Bidco Loan Notes Credit Support occurring on such date and any
other changes in the Dollar Equivalent of the aggregate amount of the Bidco Loan
Notes Credit Support Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under the Bidco Loan Notes Credit
Support or any reductions in the Dollar Equivalent of the maximum amount
available for drawing under the Bidco Loan Notes Credit Support taking effect on
such date.
For purposes of Section 2.07, the Effective Amount shall be determined without
------------
giving effect to any mandatory prepayments to be made under said Section.
14
<PAGE>
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
----
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a
Lender is a Subsidiary; (d) a commercial finance company or finance subsidiary
of a corporation organized under the laws of the United States of America, or
any State thereof, and having total assets in excess of $100,000,000; (e) a
savings bank or savings and loan association organized under the laws of the
United States of America, or any State thereof, and having total assets in
excess of $100,000,000; (f) as to the Term Loans, an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Security Act of
1933, as amended (other than the Company or an Affiliate of the Company); and
(g) any other entity approved by the Company and the Agent.
"Eligible Inventory" means the gross Dollar value (valued at the lower
------------------
of cost (determined on a first in-first out basis) or market value and otherwise
in accordance with GAAP consistently applied) of the inventory of the Company
and its Wholly-Owned Subsidiaries which are Domestic Subsidiaries or Permitted
International Subsidiaries and are a party to a Security Agreement, and which
conforms to the representations and warranties contained in the relevant
Security Agreement including, without limitation, that the Agent shall have and
maintain, for the benefit of itself and the Lenders, a first priority perfected
security interest in all such inventory (other than with respect to inventory of
Target, any Target UK Subsidiary and Target Ireland which shall in any event be
included at any time on and after the Initial Funding Date but prior to the 90th
day following the Initial Funding Date and thereafter, only if the Agent has
such a security interest), which inventory constitutes raw materials, work-in-
progress or finished goods and which is not, in the Company's good faith opinion
and consistent with past practice, excess, obsolete or unmerchantable, less (i)
----
any supplies (other than raw materials), spare parts and goods returned to
suppliers, (ii) inventory subject to any Lien other than the Liens created under
the Collateral Documents or (iii) any market reserves maintained by the Company
and its Subsidiaries.
"Eligible Receivables" means the total face amount of the receivables
--------------------
(related to the sale of goods and services other than to affiliates of the
Company) of the Company and its Wholly Owned Subsidiaries which are Domestic
Subsidiaries or Permitted International Subsidiaries and are a party to a
Security Agreement calculated in accordance with GAAP, consistently applied, and
which conform to the representations and warranties contained in the relevant
Security Agreement (including, without limitation, that the Agent shall have and
maintain for the benefit of itself and the Lenders, a first priority perfected
security interest in all such receivables (other than with respect to
receivables of Target, any Target UK Subsidiary and Target Ireland which shall
in any event be included at any time on and after the Initial Funding Date but
prior to the 90th day following the
15
<PAGE>
Initial Funding Date but prior to the 90th day following the Initial Funding
Date and thereafter, only if the Agent has such a security interest), and at all
times continue to be acceptable to the Agent in its reasonable judgment.
"EMU" means European Economic and Monetary Union as contemplated by
---
the Treaty establishing the European Community.
"EMU Legislation" means legislative measures of the European Council
---------------
in relation to EMU.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters.
"Environmental Permits" has the meaning specified in Section 6.12(b).
--------------------- ---------------
"Equity Document" has the meaning specified in Section 5.01(o).
--------------- ---------------
"Equity Investment" has the meaning specified in Section 5.02(f).
----------------- ---------------
"ERISA" means the Employee Retirement Income Security Act of 1974, and
-----
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
- -------------------- --------------- -
purposes of provisions relating to Section 412 of the Code).
-----------
"ERISA Event" means (a)a Reportable Event with respect to a Pension
-----------
Plan; (b)a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
------------
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
------------------
of operations which is treated as such a withdrawal under Section 4062(e) of
---------------
ERISA; (c)a complete or partial withdrawal by the Company or any ERISA Affiliate
from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
------------
the commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e)an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
------------
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability
16
<PAGE>
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Company or any ERISA Affiliate.
- ------------
"euro" means the single currency of the Participating Member States to
----
be introduced on the Commencement Date.
"Eurodollar Reserve Percentage" has the meaning specified in the
-----------------------------
definition of "Offshore Rate".
"euro unit" means a currency unit of the euro as defined in EMU
---------
Legislation.
"Event of Default" means any of the events or circumstances specified
----------------
in Section 9.01.
------------
"Excess Cash Flow" means, for any period, (x) EBITDA for such period
----------------
less (y) the sum, without duplication, of the amount for such period of (i)
Consolidated Interest Expense, (ii) provisions for taxes based on income, (iii)
unfinanced Capital Expenditures, and (iv) all voluntary principal payments on
the Term Loans and scheduled principal payments on Indebtedness (including all
scheduled repayments of Term Loans).
"Exchange Act" means the Securities Exchange Act of 1934, and
------------
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
----
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"Fee Letter" has the meaning specified in Section 2.10(a).
---------- ---------------
"Fixed Charge Coverage Ratio" means, with respect to any period, the
---------------------------
ratio of EBITDA for that period to the sum of (a) the aggregate principal amount
of scheduled payments of principal of Indebtedness for borrowed money of the
Company and its Subsidiaries during that period plus (b) cash interest paid with
----
respect to any Indebtedness for borrowed money during such period.
17
<PAGE>
"Foreign Subsidiary" means each Subsidiary of the Company that is not
------------------
a Domestic Subsidiary.
"FRB" means the Board of Governors of the Federal Reserve System, and
---
any Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
-------------
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
------------
"FX Trading Office" means the Foreign Exchange Trading Center #5193,
-----------------
San Francisco, California, of BofA, or such other foreign exchange trading
center of BofA as it may designate from time to time.
"GAAP" means U.S. generally accepted accounting principles set forth
----
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination; provided, however, that for purposes of all computations
-------- -------
required to be made with respect to compliance by the Company with Sections
--------
8.15, 8.16, 8.17, and 8.18 such term shall mean generally accepted accounting
- ---- ---- ---- ----
principles as in effect on the date of this Agreement, applied in a manner
consistent with those used in preparing the financial statements referred to in
Section 6.11.
- ------------
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, collectively, if and when each such document is
--------
executed and delivered, (a) each Guaranty, dated as of March 12, 1998 and as
amended as of the Announcement Date, duly executed and delivered by each Credit
Party and the Subsidiary Guarantors (other than Bidco Holding, Bidco, Target and
any Target Subsidiary), (b) the Bidco Security Documents, the Target Security
Document, the Target UK Subsidiaries Security Documents, and the Target Ireland
Security Document and (c) each guaranty delivered by a Foreign Subsidiary
pursuant to Section 7.15, in each case in favor of the Agent, on behalf of
------------
itself, the Issuing Bank and the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.
"Guaranty Obligation" has the meaning specified in the definition of
-------------------
"Contingent Obligation."
18
<PAGE>
"Hazardous Materials" means any toxic or hazardous waste, substance or
-------------------
chemical or any pollutant, contaminant, chemical or other substance defined or
regulated pursuant to any Environmental Law, including, without limitation,
asbestos, petroleum, crude oil or any fraction thereof.
"Honor Date" shall mean the date that any amount is paid by the
----------
Issuing Bank under any Letter of Credit.
"IBOR" has the meaning specified in the definition "Offshore Rate".
---- -------------
"Indebtedness" of any Person means, without duplication, (a) all
------------
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments and all L/C Obligations; (d)all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to property acquired by the Person (even though the rights and remedies of the
seller or Lender under such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations with respect to
Capital Leases; (g) all indebtedness referred to in clauses (a) through (f)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (f) above.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
----------------------- -------------
"Indemnified Person" has the meaning specified in Section 11.05.
------------------ -------------
"Independent Auditor" has the meaning specified in Section 7.01(a).
------------------- ---------------
"Initial Funding Date" means the date on which all conditions
--------------------
precedent set forth in Section 5.02 are or continue to be satisfied or waived by
------------
the Agent and the initial payment is to be made for the Target Shares purchased
pursuant to the Offer.
"Insolvency Proceeding" means, with respect to any Person, (a) any
---------------------
case, action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any
19
<PAGE>
substantial portion of its creditors; undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code or any foreign equivalent.
"Intellectual Property Assignments" means, collectively, each Patent
---------------------------------
Assignment, Trademark Assignment and Copyright Assignment duly executed and
delivered by each of the Company and each Guarantor in favor of the Agent, for
the benefit of itself and the Lenders, as the same may be amended, supplemented
or otherwise modified from time to time.
"Interest Coverage Ratio" means, with respect to any period, the ratio
-----------------------
of EBITDA for that period to Consolidated Interest Expense for that period.
"Interest Payment Date" means, as to any Offshore Rate Loan, the last
---------------------
day of each Interest Period applicable to such Offshore Rate Loan and, as to any
Base Rate Loan, the last Business Day of each March, June, September and
December; provided, however, that if any Interest Period exceeds three months,
-------- -------
the date that falls three months after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
---------------
commencing on the Borrowing Date of such Offshore Rate Loan or on the
Conversion/Continuation Date on which the relevant Revolving Loan is converted
into or continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation;
provided that:
- --------
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(c) no Interest Period for any Term Loan shall extend beyond the
maturity date of each Term Loan and no Interest Period for any Revolving
Loan shall extend beyond the Revolving Loan Termination Date; and
(d) no Interest Period applicable to a Term Loan or portion thereof
shall extend beyond any date upon which is due any scheduled principal
payment in respect of such Term Loans unless the aggregate principal amount
of such Term Loans represented by Base Rate
20
<PAGE>
Loans or Offshore Rate Loans having Interest Periods that will expire on or
before such date, equals or exceeds the amount of such principal payment.
"IRB Debt" means, collectively, the AGI Bonds and the Klearfold Bonds.
--------
"IRS" means the Internal Revenue Service, and any Governmental
---
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" means the date upon which the Issuing Bank Issues a
-------------
Letter of Credit.
"Issue" means, with respect to any Letter of Credit, to issue or to
-----
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
------ ------- --------
meanings.
"Issuing Bank" means BofA in its capacity as issuer of the Letters of
------------
Credit hereunder, together with any replacement letter of credit issuer arising
under Section 10.01(b) or Section 10.09. With respect to the Bidco Loan Notes
---------------- -------------
Credit Support, the Issuing Bank may cause a local affiliate to issue such Bidco
Loan Notes Credit Support and such local affiliate shall be deemed to be the
Issuing Bank of a Letter of Credit for the purposes of this Agreement.
"Joint Venture" means a single-purpose corporation, partnership,
-------------
limited liability company, joint venture or other similar legal arrangement
(whether created by contract or conducted through a separate legal entity) now
or hereafter formed by the Company or any of its Subsidiaries with another
Person in order to conduct a common venture or enterprise with such Person.
"Judgment Currency" has the meaning specified in Section 11.20.
----------------- -------------
"Klearfold" means Klearfold, Inc., a Pennsylvania corporation.
---------
"Klearfold Bond Documents" means, collectively, the Klearfold Bonds,
------------------------
the Klearfold Indenture, the Klearfold Remarketing Agreement, the Klearfold
Placement Agreement and any other agreements or instruments relating thereto.
"Klearfold Bond Issuer" means the Bucks County Industrial Development
---------------------
Authority.
"Klearfold Bonds" means the $4,000,000 Variable Rate Demand Revenue
---------------
Bonds, Series 1997, issued by the Klearfold Bond Issuer pursuant to the
Klearfold Indenture.
"Klearfold Indenture" means the Trust Indenture, dated as of August 1,
-------------------
1997, among the Klearfold Bond Issuer, the Klearfold Trustee and Klearfold.
21
<PAGE>
"Klearfold Interest Drawing" means a "C Drawing" as defined in the
--------------------------
Klearfold Letter of Credit.
"Klearfold Letter of Credit" means the letter of credit Issued by the
--------------------------
Issuing Bank in the form of Exhibit H.
"Klearfold L/C Interest Payment Date" means the "Interest Payment
-----------------------------------
Date" as defined in the Klearfold Letter of Credit.
"Klearfold L/C Obligations" means at any time the sum of (a) the
-------------------------
aggregate undrawn amount of the Klearfold Letter of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under the Klearfold Letter of
Credit, including all outstanding Klearfold Specified L/C Loans.
"Klearfold L/C Sublimit" means the commitment of the Issuing Bank to
----------------------
Issue, and the commitment of the Revolving Lenders severally to participate in,
the Klearfold Letters of Credit Issued or outstanding under Article III, in an
-----------
aggregate amount not to exceed on any date $4,078,440, as the same shall be
reduced as a result of a reduction in the Revolving Loan Commitment pursuant to
Section 2.07(d).
- ---------------
"Klearfold Placement Agreement" means the Bond Placement Agreement,
-----------------------------
dated August 1, 1997, among Mellon Bank, N.A. as placement agent, the Klearfold
Bond Issuer and Klearfold.
"Klearfold Pledged Bonds" has the meaning specified in Section
----------------------- -------
3.03(c).
- -------
"Klearfold Redemption Drawing" means a "B Drawing" as defined in the
----------------------------
Klearfold Letter of Credit.
"Klearfold Remarketing Agent" means the Remarketing Agent appointed
---------------------------
and serving pursuant to section 918 of the Klearfold Indenture.
"Klearfold Specified L/C Loan" means a Revolving Loan made by the
----------------------------
Revolving Lenders to Klearfold.
"Klearfold Tender Drawing" means an "A Drawing" as defined in the
------------------------
Klearfold Letter of Credit.
"Klearfold Trustee" means the Mellon Bank, N.A.
-----------------
"Klearfold Unremarketed Tendered Bonds" means Klearfold Bonds which
-------------------------------------
(a) have been delivered for purchase pursuant to the provisions of such
Klearfold Bonds and the Klearfold
22
<PAGE>
Indenture and (b) have not been successfully remarketed by the Klearfold
Remarketing Agent prior to 10:00 a.m. on the required purchase date.
"L/C Advance" means each Revolving Lender's participation in any L/C
-----------
Borrowing in accordance with its Pro Rata Revolving Share.
"L/C Amendment Application" means an application form for amendment of
-------------------------
outstanding Letters of Credit as shall at any time be in use at the Issuing
Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of Letters
---------------
of Credit as shall at any time be in use at the Issuing Bank, as the Issuing
Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
-------------
under any Letter of Credit (other than the AGI Letter of Credit or the Klearfold
Letter of Credit and the Bidco Loan Notes Credit Support) which shall not have
been reimbursed on the date when made nor converted into a Borrowing of
Revolving Loans under Section 3.03(d).
---------------
"L/C Commitment" means the commitment of the Issuing Bank to Issue,
--------------
and the commitment of the Revolving Lenders severally to participate in, Letters
of Credit from time to time Issued or outstanding under Article III, in an
-----------
aggregate amount not to exceed on any date the Effective Amount of the sum of
(a) $20,000,000, plus (b) the Bidco Loan Notes Credit Support Commitment as the
same shall be reduced as a result of a reduction in the L/C Commitment or the
Bidco Loan Notes Credit Support Commitment pursuant to Section 2.06 and 2.07(f);
------------
provided that the L/C Commitment is a part of the combined Revolving Loan
- --------
Commitments, rather than a separate, independent commitment.
"L/C-Related Documents" means the Letters of Credit, the L/C
---------------------
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Bank's standard form
documents for letter of credit issuances.
"L/C Obligations" means, collectively, (a) Specified L/C Obligations
---------------
plus (b) the Bidco Loan Notes Credit Support Obligations, plus (c) the sum of
- ----
(i) the aggregate undrawn amount of all Letters of Credit (other than the AGI
Letter of Credit, the Klearfold Letter of Credit and the Bidco Loan Notes Credit
Support) then outstanding, plus (ii) the amount of all unreimbursed drawings
under all Letters of Credit (other than the AGI Letter of Credit, the Klearfold
Letter of Credit and the Bidco Loan Notes Credit Support ), including all
outstanding L/C Borrowings.
"Lender" has the meaning specified in the introductory clause hereto.
------
References to the "Lenders" shall include BofA, including in its capacity as
Issuing Bank and Swing Line Lender and any other Lender assuming such capacity
in the future, and for purposes of clarification only, to the extent that BofA
may have any rights or obligations in addition to those of the Lenders due to
its status as Issuing Bank or Swing Line Lender, its status as such will be
specifically referenced.
23
<PAGE>
"Lending Office" means, as to any Lender, the office or offices of
--------------
such Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 11.02, or such other
--------------
office or offices as such Lender may from time to time notify the Company and
the Agent.
"Letters of Credit" means, collectively, the AGI Letters of Credit,
-----------------
the Klearfold Letters of Credit, the Bidco Loan Notes Credit Support (which
shall be issued in the form of a bank guarantee pursuant to the Bidco Loan Note
Instrument), any letter of credit issued by Issuing Bank hereunder, and any
amendments thereto or replacements thereof, pursuant to Article III.
-----------
"Level" means, and includes, Level I, Level II, Level III or Level IV,
-----
whichever is in effect at the relevant time.
"Level I" shall exist at any time the Senior Leverage Ratio is equal
-------
to or greater than 3.00:1.0.
"Level II" shall exist at any time the Senior Leverage Ratio is less
--------
than 3.00:1.0 but equal to or greater than 2.50:1.0.
"Level III" shall exist at any time the Senior Leverage Ratio is less
---------
than 2.50:1.0 but equal to or greater than 2.00:1.0.
"Level IV" shall exist at any time the Senior Leverage Ratio is less
--------
than 2.00:1.0.
"Lien" means any security interest, mortgage, deed of trust, pledge,
----
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Lender to a Credit Party
----
under Article II or Article III in the form of a Revolving Loan, a Specified L/C
---------- -----------
Loan, a Term Loan, a Swing Line Loan, a Special Funding Loan, a L/C Borrowing or
a Bidco Loan Notes Credit Support Borrowing.
"Loan Documents" means this Agreement, any Notes, the Fee Letter, the
--------------
L/C-Related Documents, the Collateral Documents and all other documents
delivered to the Agent or any Lender in connection herewith.
24
<PAGE>
"Majority Lenders" means (a) prior to the termination of the
----------------
Commitment, Lenders holding at least 51% of the then aggregate unpaid principal
amount of Term Loan plus the Revolving Loan Commitments or, (b) if the
----
Commitments have been terminated, Lenders holding at least 51% of the then
unpaid principal amount of Loans, and L/C Obligations.
"Management Group" means a group consisting of Richard Block and his
----------------
Related Parties and any other Person that is a member of the Company's
management as of the date of the Senior Subordinated Note Indenture and each of
their Related Parties; provided that Richard Block, together with his Related
--------
Parties, owns at least 25% of the Voting Stock of the Company.
"Mandatory Cost" means the cost imputed to the Bank(s) of compliance
--------------
with:
(a) the Mandatory Liquid Assets requirements of the Bank of England
and/or the banking supervision or other costs of the Financial Services
Authority as determined in accordance with Schedule 1(a); and
(b) any other applicable regulatory or central bank requirement
relating to any Loan made through a branch in the jurisdiction of the currency
of that Loan.
"Margin Stock" means "margin stock" as such term is defined in
------------
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken
as a whole; (b) a material impairment of the ability of the Company or any
Subsidiary to perform under any Loan Document to which it is a party and to
avoid any Event of Default; (c) a material adverse effect upon the legality,
validity, binding effect or enforceability against the Company or any Subsidiary
of any Loan Document to which it is a party (including, without limitation, the
value or effectiveness of its security); or (d) a material impairment of the
ability of the Target, any Target UK Subsidiary or Target Ireland to execute (or
to perform, as and when they fall due, the obligations to be incurred under) the
documents contemplated to be executed pursuant to Section 7.16.
------------
"Material Target Subsidiary" means any Subsidiary of Target that had
--------------------------
EBITDA for the immediately preceding twelve month period then last ended equal
to or greater than (Pounds)500,000 (or, in the event that the currency in which
such Subsidiary's accounts are maintained is other than Sterling, then the
Sterling Equivalent for such period).
"Moody's" means Moody's Investors Service, Inc., and any successor
-------
thereto.
"Mortgage" means any deed of trust, mortgage, leasehold deed of trust,
--------
leasehold mortgage or other document creating a Lien on real property or any
interest in real property.
25
<PAGE>
"Mortgaged Property" means the real property owned or leased by a
------------------
Credit Party or any of its Subsidiaries subject to a Mortgage in favor of the
Agent, for the benefit of itself and the Lenders.
"Multiemployer Plan" means a "multiemployer plan", within the meaning
------------------
of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate
------------------
makes, is making, or is obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make, contributions.
"national currency unit" means the currency unit (other than a euro
----------------------
unit) of a Participating Member State.
"Net Income" shall mean for any period, the net income (or loss) of
----------
the Company and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP; provided that
--------
there shall be excluded (i) the income (or loss) of any entity accrued prior to
the date it becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any Subsidiary or on which its assets are
acquired by the Company or any Subsidiary of the Company except to the extent
provided in the proviso of the definition of EBITDA and (ii) the income of any
Subsidiary of the Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary; provided, further, that Net Income shall be
-------- -------
computed for these purposes without giving effect to extraordinary losses or
extraordinary gains.
"Net Proceeds" means proceeds in cash, checks or other cash equivalent
------------
financial instruments (including Cash Equivalents) as and when received by the
Person making an Asset Disposition, net of: (a) the direct costs relating to
such Asset Disposition (excluding amounts payable to the Company or any
Affiliate of the Company), (b) sale, use or other transaction taxes paid or
payable as a result thereof and (c) amounts required to be applied to repay
principal, interest and prepayment premiums and penalties on Indebtedness
secured by a Lien on the asset which is the subject of such Asset Disposition.
"Net Worth" means shareholders' equity as determined in accordance
---------
with GAAP.
"Note" means a promissory note executed by a Credit Party in favor of
----
a Lender pursuant to Section 2.02(b), in substantially the form of Exhibit F-1,
--------------- -----------
with respect to Revolving Loans, Exhibit F-2, with respect to Specified L/C
-----------
Loans, Exhibit F-3, with respect to Term Loan A, Exhibit F-4, with respect to
----------- -----------
Term Loan B, Exhibit F-5, with respect to the Swing Line Loan.
"Notice of Borrowing" means a notice in substantially the form of
-------------------
Exhibit A.
- ---------
26
<PAGE>
"Notice of Conversion/Continuation" means a notice in substantially
---------------------------------
the form of Exhibit B.
---------
"Obligations" means all advances, debts, liabilities, obligations,
-----------
covenants and duties arising under any Loan Document owing by the Company to any
Lender, the Agent or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Offer" means the offer, recommended by the Directors of the Target,
-----
for the Target Shares made or to be made by Bidco on the terms and conditions
contained in the Press Release, as such offer may be amended, varied or waived
in compliance with Section 7.16.
------------
"Offer Document" means the document to be issued to the shareholders
--------------
of Target containing the Offer outlined in the Press Release.
"Offshore Currency" means, at any time, Sterling, German Deutsche
-----------------
Marks, Dutch Gilders, Irish Punts (so long as the aggregate principal amount of
Revolving Loans outstanding at any time with respect to Irish Punts shall not
exceed the Dollar Equivalent of $1,500,000), Austrian Schillings (so long as the
aggregate principal amount of Revolving Loans outstanding at any time with
respect to Austrian Schillings shall not exceed the Dollar Equivalent of
$3,000,000), euros and/or euro units; provided, that on the Commencement Date,
--------
each obligation under this Agreement denominated in a national currency unit
will, forthwith (but otherwise in accordance with EMU Legislation), be
redenominated into the euro. Following redenomination described in the preceding
sentence, (i) all Loans requested in the currency of a Participating Member
State shall, subject to the terms of this Agreement, be made in euro units; and
(ii) payments by the Agent to the Lenders in the currency of a Participating
Member State shall be made in euro units..
"Offshore Currency Loan" means any Revolving Loan (other than a
----------------------
Specified L/C Loan) that is an Offshore Rate Loan denominated in an Offshore
Currency, or any Sterling Term Loan.
"Offshore Currency Loan Sublimit" means, as to all Offshore Currencies
-------------------------------
in the aggregate, the Dollar Equivalent of $40,000,000.
"Offshore Rate" means, for any Interest Period, with respect to
-------------
Offshore Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/16th of 1%) determined by the Agent as
follows:
Offshore Rate = IBOR
---------------
1.00 - Eurodollar Reserve Percentage
Where,
27
<PAGE>
"Eurodollar Reserve Percentage" means for any day for any Interest
-----------------------------
Period the maximum reserve percentage (expressed as a decimal, rounded
upward to the next 1/100th of 1%) in effect on such day (whether or
not applicable to any bank or Lender) under regulations issued from
time to time by the FRB for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the Agent as
----
the rate at which deposits in the Applicable Currency in the
approximate amount of the Loan to be made or continued as, or
converted into an Offshore Rate Loan by BofA's Grand Cayman Branch,
Grand Cayman B.W.I. (or such other office as may be designated for
such purpose by BofA) and having a maturity comparable to such
Interest Period, would be offered to major banks in the offshore
interbank market for the Applicable Currency at their request at
approximately 10:00a.m. (Chicago time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans
then outstanding as of the effective date of any change in the Eurodollar
Reserve Percentage. In the case of Offshore Currency Loans, the cost to the
Lenders of complying with any Mandatory Costs will be added to the interest rate
computed in the manner set forth in Schedule 1(a).
-------------
"Offshore Rate Loan" means a Loan (other than Specified L/C Loans and
------------------
Swing Line Loans) that bears interest based on the Offshore Rate.
"Organization Documents" means, for any corporation, limited company
----------------------
or other similar organization or business entry, the certificate or articles of
incorporation, memorandum and articles of association, the bylaws, any
certificate of determination or instrument relating to the rights of preferred
shareholders of such corporation or other entity, any shareholder rights
agreement, and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation or other entity.
"Original Closing Date" means March 12, 1998.
---------------------
"Other Taxes" means any present or future stamp, court or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Overnight Rate" means, for any day, the rate of interest per annum at
--------------
which overnight deposits in the Applicable Currency, in an amount approximately
equal to the amount with respect to which such rate is being determined, would
be offered for such day by BofA's London Branch to major banks in the London or
other applicable offshore interbank market.
28
<PAGE>
"Participant" has the meaning specified in Section 11.08(d).
----------- ----------------
"Participating Member State" means a member state of the European
--------------------------
Union that adopts a single currency in accordance with the Treaty establishing
the European Community.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
Governmental Authority succeeding to any of its principal functions under ERISA.
"Pending Asset Sale" means the sale of assets by one of the Target's
------------------
Subsidiaries previously disclosed to the Agent in a letter dated July 7, 1998.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------ ------------
ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or to
which it makes, is making, or is obligated to make contributions, or in the case
of a multiple employer plan (as described in Section 4064(a) of ERISA) has made
---------------
contributions at any time during the immediately preceding five (5) plan years.
"Permitted International Subsidiaries" means each Subsidiary of the
------------------------------------
Company that is organized under the laws of England and Wales or the Republic of
Ireland or such other jurisdiction as shall permit such Person to guaranty the
Obligations and the Senior Subordinated Notes and grant a security interest to
support the guaranty of the Obligations on terms acceptable to the Agent.
"Permitted Liens" has the meaning specified in Section 8.01.
--------------- ------------
"Permitted Seller Debt" has the meaning specified in Section 8.05(g).
--------------------- ---------------
"Permitted Swap Obligations" means all obligations (contingent or
--------------------------
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (a)such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;"
(b)such Swap Contracts do not contain (i)any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, or (ii)any provision creating
or permitting the declaration of an event of default, termination event or
similar event upon the occurrence of an Event of Default hereunder (other than
an Event of Default under Section 9.01(a)).
----------------
"Person" means an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
29
<PAGE>
"Plan" means an employee benefit plan (as defined in Section 3(3) of
---- ------------
ERISA) which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Pledge Agreements" means, collectively, if and when each such
-----------------
document is executed and delivered, (a) each Pledge Agreement dated as of
March12, 1998 and as amended as of the Announcement Date, duly executed and
delivered by each Credit Party and the Subsidiary Guarantors (other than Bidco
Holding, Bidco, the Target and any Target Subsidiary), (b) the Mortgage of
Shares executed by the Company over the shares of Bidco Holding and Bidco, the
Bidco Security Documents, the Target Security Document, the Target UK
Subsidiaries Security Documents, and the Target Ireland Security Document and
(c) each pledge agreement delivered by a Foreign Subsidiary pursuant to
Section 7.15, in each case pledging the stock of their respective Subsidiaries
- ------------
to the Agent, for the benefit of itself, the Issuing Bank and the Lenders, as
the same may be amended, supplemented or otherwise modified from time to time.
"Pledged Collateral" has the meaning specified in the relevant Pledge
------------------
Agreement.
"Press Release" means the form of press release agreed between the
-------------
Company and the Agent, which has been initialed by or on behalf of the Company
and the Agent for the purpose of identification.
"Principals" means Heritage Partners, Inc., Heritage Fund I Investment
----------
Corporation, Melvin B. Herrin, Richard Block and H. Scott Herrin.
"Prior Loan Document" has the meaning specified in the second recital
-------------------
of this Agreement.
"Projections" means the Company's forecasted consolidated: (a) balance
-----------
sheets; (b) income statements; and (c) cash flow statements, all prepared on a
basis consistent with the Company's historical financial statements.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, and whether tangible or intangible.
"Pro Rata Revolving Share" means, as to any Revolving Lender, (a) at
------------------------
any time at which the Aggregate Revolving Loan Commitment remains outstanding,
the percentage equivalent (expressed as a decimal rounded to the ninth decimal
place) at such time of such Lender's Revolving Loan Commitment divided by the
Aggregate Revolving Loan Commitment, and (b) after the termination of the
Aggregate Revolving Loan Commitment, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of the principal
amount of such Lender's outstanding Revolving Loans (other than Swing Line
Loans) divided by the aggregate principal amount of the outstanding Revolving
Loans (other than Swing Line Loans) of all the Lenders.
30
<PAGE>
"Pro Rata Share" means, as to any Lender, (a) in respect of a
--------------
particular Loan and/or Commitment, (i) at any time at which the Commitments in
respect of such Loan remain outstanding, the percentage equivalent (expressed as
a decimal, rounded to the ninth decimal place) at such time of such Lender's
Commitment in respect of such Loan divided by the combined Commitments in
respect of such Loan, and (ii) after the termination of the Commitments in
respect of such Loan, the percentage equivalent (expressed as a decimal, rounded
to the ninth decimal place) at such time of the principal amount outstanding of
such Loans held by such Lender divided by the aggregate principal amount
outstanding of such Loans held by all Lenders, and (b) in respect of all Loans
and/or Commitments, (i) at any time at which the Aggregate Commitment (or any
portion thereof) remains outstanding, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of such Lender's
Commitments in respect of all Loans (and if any Term Loans are outstanding, with
the Term Loan Commitment deemed to be outstanding to the extent of the principal
amount of the related Term Loan which is then outstanding) divided by the
Aggregate Commitment, and (b) after the termination of the Aggregate Commitment,
the percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) at such time of the principal amount of such Lender's outstanding Loans
(including such Lender's ratable share of outstanding Swing Line Loans and L/C
Obligations) divided by the aggregate principal amount of the outstanding Loans
and L/C Obligations of all of the Lenders.
"Qualified Public Offering" means a public offering of common stock by
-------------------------
the Company pursuant to a registration statement under the Securities Act of
1933 and the rules and regulations in connection therewith (as the same may be
amended from time to time), resulting in aggregate gross proceeds of at least
$15,000,000 and the Company's stock being listed (or continuing to be listed, in
the case of a secondary offering) on the New York Stock Exchange, NASDAQ or
another major stock exchange.
"Related Party" with respect to any Principal or member of a
-------------
Management Group means (a) any controlling stockholder, 80% (or more) owned
Subsidiary, or spouse or ex-spouse or immediate family member (in the case of
an individual) of such Principal or member of a Management Group, or (b) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% (or more)
controlling interest of which consist of such Principal or member of a
Management Group and/or such other Persons referred to in the immediately
preceding clause (a), or (c) any investment fund, whether a limited partnership,
limited liability company or corporation, managed and controlled by Heritage
Partners Management Co., Inc. d/b/a Heritage Partners, Inc.
"Relevant Event of Default" has the meaning specified in Section 9.02.
-------------------------
"Relevant Representations and Warranties" means each of the matters
---------------------------------------
represented by the Credit Parties in Sections 6.01(a) and (b), 6.02(a), 6.03,
--------------- - ------ ----
6.04, 6.13 (other than clauses (d) and (e)) 6.16 (excluding consideration of
- ---- ----------------------------- ----
Target and its Subsidiaries), and 6.24.
----
31
<PAGE>
"Relevant Undertakings" means each of the undertakings and covenants
---------------------
of the Company contained in Sections 7.04(a), 7.12(e), 7.13 (excluding
--------------- ------ ----
consideration of Target and its Subsidiaries), and 7.16(a), (c), (f) and (m).
------------------------
"Reportable Event" means, any of the events set forth in Section
----------------
4043(c) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
------------------
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
-------------------
president of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.
"Revolving Commitment Fee" has the meaning specified in Section
------------------------ -------
2.10(b).
- -------
"Revolving Lender" means a Lender having a Revolving Loan Commitment.
----------------
"Revolving Loan" has the meaning specified in Section2.01(c).
-------------- --------------
"Revolving Loan Commitment" has the meaning specified in Section
------------------------- -------
2.01(c).
- -------
"Revolving Loan Termination Date" means the earlier to occur of:
-------------------------------
(a) the date which is the fifth anniversary of the Initial Funding
Date; and
(b) the date on which the Revolving Loan Commitments terminate in
accordance with the provisions of the Agreement.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill
---
Companies, and any successor thereto.
"Same Day Funds" means (a) with respect to disbursements and payments
--------------
in Dollars, immediately available funds, and (b) with respect to disbursements
and payments in an Offshore Currency, same day or other funds as may be
reasonably determined by the Agent to be customary in the place of disbursement
or payment for the settlement of international banking transactions in the
relevant Offshore Currency.
32
<PAGE>
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Security Agreements" means, collectively, if and when each such
-------------------
document is executed and delivered (a) each Security Agreement dated as of
March12, 1998 and as amended on the Announcement Date, duly executed and
delivered by each Credit Party and the Subsidiary Guarantors (other than Bidco
Holding, Bidco, the Target and any Target Subsidiaries), (b) when executed, the
Bidco Security Documents, the Target Security Document, the Target UK
Subsidiaries Security Documents, and the Target Ireland Security Document and
(c) each security agreement delivered by a Foreign Subsidiary pursuant to
Section 7.15, in each case granting a security interest in all of such Persons
- ------------
personal property to the Agent, for the benefit of itself, the Issuing Bank and
the Lenders, as the same may be amended, supplemented or otherwise modified from
time to time.
"Senior Debt" means the total consolidated Indebtedness (other than
-----------
Subordinated Debt and any other Indebtedness of the Company incurred after the
Announcement Date and subordinated to the prior payment in full in cash of the
Obligations on terms and conditions acceptable to the Agent) of the Company and
its Subsidiaries.
"Senior Leverage Ratio" means, with respect to any period, the ratio
---------------------
of Senior Debt as of the end of that period to EBITDA for that period.
"Senior Subordinated Note Documents" shall mean and include each of
----------------------------------
the documents, instruments (including the Senior Subordinated Notes) and other
agreements entered into by the Company (including, without limitation, the
Senior Subordinated Note Indenture) and/or any Subsidiary relating to the
issuance by the Company of the Senior Subordinated Notes and any guaranties or
other documents related thereto, as in effect on the Announcement Date and as
the same may be supplemented, amended or modified from time to time in
accordance with the terms hereof (including, without limitation, Section 8.20)
------------
and thereof.
"Senior Subordinated Note Indenture" shall mean the Indenture, dated
----------------------------------
as of March12, 1998, by and between the Company and State Street Bank and Trust
Company, as trustee thereunder, with respect to the Senior Subordinated Notes,
as in effect on the Announcement Date and as the same may be modified, amended
or supplemented from time to time in accordance with the terms hereof
(including, without limitation, Section 8.20) and thereof.
------------
"Senior Subordinated Notes" shall mean $100,000,000 of the 101/8%
-------------------------
Senior Subordinated Notes due 2008 issued by the Company under the Senior
Subordinated Note Indenture.
"Solvent" means, when used with respect to (A) a Person (other than
-------
subject to clause (B)), that (a) the fair saleable value of the assets of such
------ -
Person is in excess of the total amount of the present value of its liabilities
(including for purposes of this definition all liabilities (including loss
reserves as determined by such Person), whether or not reflected on a balance
sheet prepared in accordance with GAAP and whether direct or indirect, fixed or
contingent, secured or unsecured,
33
<PAGE>
disputed or undisputed), (b) such Person is able to pay its debts or obligations
in the ordinary course as they mature and (c) such Person does not have
unreasonably small capital to carry out its business as conducted and as
proposed to be conducted and (B) for any Person incorporated in England and
Wales, on a particular date, on that date such Person has the ability to pay its
debts as and when they fall due and could not be deemed to be insolvent for the
purposes of the Insolvency Act 1986 of the United Kingdom. "Solvency" shall have
--------
a correlative meaning.
"Special Funding Account" means a new account established by the
-----------------------
Company with the Agent into which funds to be utilized by the Company to
consummate the Acquisition will be deposited, and such account, and any and all
funds on deposit therein, shall be subject to a cash collateral agreement
granting Agent, on behalf of the Lenders, a first perfected lien on such funds
in form and substance satisfactory to the Agent.
"Special Funding Date" means the date, which shall be a Business Day,
--------------------
on which Special Funding Loans are made pursuant to Section 2.03(e) and the
--------------
Special Funding Procedure Letter.
"Special Funding Loans" mean any Term Loan made pursuant to Section
--------------------- -------
2.03(e), 100% of the proceeds of which are deposited into the Special Funding
- ------
Account.
"Special Funding Procedure Letter" means the letter attached hereto as
--------------------------------
Exhibit J.
- ---------
"Specified L/C Loan" means, collectively, an AGI Specified L/C Loan or
-------------------------
a Klearfold Specified L/C Loan.
"Specified L/C Obligations" means, collectively, the AGI L/C
-------------------------
Obligations and the Klearfold L/C Obligations.
"Specified L/C Sublimit" means, collectively, the AGI L/C Sublimit and
----------------------
the Klearfold L/C Sublimit.
"Specified Letter of Credit" means, collectively, the AGI Letter of
--------------------------
Credit and the Klearfold Letter of Credit.
"Spot Rate" for a currency means the rate generally quoted by BofA as
---------
the spot rate for the purchase by BofA of such currency with another currency
through its FX Trading Office on the date two Business Days prior to the date as
of which the foreign exchange computation is made.
"Squeeze-Out" has the meaning specified in the second paragraph of
-----------
this Agreement.
"Squeeze-Out Date" shall mean the Business Day after the Business Day
----------------
following the last date upon which Bidco becomes obliged to pay any
consideration for the purchase of the Target Shares or to deliver Bidco Loan
Notes in consideration for such a purchase.
34
<PAGE>
"Squeeze-Out Period" shall mean the period from the Initial Funding
------------------
Date to and including the Squeeze-Out Date.
"Squeeze-Out Related Purchase Date" shall mean any date occurring
---------------------------------
after the Initial Funding Date but on or prior to the Squeeze-Out Date on which
Bidco purchases Target Shares not acquired by Bidco on the Initial Funding Date.
"Stated Amount" means the stated or face amount of a Letter of Credit
-------------
to the extent available at the time for drawing (subject to presentment of all
requested documents), as the same may be increased or decreased from time to
time in accordance with the terms of such Letter of Credit
"Sterling" and "(Pounds)" means the lawful currency of the United
-------- ------
Kingdom.
"Sterling Equivalent" means, at any time, (a) as to any amount
-------------------
denominated in Sterling, the amount thereof at such time and (b) as to any
amount denominated in a currency other than Sterling, the equivalent amount in
Sterling as determined by the Agent at such time on the basis of the Spot Rate
for the purchase of such currency with Sterling on the most recent Computation
Date.
"Stockholder Agreement" means the Stockholder Agreement, dated as of
---------------------
March 12, 1998, among the Company and its stockholders, as in effect on the
Original Closing Date and as the same may be modified, amended or supplemented
from time to time; provided that for purposes of the definition of "Continuing
Directors," no such amendment shall alter the provisions relating to the
designation and election of members of the Company's Board of Directors.
"Subordinated Debt" means, collectively, the Senior Subordinated Notes
-----------------
and Permitted Seller Debt.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, limited liability company, joint venture or other business entity
(A) of which more than 50% of the voting stock, membership interests or other
equity interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof and (B) with respect to any
Person incorporated in England and Wales, a subsidiary within the meaning of
Section 736 of the Companies Act and, unless the context otherwise requires, a
- -----------
subsidiary undertaking within the meaning of Section 258 of the Companies Act.
-----------
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company; provided, that for purposes
--------
of the definitions of "Change of Control" and "Related Parties", Subsidiary
shall also include any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof) ; provided further that, for the
-------- -------
purposes of this Agreement, neither Target nor
35
<PAGE>
any Target Subsidiary shall be a Subsidiary until the occurrence of the Initial
Funding Date after giving effect to the Transaction completed on such date.
"Subsidiary Guarantor" means, collectively, (a) each Domestic
--------------------
Subsidiary of the Company (other than a L/C Borrower), (b) KF-International,
Inc., (c) upon the satisfaction of the relevant provisions of Section 7.16,
------------
Bidco Holding, Bidco, the Target, each Target UK Subsidiary and Target Ireland
and (d) to the extent requested pursuant to Section 7.15, each other Foreign
------------
Subsidiary of the Company.
"Supplemental Indenture" has the meaning specified in Section 5.01(j).
---------------------- --------------
"Surety Instruments" means all letters of credit (including standby
------------------
and documentary), banker's acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
-------------
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap, cross-
currency rate swap, swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
----------------------
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
---------
mark-to-market value(s) for such Swap Contracts, as determined by the Company
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Lender).
"Swing Line Loan Commitment" has the meaning specified in Section
-------------------------- -------
2.01(e).
- ------
"Swing Line Lender" means BofA, in its capacity as provider of the
-----------------
Swing Line Loans. With respect to Swing Line Loans, BofA may cause a local
affiliate to make such Swing Line Loans and such local affiliate shall be deemed
to be the Swing Line Lender for the purposes of this Agreement.
"Swing Line Loan" means a Loan made by the Swing Line Lender,
---------------
denominated in Sterling, pursuant to Section 2.01(e).
--------------
"Swing Line Rate" means, for any day, the rate of interest in effect
---------------
for such day as publicly announced from time to time by BofA in London as its
"reference rate." The "reference
36
<PAGE>
rate" is a rate set by BofA based upon various factors including BofA's costs
and desired return, general economic conditions and other factors, and is used
as a reference point of pricing some loans, which may be priced at, above, or
below such announced rate. Any change in the reference rate announced by BofA
shall take effect at the opening of business on the day specified in the public
announcement of such change.
"Swing Line Termination Date" means the earlier to occur of:
---------------------------
(a) the date which is the fifth Business Day prior to the fifth
anniversary of the Initial Funding Date; and
(b) the date on which the Revolving Loan Commitment terminates in
accordance with the provisions of this Agreement.
"Target" means Tinsley Robor PLC, a public limited company
------
incorporated under the laws of England and Wales (Registered no. 948646).
"Target Security Document" means the Guarantee and Debenture and any
------------------------
related Mortgage of Shares with respect to its Subsidiaries to be entered into
by the Target after the Initial Funding Date and pursuant to Section 7.16(k)
--------------
incorporating a guarantee of the Obligations and a fixed and floating charge
over the assets of the Target granted to the Agent, for the benefit of itself,
the Issuing Bank and the Lenders, in form and substance satisfactory to the
Agent.
"Target Ireland" means Irish Printing Resources, a company
--------------
incorporated under the laws of Ireland.
"Target Ireland Security Documents" means the Guarantee and Debenture
---------------------------------
to be entered into by Target Ireland after the Initial Funding Date and pursuant
to Section 7.16(k) incorporating a guarantee of the Obligations and a fixed and
--------------
floating charge over the assets of Target Ireland granted to the Agent, for the
benefit of itself, the Issuing Bank and the Lenders, in form and substance
satisfactory to the Agent.
"Target Shares" means the issued shares of each class in the capital
-------------
of the Target (including any shares of the Target issued while the Offer remains
open for acceptance.)
"Target Subsidiaries" means each Subsidiary of the Target.
-------------------
"Target UK Subsidiaries" means, collectively, each Subsidiary of
----------------------
Target incorporated under the laws of England and Wales and listed on Schedule
--------
1(b).
- ---
"Target UK Subsidiaries Security Documents" means, collectively, the
-----------------------------------------
Guarantee and Debenture to be entered into by each Target UK Subsidiary pursuant
to Section 7.16(k) incorporating a guarantee of the Obligations and a fixed and
--------------
floating charge over the assets of such Target UK
37
<PAGE>
Subsidiary granted to the Agent, for the benefit of itself, the Issuing Bank and
the Lenders, in form and substance satisfactory to the Agent.
"Taxes" means any and all present or future taxes, levies,
-----
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each Lender
and the Agent, respectively, taxes imposed on or measured by its net income by
the jurisdiction (or any political subdivision thereof) under the laws of which
such Lender or the Agent, as the case may be, is organized or maintains a
lending office.
"Term Loan Commitment" means, as to each Lender, the aggregate amount
--------------------
of such Lender's Term Loan A Commitment and Term Loan B Commitment.
"Term Loan Commitment Fee" has the meaning specified in Section
------------------------ -------
2.10(c).
- ------
"Term Loan" means, collectively, Term Loan A and Term Loan B.
---------
"Term Loan A" has the meaning specified in Section 2.01(a).
----------- --------------
"Term Loan A Commitment" means, as to each Lender, such Lender's Term
----------------------
Loan A Commitment, as specified on Schedule 2.01.
-------------
"Term Loan B" has the meaning specified in Section 2.01(b).
----------- --------------
"Term Loan B Commitment" means, as to each Lender, such Lender's Term
----------------------
Loan B Commitment, as specified on Schedule 2.01.
-------------
"Total Leverage Ratio" means, with respect to any period, the ratio of
--------------------
total consolidated Indebtedness for borrowed money as of the end of that period
to EBITDA for that period.
"Transaction" shall include (a) the Offer, (b) the purchase of Target
-----------
Shares by Bidco (c) the Equity Investment, (d) the Credit Extensions made on the
Initial Funding Date and (e) the refinancing of certain Indebtedness of the
Company and its Subsidiaries (including Target and certain Target Subsidiaries)
on the Initial Funding Date.
"Transaction Agreements" has the meaning specified in Section 6.25.
---------------------- ------------
"Type" means, with respect to any Borrowing of Loans (other than
----
Specified L/C Loans and Swing Line Loans), its nature as a Base Rate Loan or an
Offshore Rate Loan.
"Unconditional Date" means the date upon which the Offer becomes or is
------------------
declared unconditional in all respects.
38
<PAGE>
"Unfunded Pension Liability" means the excess of a Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
------------------
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
------------- ---
"Voting Stock" of any Person as of any date means the capital stock of
------------
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Waivable Term Loan B Prepayment" has the meaning specified in Section
------------------------------- -------
2.07(o).
- ------
"Wholly-Owned Subsidiary" means any corporation, association,
-----------------------
partnership, limited liability company, joint venture or other business entity
in which (other than directors' qualifying shares required by law) 100% of the
equity interests of each class having ordinary voting power, and 100% of the
equity interests of every other class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of record, by the
Company, or by one or more of the other Wholly-Owned Subsidiaries, or both.
1.02 Other Interpretive Provisions
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references
39
<PAGE>
to any statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Lenders by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lenders or the Agent merely because of the
Agent's or Lenders' involvement in their preparation.
(h) Any test, threshold, item, limit or other measurement expressed
in Dollars herein shall also mean and include the Dollar Equivalent of such
amount from time to time should the test, threshold, item, limit or other
measurement be used in respect of any item expressed in a currency other than
Dollars.
1.03 Accounting Principles
---------------------
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitment
-------------------------------
(a) Term Loan A
-----------
Each Lender with a Term Loan A Commitment severally agrees, on
the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "Term Loan A") from time to time on any Business Day during the
-----------
Squeeze-Out Period, in an amount not to exceed
40
<PAGE>
such Lender's Term Loan A Commitment as set forth on Schedule 2.01. Amounts
-------------
borrowed as a Term Loan A which are repaid or prepaid by the Company may not be
reborrowed.
(b) Term Loan B
-----------
Each Lender with a Term Loan B Commitment severally agrees, on
the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "Term Loan B") from time to time on any Business Day during the
-----------
Squeeze-Out Period, in an amount not to exceed such Lender's Term Loan B
Commitment as set forth on Schedule 2.01 (as such amount is reduced as a result
-------------
of the making of any Term Loan B during such period), it being understood and
agreed that the Lenders with a Term Loan B Commitment shall make a final Term
Loan B on the Squeeze-Out Date in an aggregate amount up to the unutilized Term
Loan B Commitment on such date. Amounts borrowed as a Term Loan B which are
repaid or prepaid by the Company may not be reborrowed.
(c) The Revolving Credit
--------------------
Subject to Section 2.01(e), each Revolving Lender severally
agrees, on the terms and conditions set forth herein, to make loans to the
Company (each such loan, a "Revolving Loan") from time to time on any Business
--------------
Day during the period from the Initial Funding Date to the Revolving Termination
Date, in an aggregate amount not to exceed at any time outstanding the amount
set forth on Schedule 2.01 (such amount, as the same may be reduced under
-------------
Section 2.07 or reduced or increased as a result of one or more assignments
- ------------
under Section 11.08, the Revolving Lender's "Revolving Loan Commitment");
------------- -------------------------
provided, however, that, after giving effect to any Borrowing of Revolving
- -------- -------
Loans, the Effective Amount of Revolving Loans, Swing Line Loans and L/C
Obligations at such time shall not at any time exceed the Aggregate Revolving
Loan Commitment; and provided further, that the Effective Amount of Revolving
--- -------- -------
Loans of any Revolving Lender plus the participation of such Revolving Lender in
the Effective Amount of all L/C Obligations and such Revolving Lender's Pro Rata
Revolving Share of the Effective Amount of Swing Line Loans shall not at any
time exceed such Revolving Lender's Revolving Loan Commitment; and provided
--- --------
further, that the Effective Amount of the Revolving Loans, the Effective Amount
- -------
of Swing Line Loans and L/C Obligations shall not at any time exceed the
Borrowing Base. Within the limits of each Revolving Lender's Commitment, and
subject to the other terms and conditions hereof, the Company may borrow under
this Section 2.01, prepay under Section 2.06 and reborrow under this Section
------------ ------------ -------
2.01(c).
- ------
(d) Specified L/C Loans
-------------------
Each Revolving Lender severally agrees, on the terms and
conditions set forth herein, to make loans to AGI and Klearfold, as the case may
be, pursuant to Sections 3.03(b) and (c) from time to time on any Business Day
--------------- -
during the period from the Initial Funding Date to the Revolving Loan
Termination Date, in an aggregate amount not to exceed at any time outstanding
the Specified L/C Sublimit (such amount, as the same may be reduced under
Section 2.05 or 2.07)
- ------------ ----
41
<PAGE>
provided, however, that after giving effect to (i) any Borrowing of AGI
- -------- -------
Specified L/C Loans, the Effective Amount of all AGI L/C Obligations shall not
at any time exceed the AGI L/C Sublimit; (ii) any Borrowing of Klearfold
Specified L/C Loans, the Effective Amount of all Klearfold L/C Obligations shall
not at any time exceed the Klearfold L/C Sublimit; and (iii) any Borrowing of
Specified L/C Loans, the Effective Amount of the Specified L/C Obligations of
any Revolving Lender shall not at any time exceed such Revolving Lender's Pro
Rata Revolving Share of the Specified L/C Sublimit. The parties hereto
acknowledge and agree that $13,000,000 of the Aggregate Revolving Loan
Commitment shall only be utilized to facilitate the issuance of Specified
Letters of Credit and corresponding Specified L/C Loans consisting of the AGI
L/C Obligations and the Klearfold L/C Obligations but not otherwise as Revolving
Loans or for other Letters of Credit.
(e) Swing Line Loans
----------------
(i) Subject to the terms and conditions hereof, the Swing Line
Lender agrees to make Swing Line Loans to the Company from time to time
prior to the Swing Line Termination Date in an aggregate principal amount
at any one time outstanding not to exceed the Sterling Equivalent of
$15,000,000 (the "Swing Line Loan Commitment"); provided, that after giving
--------------------------
effect to any such Swing Line Loan, the Effective Amount of Revolving
Loans, Swing Line Loans and L/C Obligations at such time would not exceed
the Aggregate Revolving Loan Commitment at such time; and provided further
-------- -------
that the Effective Amount of all Revolving Loans, Swing Line Loans and L/C
Obligations at such time would not exceed the Borrowing Base at such time.
Prior to the Swing Line Termination Date, the Company may use the Swing
Line Commitment by borrowing, prepaying the Swing Line Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions
hereof.
(ii) The Company may borrow under the Swing Line Commitment on
any Business Day after the Initial Funding Date but on or prior to the
Swing Line Termination Date; provided, that the Company shall give the
--------
Swing Line Lender irrevocable written notice signed by a Responsible
Officer or an authorized designee (which notice must be received by the
Swing Line Lender prior to 11:00 a.m. (London time)) with a copy to the
Agent specifying the amount of the requested Swing Line Loan, which shall
be in a minimum amount of the Sterling Equivalent of $100,000 (or such
lesser amount as is acceptable to the Swing Line Lender). The proceeds of
the Swing Line Loan will be made available by the Swing Line Lender to the
Company in immediately available funds at the office of the Swing Line
Lender by 1:00 p.m. (London time) on the date of such notice. The Company
may at any time and from time to time, prepay the Swing Line Loans, in
whole or in part, without premium or penalty, by notifying the Swing Line
Lender prior to 11:00 a.m. (London time) on any Business Day of the date
and amount of prepayment with a copy to the Agent. If any such notice is
given, the amount specified in such notice shall be due and payable on the
date specified therein. Partial prepayments shall be in an aggregate
principal amount of the Sterling Equivalent of $100,000 or a whole multiple
of the Sterling Equivalent of $100,000 in excess thereof.
42
<PAGE>
(iii) The Swing Line Lender, at any time in its sole and absolute
discretion, may on behalf of the Company (which hereby irrevocably directs
the Swing Line Lender to so act on its behalf) notify the Agent to notify
each Revolving Lender (including the Swing Line Lender) to make a Revolving
Loan to the Company in a principal amount equal to such Bank's Pro Rata
Revolving Share of the amount of such Swing Line Loan, and such Revolving
Lender shall be obligated, pursuant to Section 2.01(c), to make Same Day
--------------
Funds available to the Agent on the date such notice is given in an
aggregate amount equal to or in excess of such Swing Line Loan, in which
case such funds shall be applied by the Agent first to repay such Swing
Line Loan and any remaining funds shall be made available to the Company in
accordance with Section 2.01(c); provided, however, that such notice shall
-------------- -------- -------
be deemed to have automatically been given upon the occurrence of an Event
of Default under Section9.01(f) or (g). Upon notice from the Agent, each
------------- -
Revolving Lender (other than the Swing Line Lender) will immediately
transfer to the Agent, for transfer to the Swing Line Lender, in
immediately available funds, an amount equal to such Revolving Lender's Pro
Rata Revolving Share of the amount of such Swing Line Loan so repaid. Each
Revolving Lender's obligation to transfer the amount of such Revolving Loan
to the Agent shall be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation, (i) any set- off,
counterclaim, recoupment, defense or other right which such Revolving
Lender or any other Person may have against the Swing Line Lender, (ii) the
occurrence or continuance of a Default or an Event of Default or the
termination of the Revolving Loan Commitments, (iii) any adverse change in
the condition (financial or otherwise) of the Company or any other Person,
(iv) any breach of this Agreement by the Company or any other Company or
(v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(iv) Notwithstanding anything herein to the contrary, the Swing Line
Lender (i) shall not be obligated to make any Swing Line Loan if the
conditions set forth in Article V have not been satisfied and (ii) shall
---------
not make any requested Swing Line Loan if, prior to 11:00 a.m. (London
time) on the date two (2) days preceding the date of such requested Swing
Line Loan, it has received a written notice from the Agent or any Revolving
Lender directing it not to make further Swing Line Loans because one or
more of the conditions specified in Article V are not then
---------
satisfied.
(v) If prior to the making of a Revolving Loan required to be made
by Section 2.01(e)(iii) an Event of Default described in Section 9.01(f) or
------------------- --------------
9.01(g) shall have occurred and be continuing with respect to the Company,
------
each Revolving Lender will, on the date such Revolving Loan was to have
been made pursuant to the notice described in Section2.01(e)(iii), purchase
------------------
an undivided participating interest in the Dollar Equivalent of the
Effective Amount of Swing Line Loans in an amount equal to its Pro Rata
Revolving Share of the Dollar Equivalent of the Effective Amount of Swing
Line Loans then outstanding. Each Revolving Lender will immediately
transfer to the Agent for the benefit of the Swing Line Lender, in
immediately available funds, the amount of its participation.
43
<PAGE>
(vi) Whenever, at any time after a Revolving Lender has
purchased a participating interest in a Swing Line Loan, the Swing Line
Lender receives any payment on account thereof, the Swing Line Lender will
distribute to the Agent for delivery to each Revolving Lender the Dollar
Equivalent of its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Revolving Lender's participating interest was outstanding
and funded); provided, however, that in the event that such payment
-------- -------
received by the Swing Line Lender is required to be returned, such
Revolving Lender will return to the Agent for delivery to the Swing Line
Lender any portion thereof previously distributed by the Swing Line Lender
to it.
(vii) Each Revolving Lender's obligation to make the Revolving
Loans referred to in Section 2.01(e)(iii) and to purchase participating
-------------------
interests pursuant to Section2.01(e)(v) shall be absolute and unconditional
----------------
and shall not be affected by any circumstance, including, without
limitation, (I) any set-off, counterclaim, recoupment, defense or other
right which such Revolving Lender or the Company may have against the Swing
Line Lender, the Company or any other Person for any reason whatsoever,
(II) the occurrence or continuance of a Default or an Event of Default,
(III) any adverse change in the condition (financial or otherwise) of the
Company or any Subsidiary Guarantor, (IV) any breach of this Agreement or
any other Loan Document by the Company or any of its Subsidiaries or any
other Lender, (V) whether or not there is availability in accordance with
the Borrowing Base or (VI) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
2.02 Loan Accounts
-------------
(a) The Loans made by each Lender and the Letters of Credit Issued by
the Issuing Bank shall be evidenced by one or more accounts or records
maintained by such Lender or Issuing Bank, as the case may be, in the ordinary
course of business. The accounts or records maintained by the Agent, the Issuing
Bank and each Lender shall be prima facie evidence of the amount of the Loans
made by the Lenders to a Credit Party and the Letters of Credit Issued for the
account of an L/C Borrower, and the interest and payments thereon. Any failure
so to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of a Credit Party hereunder to pay any amount owing with
respect to the Loans or any Letter of Credit.
(b) Upon the request of any Lender made through the Agent, the Loans
made by such Lender may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Lender shall record on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the applicable Credit Party with
respect thereto. Each such Lender is irrevocably authorized by each Credit Party
to make such recordations on its Note(s) and each Lender's record shall be
deemed prima facie correct; provided, however, that the failure of a Lender to
-------- -------
make, or an error in making, a notation thereon
44
<PAGE>
with respect to any Loan shall not limit or otherwise affect the obligations any
Credit Party hereunder or under any such Note to such Lender.
2.03 Procedure for Borrowing
-----------------------
(a) Each Borrowing (other than a Borrowing of Swing Line Loans,
Specified L/C Loans, a L/C Borrowing or a Bidco Loan Notes Credit Support
Advance) shall be made upon the Company's irrevocable written notice delivered
to the Agent in the form of a Notice of Borrowing (which notice must be received
by the Agent prior to (i) 10:00 a.m. (Chicago time) two Business Days prior to
the requested Borrowing Date, in the case of Offshore Rate Loans denominated in
Dollars, (ii) 10:00 a.m. (Chicago time) four Business Days prior to the
requested Borrowing Date, in the case of Offshore Rate Loans in an Offshore
Currency and (iii) 12:00 noon (Chicago time) on the date of the requested
Borrowing, in the case of Base Rate Loans, specifying:
(i) the amount of the Borrowing, which shall be in an aggregate
minimum amount of $500,000, or any multiple of $250,000 in excess thereof,
in the case of Base Rate Loans, and $1,000,000, or any multiple of $500,000
in excess thereof, in the case of Offshore Rate Loans;
(ii) the requested Borrowing Date, which shall be a Business
Day;
(iii) whether such Loan shall be a Revolving Loan, a Term Loan A
or a Term Loan B;
(iv) the Type of Loans comprising the Borrowing;
(v) if a Revolving Loan comprised of Offshore Currency Loans,
the Applicable Currency;
(vi) if the Loan then requested is to be an Offshore Rate Loan,
the duration of the Interest Period applicable to such Loans included in
such notice, provided, however, that in the event the Notice of Borrowing
-------- -------
fails to specify the duration of the Interest Period for any Borrowing
comprised of Offshore Rate Loans, such Interest Period shall be three
months; and
(vii) if such Loans are Special Funding Loans, whether such
Special Funding Loans will be utilized by the Company on the Initial
Funding Date, a Squeeze-Out Related Purchase Date or the Squeeze-Out Date,
as applicable;
provided, however, that with respect to the Borrowing to be made on the initial
- -------- -------
Special Funding Date, the Notice of Borrowing shall be delivered to the Agent
not later than 10:00 a.m. (Chicago time) on the initial Special Funding Date and
such Borrowing will consist of Base Rate Loans only; and provided further, all
-------- -------
Borrowings during the first 90 days following the initial Special Funding
45
<PAGE>
Date (or such shorter period as determined by the Agent) shall have the same
Interest Period and shall be Base Rate Loans or Offshore Rate Loans for Interest
Periods no longer than one month.
(b) Upon receipt of the Notice of Borrowing, the Agent will promptly
notify each Lender thereof and of the amount of such Lender's Pro Rata Share of
the Borrowing. In the case of a Borrowing of Revolving Loans comprised of
Offshore Currency Loans, such notice will provide the amount of each Lender's
ProRata Revolving Share of the Borrowing, and the Agent will, upon the
determination of the Dollar Equivalent amount of the Borrowing as specified in
the Notice of Borrowing, promptly notify each Lender of the exact Dollar
Equivalent amount of such Lender's Pro Rata Revolving Share of the Borrowing.
The Dollar Equivalent amount of any Borrowing in an Offshore Currency will be
determined by the Agent for such Borrowing on the Computation Date therefor in
accordance with Section 2.15(a).
---------------
(c) Each Lender will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office on the Borrowing Date requested by the Company in Same Day Funds
and in the requested currency (i) in the case of a Borrowing comprised of Loans
in Dollars, by 12:00 noon (Chicago time) and (ii) in the case of a Borrowing
comprised of Offshore Currency Loans, by such time as the Agent may specify. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BofA with the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than (x) at any time prior to the 120th
day following the Squeeze-Out Date, fifteen (15) and (y) thereafter, seven (7)
different Interest Periods in effect with respect to Offshore Rate Loans.
(e) The obligation of each Lender to make any Loan on a Special
Funding Date is subject to the following conditions precedent:
The Company may request a Borrowing of Special Funding Loans on
any Special Funding Date in the event that (i) the Announcement Date shall have
occurred; (ii) each Lender has executed and delivered the Special Funding
Procedure Letter to the Agent; (iii) the Company has established the Special
Funding Account, and shall have granted to the Agent, for the benefit of itself
and the Lenders, a first priority security interest in the Special Funding
Account and any and all funds from time to time on deposit therein, and the
Agent shall have received evidence that all actions necessary or, in the opinion
of Agent, desirable to perfect and protect a first priority Lien in the Special
Funding Account and on all funds on deposit therein have been taken; and (iv)
there shall not exist on any Special Funding Date a judgment, order, injunction
or other restraint issued or filed with respect to (w) any Offer Document or the
consummation of the Offer, (x) the Special Funding Account or any funds on
deposit therein, (y) the making of Special Funding Loans or (z) this Agreement
or any other Loan Document.
46
<PAGE>
2.04 Conversion and Continuation Elections for Revolving Loans
---------------------------------------------------------
(a) The Company may, upon irrevocable written notice to the Agent in
accordance with Section 2.04(b):
---------------
(i) elect, as of any Business Day, in the case of Base Rate
Loans (other than Specified L/C Loans), or as of the last day of the
applicable Interest Period, in the case of Offshore Rate Loans, to convert
any such Loans (or any part thereof in an aggregate minimum amount of
$500,000, or any multiple of $250,000 in excess thereof, in the case of
Base Rate Loans (other than Specified L/C Loans), and $1,000,000, or any
multiple of $500,000 in excess thereof, in the case of Offshore Rate Loans)
into Loans of any other Type; or
(ii) elect as of the last day of the applicable Interest Period
with respect of any Offshore Rate Loan, to continue any Loans having
Interest Periods expiring on such day (or any part thereof in an amount not
less than $500,000, or that is in an integral multiple of $250,000 in
excess thereof) as Loans of the same Type;
provided, that if at any time the aggregate amount of Offshore Rate Loans in
- --------
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $250,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans as of the last day of the Interest
Period applicable thereto, and on and after such date the right of the Company
to continue such Revolving Loans as, and convert such Revolving Loans into,
Offshore Rate Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than 10:00 a.m. (Chicago time) at least (i)
two Business Days in advance of the Conversion/Continuation Date, if the Loans
are to be converted into or continued as Offshore Rate Loans denominated in
Dollars, (ii) 10:00 a.m. (Chicago time) four Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore Rate Loans in an Offshore Currency and (iii) on the date of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or
continued;
(iii) the Type of Loans resulting from the proposed conversion
or continuation;
(iv) the Applicable Currency; and
47
<PAGE>
(v) other than in the case of conversions into Base Rate Loans,
the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select a new Interest Period to
be applicable to such Offshore Rate Loans by the time specified in Section
-------
2.04(b), or if any Default or Event of Default then exists, the Company shall be
- -------
deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period. If the Company has
failed to select a new Interest Period to be applicable to Offshore Currency
Loans prior to the fourth Business Day in advance of the expiration date of the
current Interest Period applicable thereto as provided in Section 2.04(b), or if
---------------
any Default or Event of Default shall then exist, the Company shall be deemed to
have elected to continue such Offshore Currency Loans on the basis of a one
month Interest Period.
(d) The Agent will promptly notify each Lender of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans, with
respect to which the notice was given, held by each Lender.
(e) Unless the Majority Lenders otherwise consent, during the
existence of a Default or Event of Default, the Company may not elect to have
(i) a Loan converted into or continued as an Offshore Rate Loan or (ii) an
Offshore Currency Loan continued on the basis of an Interest Period exceeding
one month.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent, there may not be more than (x) at
anytime prior to the 120th day following the Squeeze-Out Date, fifteen (15) and
(y) thereafter, seven (7), different Interest Periods in effect with respect to
Offshore Rate Loans.
(g) Notwithstanding anything else to the contrary in this Agreement,
Specified L/C Loans may only be Base Rate Loans and Swing Line Loans may only
bear interest at the Swing Line Rate.
(h) Notwithstanding anything to the contrary herein, the Company may
only have Base Rate Loans and Offshore Rate Loans with a thirty (30) day
Interest Period for the first 90 days after the Initial Funding Date or if
earlier, the date on which Bank of America National Trust and Savings
Association successfully syndicates the Commitments and Loans hereunder.
2.05 Voluntary Termination or Reduction of Commitments
-------------------------------------------------
(a) The Company may, upon not less than two Business Days' prior
notice to the Agent, terminate the Commitments of all Lenders ratably, or
permanently reduce the Commitments
48
<PAGE>
of all Lenders ratably by an aggregate minimum amount of $250,000 or any
multiple of $250,000 in excess thereof; unless, after giving effect thereto and
------
to any prepayments of Loans made on the effective date thereof, (a) the
Effective Amount of all Revolving Loans would exceed the amount of the combined
Revolving Loan Commitments of all Revolving Lenders then in effect, (b) the
Effective Amount of all L/C Obligations would exceed the amount of the L/C
Commitment then in effect, (c) the Effective Amount of all Klearfold L/C
Obligations or AGI L/C Obligations, as the case may be, would exceed the amount
of the Klearfold L/C Sublimit or AGI L/C Sublimit, as the case may be, then in
effect or (d) the Effective Amount of all Swing Line Loans would exceed the
Swing Line Loan Commitment then in effect. Once reduced in accordance with this
Section, the Commitments may not be increased. Any reduction of the Commitments
shall be applied to each Lender according to its Pro Rata Share. All accrued
commitment and letter of credit fees and interest, if applicable, to, but not
including, the effective date of any reduction or termination of the Commitments
shall be paid on the effective date of such reduction or termination.
(b) At no time shall the Swing Line Commitment exceed the Aggregate
Revolving Loan Commitment, and any reduction of the Aggregate Revolving Loan
Commitment which reduces the Aggregate Revolving Loan Commitment below the then-
current amount of the Swing Line Commitment shall result in an automatic
corresponding reduction of the Swing Line Commitment to the amount of the
Aggregate Revolving Loan Commitment, as so reduced, without any action on the
part of the Swing Line Lender. Any reduction of the Aggregate Revolving Loan
Commitment below the then-current amount of the Swing Line Commitment shall
result in an automatic corresponding reduction of the Swing Line Commitment to
the amount of the Aggregate Revolving Loan Commitment as so reduced, without any
action on the part of the Swing Line Lender.
2.06 Optional Prepayments of Loans
-----------------------------
Subject to Section 4.04, any Credit Party, may, at any time or from
------------
time to time, upon irrevocable notice to the Agent, prepay (but not permanently
reduce the Revolving Loan Commitments to the extent of prepayments on the
Revolving Loans unless otherwise expressly requested in writing by the Company)
the Loans, including the Term Loans, in whole or in part, in minimum amounts of
$500,000, or any multiple of $250,000 in excess thereof, in the case of Base
Rate Loans, and the Dollar Equivalent $500,000, or any multiple of the Dollar
Equivalent $250,000 in excess thereof (or such other amount necessary to repay
any Offshore Currency Loan in full), in the case of Offshore Rate Loans. The
Company may designate whether such prepayments shall be applied to prepay
Revolving Loans or Term Loans provided that such prepayments shall be applied
ratably among the Lenders holding such Revolving Loans or Term Loans, as the
case may be. The Company shall deliver a notice of prepayment in accordance with
Section 11.02 to be received by the Agent not later than 10:30 a.m. (Chicago
- -------------
time) (a) at least three Business Days in advance of the prepayment date if the
Loans to be prepaid are Offshore Currency Loans, (b) at least two Business Days
in advance of the prepayment date if the Loans to be prepaid are Offshore Rate
Loans in Dollars, and (iii) on the date of the prepayment date if the Loans to
be prepaid are Base Rate Loans. Such notice of prepayment shall specify the date
and amount of such prepayment, the Loans being
49
<PAGE>
prepaid and whether such prepayment is of Base Rate Loans or Offshore Rate
Loans, or any combination thereof, and the Applicable Currency. The Agent will
promptly notify each Lender of its receipt of any such notice, and of such
Lender's Pro Rata Share of such prepayment. If such notice is given by a Credit
Party, such Credit Party shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified therein,
together with accrued interest to each such date on the amount prepaid and any
amounts required pursuant to Section 4.04.
------------
2.07 Termination of Commitments; Mandatory Prepayments of Loans; Mandatory
---------------------------------------------------------------------
Commitment Reductions
- ---------------------
(a) The Aggregate Commitment shall be reduced to zero in the event
that:
(i) the Offer is not posted on or prior to the twenty-eighth
(28th) day following the Announcement Date; or
(ii) the Company and/or Bidco withdraws the Offer or the Offer
lapses;
(iii) the Offer has not gone wholly unconditional within four
(4) calendar months after the posting of the Offer Documents; or
(iv) the Initial Funding Date has not occurred within fourteen
(14) days after the Offer has gone wholly unconditional;
and in any event the Prior Loan Document shall remain unaffected by the terms
and conditions of this Agreement and this Agreement shall be automatically
terminated other than (x) with respect to those provisions that by their terms
survive termination of this Agreement, (y) the payment of any accrued Commitment
Fee pursuant to Section 2.10 which is due and payable on the date this Agreement
------------
is terminated pursuant to this Section 2.07(a)) and (z) any rights of
----------------
indemnification in favor of the Agent, or the Issuing Bank, any Agent-Related
Person and the Lenders.
(b) (i) If on any date the Effective Amount of all AGI L/C
Obligations exceeds the AGI L/C Sublimit, AGI shall either (x) Cash
Collateralize on such date the outstanding AGI Letter of Credit in an
amount equal to the excess of the maximum amount then available to be drawn
under the AGI Letter of Credit over the AGI L/C Sublimit or (y)
immediately, and without notice or demand, prepay the outstanding principal
amount of the AGI Specified L/C Loans by an amount equal to the applicable
excess (or take any combination of the actions specified in clauses (x) and
---------------
(y) if necessary to cover such excess).
---
(ii) The Specified L/C Commitment and the AGI L/C Sublimit shall
be automatically reduced from time to time on the date, and in the amount,
that the stated
50
<PAGE>
amount of the AGI Letter of Credit is reduced pursuant to the terms of the
AGI Letter of Credit.
(c) (i) If on any date the Effective Amount of all Klearfold L/C
Obligations exceeds the Klearfold L/C Sublimit, Klearfold shall either (x)
Cash Collateralize on such date the outstanding Klearfold Letter of Credit
in an amount equal to the excess of the maximum amount then available to be
drawn under the Klearfold Letter of Credit over the aggregate Klearfold L/C
Sublimit or (y) immediately, and without notice or demand, prepay the
outstanding principal amount of the Klearfold Specified L/C Loans by an
amount equal to the applicable excess (or take any combination of the
actions specified in clauses (x) and (y) if necessary to cover such
-------------------
excess).
(ii) The Specified L/C Commitment and the Klearfold L/C Sublimit
shall be automatically reduced from time to time on the date, and in the
amount, that the stated amount of the Klearfold Letter of Credit is reduced
pursuant to the terms of the Klearfold Letter of Credit.
(d) (i) Subject to Section 4.04, if on any date after giving effect
------------
to any Cash Collateralization made on such date pursuant to Section 2.07(b) and
---------------
(c), the Effective Amount of Revolving Loans, Swing Line Loans and L/C
- ---
Obligations exceeds the Aggregate Revolving Loan Commitment, the Company shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Revolving Loans and L/C Advances by an amount equal to the
applicable excess and the Lenders shall apply such amounts first to repay Base
Rate Loans and thereafter to repay Offshore Rate Loans.
(e) If any Borrowing Base Certificate shall disclose the existence of
a Borrowing Base Deficiency, the Company shall on the date of the delivery
thereof in accordance with Section 7.02(g), repay the principal of Swing Line
---------------
Loans and, after the Swing Line Loans have been repaid in full, the principal of
Revolving Loans in an aggregate amount equal to such Borrowing Base Deficiency
and, to the extent such Borrowing Base Deficiency exceeds the Effective Amount
of Swing Line Loans and Revolving Loans required to be prepaid, the Company
shall Cash Collateralize the outstanding Letters of Credit (other than the
Specified Letters of Credit) in an amount equal to the excess of the maximum
amount then available to be drawn under such Letters of Credit over the L/C
Commitment minus the Specified L/C Sublimit.
-----
(f) The Bidco Loan Notes Credit Support Term Loan Commitment shall be
automatically reduced from time to time on the date, and in the amount, that the
Stated Amount of the Bidco Loan Notes Credit Support is reduced pursuant to the
terms of the Bidco Loan Notes Credit Support, (but after giving effect to any
Borrowing of Revolving Loans used to repay drawing thereunder on such date). No
reduction in the Bidco Loan Notes Credit Support Commitment shall reduce the
Aggregate Revolving Loan Commitment.
51
<PAGE>
(g) Each Credit Party hereby grants to the Agent, for the benefit of
the Agent, the Issuing Bank and the Lenders, a security interest in all cash and
deposit account balances subject to Cash Collateralization. Cash collateral
subject to Cash Collateralization shall be maintained in blocked deposit
accounts at BofA. BofA shall invest any and all available funds deposited in
such deposit accounts, within five (5) business days after the date the relevant
funds become available, in securities issued or fully guaranteed or insured by
the United States Government or any agency thereof backed by the full faith and
credit of the United States having maturities of no greater than three months
from the date of acquisition thereof (collectively, "Government Obligations").
----------------------
Each Credit Party hereby acknowledges and agrees that BofA shall not have any
liability with respect to, and each Credit Party hereby indemnifies BofA
against, any loss resulting from the acquisition of the Government Obligations
and BofA shall not have any obligation to monitor the trading activity of any
such Governmental Obligations on and after the acquisition thereof for the
purpose of obtaining the highest possible return with respect thereto, BofA's
responsibility being limited to acquiring such Governmental Obligations.
(h) If on any Computation Date the Agent shall have determined that
the aggregate Dollar Equivalent principal amount of all Revolving Loans and
Swing Line Loans then outstanding loan the aggregate amount of outstanding L/C
Obligations exceeds the Aggregate Revolving Credit Commitment, due to a change
in applicable rates of exchange between Dollars and Offshore Currencies, then
the Agent shall give notice to the Company that a prepayment is required under
this Section 2.07(h), and the Company agrees thereupon to make prepayments of
---------------
Revolving Loans, subject to Section 4.04, such that, after giving effect to such
------------
prepayment, the aggregate Dollar Equivalent amount of all Revolving Loans, Swing
Line Loans and aggregate outstanding L/C Obligations does not exceed the
Aggregate Revolving Credit Commitment.
(i) If on any date the Effective Amount of L/C Obligations (other
than Specified L/C Obligations) exceeds the L/C Commitment less than the
Specified L/C Commitment, the Company shall Cash Collateralize on such date the
outstanding Letters of Credit (other than Specified Letters of Credit) in an
amount equal to the excess of the maximum amount then available to be drawn
under such Letters of Credit over the L/C Commitment less the Specified L/C
Commitment. Subject to Section 4.04, if on any date after giving effect to any
------------
Cash Collateralization made on such date pursuant to the preceding sentence, the
Effective Amount of Revolving Loans, Swing Line Loans and L/C Obligations
exceeds the Aggregate Revolving Loan Commitment, the Company shall immediately,
and without notice or demand, prepay the outstanding principal amount of the
Revolving Loans and L/C Advances by an amount equal to the applicable excess.
(j) The Company shall prepay the Term Loans in an amount equal to
100% of the insurance proceeds received by the Company or any Subsidiary
following a casualty involving such Person's Property, to the extent not applied
(or committed to be applied) within 90 days after the consummation or receipt
thereof, as applicable, to the purchase of replacement assets that are not
classified as current assets under GAAP and are used or useful in the business
of the Company and its Subsidiaries. Such prepayment shall be made on the 90th
day after receipt of such insurance
52
<PAGE>
proceeds and the amount of such prepayment shall be applied (i) subject to
paragraph (o) below, on a ratable basis among the then outstanding Term Loans,
and (ii) on a ratable basis among all remaining payments in each such Term Loan
with such proceeds to be applied first, to the extent possible, to prepay Base
Rate Loans and then to prepay Offshore Rate Loans. The Company shall use its
commercially reasonable efforts to notify the Agent and each Lender holding a
Term Loan of the amount of any required prepayment at least three (3) Business
Days before it is made.
(k) On each March 31, beginning March 31, 2000, the Company shall
prepay the Term Loans in an amount equal to fifty percent (50%) of the Excess
Cash Flow, if any, generated by the Company and its Subsidiaries during the
immediately preceding fiscal year of the Company. The amount of such prepayment
shall be applied (i) (subject to paragraph (o) below), on a ratable basis among
-------------
the then outstanding Term Loans, and (ii) on a ratable basis among all remaining
payments in each such Term Loan. Such proceeds shall be applied first, to the
extent possible, to prepay Base Rate Loans and then to prepay Offshore Rate
Loans. The Company shall use its commercially reasonable efforts to notify the
Agent and each Lender holding a Term Loan of the amount of any required
prepayment at least three (3) Business Days before it is made.
(l) The Company shall prepay the Term Loans in an amount equal to
100% of the sum of the Net Proceeds realized upon all Asset Dispositions (other
than the Pending Asset Sale) made by the Company or any Subsidiary, aggregating
(without inclusion of up to $2,000,000 of the Net Proceeds from the Pending
Asset Sale) in excess of $1,000,000, within one-hundred and eighty (180)
Business Days after the date of such Asset Disposition or, if later, the date of
the receipt of the proceeds therefrom to the extent not applied (or committed to
be applied) within such period to the purchase of other assets that are not
classified as current assets under GAAP and are used or useful in the business
of the Company and its Subsidiaries. The amount of such prepayment shall be
applied (i) (subject to paragraph (o) below), on a ratable basis among the then
-------------
outstanding Term Loans, and (ii) on a ratable basis among all remaining payments
in each such Term Loan. Such proceeds shall be applied first, to the extent
possible, to prepay Base Rate Loans and then to prepay Offshore Rate Loans. The
Company shall use its commercially reasonable efforts to notify the Agent and
each Lender holding a Term Loan of the amount of any required prepayment at
least three (3) Business Days before it is made.
(m) The Aggregate Term Loan B Commitment, and the Term Loan B
Commitment of each Lender, shall be reduced on the Squeeze-Out Date (after
giving effect to the Term Loan B made on the Squeeze-Out Date) in an amount
equal to the unutilized Aggregate Term Loan B Commitment, and Term Loan B
Commitment of each Lender, as of such date.
(n) The relevant Credit Party shall pay, together with each
prepayment under this Section 2.07, accrued interest on the amount prepaid.
------------
(o) Notwithstanding anything to the contrary contained in this
Section 2.07 or elsewhere in this Agreement, any Lender with an outstanding Term
- ------------
Loan B shall have the option to waive a mandatory prepayment of such Term Loan
pursuant to Section 2.07 (j), (k) or (l) (each such
----------------------------
53
<PAGE>
prepayment, a "Waivable Mandatory Term Loan B Prepayment") upon the terms and
-----------------------------------------
provisions set forth in this paragraph (o). In the event any such Lender desires
-------------
to waive such Lender's right to receive any such Waivable Mandatory Term Loan B
Prepayment in whole or in part, such Lender shall so advise the Agent no later
than the close of business two (2) Business Days prior to the date on which such
prepayment is to occur, which notice shall also include the amount such Lender
desires to receive in respect of such prepayment. If any such Lender does not
provide such amount by such date, it will be deemed not to have waived any part
of such prepayment. If any such Lender does not deliver such notice, it will be
deemed to have accepted one hundred percent (100%) of the total payment. In the
event that any such Lender waives all or part of such right to receive any such
Waivable Mandatory Term Loan B Prepayment, the Agent shall apply one hundred
percent (100%) of the amount so waived by such Lender to Term Loan A in
accordance with this Section 2.07; provided, further, that no such waiver
------------ -------- -------
requests shall be honored following the prepayment in full of Term Loan A.
2.08 Repayment of Loans
------------------
(a) The Company shall repay to the Revolving Lenders on the
Revolving Loan Termination Date the aggregate principal amount of Revolving
Loans outstanding on such date.
(b) AGI shall repay to the Revolving Lenders on the Revolving Loan
Termination Date the aggregate principal amount of AGI Specified L/C Loans
outstanding on such date; provided, however, that with respect to any AGI
-------- -------
Specified L/C Loan made (A) in respect of an AGI-B Drawing (Principal) or an AGI
C Drawing (Interest), AGI shall repay the unpaid principal amount of such AGI
Specified L/C Loan on or before the earliest of (i) the Revolving Loan
Termination Date, (ii) the 5th day following the date of such AGI Specified L/C
Loan, and (B) in respect of any AGI-A Drawing (Purchase), AGI shall repay the
unpaid principal amount of such AGI Specified L/C Loan on the same date on which
the AGI Pledged Bonds acquired by the proceeds of an AGI-A Drawing (Purchase)
(which AGI-A Drawing (Purchase) was financed by such AGI Specified L/C Loan) are
sold as a result of a remarketing with any deficiency in the amount due paid by
AGI.
(c) Klearfold shall repay to the Revolving Lenders on the Revolving
Loan Termination Date the aggregate principal amount of Klearfold Specified L/C
Loans outstanding on such date; provided, however, that with respect to any
-------- -------
Klearfold Specified L/C Loan made (A) in respect of any Klearfold Interest
Drawing (or C Drawing), Klearfold shall repay the unpaid principal amount of
such Klearfold Specified L/C Loan on or before the earliest of (i) the Revolving
Loan Termination Date, (ii) the 5th day following the date of such Klearfold
Specified L/C Loan, and (B) in respect of any Klearfold Tender Drawing (or A
Drawing) Klearfold shall repay the unpaid principal amount of such Specified L/C
Loan on the same date on which the Klearfold Pledged Bonds acquired by the
proceeds of a Klearfold Tender Drawing (which Klearfold Tender Drawing was
financed by such Klearfold Specified L/C Loan) are sold as a result of a
remarketing with any deficiency in the amount due paid by Klearfold.
54
<PAGE>
(d) The Company shall repay the Term Loans on each date set forth on
Schedule 2.08(d) (each a "Principal Payment Date").
----------------------
(e) The Company shall repay to the Swing Line Lender on the Swing
Line Termination Date the aggregate principal amount of Swing Line Loans
outstanding on such date.
(f) The Company shall repay to the Lenders on the Business Day
following a Special Funding Date the aggregate principal amount of Special
Funding Loans outstanding on such date in the event that the Initial Funding
Date, a Squeeze-Out Related Purchase Date or the Squeeze-Out Date, as the case
may be, has not occurred on such date.
2.09 Interest
--------
(a) Each (i) Loan (other than a Swing Line Loan) shall bear interest
on the outstanding principal amount thereof from the applicable Borrowing Date
at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may
be (and subject to the Company's right to convert to other Types of Loans under
Section 2.04), plus the Applicable Margin and (ii) Swing Line Loans shall bear
- ------------
interest on the outstanding principal amount thereof from the applicable
Borrowing Date at a rate per annum equal to the Swing Line Rate, plus the
----
Applicable Margin for Revolving Loans maintained as Offshore Rate Loans.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of the conversion of an
Offshore Rate Loan into a Base Rate Loan, on the date of any prepayment of any
Offshore Rate Loans under Section 2.06 or 2.07 for the portion of the Loans so
------------ ----
prepaid and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the Agent
at the request or with the consent of the Majority Lenders.
(c) Notwithstanding Section 2.09(a) or (e) while any Event of
--------------- ---
Default exists or after acceleration, each Credit Party shall pay interest or
additional fees (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Obligations, at a
rate per annum which is determined by adding 2% per annum to the Applicable
Margin then in effect for such Obligations; provided, however, that, on and
-------- -------
after the expiration of any Interest Period applicable to any Offshore Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Offshore Rate Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of each Credit Party to any Lender hereunder shall be subject to the limitation
that payments of interest shall not be required for any period for which
interest is computed hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by such Lender would be contrary to
the provisions of any law applicable to such Lender limiting the highest rate of
interest that may be
55
<PAGE>
lawfully contracted for, charged or received by such Lender, and in such event
the Credit Parties shall pay such Lender interest at the highest rate permitted
by applicable law.
2.10 Fees
----
In addition to certain fees described in Section 3.08:
------------
(a) Agency Fees
-----------
The Company shall pay the fees to the Agent for the Agent's own
account, as required by the letter agreement ("Fee Letter") between the Company
----------
and the Agent, dated as of July7, 1998.
(b) Commitment Fees
---------------
The Company shall pay to the Agent for the account of each
Lender with a Revolving Loan Commitment a commitment fee ("Revolving Commitment
--------------------
Fee") on the actual daily unused portion of such Revolving Lender's Revolving
- ---
Loan Commitment or computed on a quarterly basis in arrears on the last Business
Day of each calendar quarter based upon the daily utilization for that quarter
as calculated by the Agent, equal to the Applicable Margin per annum applicable
to the Commitment Fee. For purposes of calculating utilization under this
Section, the Revolving Loan Commitments shall be deemed used to the extent of
the Effective Amount of Revolving Loans then outstanding and the Effective
Amount all L/C Obligations then outstanding. Such commitment fee shall accrue
from the Initial Funding Date to the Revolving Loan Termination Date and shall
be due and payable quarterly in arrears on the last Business Day of each March,
June, September and December through the Revolving Loan Termination Date, with
the final payment to be made on the Revolving Loan Termination Date. The
commitment fees provided in this Section shall accrue at all times after the
Initial Funding Date, including at any time during which one or more conditions
in Article V are not met.
---------
(c) Term Loan Commitment Fees
-------------------------
The Company shall pay to the Agent for the account of each
Lender with a Term Loan Commitment a commitment fee ("Term Loan Commitment Fee")
------------------------
on the actual daily unused portion of such Lenders' Term Loan Commitment
computed on a quarterly basis in arrears on the last Business Day of each
calendar quarter based upon the daily utilization for that quarter as calculated
by the Agent, equal to the Applicable Margin per annum applicable to the
Commitment Fee. For purposes of calculating utilization under this paragraph
---------
(c), the Term Loan Commitments shall be deemed used to the extent of the
-
Effective Amount of Term Loans then outstanding. Such
56
<PAGE>
Term Loan Commitment Fee shall accrue from the Announcement Date to the Squeeze-
Out Date and shall be due and payable quarterly in arrears on the last Business
Day of each March, June, September and December through the Squeeze-Out Date,
with the final payment to be made on the Squeeze-Out Date; provided, that in
--------
connection with any reduction or termination of Term Loan Commitments, as the
case may be, under Section 2.05 or 2.08(a), the accrued Term Loan Commitment Fee
------------ -------
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to
such quarterly payment date. The Term Loan Commitment Fee shall accrue at all
times after the above-mentioned commencement date until the Squeeze-Out Date,
including at any time during which one or more conditions in Article V are not
---------
met.
2.11 Computation of Fees and Interest
--------------------------------
(a) All computations of interest for Base Rate Loans when the Base
Rate is determined by BofA's "reference rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees shall accrue during
each period during which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate or a Dollar Equivalent
amount by the Agent shall be conclusive and binding on each Credit Party and the
Lenders in the absence of manifest error. The Agent will, at the request of a
Credit Party or any Lender, deliver to such Credit Party or such Lender, as the
case may be, a statement showing the quotations used by the Agent in determining
any interest rate and the resulting interest rate or any Dollar Equivalent
Amount.
2.12 Payments by the Credit Parties
------------------------------
(a) All payments to be made by a Credit Party shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by a Credit Party shall be made to the Agent for the
account of the Lenders at the Agent's Payment Office, and, with respect to
principal of, interest on, and any other amounts relating to, any Offshore
Currency Loan, shall be made in the Offshore Currency in which such Loan is
denominated or payable, and, with respect to all other amounts payable
hereunder, shall be made in Dollars. Such payments shall be made in Same Day
Funds, and (i) in the case of Offshore Currency payments, no later than such
time on the dates specified herein as may be reasonably determined by the Agent
to be necessary for such payment to be credited on such date in accordance with
normal lending procedures in the place of payment, and (ii) in the case of any
Dollar payments, no later than 12:00 noon (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Lender its Pro Rata Share (or
other applicable share as expressly provided herein) of such principal,
interest, fees or other amounts, in like funds as received. Any payment which is
received by the Agent later than 12:00 noon (Chicago time) in the case of Dollar
payments, or later than the time specified by
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the Agent as provided in clause (i) above (in the case of Offshore Currency
payments), shall be deemed to have been received on the following Business Day
and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Lenders that a Credit Party will not
make such payment in full as and when required, the Agent may assume that such
Credit Party has made such payment in full to the Agent on such date in Same Day
Funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent such Credit Party has not made
such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate or, in the case of a payment in an Offshore Currency, the
Overnight Rate, for each day from the date such amount is distributed to such
Lender until the date repaid.
2.13 Payments by the Lenders to the Agent
------------------------------------
(a) Unless the Agent receives notice from a Lender on or prior to
the Special Funding Date or, with respect to any Borrowing after the initial
Special Funding Date, at least one Business Day prior to the date of such
Borrowing, that such Lender will not make available as and when required
hereunder to the Agent for the account of the relevant Credit Party the amount
of that Lender's Pro Rata Share of the Borrowing, the Agent may assume that each
Lender has made such amount available to the Agent in Same Day Funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the relevant Credit Party on such date a
corresponding amount. If and to the extent any Lender shall not have made its
full amount available to the Agent in Same Day Funds and the Agent in such
circumstances has made available to the Company such amount, that Lender shall
on the Business Day following such Borrowing Date make such amount available to
the Agent, together with interest at the Federal Funds Rate or, in the case of
any Borrowing consisting of Offshore Currency Loans, the Overnight Rate, for
each day during such period. A notice of the Agent submitted to any Lender with
respect to amounts owing under this Section 2.13(a) shall be conclusive, absent
---------------
manifest error. If such amount is so made available, such payment to the Agent
shall constitute such Lender's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the Agent on the
Business Day following the Borrowing Date, the Agent will notify such Credit
Party of such failure to fund and, upon demand by the Agent, the relevant Credit
Party shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
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(b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
2.14 Sharing of Payments, Etc.
-------------------------
If, other than as expressly provided elsewhere herein, any Lender
shall obtain on account of the Loans made by it any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated hereunder), such Lender
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Lenders such participations in the Loans made by them as shall be
necessary to cause such purchasing Lender to share the excess payment pro rata
with each of them; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from the purchasing Lender, such purchase shall
to that extent be rescinded and each other Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount equal to such
paying Lender's ratable share (according to the proportion of (i) the amount of
such paying Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. Each Credit
Party agrees that any Lender so purchasing a participation from another Lender
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with respect to
--------------
such participation as fully as if such Lender were the direct creditor of the
relevant Credit Party in the amount of such participation. The Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments.
2.15 Utilization of Commitments in Offshore Currencies
-------------------------------------------------
(a) The Agent will determine the Dollar Equivalent amount with
respect to any (i) Borrowing comprised of Offshore Currency Loans as of the
requested Borrowing Date, (ii) outstanding Offshore Currency Loans denominated
in a currency other than Dollars as of the last Business Day of each month,
(iii) outstanding Offshore Currency Loans denominated in a currency other than
Dollars as of any redenomination date pursuant to this Section 2.15 or Section
------------ -------
4.05, (iv) L/C Obligations denominated in a currency other than Dollars as of
- ----
the last Business Day of each month and (v) Offshore Currency Loans or L/C
Obligations, any date specified for determining the Dollar Equivalent or
Sterling Equivalent of any amount (each such date under clauses (i) through (iv)
a "Computation Date").
----------------
(b) In the case of a proposed Borrowing comprised of Offshore
Currency Loans, the Lenders shall be under no obligation to make Offshore
Currency Loans in the requested Offshore Currency as part of such Borrowing if
the Agent has received notice from any of the Lenders by 5:00 p.m. (Chicago
time) four Business Days prior to the day of such Borrowing that such Lender
cannot
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provide Loans in the requested Offshore Currency, in which event the Agent will
give notice to the Company no later than 12:00 noon (Chicago time) on the third
Business Day prior to the requested date of such Borrowing that the Borrowing in
the requested Offshore Currency is not then available, and notice thereof also
will be given promptly by the Agent to the Lenders. If the Agent shall have so
notified the Company that any such Borrowing in a requested Offshore Currency is
not then available, the Company may, by notice to the Agent not later than 5:00
p.m. (Chicago time) two Business Days prior to the requested date of such
Borrowing, withdraw the Notice of Borrowing relating to such requested
Borrowing. If the Company does so withdraw such Notice of Borrowing, the
Borrowing requested therein shall not occur and the Agent will promptly so
notify each Lender. If the Company does not so withdraw such Notice of
Borrowing, the Agent will promptly so notify each Lender and such Notice of
Borrowing shall be deemed to be a Notice of Borrowing that requests a Borrowing
comprised of Offshore Rate Loans for the same Interest Period previously
applicable in an aggregate amount equal to the amount of the originally
requested Borrowing as expressed in Dollars in the Notice of Borrowing; and in
such notice by the Agent to each Lender the Agent will state such aggregate
amount of such Borrowing in Dollars and such Lender's Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore Currency Loans
for an additional Interest Period pursuant to Section 2.04, the Lenders shall be
------------
under no obligation to continue such Offshore Currency Loans if the Agent has
received notice from any of the Lenders by 5:00 p.m. (Chicago time) four
Business Days prior to the day of such continuation that such Lender cannot
continue to provide Loans in the relevant Offshore Currency, in which event the
Agent will give notice to the Company not later than 12:00 noon (Chicago time)
on the third Business Day prior to the requested date of such continuation that
the continuation of such Offshore Currency Loans in the relevant Offshore
Currency is not then available, and notice thereof also will be given promptly
by the Agent to the Lenders. If the Agent shall have so notified the Company
that any such continuation of Offshore Currency Loans is not then available, any
Notice of Continuation/Conversion with respect thereto shall be deemed withdrawn
and such Offshore Currency Loans shall be redenominated into Offshore Rate Loans
in Dollars for the same Interest Period previously applicable with effect from
the last day of the Interest Period with respect to any such Offshore Currency
Loans. The Agent will promptly notify the Company and the Lenders of any such
redenomination and in such notice by the Agent to each Lender the Agent will
state the aggregate Dollar Equivalent amount of the redenominated Offshore
Currency Loans as of the Computation Date with respect thereto and such Lender's
Pro Rata Share thereof.
(d) Notwithstanding anything herein to the contrary, during the
existence of a payment default or an Event of Default, upon the request of the
Majority Lenders, all or any part of any outstanding Offshore Currency Loans
shall be redenominated and converted into Base Rate Loans in Dollars with effect
from the last day of the Interest Period with respect to any such Offshore
Currency Loans. The Agent will promptly notify the Company of any such
redenomination and conversion request.
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(e) The Company shall be entitled to request that Revolving Loans
(other than Specified L/C Loans) hereunder also be permitted to be made in any
other lawful currency (other than Dollars), in addition to the currencies
specified in the definition of "Offshore Currency" herein, that in the opinion
-----------------
of the Majority Lenders is at such time freely traded in the offshore interbank
foreign exchange markets and is freely transferable and freely convertible into
Dollars (an "Agreed Alternative Currency"). The Company shall deliver to the
---------------------------
Agent any request for designation of an Agreed Alternative Currency in
accordance with Section 11.02, to be received by the Agent not later than 12:00
-------------
noon (Chicago time) at least 10 Business Days in advance of the date of any
Borrowing hereunder proposed to be made in such Agreed Alternative Currency.
Upon receipt of any such request the Agent will promptly notify the Lenders
thereof, and each Lender will use its commercially reasonable efforts to respond
to such request within five (5) Business Days of receipt thereof. Each Lender
may grant or accept such request in its sole discretion. The Agent will promptly
notify the Company of the acceptance or rejection of any such request.
ARTICLE III
THE LETTERS OF CREDIT, BANK GUARANTEE
3.01 The Letter of Credit Facility and Bank Guarantee
------------------------------------------------
(a) On the terms and conditions set forth herein (i) the Issuing
Bank agreed, (A) on the Original Closing Date to permit the AGI Letter of Credit
to become an obligation under and be deemed to have been issued under this
Agreement for the account of AGI in the amount and to the beneficiary as set
forth on Exhibit G hereto, and subject to the satisfaction of the conditions in
---------
Section 5.03, to amend or renew the AGI Letter of Credit in accordance with
- ------------
Sections 3.02(c) and (d), and (B) to honor drafts under the AGI Letter of
- ---------------- ---
Credit; and (ii) the Revolving Lenders severally agree to participate in the AGI
Letter of Credit; provided that the Issuing Bank shall not be obligated to
--------
Issue, and no Revolving Lender shall be obligated to participate in, the AGI
Letter of Credit if, as of the Issuance Date of the AGI Letter of Credit, (1)
the Effective Amount of all L/C Obligations exceeds the Specified L/C
Commitments, (2) the participation of any Revolving Lender in the Effective
Amount of all AGI L/C Obligations of such Revolving Lender exceeds such L/C
Lender's Pro Rata Revolving Share of the AGI L/C Sublimit or (3) the Effective
Amount of AGI L/C Obligations exceeds the AGI L/C Sublimit. The parties hereto
acknowledge and agree that the AGI Letter of Credit is not being reissued on the
Initial Funding Date, and that as such it will be deemed to be a continuing
obligation of AGI hereunder and that this Agreement will henceforth constitute,
among other things, an amendment and restatement of the AGI Reimbursement
Agreement for purposes of the AGI Bond Documents and shall supersede and replace
such Reimbursement Agreement in its entirety.
(b) On the terms and conditions set forth herein (i) the Issuing
Bank agreed, (A)on the Original Closing Date to permit the Klearfold Letter of
Credit for the account of Klearfold
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in the amount and to the beneficiary as set forth on Exhibit H, and subject to
---------
the satisfaction of the conditions in Section 5.03, to amend or renew the
------------
Klearfold Letter of Credit in accordance with Sections 3.02(c) and (d), and (B)
---------------- ---
to honor drafts under the Klearfold Letter of Credit; and (ii) the Revolving
Lenders severally agree to participate in the Klearfold Letter of Credit;
provided, that the Issuing Bank shall not be obligated to Issue, and no
- --------
Revolving Lender shall be obligated to participate in, the Klearfold Letter of
Credit if as of the Issuance Date of such Klearfold Letter of Credit (1) the
Effective Amount of all L/C Obligations exceeds the Specified L/C Commitments,
(2) the participation of any Revolving Lender in the Effective Amount of all
Klearfold L/C Obligations exceeds such Lender's Pro Rata Revolving Share of the
Klearfold L/C Sublimit or (3) the Effective Amount of Klearfold L/C Obligations
exceeds the Klearfold L/C Sublimit. The parties hereto acknowledge and agree
that the Klearfold Letter of Credit is not being reissued on the Initial Funding
Date, and that as such it will be deemed to be a continuing obligation of
Klearfold hereunder.
(c) On the terms and conditions set forth herein (i) the Issuing
Bank agrees, (A) from time to time on any Business Day during the period from
the Initial Funding Date to the day which is thirty (30) days prior to the
Revolving Loan Termination Date, to issue standby or trade Letters of Credit for
the account of the Company or the L/C Borrowers and to amend or renew Letters of
Credit previously issued by it under this clause (c); in accordance with
Section 3.02(d) and 3.02(e), and (B) to honor drafts under the Letters of Credit
- --------------- -------
issued under this clause (c); and (ii) the Revolving Lenders severally agree to
participate in Letters of Credit issued for the account of the Company under
this clause (c); provided, that the Issuer shall not be obligated to Issue any
--------
Letter of Credit under this clause (c), if as of the Issuance Date of such
Letter of Credit (1) the Effective Amount of all L/C Obligations exceed the
combined L/C Commitments of all Revolving Lenders, (2) the participation of any
Revolving Lender in the Effective Amount of all L/C Obligations of such
Revolving Lender exceeds such Lender's Commitment, (3) the Effective Amount of
AGI L/C Obligations or Klearfold L/C Obligation (as the case may be) exceeds the
AGI L/C Sublimit or Klearfold L/C Sublimit, (4) the Effective Amount of all L/C
Obligations related to standby and trade Letters of Credit issued under this
clause (c) exceeds in an aggregate Stated Amount $7,000,000 (as such amount
shall be reduced by any increase in the Stated Amount of the Klearfold IRB
Letter of Credit or the AGI IRB Letter of Credit after the Initial Funding Date)
(the "Trade L/C Sublimit"). Within the foregoing limits, and subject to the
other terms and conditions hereof, the Company's ability to obtain standby and
trade Letters of Credit under this clause (c) shall be fully revolving, and,
accordingly, the Company may, during the forgoing period, obtain under this
clause (c) new Letters of Credit, or replacement Letters of Credit for Letters
of Credit which have expired or which have been drawn upon and reimbursed,
provided all such Letters of Credit are issued in compliance with this
Agreement.
(d) On the terms and conditions set forth herein (i) the Issuing
Bank agrees, (A) on the Initial Funding Date to issue an irrevocable bank
guarantee for the account of the Company in form and substance satisfactory to
the Issuing Bank and in an amount not to exceed the Bidco Loan Notes Credit
Support Commitment for the benefit of the holders of Bidco Loan Notes (the
"Bidco Loan Notes Credit Support") in support of the principal and interest
-------------------------------
payment obligations of Bidco pursuant to the Bidco Loan Notes, and subject to
the satisfaction of the conditions in Section
-------
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5.03, to amend or renew the Bidco Loan Notes Credit Support in accordance with
- ----
Sections 3.02(c) and (d), and (B) to honor drawings under the Bidco Loan Notes
- ---------------- ---
Credit Support; and (ii) the Revolving Lenders severally agree to participate in
the Bidco Loan Notes Credit Support; provided that the Issuing Bank shall not be
--------
obligated to Issue, and no Revolving Lender shall be obligated to participate
in, the Bidco Loan Notes Credit Support if, as of the Issuance Date of the Bidco
Loan Notes Credit Support, (1) the Effective Amount of all Bidco Loan Notes
Credit Support Obligations exceeds the Bidco Loan Notes Credit Support
Commitment, (2) the participation of any Revolving Lender in the Effective
Amount of all Bidco Loan Notes Credit Support Obligations of such Revolving
Lender exceeds such Revolving Lender's Pro Rata Revolving Share of the Bidco
Loan Notes Credit Support Commitment or (3) the Effective Amount of all L/C
Obligations exceeds the combined L/C Commitments of all Revolving Lenders.
(e) The Issuing Bank is under no obligation to Issue, amend or renew
any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
the Issuing Bank from Issuing such Letter of Credit, or any Requirement of
Law applicable to the Issuing Bank or any request or directive (whether or
not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from, the Issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon the Issuing Bank
with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Initial Funding Date, or shall impose upon
the Issuing Bank any unreimbursed loss, cost or expense which was not
applicable on the Initial Funding Date and which the Issuing Bank in good
faith deems material to it;
(ii) the Issuing Bank has received written notice from any
Revolving Lender, the Agent or any Credit Party, on or prior to the
Business Day prior to the requested Issuance Date of such Letter of Credit,
that one or more of the applicable conditions contained in Article V is not
---------
then satisfied;
(iii) the expiry date of any requested Letter of Credit is after
the Revolving Loan Termination Date;
(iv) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the Issuing
Bank, or the Issuance of a Letter of Credit shall violate any applicable
policies of the Issuing Bank; or
(v) such Letter of Credit (x) (other than the AGI Letter of
Credit, the Klearfold Letter of Credit and the Bidco Loan Notes Credit
Support) is in a face amount less than $25,000, unless such lesser amount
is approved by the Agent and the Issuing Bank, and (y) is to be denominated
in a currency other than Dollars or an Offshore Currency.
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3.02 Issuance, Amendment and Renewal of Letters of Credit
----------------------------------------------------
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the relevant Credit Party received by the Issuing Bank (with
a copy sent by the relevant L/C Borrower to the Agent) at least five (5) days
(or such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed Issuance Date. Each such request for
issuance of a Letter of Credit shall be in writing or by facsimile, confirmed
immediately in an original writing, in the form of an L/C Application, and shall
specify in form and detail satisfactory to the Issuing Bank: (i) the proposed
Issuance Date of the Letter of Credit (which shall be a Business Day); (ii) the
face amount of the Letter of Credit; (iii) the expiry date of the Letter of
Credit; (iv) the name and address of the beneficiary thereof; (v) the documents
to be presented by the beneficiary of the Letter of Credit in case of any
drawing thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; (vii) other than with respect to
the AGI Letter of Credit and the Klearfold Letter of Credit, the demonimation of
the Stated Amount in Dollars or an Offshore Currency, and (viii) such other
matters as the Issuing Bank may require.
(b) Prior to the Issuance of any Letter of Credit, the Issuing Bank
will confirm with the Agent (by telephone or in writing) that the Agent has
received a copy of the L/C Application or L/C Amendment Application from the
relevant Credit Party and, if not, the Issuing Bank will provide the Agent with
a copy thereof. Unless the Issuing Bank has received notice on or before the
Business Day the Issuing Bank is to issue a requested Letter of Credit from the
Agent (A) directing the Issuing Bank not to issue such Letter of Credit because
such issuance is not then permitted under Section 3.01(a) as a result of the
--------------
limitations set forth in clauses (1) through (3) thereof, Section 3.01(b) as a
----------- --- ---------------
result of the limitations set forth in clauses (1) through (3) thereof, Section
----------- --- -------
3.01(c) as a result of the limitations set forth in clauses (1) through (3)
- ------- ----------- ---
thereof, Section 3.01(d) as a result of the limitations set forth in clauses (1)
--------------- -----------
or (2) thereof, or Section 3.01(e)(ii); or (B) that one or more conditions
--- -------------------
specified in Article V are not then satisfied; then, subject to the terms and
---------
conditions hereof, the Issuing Bank shall, with the approval of the Agent, on
the requested date, issue a Letter of Credit for the account of the relevant
Credit Party in accordance with the Issuing Bank's usual and customary business
practices.
(c) From time to time while a Letter of Credit is outstanding and
prior to the Termination Date, the Issuing Bank will, upon the written request
of the relevant Credit Party received by the Issuing Bank (with a copy sent by
the relevant Credit Party to the Agent) at least five (5) days (or such shorter
time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made in writing or by facsimile, confirmed immediately in an original writing,
made in the form of an L/C Amendment Application and shall specify in form and
detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended;
(ii) the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Bank
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would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (B) the beneficiary of any
such Letter of Credit does not accept the proposed amendment to the Letter of
Credit. The Agent will promptly notify the Lenders of the receipt by it of any
L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Revolving Loan Termination Date, at the
option of the relevant Credit Party and upon the written request of the relevant
Credit Party received by the Issuing Bank (with a copy sent by the relevant
Credit Party to the Agent) at least five (5) days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of notification of renewal, the Issuing Bank shall be entitled
to authorize the automatic renewal of any Letter of Credit issued by it. Each
such request for renewal of a Letter of Credit shall be made in writing or by
facsimile, confirmed immediately in an original writing, in the form of an L/C
Amendment Application, and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Letter of Credit; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation so to renew any Letter of Credit if: (A) the Issuing Bank would have
no obligation at such time to issue or amend such Letter of Credit in its
renewed form under the terms of this Agreement; or (B) the beneficiary of any
such Letter of Credit does not accept the proposed renewal of the Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
Issuing Bank that such Letter of Credit shall not be renewed, and if at the time
of renewal the Issuing Bank would be entitled to authorize the automatic renewal
of such Letter of Credit in accordance with this clause (d) upon the request of
----------
the relevant Credit Party but the Issuing Bank shall not have received any L/C
Amendment Application from the relevant Credit Party with respect to such
renewal or other written direction by the relevant Credit Party with respect
thereto, the Issuing Bank shall nonetheless be permitted to allow such Letter of
Credit to renew, and the relevant Credit Party and the Revolving Lenders hereby
authorize such renewal, and, accordingly, the Issuing Bank shall be deemed to
have received an L/C Amendment Application from the Credit Party requesting such
renewal.
(e) The Issuing Bank may, at its election (or as required by the
Agent at the direction of the Majority Lenders), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Termination Date.
(f) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an
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advising bank or a beneficiary, a true and complete copy of each such Letter of
Credit or amendment to or renewal of a Letter of Credit.
3.03 Risk Participations, Drawings, Specified L/C Loans, L/C Borrowings,
-------------------------------------------------------------------
Revolving Loans and Reimbursements
- ----------------------------------
(a) Immediately upon the Issuance of each Letter of Credit , each
Revolving Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a participation
in such Letter of Credit and each drawing thereunder in an amount equal to
the product of (i) the Pro Rata Revolving Share of such Revolving Lender,
times (ii) the maximum amount available to be drawn under such Letter of
Credit and the amount of such drawing, respectively. For purposes of
Section 2.01(d), the Issuance of the AGI Letter of Credit shall be deemed
---------------
to utilize the AGI L/C Sublimit of each Revolving Lender. For purposes of
Section 2.01(d), the Issuance of the Klearfold Letter of Credit shall be
---------------
deemed to utilize the Pro Rata Revolving Share of the Klearfold L/C
Sublimit of each Revolving Lender. For the purposes of Section 2.01(c), the
Issuance of the Bidco Loan Notes Support shall be deemed to utilize the
Bidco Loan Notes Credit Support Commitment of each Revolving Lender.
(b) (i) In the event of any request for a drawing under the AGI
Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank
will promptly notify AGI. AGI will automatically be deemed to have
requested and received an AGI Specified L/C Loan in an amount equal to any
drawing actually made under the AGI Letter of Credit. Such Specified L/C
Loan shall be automatic whether the drawing is pursuant to any AGI-A
Drawing (Purchase) to pay the AGI Tender Price of the AGI Bonds, which AGI
Bonds are purchased (other than on an AGI LOC Termination Tender Date)
pursuant to Section 202 or Section 503 of the AGI Indenture, any AGI-B
Drawing (Principal), any AGI-C Drawing (Interest), any AGI-D Drawing
(Premium) to pay principal of or interest or premium on the AGI Bonds, as
applicable, any AGI-E Drawing (Acceleration) to pay principal of or
interest or premium, if any on the AGI Bonds, or any other drawing under
the AGI Letter of Credit in full and without demand on the date of drawing.
(ii) As additional security for the payment of the obligations
of AGI pursuant to Section 3.03(b)(i) and otherwise under the Loan
------------------
Documents, AGI will pledge to the Agent, and grant to the Agent, for the
benefit of itself, the Issuing Bank and the Lenders, a security interest in
its right, title and interest in and to AGI Bonds delivered to the Issuing
Bank in connection with an AGI-A Drawing (Purchase) (any such AGI Bonds,
"AGI Pledged Bonds"), pursuant to a pledge and security agreement in the
-----------------
form of Exhibit I (the "AGI Pledge and Security Agreement").
---------------------------------
(iii) Upon indefeasible reimbursement in full of an AGI-A
Drawing (Purchase) (including, without limitation the payment in full, in
cash, of any AGI Specified L/C Loan made by the Revolving Lenders pursuant
to Section 3.03(b)(i) in respect thereof),
------------------
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<PAGE>
together with accrued interest to the date of such payment on the amount to
be paid and provided that no Event of Default shall then have occurred and
be continuing or would result after giving effect thereto, the AGI Pledged
Bonds (but only in authorized denominations) held by the Agent pursuant to
the AGI Pledge and Security Agreement corresponding and equal to the
principal amount of such AGI Pledged Bonds included in the AGI-A Drawing
(Purchase) (or the AGI Specified L/C Loan in respect thereof) reimbursed by
such payment shall be released by the Agent and returned to AGI.
(iv) The Issuing Bank will reinstate the amount under the AGI
Letter of Credit of any AGI-C Drawing (Interest) that does not relate to a
redemption or purchase and cancellation of the AGI Bonds on the fourth
Business Day after the repayment of any Specified L/C Loan made in respect
of such AGI-C Drawing (Interest) unless on or prior thereto the Agent and
the Issuing Bank notify AGI that an Event of Default has occurred and is
continuing. Upon reimbursement as contemplated in Section 3.03(b)(iii) and
--------------------
upon the release of the AGI Pledged Bonds as specified therein, the Issuing
Bank will reinstate the AGI Letter of Credit by an amount equal to the
total potential AGI Tender Price of the AGI Pledged Bonds so released.
(v) Payments by the AGI Bond Issuer of interest due on the AGI
Pledged Bonds received by the Issuing Bank shall be credited against
payments of interest due under Section 2.09(a).
---------------
(vi) Notwithstanding any other term or provision of this
Agreement, each Revolving Lender shall have an irrevocable obligation to
make any AGI Specified L/C Loan whether or not the conditions set forth in
Section 5.03 have been satisfied as of such date.
------------
(vii) In the event AGI fails to reimburse the Issuing Bank for
the full amount of any drawing under any AGI Letter of Credit by 10:00 a.m.
(Chicago time) on the Honor Date, the Issuing Bank will promptly notify the
Agent and the Agent will promptly notify each Revolving Lender thereof, and
AGI shall be deemed to have requested that Base Rate Loans in an aggregate
amount equal to the unreimbursed drawing be made by the Revolving Lenders.
Any notice given by the Issuing Bank or the Agent pursuant to this clause
------
(vii) may be oral if immediately confirmed in writing (including by
-----
facsimile); provided that the lack of such an immediate confirmation shall
--------
not affect the conclusiveness or binding effect of such notice. Each
Revolving Lender shall upon any notice pursuant to this clause (vii) make
------------
available to the Agent for the account of the Issuing Bank an amount in
Dollars and in immediately available funds equal to its Pro Rata Revolving
Share of the amount of the drawing, whereupon the participating Revolving
Lenders shall each be deemed to have made an AGI Specified L/C Loan
consisting of a Base Rate Loan to AGI in that amount. If any Revolving
Lenders so notified fails to make available to the Agent for the account of
the Issuing Bank the amount of such Revolving Lender's Pro Rata Revolving
Share of the amount of the drawing by no later than 2:00 p.m. (Chicago
time) on the Honor Date, then interest shall accrue on such Revolving
Lender's obligation to make such
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<PAGE>
payment, from the Honor Date to the date such Revolving Lender makes such
payment, at a rate per annum equal to the Federal Funds Rate in effect from
time to time during such period. The Agent will promptly give notice to the
Revolving Lenders of AGI's failure to reimburse the Issuing Bank on the
Honor Date, but failure of the Agent to give any such notice on the Honor
Date or in sufficient time to enable any Revolving Lender to effect such
payment on such date shall not relieve such Revolving Lender from its
obligations under this Section 3.03.
------------
(c) (i) In the event of any request for a drawing under the
Klearfold Letter of Credit by the beneficiary or transferee thereof, the
Issuing Bank will promptly notify Klearfold. Klearfold will automatically
be deemed to have requested and received a Klearfold Specified L/C Loan in
an amount equal to any drawing actually made under the Klearfold Letter of
Credit. Such Specified L/C Loan shall be automatic whether the drawing is
pursuant to any Klearfold Interest Drawing (or C Drawing), Klearfold
Redemption Drawing (or B Drawing), Klearfold Tender Drawing (or A Drawing)
or any other drawing under the Klearfold Letter of Credit in full without
demand on the date of drawing.
(ii) Klearfold and the Issuing Bank intend that in the event of
one or more drawings under the Klearfold Letter of Credit and the
application thereof to the payment of Klearfold Bonds, subject to the
provisions of the Klearfold Indenture, the Agent (on behalf of the Lenders)
and the Issuing Bank will be subrogated pro tanto to the rights of the
--- -----
Klearfold Trustee and the holders of such Klearfold Bonds in and to all
funds (except rebate and bond purchase funds) and security held by the
Klearfold Trustee under the Klearfold Bond Documents for the payment of the
principal of and interest on such Klearfold Bonds, including without
limitation all bond funds, construction funds, revenue funds, debt service
funds, and other funds (except rebate and bond purchase funds) and
securities and other instrument comprising investments thereof. In
addition, the Agent (on behalf of the Lenders) and the Issuing Bank shall
have all other subrogation rights available to the Issuing Bank at law and
in equity, to the extent such rights do not violate any other agreements of
Klearfold.
(iii) To secure Klearfold's obligations to the Issuing Bank and
the Revolving Lenders under this Agreement and all Klearfold L/C
Obligations, Klearfold hereby pledges and grants to the Agent, for the
benefit of itself, the Issuing Bank and the Lenders, a security interest in
all of Klearfold's right, title and interest in and to all funds (except
rebate and bond purchase funds) and investments thereof now or hereafter
held by the Klearfold Trustee under the Klearfold Indenture as security for
the payment of the Klearfold Bonds, including, without limitation, any and
all bond funds, reserve funds, revenue funds, debt service funds, and other
funds and securities and other instruments comprising investments thereof
and interest and other income derived therefrom held as security for the
payment of the Klearfold Bonds; such pledge, assignment and grant being
under and subject only to the rights to the Klearfold Trustee under the
Klearfold Indenture. Klearfold covenants and agrees that it will defend the
Agent's rights and security interests created by this clause (iii) against
------------
the claims and demands of all persons. In addition to its
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<PAGE>
other rights and remedies under this Agreement and the Klearfold Bond
Documents, the Agent shall have all the rights and remedies of a secured
party under the Uniform Commercial Code or other applicable law with
respect to the security interests created by this clause (iii). The Agent's
------------
rights under this clause (iii) are in addition to, and not in lieu of, its
------------
rights described in Section 3.03(c)(ii).
-------------------
(iv) (1) To secure Klearfold's obligations to the Issuing Bank
and the Lenders under this Agreement with respect the Klearfold Letters of
Credit, all Klearfold L/C Obligations and otherwise under the Loan
Documents, Klearfold hereby pledges and assigns to the Agent, for the
benefit of itself, the Issuing Bank and the Lenders, and grants to the
Agent, for the benefit of itself, the Issuing Bank and the Lenders, a
security interest in all of the right, title and interest of Klearfold, now
owned or hereafter acquired, in and to any and all Klearfold Unremarketed
Tendered Bonds (together with all income therefrom and proceeds thereof)
which are purchased pursuant to the Klearfold Indenture with funds derived
in whole or in part from a drawing under the Klearfold Letter of Credit for
which full reimbursement has not been made. Such Klearfold Unremarketed
Tendered Bonds shall be pledged to the Agent, registered in Klearfold's
name and delivered to and held by the Klearfold Trustee as agent for the
Agent under this clause (iv)(1) or, at the option of the Agent by written
--------------
notice to Klearfold and the Klearfold Trustee, the pledged Klearfold
Unremarketed Tendered Bonds specified in such notice shall be delivered to
and held by the Agent; provided that, if the Klearfold Unremarketed
Tendered Bonds are held in uncertificated form pursuant to an agreement
with The Depository Trust Company or a successor securities depository,
then such pledge to the Agent shall be recorded in the registration books
maintained by the Klearfold Trustee and in the records of ownership
maintained by the securities depository and/or the participant through
which such Klearfold Unremarketed Tendered Bonds are held together with
irrevocable notice (acknowledged by the Person holding such Klearfold
Bonds) that the Agent has the unilateral right to direct the disposition of
such Klearfold Unremarketed Tendered Bonds without further notice to,
consent of or direction from Klearfold. Klearfold Unremarketed Tendered
Bonds which are so pledged to the Agent are herein referred to as
"Klearfold Pledged Bonds." The Klearfold Indenture provides that the
-----------------------
Klearfold Trustee will act as agent for the Agent with respect to Klearfold
Pledged Bonds as provided in this clause (iv)(1).
--------------
(2) Any principal of, premium on and interest on
Klearfold Pledged Bonds which becomes due and payable shall be paid to the
Agent. All sums of money so paid to the Agent in respect of Klearfold
Pledged Bonds shall be credited against the obligation of Klearfold to
repay outstanding Klearfold Specified L/C Loans, with interest, for the
amount drawn with a Klearfold Tender Draft to fund the purchase of such
Klearfold Pledged Bonds pursuant to the Klearfold Indenture.
(3) In the event that Klearfold pays or causes to be paid
in full the relevant Klearfold Specified L/C Loan (which Loan was
originally made to reimburse an amount drawn under the Klearfold Letter of
Credit as a Klearfold Tender Drawing to fund
69
<PAGE>
the purchase of Klearfold Pledged Bonds pursuant to the Klearfold
Indenture) and provided no Event of Default has occurred and is continuing
or would result after giving effect thereto, the Agent will release and
will deliver, or cause its agent to deliver, such Klearfold Pledged Bonds
to such Person or Persons as Klearfold or the Klearfold Remarketing Agent
may direct. Upon receipt by the Klearfold Trustee from the Issuing Bank of
confirmation that the Klearfold Letter of Credit has been reinstated with
respect to Klearfold Pledged Bonds, such Klearfold Pledged Bonds shall be
automatically deemed released and the Klearfold Trustee shall be
automatically authorized to deliver such Klearfold Pledged Bonds free from
the pledge granted pursuant to this Section 3.03(c)(iv), unless the
-------------------
Klearfold Trustee has received from the Agent written or telephonic notice
(which shall thereafter be confirmed in writing) that such release shall
not occur.
(4) The Agent shall not be liable for failure to collect
or realize upon the obligations secured by the Klearfold Pledged Bonds or
any collateral security or guarantee therefor, or any part thereof, or for
any delay in so doing, and the Agent shall not be under any obligation to
take any action whatsoever with regard thereto.
(5) Klearfold covenants and agrees that it will defend
the Agent's right, title and interest in and to the Klearfold Pledged Bonds
and the proceeds thereof against the claims and demands of all Persons. In
addition to its other rights and remedies under this Agreement and the
Klearfold Indenture, the Agent shall have all the rights and remedies of a
secured party under the Uniform Commercial Code or other applicable law
with respect to the security interests created by this Section 3.03(c)(iv).
-------------------
(v) Notwithstanding any other term or provision of this
Agreement, each Revolving Lender shall have an irrevocable obligation to
make any Klearfold Specified L/C Loan whether or not the conditions set
forth in Section 5.03 have been satisfied as of such date.
------------
(vi) In the event Klearfold fails to reimburse the Issuing Bank
for the full amount of any drawing under any Klearfold Letter of Credit by
10:00 a.m. (Chicago time) on the Honor Date, the Issuing Bank will promptly
notify the Agent and the Agent will promptly notify each Revolving Lender
thereof, and Klearfold shall be deemed to have requested that Base Rate
Loans in an aggregate amount equal to the unreimbursed drawing be made by
the Revolving Lenders. Any notice given by the Issuing Bank or the Agent
pursuant to this clause (vi) may be oral if immediately confirmed in
-----------
writing (including by facsimile); provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding
effect of such notice. Each Revolving Lender shall upon any notice pursuant
to this clause (vi) make available to the Agent for the account of the
Issuing Bank an amount in Dollars and in immediately available funds equal
to its Pro Rata Revolving Share of the amount of the drawing, whereupon the
participating Revolving Lenders shall each be deemed to have made a
Klearfold Specified L/C Loan consisting of a Base Rate Loan to Klearfold in
that amount. If any Revolving Lender so notified fails to
70
<PAGE>
make available to the Agent for the account of the Issuing Bank the amount
of such Revolving Lender's Pro Rata Revolving Share of the amount of the
drawing by no later than 2:00 p.m. (Chicago time) on the Honor Date, then
interest shall accrue on such Revolving Lender's obligation to make such
payment, from the Honor Date to the date such Revolving Lender makes such
payment, at a rate per annum equal to the Federal Funds Rate in effect from
time to time during such period. The Agent will promptly give notice to
the Revolving Lenders of Klearfold's failure to reimburse the Issuing Bank
on the Honor Date, but failure of the Agent to give any such notice on the
Honor Date or in sufficient time to enable any Revolving Lender to effect
such payment on such date shall not relieve such Revolving Lender from its
obligations under this Section 3.03.
------------
(d) (i) In the event of any request for a drawing under a Letter
of Credit (other than the AGI Letter of Credit and the Klearfold Letter of
Credit) by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Company. The Company shall reimburse the Issuing Bank
(by an L/C Borrowing or otherwise) prior to 12:00 Noon (Chicago time), on
the Honor Date, in an amount equal to the amount so paid by the Issuing
Bank. In the event the Company fails to reimburse the Issuing Bank for the
full amount of any drawing under any Letter of Credit by 12:00 Noon
(Chicago time) on the Honor Date, the Issuing Bank will promptly notify the
Agent and the Agent will promptly notify each Revolving Lender thereof, and
the Company shall be deemed to have requested that Base Rate Loans in an
aggregate amount equal to the unreimbursed drawing be made by the Revolving
Lenders to be disbursed on the Honor Date under such Letter of Credit,
subject to the amount of the unutilized portion of the Revolving Loan
Commitment and subject to the conditions set forth in Section 5.03. Any
------------
notice given by the Issuing Bank or the Agent pursuant to this clause
------
(d)(i) may be oral if immediately confirmed in writing (including by
------
facsimile); provided, that the lack of such an immediate confirmation shall
--------
not affect the conclusiveness or binding effect of such notice.
(ii) Each Revolving Lender shall upon any notice pursuant to
Section3.03(d)(i) make available to the Agent for the account of the
-----------------
relevant Issuing Bank an amount in Same Day Funds equal to its Pro Rata
Revolving Share of the amount of the drawing, whereupon the participating
Revolving Lenders shall (subject to Section 3.03(d)(iii)) each be deemed to
--------------------
have made a Revolving Loan consisting of a Base Rate Loan to the Company in
that amount. If any Revolving Lender so notified fails to make available to
the Agent for the account of the Issuing Bank the amount of such Revolving
Lender's Pro Rata Revolving Share of the amount of the drawing by no later
than 2:00 p.m. (Chicago time) on the Honor Date, then interest shall accrue
on such Revolving Lender's obligation to make such payment, from the Honor
Date to the date such Revolving Lender makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time during
such period. The Agent will promptly give notice of the occurrence of the
Honor Date, but failure of the Agent to give any such notice on the Honor
Date or in sufficient time to enable any Bank to effect such payment on
such date shall not relieve such Bank from its obligations under this
Section 3.03(d).
---------------
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<PAGE>
(iii) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans to the Company
in whole or in part, because of the Company's failure to satisfy the
conditions set forth in Section 5.03 or for any other reason, the Company
------------
shall be deemed to have incurred from the Issuing Bank an L/C Borrowing in
the amount of such drawing which L/C Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin for Revolving Loans
maintained as Base Rate Loans plus 2% per annum, and each Revolving
Lender's payment to the Issuing Bank pursuant to Section 3.03(d)(ii) shall
-------------------
be deemed payment in respect of its participation in such L/C Borrowing and
shall constitute an L/C Advance from such Revolving Lender in satisfaction
of its participation obligation under this Section 3.03(d).
---------------
(e) (i) In the event of any request for a drawing under the Bidco
Loan Notes Credit Support by any beneficiary or transferee thereof, the
Issuing Bank will promptly notify the Company. The Company shall reimburse
the Issuing Bank (by a Revolving Loan Borrowing or otherwise) prior to
12:00 Noon (London time), on the Honor Date, in an amount equal to the
amount so paid by the Issuing Bank. In the event the Company fails to
reimburse the Issuing Bank for the full amount of any drawing under the
Bidco Loan Notes Credit Support by 12:00 Noon (London time) on the Honor
Date, the Issuing Bank will promptly notify the Agent and the Agent will
promptly notify each Revolving Lender thereof, and the Company shall be
deemed to have requested that Base Rate Loans in an aggregate amount equal
to the unreimbursed drawing be made by the Revolving Lenders to be
disbursed on the Honor Date under such Bidco Loan Notes Credit Support,
subject to the amount of the unutilized portion of the Bidco Loan Notes
Support Commitment and subject to the conditions set forth in Section 5.03.
------------
Any notice given by the Issuing Bank or the Agent pursuant to this clause
------
(e)(i) may be oral if immediately confirmed in writing (including by
------
facsimile); provided, that the lack of such an immediate confirmation shall
--------
not affect the conclusiveness or binding effect of such notice.
(ii) Each Revolving Lender shall upon any notice pursuant to
Section3.03(e)(i) make available to the Agent for the account of the
-----------------
Issuing Bank an amount in Same Day Funds equal to its Pro Rata Revolving
Share of the amount of the drawing, whereupon each participating Revolving
Lender shall (subject to Section 3.03(e)(iii)) be deemed to have made a
--------------------
Revolving Loan consisting of a Base Rate Loan to the Company in that
amount. If any Revolving Lender so notified fails to make available to the
Agent for the account of the Issuing Bank the amount of such Revolving
Lender's Pro Rata Revolving Share of the amount of the drawing by no later
than 2:00 p.m. (Chicago time) on the Honor Date, then interest shall accrue
on such Revolving Lender's obligation to make such payment, from the Honor
Date to the date such Revolving Lender makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time during
such period. The Agent will promptly give notice of the occurrence of the
Honor Date, but failure of the Agent to give any such notice on the Honor
Date or in sufficient time to enable any
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<PAGE>
Revolving Lender to effect such payment on such date shall not relieve such
Revolving Lender from its obligations under this Section 3.03(e).
---------------
(iii) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans to the Company
in whole or in part, because of the Company's failure to satisfy the
conditions set forth in Section 5.03 or for any other reason, the Company
------------
shall be deemed to have incurred from the Issuing Bank a Bidco Loan Notes
Credit Support Borrowing in the amount of such drawing which Bidco Loan
Notes Credit Support Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at a rate per annum equal to the
Base Rate plus the Applicable Margin for Revolving Loans maintained as Base
Rate Loans plus 2% per annum, and each Revolving Lender's payment to the
Issuing Bank pursuant to Section 3.03(e)(ii) shall be deemed payment in
-------------------
respect of its participation in such Bidco Loan Notes Credit Support
Borrowing and shall constitute a Bidco Loan Notes Credit Support Advance
from such Revolving Lender in satisfaction of its participation obligation
under this Section 3.03(e).
---------------
(f) Each Lender's obligation in accordance with this Agreement to
make the Specified L/C Loans, an L/C Advance, Revolving Loans or Bidco Loan
Notes Credit Support Advance, as contemplated by this Section 3.03, as a result
------------
of a drawing under a Letter of Credit, shall be absolute and unconditional and
without recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Lender or any Credit Party may have against the Issuing
Bank, a Credit Party or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default, a Material Adverse
Effect or any failure to satisfy the conditions under Article V; or (iii) any
---------
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing.
3.04 Repayment of Participations
---------------------------
(a) Upon (and only upon) receipt by the Agent for the account of the
Issuing Bank of immediately available funds from the relevant Credit Party (i)
in reimbursement of any payment made by the Issuing Bank under the Letter of
Credit with respect to which any Lender has paid the Agent for the account of
the Issuing Bank for such Lender's participation in the Letter of Credit
pursuant to Section 3.03 or (ii) in payment of interest thereon, the Agent will
------------
pay to each Revolving Lender, in the same funds as those received by the Agent
for the account of the Issuing Bank, the amount of such Revolving Lender's Pro
Rata Revolving Share of such funds, and the Issuing Bank shall receive the
amount of the Pro Rata Revolving Share of such funds of any Revolving Lender
that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to a Credit Party, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by
such Credit Party to the Agent for the account of the Issuing Bank pursuant to
Section 3.04(a) in reimbursement of a payment made under the Letter of Credit
- ---------------
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<PAGE>
or interest or fee thereon, each Revolving Lender shall, on demand of the Agent,
forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata
Revolving Share of any amounts so returned by the Agent or the Issuing Bank plus
interest thereon from the date such demand is made to the date such amounts are
returned by such Revolving Lender to the Agent or the Issuing Bank, at a rate
per annum equal to the Federal Funds Rate in effect from time to time.
3.05 Role of the Issuing Bank
------------------------
(a) Each Lender and each Credit Party agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Lender for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Revolving Lenders (including the Majority
Lenders, as applicable); (ii) any action taken or omitted in the absence of
gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(c) Each Credit Party hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
--------
not, preclude a Credit Party's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
----------- ----- ------------ --------
however, anything in such clauses to the contrary notwithstanding, that a Credit
Party may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to such Credit Party, to the extent, but only to the extent, of any
direct, as opposed to consequential or exemplary, damages suffered by such
Credit Party which such Credit Party proves were caused by the Issuing Bank's
willful misconduct or gross negligence or the Issuing Bank's willful failure to
pay under any Letter of Credit after the presentation to it by the beneficiary
of a sight draft and certificate(s) strictly complying with the terms and
conditions of a Letter of Credit. In furtherance and not in limitation of the
foregoing: (i) the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary; and (ii) the Issuing Bank shall not
be responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.06 Obligations Absolute
--------------------
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<PAGE>
The obligations of each Credit Party under this Agreement and any
L/C-Related Document to reimburse the Issuing Bank for a drawing under a Letter
of Credit, and to repay any L/C Borrowing or Bidco Loan Notes Credit Support
Borrowing and any drawing under a Letter of Credit converted into Revolving
Loans or Specified L/C Loans, shall be unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement and each such
other L/C-Related Document under all circumstances (unless due to gross
negligence or wilful misconduct of the Issuing Bank), including the following:
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of a Credit Party in
respect of any Letter of Credit or any other amendment or waiver of or any
consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other right
that a Credit Party may have at any time against any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by the L/C-Related Documents or any unrelated
transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit; or any payment made by the
Issuing Bank under any Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
other guarantee, for all or any of the obligations of a Credit Party in
respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that
might otherwise constitute a defense available to, or a discharge of, a
Credit Party or a guarantor.
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3.07 Cash Collateral Pledge
----------------------
If, as of the Revolving Loan Termination Date, any Letters of Credit
may for any reason remain outstanding and partially or wholly undrawn, or upon
the occurrence and continuation of the circumstances described in Sections
2.07(b), (c) or (h) requiring the relevant Credit Party to Cash Collateralize
Letters of Credit, then, the relevant Credit Party shall immediately Cash
Collateralize the L/C Obligations in an amount equal to such L/C Obligations or
any excess amount.
3.08 Letter of Credit Fees.
---------------------
(a) The Company shall pay to the Agent for the account of each
of the Revolving Lender a letter of credit fee with respect to the Letters of
Credit equal to the Applicable Margin per annum specified for Revolving Loans
maintained as Offshore Rate Loans on the daily maximum amount available to be
drawn on the outstanding Letters of Credit, computed on a quarterly basis in
arrears on the last Business Day of each March, June, September and December
based upon Letters of Credit outstanding for that quarter as calculated by the
Agent. Such letter of credit fees shall be due and payable quarterly in arrears
on the last Business Day of each calendar quarter during which Letters of Credit
are outstanding, commencing on the first such quarterly date to occur after the
Initial Funding Date, through the Revolving Termination Date (or such later date
upon which the outstanding Letters of Credit shall expire), with the final
payment to be made on the Revolving Termination Date (or such later expiration
date).
(b) The Company shall pay to the Issuing Bank, individually, a bank
guarantee fronting fee for the Bidco Loan Notes Credit Support Issued by the
Issuing Bank to .250% per annum of the Stated Amount of such Bidco Loan Notes
Credit Support. Such bank guarantee fronting fee shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which such Bidco Loan Notes Credit Support is outstanding, commencing on the
first such quarterly date to occur after such Bidco Loan Notes Credit Support is
issued, through the Revolving Loan Termination Date, with the final payment to
be made on the Revolving Loan Termination Date.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
3.09 Uniform Customs and Practice
----------------------------
The Uniform Customs and Practice for Documentary Credits as published
by the International Chamber of Commerce most recently at the time of issuance
of any Letter of Credit shall (unless otherwise expressly provided in the
Letters of Credit) apply to the Letters of Credit.
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ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes
-----
(a) Any and all payments by a Credit Party to each Lender or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
relevant Credit Party shall pay all Other Taxes.
(b) If a Credit Party shall be required by law to deduct or withhold
any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section),
such Lender or the Agent, as the case may be, receives and retains an
amount equal to the sum it would have received and retained had no such
deductions or withholdings been made;
(ii) such Credit Party shall make such deductions and
withholdings;
(iii) such Credit Party shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) such Credit Party shall also pay to each Lender or the
Agent for the account of such Lender, at the time interest is paid, Further
Taxes in the amount that the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes,
Other Taxes or Further Taxes had not been imposed.
(c) Each Credit Party agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii)
Further Taxes in the amount that the respective Lender specifies as necessary to
preserve the after-tax yield the Lender would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Lender or the Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment pursuant to this
Section by a Credit Party of Taxes, Other Taxes or Further Taxes, such Credit
Party shall furnish to each Lender or the Agent the original or a certified copy
of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to such Lender or the Agent.
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(e) If a Credit Party is required to pay any amount to any Lender or
the Agent pursuant to clauses (b) or (c) of this Section, then such Lender shall
---------- -
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by such Credit Party which may thereafter accrue, if such
change in the sole judgment of such Lender is not otherwise disadvantageous to
such Lender; provided, however, that the Swing Line Lender may in any event
-------- -------
continue to make Swing Line Loans out of its Lending Office in London.
4.02 Illegality.
----------
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central Lender or other Governmental Authority has
asserted that it is unlawful, for any Lender or its applicable Lending Office to
make Offshore Rate Loans (including Offshore Rate Loans in any Applicable
Currency), then, on notice thereof by the Lender to the Company through the
Agent, any obligation of that Lender to make Offshore Rate Loans shall be
suspended until the Lender notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Lender (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Lender then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last day
------------
of the Interest Period thereof, if the Lender may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Lender may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company may borrow from the affected Lender, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain Offshore
Rate Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Lender through the Agent that all Loans which would otherwise be
made by the Lender as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Lender shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Lender, be
illegal or otherwise disadvantageous to the Lender.
4.03 Increased Costs and Reduction of Return.
---------------------------------------
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(a) If any Lender determines that, due to either (i)the introduction
of or any change in or in the interpretation of any law or regulation or (ii)the
compliance by that Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any Offshore Rate Loans or participating in Letters of
Credit, or, in the case of the Issuing Bank, any increase in the cost to the
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the relevant Credit Party shall be liable for,
and shall from time to time, upon demand (with a copy of such demand to be sent
to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Lender (or its Lending Office) or any corporation controlling the Lender
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Company through
the Agent, the relevant Credit Party shall pay to the Lender, from time to time
as specified by the Lender, additional amounts sufficient to compensate the
Lender for such increase.
(c) Any provision of this Agreement stated to have effect on, after,
or as from, the Commencement Date will, to the extent that the provision relates
to any currency of a state which is not a Participating Member State on the
Commencement Date, have effect in relation to that currency on the date on which
if becomes a Participating Member State.
4.04 Funding Losses
--------------
(a) Each Credit Party shall reimburse each Lender and hold each Lender
harmless from any loss or expense which the Lender may sustain or incur (other
than as a result of Section 4.05) as a consequence of:
------------
(i) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(ii) the failure of such Credit Party to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
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(iii) the failure of such Credit Party to make any prepayment in
accordance with any notice delivered under Section 2.06;
------------
(iv) the prepayment or other payment (including after acceleration
thereof) of an Offshore Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(v) the automatic conversion under Section 2.04 of any Offshore
------------
Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained or from changes
relating to any Offshore Currency Loans. For purposes of calculating amounts
payable by the Company to the Lenders under this Section and under
Section4.03(a), each Offshore Rate Loan made by a Lender (and each related
- -------------
reserve, special deposit or similar requirement) shall be conclusively deemed to
have been funded at the IBOR used in determining the Offshore Rate for such
Offshore Rate Loan by a matching deposit or other borrowing in the interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Offshore Rate Loan is in fact so funded.
(b) Unless otherwise prohibited by law, if more than one currency or
currency unit are at the same time recognised by the central bank of any country
as the lawful currency of that country, then:
(i) any reference in the Loan Documents to, and any obligations
arising under the Loan Documents in, the currency of that country shall be
translated into, or paid in, the currency or currency unit of that country
designated by the Agent; and
(ii) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the central bank
for the conversion of that currency or currency unit into the other,
rounded up or down by the Agent acting reasonably.
(c) If a change in any currency of a country occurs, this Agreement will
be amended to the extent the Agent specifies to be necessary to reflect the
change in currency and to put the Agent, the Issuing Bank and each Lender in the
same position, so far as possible, that it would have been in if no change in
currency had occurred.
4.05 Inability to Determine Rates
----------------------------
If the Agent determines that for any reason adequate and reasonable
means do not exist for determining the Offshore Rate for any requested Interest
Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate
applicable pursuant to Section 2.09(a) for any requested Interest Period with
------------
respect to a proposed Offshore Rate Loan does not adequately and
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fairly reflect the cost to the Lenders of funding such Loan, the Agent will
promptly so notify the Company and each Lender. Thereafter, the obligation of
the Lenders to make or maintain Offshore Rate Loans hereunder shall be suspended
until the Agent revokes such notice in writing. Upon receipt of such notice, the
Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation
then submitted by it. If the Company does not revoke such Notice, the Lenders
shall make, convert or continue the Loans, as proposed by the Company, in the
amount specified in the applicable notice submitted by the Company, but such
Loans shall be made, converted or continued as Base Rate Loans instead of
Offshore Rate Loans. In the case of any Offshore Currency Loans, the Borrowing
or continuation shall be in an aggregate amount equal to the Dollar Equivalent
amount of the originally requested Borrowing or continuation in the Offshore
Currency, and to that end any outstanding Offshore Currency Loans which are the
subject of any continuation shall be redenominated and converted into Base Rate
Loans in Dollars with effect from the last day of the Interest Period with
respect to any such Offshore Currency Loans.
4.06 Reserves on Offshore Rate Loans
-------------------------------
The Company shall pay to each Lender, in respect of any Offshore
Currency Loans, additional costs arising under any applicable regulations of the
central bank or other relevant Governmental Authority in the country in which
the Offshore Currency of such Offshore Rate Loan circulates on the unpaid
principal amount of each Offshore Rate Loan equal to the actual costs of such
reserves allocated to such Loan by the Lender (as determined by the Lender in
good faith, which determination shall be conclusive), payable on each date on
which interest is payable on such Loan; provided the Company shall have received
at least 15 days' prior written notice (with a copy to the Agent) of such
additional interest from such Lender. If such Lender fails to give notice 15
days prior to the relevant Interest Payment Date, such additional interest shall
be payable 15 days from receipt of such notice.
4.07 Certificates of Lenders
-----------------------
Any Lender claiming reimbursement or compensation under this Article
IV shall deliver to the Company (with a copy to the Agent) a certificate setting
forth in reasonable detail the amount payable to the Lender hereunder and such
certificate shall be conclusive and binding on the Company in the absence of
manifest error.
4.08 Substitution of Lenders
-----------------------
Upon the receipt by a Credit Party from any Lender (an "Affected
Lender") of a claim for compensation under Section 4.03, such Credit Party may:
(i) request the Affected Lender to use commercially reasonable efforts to obtain
a replacement Lender or financial institution satisfactory to such Credit Party
to acquire and assume all or a ratable part of all of such Affected Lender's
Loans, Commitments and participations in Letters of Credit (a "Replacement
Lender"); (ii) request one more of the other Lenders to acquire and assume all
or part of such Affected Lender's Loans,
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Commitment and participations in Letters of Credit; or (iii) designate a
Replacement Lender. Any such designation of a Replacement Lender under clause
(i) or (iii) above shall be subject to the prior written consent of the Agent
(which consent shall not be unreasonably withheld), and any such substitution
shall in any event be effective upon satisfaction of the conditions set forth in
Section 11.08.
4.09 Survival
--------
The agreements and obligations of the Company in this Article IV
shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to Announcement Date
-------------------------------
The obligation of each Lender to make its initial Credit Extension
hereunder is subject to the condition that the Agent shall have received on or
prior to the date of the Press Release each of the following, in form and
substance satisfactory to the Agent, and in sufficient copies for each Lender
(the date upon which each of the conditions contained in this Section 5.01 is
satisfied shall be referred to in this Agreement as the "Announcement Date"):
(a) Credit Agreement and Notes
--------------------------
This Agreement and the Notes shall be executed by each party
thereto;
(b) Resolutions; Incumbency
-----------------------
With respect to each Credit Party, Bidco Holding and Bidco:
(i) copies of the resolutions of the board of directors of
such Person authorizing the Transactions and the transactions contemplated
thereby, certified by the Secretary or an Assistant Secretary of such
Person; and
(ii) a certificate of the Secretary or Assistant Secretary of
such Person, dated as of the Announcement Date, and certifying the names
and true signatures of the officers of such Person authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) Organization Documents; GoodStanding
------------------------------------
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Each of the following documents with respect to each Credit
Party, Bidco Holding and Bidco:
(i) the articles or certificate of incorporation, memorandum
of association the bylaws and board of directors resolutions of such Person
as then in effect, certified by the Secretary or Assistant Secretary of
such Person; and
(ii) a good standing certificate for each Credit Party from
the Secretary of State (or similar, applicable Governmental Authority) of
its state of incorporation and each state where such Person is qualified to
do business as a foreign corporation as of a recent date, together with a
bring-down certificate by facsimile;
(d) Legal Opinions
--------------
An opinion addressed to the Agent and the Lenders, dated as of
the Announcement Date, (i) of Bingham Dana LLP, counsel to the Credit Parties,
substantially in the form of Exhibit D-1, (ii) of Kleinbard, Bell & Becker LLP,
special Pennsylvania counsel to Klearfold, substantially in the form of Exhibit
D-2, (iii) of Sonnenschein Nath & Rosenthal, special Illinois counsel to AGI,
substantially in the form of Exhibit D-3, (iv) of Simmons & Simmons, special
English counsel to the Company, substantially in the form of Exhibit D-4; and
(v) of Allen & Overy, special English counsel to the Agent, substantially in the
form of Exhibit D-5;
(e) Payment of Fees
---------------
Evidence of payment by the Company of all accrued and unpaid fees,
costs and expenses to the extent then due and payable, together with Attorney
Costs of BofA to the extent invoiced prior to or on the Announcement Date, plus,
to the extent requested such additional amounts of Attorney Costs as shall
constitute BofA's reasonable estimate of Attorney Costs incurred or to be
incurred by it through the effectiveness proceedings (provided that such
estimate shall not thereafter preclude final settling of accounts between the
Company and BofA); including any such costs, fees and expenses arising under or
referenced in Sections 2.10 and 11.04;
(f) Certificate
-----------
A certificate signed by a Responsible Officer of each Credit Party,
dated as of the Announcement Date:
(i) stating that the representations and warranties contained
in Article VI are true and correct on and as of such date, as though made
on and as of such date;
(ii) stating that no Default or Event of Default exists; and
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<PAGE>
(iii) stating that there has occurred since December 31, 1997,
no event or circumstance that has resulted or could reasonably be expected
to result in a Material Adverse Effect;
(g) Press Release
-------------
A true and complete copy of the Press Release, certified as true and
correct by a Responsible Officer, which Press Release (including, without
limitation, any conditions to the Offer contained therein) shall (i) be in form
and substance reasonably satisfactory to the Agent, and (ii) indicate that the
Offer is recommended by the Directors of the Target, and that such Directors are
giving personal undertakings, in form and substance acceptable to the Agent, in
favor of Bidco with respect to the Offer, and the Agent shall have received
evidence satisfactory to it that the Press Release has been released;
(h) Collateral Documents
--------------------
As of the Announcement Date, the Collateral Documents, executed by
the Credit Parties, in appropriate form for recording, where necessary, together
with:
(i) acknowledgement copies of all UCC-l financing statements
filed, registered or recorded to perfect the security interests of the
Agent for the benefit of the Lenders, or other evidence satisfactory to the
Agent that there has been or will be filed, registered or recorded all
financing statements and other filings, registrations and recordings
necessary and advisable to perfect the Liens of the Agent for the benefit
of the Lenders in accordance with applicable law;
(ii) written advice relating to such Lien and judgment
searches as the Agent shall have requested of the Company, and such
termination statements or other documents as may be necessary to confirm
that the Collateral is subject to no other Liens in favor of any Persons
(other than Permitted Liens);
(iii) all certificates and instruments representing the Pledged
Collateral, stock transfer powers executed in blank as the Agent or the
Lenders may specify;
(iv) evidence that all other actions necessary or, in the
opinion of the Agent desirable to perfect and protect the first priority
security interest created by the Collateral Documents have been taken;
(v) funds sufficient to pay any filing or recording tax or
fee in connection with any and all UCC-1 financing statements;
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(vi) evidence that the Agent (on behalf of the Lenders) has
been named as loss payee under all policies of casualty insurance, and the
Agent and all Lenders are named as additional insureds under all policies
of liability insurance;
(vii) such consents, estoppels, subordination agreements and
other documents and instruments executed by landlords, tenants and other
Persons party to material contracts relating to any Collateral as to which
the Agent shall be granted a Lien for the benefit of the Lenders, as
requested by the Agent; and
(viii) evidence that all other actions necessary or, in the
opinion of the Agent, desirable to perfect and protect the first priority
Lien created by the Collateral Documents, and to enhance the Agent's
ability to preserve and protect its interests in and access to the
Collateral, have been taken;
(i) Amendments to Prior Loan Document
---------------------------------
The Agent shall have received a fully executed amendment to the Prior
Loan Document in form and substance satisfactory to Agent, and such amendment
shall be in full force and effect;
(j) Consent Solicitation
--------------------
The Agent shall have received a copy of the Consent Solicitation
Statement, together with the text of the proposed amendments to the Senior
Subordinated Note Indenture attached thereto as Exhibit A (the "Consent
Solicitation Statement"), which Consent Solicitation Statement shall be in form
and substance acceptable to the Agent and shall, among other things, request
that the holders of the Senior Subordinated Notes agree that (x) Bidco Holdings,
Bidco, the Target and each Target Subsidiary shall be "Restricted Subsidiaries"
thereunder prior to delivery of a guaranty to the holders of the Senior
Subordinated Notes, which guaranty and the guaranty of any Target Subsidiary
need only be delivered simultaneously with delivery of a guaranty or other
credit support directly to the holder of any Indebtedness of the Company and (y)
Bidco shall be permitted to issue the Bidco Loan Notes and the Issuing Bank
shall be permitted to guarantee and fund such obligation, and (z) the
acquisition of the Target Shares will be permitted;
(k) Currency Fluctuations Protection
--------------------------------
On or prior to the Announcement Date, the Company shall enter into
Swap Contracts providing protection against fluctuations in the rate of exchange
between Sterling and Dollars with one or more financial institutions each having
a combined capital and surplus of at least $100,000,000, which shall hedge
against any fluctuations in the exchange rate of Dollars against Sterling above
$1.80 to (Pounds)1 on (Pounds)83,800,000 and contain such other terms as are
customary and satisfactory to the Agent;
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(l) Environment Review
------------------
Such environmental site assessments with respect to the real property of
the Company and its Subsidiaries and the Target and the Target Subsidiaries as
shall be requested by the Agent;
(m) Indenture Certificate
---------------------
A certificate of a Responsible Officer of the Company calculating and
demonstrating that the Term Loans are (or would be if drawn in full on such
date) permitted Senior Indebtedness under the Senior Subordinated Note Indenture
and specifying the allocation of the Revolver Loan Commitment L/C Commitment
to the particular provisions of such indenture in form and substance acceptable
to the Agent;
(n) Pro Forma Balance Sheet; Projections; and Financials
----------------------------------------------------
(i) A pro forma consolidated and consolidating balance sheet
of the Company and its Subsidiaries, after giving effect to the Transaction
and the related financing thereof, together with a Compliance Certificate
executed by a Responsible Officer, demonstrating compliance by the Company
with Sections 8.15, 8.16, 8.17, and 8.18 as of March 31, 1998 (after giving
effect to the Transaction and the related financing thereof), which pro
forma balance sheet and Compliance Certificate shall be in form and
substance acceptable to the Agent;
(ii) Projections for the period commencing in 1998 and
concluding on the date approximately five years thereafter in form and
substance acceptable to the Agent; and
(iii) a copy of the audited financial statements of the Target
for the fiscal year ended March 31, 1998; and
(o) Equity Documents
----------------
The Company shall have delivered to the Agent a true and correct
copy of the Commitment Letter relating to the Equity Investment (the "Equity
Document") dated as of even date herewith among the Company, BT Wolfensohn,
Heritage Fund I L.P., Heritage Fund II L.P. which shall be in form and substance
satisfactory to the Agent and shall be in full force and effect.
(p) Solvency Certificates
---------------------
Each Credit Party shall have delivered a Solvency Certificate in
substantially the form of Exhibit L hereto.
5.02 Conditions of Initial Funding Date
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The obligation of each Lender to make its initial Credit Extension
hereunder is subject to the condition that the Agent shall have received on or
before the Initial Funding Date all of the following, in form and substance
satisfactory to the Agent, and in sufficient copies for each Lender:
(a) Bring Down Certificate
----------------------
A certificate signed by a Responsible Officer dated as of the Initial
Funding Date, proposing any necessary changes to the Disclosure Schedules to
this Agreement occurring after the Announcement Date (provided, however, that
the Agent may accept or reject such proposed changes, but any rejection of the
changes will not mean that this condition has not been satisfied);
(b) Lender Payoff Letter
--------------------
A bank payoff letter, or other evidence of satisfaction, in form and
substance acceptable to the Agent from each lender to the Target and each of its
Subsidiaries, to the effect that the total amount due under such Person's
agreements for borrowed money with such lender, as the case may be, howsoever
due and owing (whether as principal, interest or premium) shall be satisfied
(and such agreements terminated) upon payment of an amount certain, together
with such lien releases and other documents as the Agent shall require;
provided, however, that the Lenders hereby acknowledge and agree that their
obligation to make a Term Loan A, a Term Loan B to enable the Company to
purchase Target Shares and the obligation of the Issuing Bank to issue the Bidco
Loan Notes Credit Support on the Initial Funding Date will not be dependent upon
the satisfaction of this clause (b);
(c) Solvency Certificates
---------------------
A written solvency certificate from the chief financial officer of the
Company (for the Company, Bidco Holding and Bidco) and each Credit Party in the
form of Exhibit L-1, with respect to each Credit Party and Exhibit L-2 with
respect to Bidco Holding and Bidco, each dated as of the Initial Funding Date
(except that the certificate of Klearfold need not contain the representation in
paragraph A(1) of Exhibit L-1), with respect to the Solvency of each Credit
Party, and a written solvency certificate dated as of the Initial Funding Date
from the chief financial officer of the Company with respect to Target and
certain of the Target Subsidiaries (consisting solely of Van de Steeg Packaging
B.V., James Upton B.V., James Upton - Swindon, Limited, James Upton Limited,
Printing Resources Limited and Sonicon Limited), each on a stand-alone basis
after giving effect to the transactions (except that the certification will be
as of the Unconditional Date) in the form of Exhibit M.
(d) Applicable Margin Certificate
-----------------------------
A certificate, executed by a Responsible Officer, delineating the
Applicable Margin after giving pro forma effect to the Loans to be incurred on
the Initial Funding Date and the
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consummation of the Transaction, the form and substance of such certificate to
be satisfactory to the Agent;
(e) Senior Subordinated Note Documents
----------------------------------
The Consent Solicitation and the Supplemental Indenture described in
the Press Release shall have been delivered to the Agent and shall be in full
force and effect and the Company shall reaffirm the continuing accuracy of the
representations in Section 5.01(m);
(f) Equity Investment
-----------------
Heritage Partners, Inc., and/or funds controlled by Heritage Partners,
Inc., and certain members of the management of the Credit Parties shall have
made a contribution to the capital of the Company in an amount at least equal to
$59,000,000 pursuant to certain subscription agreements and shareholder
agreements reflecting substantially the transaction and investment as described
in the Equity Document (the "Equity Investment"), and the Company shall have
made available to Bidco the benefit of the hedging contract referred to in
Section 5.01(k), and 100% of the proceeds of such Equity Investment and hedging
contract shall have been utilized by the Company to make a contribution to the
capital of, or an intercompany loan to, Bidco Holding (and in turn to Bidco) and
Bidco pursuant to subscription agreements and intercompany loan arrangements in
form and substance reasonably acceptable to the Agent, and 100% of the proceeds
of which shall have been utilized by Bidco (substantially simultaneously with
the utilization of proceeds of any Term Loan A or Term Loan B) to purchase
shares of Target pursuant to the Offer; and
(g) Completion of Offer
-------------------
The Agent shall have received each of the following certified by a
Responsible Officer of the Company:
(i) evidence that the Offer shall have been declared and/or
become unconditional in all respects and that valid acceptances relating to
the number of Target Shares to which the Offer relates referred to in
Section 7.16(f) have been received and have not (where permitted) been
withdrawn; and
(ii) a certificate in form and substance acceptable to the
Agent from the Company, Bidco Holding and Bidco certifying that they have
complied with the terms and conditions of Section 7.16(a), (c), (f) and
(m).
5.03 Conditions to All Credit Extensions
-----------------------------------
The obligation of each Lender to make any Loan to be made by it
(including its initial Loan) or to continue or convert any Loan under Section
2.04 and the obligation of the Issuing Bank to Issue, renew or amend any Letter
of Credit (including the initial Letters of Credit) is subject to
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the satisfaction of the following conditions precedent on the relevant Borrowing
Date or Issuance Date:
(a) Notice, Application
-------------------
The Agent shall have received (with, in the case of the initial
Loans only, a copy for each Lender) a Notice of Borrowing or, in the case of any
Issuance of any Letter of Credit, the Issuing Bank and the Agent shall have
received an L/C Application or L/C Amendment Application, as required under
Section 3.02, and in the case of Special Funding Loans, the notice required
pursuant to Section 2.03(e).
(b) Continuation of Representations and Warranties
----------------------------------------------
The representations and warranties in Article VI shall be true
and correct in all material respects on and as of such Borrowing Date or
Issuance Date with the same effect as if made on and as of such Borrowing Date,
or Issuance Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date); provided, however, that notwithstanding the provisions
of this clause (b) (but subject to compliance with Sections 5.01 and 5.02), at
any time during the Certain Funds Period the obligations of the Lenders to make
any Term Loan A or Term Loan B or of the Issuing Bank to issue the Bidco Loan
Notes Credit Support to enable in each case the Company to purchase Target
Shares are only subject to the condition that, at the time of the making of such
Loan, Relevant Representations and Warranties are true and correct in all
material respects; and
(c) No Existing Default
-------------------
No Default or Event of Default shall exist or shall result after
giving effect to such Borrowing or continuation or conversion or issuance;
provided, however, that notwithstanding the provisions of this clause (c) (but
subject to compliance with Sections 5.01 and 5.02), at any time during the
Certain Funds Period, the obligations of the Lenders to make any Term Loan A or
Term Loan B or of the Issuing Bank to issue the Bidco Loan Notes Credit Support,
in each case to enable the Company to purchase Target Shares, are only subject
to the condition that, at the time of the making of such Loan, no Relevant Event
of Default has occurred and is continuing or would result after giving effect to
such Loan.
Each Notice of Borrowing, Special Funding Procedure Letter, L/C Application or
L/C Amendment Application submitted by a Credit Party hereunder shall constitute
a representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date or Issuance Date, as applicable, that
the conditions in this Section 5.03 are satisfied. For purposes of the
immediately preceding sentence, each of the representations and warranties
contained in Article VI shall be deemed to have been made notwithstanding the
fact the Lenders may be required to make Loans during the Certain Funds Period,
and any Default or Event of Default that may exist under Section 9.01(b) on the
date such Loan is made shall not be waived as a result of such Loan.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each Credit Party represents and warrants to the Agent and each Lender
that:
6.01 Corporate Existence and Power
-----------------------------
Each Credit Party and each of its Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its
business and to execute, deliver, and perform its obligations under the
Loan Documents and the Offer;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
6.02 Corporate Authorization; No Contravention
-----------------------------------------
The execution, delivery and performance by a Credit Party and its
Subsidiaries of this Agreement, each other Loan Document and each other
Transaction Agreement to which such Person is party, have been duly authorized
by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of such Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party or any order, injunction, writ
or decree of any Governmental Authority to which such Person or its
property is subject; or
(c) violate any Requirement of Law.
6.03 Governmental Authorization
--------------------------
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Except to the extent the following may be required under Section 395
of the Companies Act in connection with the Offer, no approval, consent,
exemption, authorization, or other action by, or notice to, or filing (other
than pursuant to the Collateral Documents) with, any Governmental Authority is
necessary or required in connection with the execution, delivery or performance
by, or enforcement against, a Credit Party or any of its Subsidiaries of the
Agreement, any other Loan Document or any other Transaction Agreement other than
those approvals, consents, exemptions and authorizations which have already been
obtained, other than any consent or dispensations from the Office of Fair
Trading which will be obtained on or prior to the Initial Funding Date and the
registration of certain of the Collateral Documents as required by Section 395
of the Companies Act.
6.04 Binding Effect
--------------
This Agreement and each other Loan Document to which a Credit Party
or any of its Subsidiaries is a party constitute the legal, valid and binding
obligations of such Person to the extent it is a party thereto, enforceable
against such Person in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability and the time barring of claims under any
applicable limitations act.
6.05 Litigation
----------
Except as listed on Schedule 6.05, there are no actions, suits,
proceedings, claims or disputes pending, or to the best knowledge of a Credit
Party, threatened or contemplated, at law, in equity, in arbitration or before
any Governmental Authority, against a Credit Party, or its Subsidiaries or any
of their respective properties which: (a)purport to affect or pertain to this
Agreement or any other Loan Document or the Offer, or any of the transactions
contemplated hereby or thereby; or (b)if determined adversely to a Credit Party
or its Subsidiaries or the Target or any Target Subsidiaries, would reasonably
be expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document or the
Offer, or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 No Default
----------
No Default or Event of Default exists or would result from the
incurring of any Obligations by a Credit Party. As of the Announcement Date, no
Credit Party nor any of its Subsidiaries is in default under or with respect to
any Contractual Obligation or any Transaction Agreement in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect, or that would, if such default had occurred
after the Announcement Date, create an Event of Default under Section 9.01(e).
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6.07 ERISA Compliance.
----------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of each
Credit Party, nothing has occurred which would cause the loss of such
qualification. Each Credit Party and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of each Credit
Party, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Credit
Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) no Credit
Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) no Credit Party nor
any ERISA Affiliate has engaged in a transaction that could be subject to
Section4069 or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations
-----------------------------------
The proceeds of the Loans are to be used solely for the purposes set
forth in and permitted by Section 7.12 and Section 8.07. No Credit Party nor any
Subsidiary is generally engaged in the business of purchasing or selling Margin
Stock or extending credit for the purpose of purchasing or carrying Margin
Stock.
6.09 Title to Properties
-------------------
Each Credit Party and each of its Subsidiaries have good record and
marketable title in fee simple to, or valid leasehold interests in, all property
necessary or used in the ordinary conduct of their respective businesses, except
for such defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Announcement Date, the property of each
Credit Party and its Subsidiaries is subject to no Liens, other than Permitted
Liens.
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6.10 Taxes
-----
Each Credit Party and each of its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against a Credit Party
or any of its Subsidiaries that would, if made, have a Material Adverse Effect.
6.11 Financial Condition
-------------------
(a) The audited consolidated financial statements of the Company and
its Subsidiaries (other than AGI), dated December 31, 1997, and the audited
consolidated financial statements of AGI, dated December 31, 1997, in each
case including the related consolidated statements of income or operations,
shareholders' equity and cash flows for the period ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly
noted therein;
(ii) fairly present the financial condition of such Person as
of the date thereof and results of operations for the period covered
thereby; and
(iii) except as specifically disclosed in Schedule 6.11, show
all material indebtedness and other liabilities, direct or contingent,
of such Person and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments and
Contingent Obligations.
(b) Since December31, 1997, there has been no Material Adverse
Effect.
6.12 Environmental Matters.
---------------------
(a) The on-going operations of each Credit Party and each of its
Subsidiaries comply in all respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability in excess of $375,000 in the aggregate.
(b) Each Credit Party and each of its Subsidiaries have obtained all
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for their
respective ordinary course operations, all such Environmental
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Permits are in good standing, and each Credit Party and each of its Subsidiaries
are in compliance with all material terms and conditions of such Environmental
Permits.
(c) Except as set forth on Schedule 6.12, no Credit Party, any of
its Subsidiaries or any of their respective present Property or operations, is
subject to any outstanding written order from or agreement with any Governmental
Authority, nor subject to any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or Hazardous Material.
(d) Except as set forth on Schedule 6.12, there are no Hazardous
Materials or other conditions or circumstances existing with respect to any
Property, or arising from operations prior to the Announcement Date, of any
Credit Party or any of its Subsidiaries, and in any event, no such materials,
conditions or circumstances (whether or not disclosed) would reasonably be
expected to give rise to Environmental Claims with a potential liability of a
Credit Party and its Subsidiaries in excess of $1,000,000 in the aggregate for
any such condition, circumstance or Property. In addition, (i)no Credit Party
nor any of its Subsidiaries has any underground storage tanks (x)that are not
properly registered or permitted under applicable Environmental Laws, or (y)to
their knowledge that are leaking or disposing of Hazardous Materials off-site
or, whether known or not, could reasonably be expected to result in or cause a
Material Adverse Effect, and (ii)each Credit Party and its Subsidiaries have
notified all of their employees of the existence, if any, of any health hazard
known to them arising from the conditions of their employment and have met all
notification requirements under Title III of CERCLA and all other Environmental
Laws.
6.13 Collateral Documents.
--------------------
(a) The provisions of each of the Collateral Documents are effective
to create in favor of the Agent for the benefit of the Lenders, a legal, valid
and enforceable first priority security interest in all right, title and
interest of a Credit Party and its Subsidiaries in the collateral described
therein (except (i) up to $500,000 of AGI's inventory, which is on consignment
with Avon at Avon's facility in Ohio, (ii) up to $500,000 of Klearfold's
inventory, which is on consignment with Colgate at Colgate's facility in Puerto
Rico and (iii) such other inventory held on consignment as the Agent shall
approve in writing); and financing statements have been delivered to the Agent
prior to the Announcement Date to be filed in the offices in all of the
jurisdictions listed in the schedule to the Security Agreements, and each
Intellectual Property Assignment has been delivered to the Agent prior to the
Announcement Date to be filed in the U.S. Patent and Trademark Office and the
U.S. Copyright Office.
(b) Each Mortgage, if and when delivered, will be effective to grant
to the Agent for the benefit of the Lenders a legal, valid and enforceable Lien
on all the right, title and interest of the mortgagor under such Mortgage in the
Mortgaged Property described therein. If and when each such Mortgage is duly
recorded in the offices listed on the schedule to such Mortgage and the
recording fees and taxes in respect thereof are paid and compliance is otherwise
had with the formal requirements of state law applicable to the recording of
real estate mortgages generally, each such
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Mortgaged Property, subject to the encumbrances and exceptions to title set
forth therein and except as noted in the title policies delivered to the Agent
and Permitted Liens, will be subject to a legal, valid, enforceable and
perfected first priority mortgagor or deed of trust, as the case may be; and
when financing statements have been filed in the offices listed in the schedule
to such Mortgage, such Mortgage will also create a legal, valid, enforceable and
perfected first lien on, and security interest in, all right, title and interest
of such Credit Party or such Subsidiary under such Mortgage in all personal
property and fixtures which is covered by such Mortgage, subject to no other
Liens, except the encumbrances and exceptions to title set forth therein and
except as noted in the title policies delivered to the Agent and Permitted
Liens.
(c) The provisions of each Pledge Agreement are effective to create,
in favor of the Agent for the benefit of the Lenders, a legal, valid and
enforceable security interest in all of the collateral described therein; and
the Pledged Collateral was delivered to the Agent or its nominee in accordance
with the terms thereof. The Lien of each Pledge Agreement constitutes a
perfected, first priority security interest in all right, title and interest of
a Credit Party or its Subsidiary, as the case may be, in the Collateral
described therein, prior and superior to all other Liens and interests.
(d) All representations and warranties of a Credit Party and any of
its Subsidiaries party thereto contained in the Collateral Documents are true
and correct.
(e) At the time of the delivery of the Bidco Security Documents, the
Target Security Document, any Target UK Subsidiaries Security Documents:
(i) Bidco Holding, Bidco, the Target and such Target UK
Subsidiary, as the case may be, had net assets (as defined in Section
154(2)(a) of the Companies Act) immediately before the execution and
delivery of such Collateral Document, as the case may be, which net assets
were not reduced as a result of the giving of financial assistance (as
defined in Section 152 of the Companies Act) being given under such
Collateral Document, as the case may be, or, to the extent that they were
so reduced, that financial assistance was provided out of distributable
profits in accordance with Section 155(2) of the Company Act;
(ii) all of the Directors of Bidco Holding, Bidco, the Target
and such Target UK Subsidiary, as the case may be, swore statutory
declarations under Section 155(6) of the Companies Act 1985 on the date of,
and immediately prior to the execution of such Collateral Document, of as
the case may be; and
(iii) the provisions of Section 155 to 158 of the Companies Act
were fully complied with in respect to the giving of financial assistance
(as defined in Section 152 of the Companies Act) with respect to such
Collateral Document.
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6.14 Regulated Entities
------------------
No Credit Party nor any of its Subsidiaries, is an "Investment
Company" within the meaning of the Investment Company Act of 1940. No Credit
Party is subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.
6.15 No Burdensome Restrictions
--------------------------
Neither the Company nor any Subsidiary is a party to or bound by any
Contractual Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be expected to have
a Material Adverse Effect.
6.16 Solvency
--------
The Company and its Subsidiaries, on a consolidated basis, are
Solvent, and, on and after the Initial Funding Date, Bidco Holdings, Bidco, the
Target and each Target Subsidiary is Solvent.
6.17 Labor Relations
---------------
There are no strikes, lockouts or other labor disputes against a
Credit Party or any of its Subsidiaries, or, to the best of the Credit Party's
knowledge, threatened against or affecting a Credit Party or any of its
Subsidiaries, and no significant unfair labor practice complaint is pending
against the Credit Party or any of its Subsidiaries or, to the best knowledge of
the Company, threatened against any of them before any Governmental Authority.
6.18 Copyrights, Patents, Trademarks and Licenses, etc.
-------------------------------------------------
Except as set forth on Schedule 6.18 hereof, a Credit Party or its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Credit Party, no slogan or
other advertising device, product, process, method, substance, part or other
material employed by a Credit Party or any of its Subsidiaries infringes upon
any rights held by any other Person. Except as set forth on Schedule 6.18
hereof, no claim or litigation regarding any of the foregoing is pending or to
the knowledge of a Credit Party threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
6.19 Capitalization; Subsidiaries
----------------------------
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As of the Announcement Date and after giving effect to the
Transaction, no Credit Party has any Subsidiaries other than those specifically
disclosed in part (a) of Schedule 6.19 (as such Schedule is updated on the
Initial Funding Date with the consent of the Agent) hereto and has no equity
investments in any other corporation or entity other than those specifically
disclosed in part (b) of Schedule 6.19 (as such Schedule is updated on the
Initial Funding Date with the consent of the Agent). All of the issued and
outstanding capital stock of each Credit Party and each of its Subsidiaries is
owned by each of the stockholders named on Schedule 6.19 (as such Schedule is
updated on the Initial Funding Date with the consent of the Agent). Except as
set forth on Schedule 6.19 (as such Schedule is updated on the Initial Funding
Date with the consent of the Agent), there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which a
Credit Party may be required to issue or sell any capital stock or other equity
security.
6.20 Broker's; Transaction Fees
--------------------------
No Credit Party nor any of its Subsidiaries has any obligation to any
Person in respect of any finder's, broker's or investment banker's fee in
connection with the Transaction except as disclosed on Schedule 6.20.
-------------
6.21 Insurance
---------
The properties of each Credit Party and its Subsidiaries are insured
with financially sound and reputable insurance companies not Affiliates of a
Credit Party, in such amounts, with such deductibles and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where such Credit Party or such Subsidiary
operates.
6.22 Swap Obligations
----------------
No Credit Party nor any of its Subsidiaries has incurred any
outstanding obligations under any Swap Contracts, other than Permitted Swap
Obligations. Each Credit Party has undertaken its own independent assessment of
its consolidated assets, liabilities and commitments and has considered
appropriate means of mitigating and managing risks associated with such matters
and has not relied on any swap counterparty or any Affiliate of any swap
counterparty in determining whether to enter into any Swap Contract.
6.23 Full Disclosure
---------------
None of the representations or warranties made by a Credit Party or
any of its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of a Credit Party or any of its Subsidiaries in connection with
the Loan Documents (including the offering and disclosure materials delivered by
or on behalf of a Credit Party to the Lenders prior to the Initial Funding
Date), contains any untrue statement of a material
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fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
are made, not misleading as of the time when made or delivered.
6.24 Subordination Provisions
------------------------
The subordination provisions contained in the Senior Subordinated
Note Documents and in any Permitted Seller Debt are enforceable against the
issuer of the respective security and the holders thereof, and the Loans and all
other Obligations entitled to the benefits of any Loan Document and any related
guaranty are within the definitions of "Senior Indebtedness" included in such
provisions.
6.25 Transaction Agreements
----------------------
The agreements in connection with the Transaction (including, without
limitation, the Press Release, the Offer Documents, the Equity Document, and the
agreements relating to the refinancing of certain Indebtedness of the Target and
certain Target Subsidiaries) ("Transaction Agreements") are, or when executed
will be, in full force and effect, and if previously executed, have not been
terminated, rescinded or withdrawn, and no material portion thereof has been
amended or waived by any party. All requisite approvals by governmental
authorities and regulatory bodies having jurisdiction over a Credit Party and
other Persons referenced therein, with respect to the transactions contemplated
by the Transaction Agreements, have been obtained, and no such approvals impose
any conditions to the consummation of the transactions contemplated by the
Transaction Agreements or to the conduct in any material respect by a Credit
Party and its Subsidiaries of its business thereafter. To the best of each
Credit Party's knowledge, none of any Person's representations or warranties in
the Transaction Agreements contain any untrue statement of a material fact or
omit any fact necessary to make the facts therein not misleading.
6.26 Year 2000 Compliance
--------------------
On the basis of an inquiry made of each Credit Party and each of its
Subsidiaries, each Credit Party to the best of their knowledge reasonably
believes that the "Year 2000 problem" (that is, the risk that computer
applications used by the Credit Parties and their Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999) will not result in a Material
Adverse Effect.
ARTICLE VII
AFFIRMATIVE COVENANTS
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On and after the Announcement Date, so long as any Lender shall have any
Commitment hereunder, or any Loan or other Obligation shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, unless the
Majority Lenders waive compliance in writing:
7.01 Financial Statements
--------------------
The Company shall deliver to the Agent, in form and detail
satisfactory to the Agent and the Majority Lenders, with sufficient copies for
the Agent and each Lender:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year (commencing with the fiscal year ended December 31, 1998),
to the extent prepared to comply with SEC requirements, a copy of the SEC
Form 10-K's filed by the Company with the SEC for such fiscal year, or, if
no such Form 10-K was so filed by the Company for such fiscal year, a copy
of the audited consolidated and unaudited consolidating balance sheet of
the Company and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income or operations,
shareholders' equity and cash flows for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Price Waterhouse LLP or another nationally-
recognized independent public accounting firm ("Independent Auditor") which
report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years. Such opinion shall not
be qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b) as soon as available, but not later than 45 days after the end
of each of the first three fiscal quarter of each fiscal year (commencing
with the fiscal quarter ended September 30, 1998), to the extent prepared
to comply with SEC requirements, a copy of the SEC Form 10- Q's filed by
the Company with the SEC for such fiscal quarter, together with a copy of
the unaudited consolidated and consolidating balance sheet of the Company
and its Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of income, shareholders' equity
and cash flows for the period commencing on the first day and ending on the
last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-
end audit adjustments), the financial position and the results of
operations of the Company and the Subsidiaries.
7.02 Certificates; Other Information
-------------------------------
The Company shall furnish to the Agent, with sufficient copies for
each Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section7.01(a), a certificate of the Independent Auditor
stating that in making the
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examination necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 7.01(a) and (b), a Compliance Certificate executed
by a Responsible Officer;
(c) promptly, copies of all financial statements and regular,
periodical or special reports (including Forms 10K, 10Q and 8K) that the
Company or any Subsidiary may make to, or file with, the SEC, the Panel, or
any announcements made with the London Stock Exchange;
(d) as soon as available, but in any event not later than 45 days
after the start of each fiscal year, a copy of the plan and forecast
(including a projected consolidated and consolidating balance sheet, income
statement and cash flow statement) of the Company and its Subsidiaries for
the next fiscal year;
(e) within 10 days prior to the expiry date of any existing
insurance policy, a new certificate satisfying the requirements of Section
5.01(h)(vi) with respect to each such policy;
(f) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the
Agent, at the request of any Lender, may from time to time request; and
(g) (i) on the Initial Funding Date and (ii) thereafter, not later
than 12:00 Noon (New York time) on the thirtieth (30th) day after the end
of each fiscal month, a borrowing base certificate substantially in the
form of Exhibit K (each, a "Borrowing Base Certificate"), with respect to
the Eligible Receivables and the Eligible Inventory as of the last day of
the immediately preceding fiscal month, and certified by the Chief
Financial Officer of the Company.
7.03 Notices
-------
Each Credit Party shall promptly notify the Agent and each Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted or may reasonably be expected to
result in a Material Adverse Effect, including (i) breach or non-
performance of, or any default under, a Contractual Obligation of a Credit
Party or any of its Subsidiaries; (ii) any dispute, litigation,
investigation, proceeding or suspension between a Credit Party or any of
its Subsidiaries and any Governmental Authority; or (iii) the commencement
of, or any material development in, any litigation or proceeding affecting
a Credit Party or any of its Subsidiaries; including pursuant to any
applicable Environmental Laws;
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(c) of the occurrence of any of the following events affecting a
Credit Party or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Agent and each Lender a copy of any
notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the
Company or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of
any Pension Plan;
(iii) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by a Credit
Party or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension
Liability;
(d) of any material change in accounting policies or financial
reporting practices by a Credit Party or any of its consolidated
Subsidiaries; and
(e) upon the request from time to time of the Agent, the Swap
Termination Values, together with a description of the method by which such
values were determined, relating to any then-outstanding Swap Contracts to
which a Credit Party or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the affected Person proposes to
take with respect thereto and at what time. Each notice under Section7.03(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been (or foreseeably will be)
breached or violated.
7.04 Preservation of Corporate Existence, etc.
----------------------------------------
Each Credit Party shall, and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) preserve and maintain in full force and effect all material
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal
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conduct of its business, except in connection with transactions permitted by
Section 8.03 and sales of assets permitted by Section 8.02;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.05 Maintenance of Property
-----------------------
Each Credit Party shall maintain, and shall cause each of its
Subsidiaries to maintain, and preserve all its property which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted, and make all necessary repairs thereto and renewals and replacements
thereof.
7.06 Insurance
---------
Each Credit Party shall maintain, and shall cause each of its
Subsidiaries to maintain or be covered by, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.
7.07 Payment of Obligations
----------------------
Each Credit Party shall, and shall cause each of its Subsidiaries to,
pay and discharge as the same shall become due and payable, all their respective
obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by such Credit Party or such
Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
(other than a Permitted Lien) upon its property; and
(c) all indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.
7.08 Compliance with Laws
--------------------
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Each Credit Party shall comply, and shall cause each of its
Subsidiaries to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.09 Compliance with ERISA
---------------------
Each Credit Party shall, and shall cause each of its ERISA Affiliates
to: (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification unless such Plan is terminated; and (c)make all required
contributions to any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records
--------------------------------------------
Each Credit Party shall maintain and shall cause each of its
Subsidiaries to maintain, proper books of record and account, in which full,
true and correct entries in conformity with GAAP consistently applied shall be
made of all financial transactions and matters involving the assets and business
of such Person. Each Credit Party shall permit, and shall cause each of its
Subsidiaries to permit, representatives and independent contractors of the Agent
or any Lender (if accompanied by the Agent) to visit and inspect any of their
respective properties, to examine their respective corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Lender may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice.
7.11 Environmental Laws
------------------
Each Credit Party shall, and shall cause each of its Subsidiaries to,
conduct its operations and keep and maintain its property in compliance in all
material respects with all Environmental Laws.
7.12 Use of Proceeds
---------------
(a) The Company shall use the proceeds of the Revolving Loans, the
Bidco Note Credit Support (and related Bidco Note Credit Support Borrowing) and
Swing Line Loans for working capital and other general corporate purposes (other
than for the purpose of financing a hostile Acquisition), the refinancing or
prepayment of certain Indebtedness on the Initial Funding Date in connection
with the Transaction and the payment of fees and expenses relating thereto and
towards the financing, in part, of the consideration to be paid by Bidco for the
Target Shares
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pursuant to the Offer, in each case not in contravention of any Requirement of
Law or of any Loan Document.
(b) Each L/C Borrower shall use the proceeds of Specified L/C Loans
solely for the purpose of financing a reimbursement obligation owing to the
Issuing Bank in connection with a drawing under a Letter of Credit.
(c) The Company shall apply the proceeds of all Term Loan A and Term
Loan B towards the refinancing of certain Indebtedness of the Target and certain
Target Subsidiaries as provided in Section 5.02(b), towards financing, in part,
the cash consideration to be paid by Bidco for the Target Shares pursuant to
acceptances of the Offer, including, the amount of any cash payable to Target's
shareholders whose Target Shares are acquired by Bidco pursuant to Sections 428-
430F of the Companies Act, and towards the payment of fees and expenses relating
thereto.
(d) The Company hereby acknowledges and agrees that the aggregate
Dollar Equivalent of Loans and L/C Obligations incurred in connection with the
purchase of Target Shares payment of fees, and refinanced Indebtedness in
connection with the acquisition of Target pursuant to the Offer shall not exceed
$134,000,000.
7.13 Solvency
--------
The Company and its Subsidiaries, on a consolidated basis, shall at
all times be Solvent, and on and after the Initial Funding Date, Bidco Holding,
Bidco, the Target and each Target Subsidiary shall at all times be Solvent.
7.14 Further Assurances
------------------
(a) Each Credit Party shall ensure that all written information,
exhibits and reports furnished to the Agent or the Lenders do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to the Agent and the Lenders and correct any defect or error
that may be discovered therein or in any Loan Document or in the execution,
acknowledgement or recordation thereof.
(b) Promptly upon the written request of the Agent or the Majority
Lenders, each Credit Party shall (and shall cause any of its Subsidiaries to)
do, execute, acknowledge, deliver, record, re-record, file, re-file, register
and re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, leasehold mortgages, landlord waivers, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments the Agent or such Lenders, as the case may be,
may reasonably require from time to time in order (i)to carry out more
effectively the purposes of this Agreement or any other Loan Document, (ii)to
subject any of the
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properties, rights or interests covered by any of the Collateral Documents to
the Liens created by any of the Collateral Documents, (iii)to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, (iv) to grant to the
Agent, on behalf of the Lenders, mortgages and leasehold mortgages conveying a
first priority lien and security interest (subject to Permitted Liens) on all
owned and leased real property interests of the Credit Parties and their
Subsidiaries, and to further provide title insurance and surveys (all at the
Company's cost and expense) to insure such mortgages and leasehold mortgages,
and all such documents and agreements shall be in form and substance acceptable
to the Agent, and (v)to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to the Agent and the Lenders the rights granted or
now or hereafter intended to be granted to the Agent and the Lenders under any
Loan Document or under any other document executed in connection therewith.
7.15 Foreign Subsidiaries Security
-----------------------------
Other than with respect to Bidco Holding, Bidco, the Target,
Target UK Subsidiaries and Target Ireland Subsidiary and other existing Target
Subsidiaries, if following a change in the relevant sections of the Code, the
regulations and rules promulgated thereunder and any rulings issued thereunder
and at the request of the Agent or the Majority Lenders, counsel for the Company
acceptable to the Agent and the Majority Lenders does not within 30 days after
such request deliver evidence satisfactory to the Agent, with respect to any
Foreign Subsidiary which is a Wholly-Owned Subsidiary of the Company, that (i) a
pledge of 66-2/3% or more of the total combined voting power of all classes of
capital stock of such Foreign Subsidiary entitled to vote, (ii)the entering into
by such Foreign Subsidiary of a guaranty in substantially the form of the
Guaranty or (iii)the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement, in either case
would cause the earnings of such Foreign Subsidiary to be treated as a deemed
dividend to such Foreign Subsidiary's United States parent or would otherwise
violate a material applicable law or governmental or regulatory restriction or
rule (including laws, rules, or restrictions of, or issued by, a government or
regulatory authorities of a foreign jurisdiction), then in the case of a failure
to deliver the evidence described in clause (i) above, that portion of such
Foreign Subsidiary's outstanding capital stock not theretofore pledged pursuant
to the Pledge Agreement shall be pledged to the Agent for the benefit of the
Lenders pursuant to the Pledge Agreement (or another pledge agreement in
substantially similar form, if needed), (ii) in the case of a failure to deliver
the evidence described in clause (ii) above, such Foreign Subsidiary shall
execute and deliver a guaranty of the Obligations of the Company under the Loan
Documents and (iii)in the case of a failure to deliver the evidence described in
clause (iii) above, such Foreign Subsidiary shall execute and deliver a security
agreement granting the Agent for the benefit of the Lenders a security interest
in all of such Foreign Subsidiary's assets, in each case with all documents
delivered pursuant to this Section 7.15 to be in form and substance satisfactory
to the Agent and the Majority Lenders.
7.16 The Offer
---------
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(a) The Company will procure that the Offer is initially made on the
terms and conditions set out in the Press Release including, without limitation
that the Offer price is two hundred eighteen pence ((Pounds)2.18) per share.
(b) The Company will keep the Agent informed as to the status of, and
progress with respect to, the Offer and updated financial information on Target
and each Target Subsidiary (as available) and, in particular, will promptly give
to the Agent such information (including details as to the current level of
acceptances) concerning the Offer or otherwise relevant to the Offer as the
Agent may reasonably request and shall promptly upon receipt deliver to the
Agent a copy of every certificate delivered to Bidco Holding or Bidco in
connection with the Offer by the receiving agent pursuant to the City Code.
(c) Without the prior approval of the Agent (the Agent's response not
to be unreasonably delayed), the Company will not, and will procure that Bidco
Holding and Bidco will not:
(i) waive, in whole or in part, the condition to the Offer
relating to Irish merger control (as set out in paragraph 1(c) of the Press
Release) or accept or decide to accept any condition of the Minister for
Enterprise, Trade and Employment of Ireland not making an order prohibiting
the Offer under section 7(a) of the Merger, Takeovers and Monopolies
(Control) Act, 1978 (as amended); or
(ii) make any material alteration to the terms and/or conditions
of the Offer or take or permit to be taken any step as a result of which
such terms and/or conditions are, or may be required to be, altered (it
being understood and agreed that, without limiting the generality of the
foregoing, any increase in the Offer Purchase Price, any change in the form
of consideration of the Offer Purchase Price and the removal of any
condition to the Offer (each as delineated in the Press Release as of the
Announcement Date) shall be deemed material); or
(iii) waive any other condition of the Offer, in whole or in
part, unless it has complied with its obligations under paragraph (d) below
and the Takeover Panel has required to allow Bidco Holding and/or Bidco to
waive the condition of any part thereof.
(d) The Company will notify the Agent immediately upon becoming aware
of any circumstance or event which is or could reasonably be construed as being
covered by a condition of the Offer which, if not waived, would entitle it, with
the consent of the Takeover Panel if needed, to lapse the Offer and it shall, if
so required by the Agent, promptly make such representations to the Takeover
Panel as the Agent may deem necessary, and otherwise use its commercially
reasonable efforts, to obtain such consent.
(e) Evidence of payment by each Credit Party of all accrued and
unpaid fees, costs and expenses to the extent then due and payable on the
Initial Funding Date, together with
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Attorney Costs of BofA to the extent invoiced prior to or on the Initial Funding
Date, plus such additional amounts of Attorney Costs as shall constitute BofA's
reasonable estimate of Attorney Costs incurred or to be incurred by it through
the closing proceedings (provided that such estimate shall not thereafter
preclude final settling of accounts between each Credit Party and BofA);
including any such costs, fees and expenses arising under or referenced in
Sections2.10 and 11.04;
(f) The Company will not, and will not permit Bidco Holding or Bidco
to, exercise its rights to declare the Offer unconditional as to acceptances
unless it has acquired or agreed to acquire pursuant to the Offer not less than
90% in nominal value of the Target Shares to which the Offer relates (within the
meaning of Section 428-430F of the Companies Act).
(g) The Company shall, and shall cause Bidco Holding or Bidco to,
comply in all material respects with the provisions of the Take-over Code, the
Financial Services Act 1986 and the Companies Act 1985 and all other applicable
statutes, laws and regulations relevant in the context of the Offer.
(h) The Company shall, cause Bidco to, give notice under Section 429
of the Companies Act to relevant Target shareholders promptly upon becoming
entitled to do so under the Companies Act.
(i) As soon as practicable after the acquisition by Bidco Holding or
Bidco of any Target Shares (but in any event within 90 days after the Initial
Funding Date with respect to Target Shares acquired by Bidco on the Initial
Funding Date) the Company shall, or shall cause Bidco Holding or Bidco to,
deliver to the Agent, or its nominee, (A)share certificates in respect of the
Target Shares acquired by Bidco Holding or Bidco, together with a valid, duly
stamped, transfer in the favor of the Agent or its nominee, for the benefit of
itself and the Lenders, duly executed by Bidco Holding or Bidco, (B) evidence
that a duly authorized officer of the Target enters the Agent or its nominee, in
the Target's register of members as the holder, for the benefit of itself and
the Lenders, of such Target Shares and (C) a duly executed share certificate
issued to the Agent or its nominee showing the Agent or such nominee as the
registered holder, for the benefit of itself and the Lenders, of such Target
Shares.
(j) The Company shall procure that, as soon as practicable after the
Unconditional Date (subject to compliance with all applicable laws), but in any
event not later than 90 days following the Initial Funding Date, the obligations
of the Credit Parties hereunder are guaranteed by Bidco Holding, Bidco, the
Target, each Target UK Subsidiary and Target Ireland, as the case may be, and
secured on all the assets of each such Person.
(k) To effect paragraph (j) above the Company shall, or shall cause
Bidco Holding, Bidco, the Target, Target UK Subsidiaries and Target Ireland to,
without limitation, procure that (subject to compliance with all applicable
laws) on or prior to the 90th day following the Initial Funding Date:
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(i) the shareholders and directors of the Bidco Holding, Bidco
and the Target do all things necessary to re-register such Persons as a
private company and implement the procedures laid down in Sections155-158
of the Companies Act1985 and, with respect to Target Ireland, the
equivalent procedures in Ireland;
(ii) the auditors of (x) Bidco Holding, Bidco, the Target and
each Target UK Subsidiary deliver a letter stating that in their opinion
each such Person, as the case may be, will be solvent within the meaning of
Section123(1) and (2) of the Insolvency Act 1986 immediately before and for
a period of twelve months after the granting of the Bidco Security
Documents, the Target Security Document and each Target UK Security
Document, as the case may be, and with respect to sufficiency of the assets
of such Person subject to the Bidco Security Documents, the Target Security
Document and each Target UK Subsidiary Security Document, as the case may
be, and (y) Target Ireland deliver a letter stating that in their opinion
Target Ireland will be solvent within the meaning of relevant Irish law
provisions immediately before and immediately after the granting of the
Target Ireland Security Documents;
(iii) Bidco Holding and Bidco to enter into the Bidco Security
Documents, the Target to enter into the Target Security Document, each
Target UK Subsidiary enters into a Target UK Subsidiary Security Document,
and Target Ireland enters into the Target Ireland Security Document;
(iv) a certified copy of the Bidco Security Documents, the
Target Security Document and each Target UK Subsidiary Document, in each
case together with prescribed particulars thereof are delivered to the
Registrar of Companies in accordance, where applicable, with Section395 of
the Companies Act, and of the Target Ireland Security Document, together
with such additional documentation as, in the reasonable opinion of the
Agent, is required pursuant to Irish law;
(v) each of Bidco Holding, Bidco, the Target, each Target UK
Subsidiary and Target Ireland, at its own expense, executes and does all
such assurances, acts and things as the Agent may require to ensure the
valid, lawful and binding giving of such guarantee, granting, perfecting
and protecting of such security and the distribution of such proceeds,
including, where required by the Agent, entering into pledges over shares
in its Subsidiaries;
(vi) Bidco shall deliver to the Agent share certificates in
respect of the Target Shares not previously delivered to the Agent or its
nominee together with a valid, duly stamped, transfer in favor of the Agent
or its nominees, for the benefit of itself and the Lenders, duly executed
by Bidco;
(vii) a duly authorized officer of the Target enters the Agent or
its nominee in the Target's register of members as the holder, for the
benefit of itself and the Lenders, of the Target Shares; and
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(viii) a duly executed share certificate is issued to the Agent,
or its nominee showing the Agent or its nominee as the registered holder of
the Target Shares;
(l) The Company shall cause, at the time the Bidco Security
Agreements, the Target Security Document, any Target UK Subsidiary Security
Document and the Target Ireland Security Document are entered into, that the
Agent is provided with copies of such constitutional documents of Bidco Holding,
Bidco, the Target, the relevant Target UK Subsidiary and Target Ireland such
resolutions, such legal opinions and such consents and other documents, consents
and authorities as the Agent may reasonably require in connection with the
giving of such guarantee and the granting of the security;
(m) The Company shall procure that Bidco will terminate the Offer on
the date which is four calendar months after the date the Offer is posted if
Bidco has not by then acquired or unconditionally agreed to acquire pursuant to
the Offer at least 90% in nominal value of the Target Shares to which the Offer
relates within the meaning of Section 428-430F of the Companies Act; and
7.17 Interest Rate Protection
------------------------
Within 90 days of the Initial Funding Date, the Company shall enter
into Swap Contracts providing protection against fluctuations in interest rates
with one or more financial institutions each having a combined capital and
surplus of at least $100,000,000 with respect to at least 50% of the aggregate
average outstanding principal amount of the Effective Amount of the Term Loans,
which shall contain such other terms as are customary and satisfactory to the
Agent.
7.18 Mortgages
---------
Within forty-five days after the Unconditional Date, the Company shall
cause, or cause the relevant Credit Party to, deliver Mortgages with respect to
each fee interest and, to the extent requested by the Agent, any leasehold
interest of all real property held by a Credit Party, executed by each Credit
Party, in appropriate form for recording, together with:
(i) copies of all UCC-l fixture financing statements necessary
and advisable to perfect the Liens of the Agent for the benefit of the
Lenders in accordance with applicable law;
(ii) an ALTA. Form B (or other form acceptable to the Agent and
the Lenders) mortgagee policy of title insurance or a binder issued by a
title insurance company satisfactory to the Agent insuring (or undertaking
to insure, in the case of a binder) that the Mortgages create and
constitute a valid first Lien against the Mortgaged Property in favor of
the Agent, subject only to exceptions acceptable to the Agent, with such
endorsements and affirmative insurance as the Agent may reasonably request;
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(iii) flood insurance and earthquake insurance, to the extent
applicable, on terms satisfactory to the Agent;
(iv) current ALTA surveys and surveyor's certification as to all
Mortgaged Property to the extent reasonably required by the Agent, each in
form and substance satisfactory to the Agent;
(v) proof of payment (or arrangements therefor satisfactory to
the Agent) of all title insurance premiums, documentary stamp or intangible
taxes, recording fees and mortgage taxes payable in connection with the
recording of any Mortgage or the issuance of the title insurance policies
(whether due on the Initial Funding Date or in the future) including sums
due in connection with any future advances;
(vi) funds sufficient to pay any filing or recording tax or fee
in connection with any and all UCC-1 financing statements and the
Mortgages; and
(vii) evidence that all other actions necessary or, in the
opinion of the Agent or the Lenders, desirable to perfect and protect the
first priority Lien created by the Mortgages, and to enhance the Agent's
ability to preserve and protect its interests in and access to the
Mortgaged Property, have been taken (including, without limitation,
obtaining any environmental reports on such Mortgaged Property reasonably
requested by the Agent).
7.19 Bidco Holding and Bidco Capitalization
--------------------------------------
On or prior to the Initial Funding Date, the Company shall take any
and all actions necessary to ensure that the shares of Bidco Holding and Bidco
are fully paid, and shall have delivered evidence satisfactory to the Agent that
such actions have been taken.
ARTICLE VIII
NEGATIVE COVENANTS
On and after the Announcement Date, so long as any Lender shall have
any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, unless the
Majority Lenders waive compliance in writing:
8.01 Limitation on Liens
-------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
to exist any Lien upon or with respect to any part of its property, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
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(a) any Lien existing on property of a Credit Party or any of its
Subsidiaries on the Announcement Date and set forth in Schedule 8.01 (as
such Schedule is updated on the Initial Funding Date with the consent of
the Agent) securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 7.07, provided that
no notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of
business which are not delinquent or remain payable without penalty or
which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of a Credit Party or its Subsidiaries
securing (i) the non-delinquent performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course
of business, provided all such Liens in the aggregate would not (even if
enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all
such liens in the aggregate at any time outstanding for the Credit Parties
and their Subsidiaries does not exceed $750,000;
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of a Credit Party and
its Subsidiaries;
(i) Liens on assets of corporations which become Subsidiaries after
the date of this Agreement, provided, however, that such Liens existed at
the time the respective corporations became Subsidiaries and were not
created in anticipation thereof and do not in the aggregate at any time
outstanding exceed $1,500,000;
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(j) purchase money security interests on any property acquired or
held by a Credit Party or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property; provided
that (i) any such Lien attaches to such property concurrently with or
within 20 days after the acquisition thereof, (ii) such Lien attaches
solely to the property so acquired in such transaction and (iii) the
principal amount of the Indebtedness secured by any and all such purchase
money security interests shall not at any time exceed, together with
Indebtedness permitted under Section 8.05(h), $1,500,000;
(k) Liens securing Capital Lease Obligations on assets subject to
such Capital Leases, provided that such Capital Leases are otherwise
permitted under Section 8.10(a) or (c); and
(l) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions
against access by a Credit Party in excess of those set forth by
regulations promulgated by the FRB, and (ii)such deposit account is not
intended by a Credit Party or any of its Subsidiaries to provide collateral
to the depository institution.
8.02 Disposition of Assets
---------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) any
property or assets (including accounts and notes receivable, with or without
recourse) or enter into any agreement to do any of the foregoing (an "Asset
Disposition"), except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement equipment;
(c) dispositions of inventory and/or equipment by a Credit Party or
any Subsidiary Guarantor to a Credit Party or any Subsidiary Guarantor
pursuant to reasonable and ordinary course business requirements;
(d) any Subsidiary (other than a Credit Party) may sell all or
substantially all of its assets (upon voluntary liquidation or otherwise),
to a Credit Party or another Wholly-Owned Subsidiary that is a Domestic
Subsidiary; and
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(e) dispositions permitted under Sections 8.03 and 8.04;
provided, however, in no event (i) will any such asset sales, leases,
conveyances or dispositions be permitted under this Section 8.02 to the
extent they would result in or require the Company to make an offer to or
otherwise prepay or repay any of the Subordinated Debt and (ii) at any time
the Senior Subordinated Notes shall remain outstanding, will the Company or
any of its Subsidiaries consummate any asset sale that would result in a
prepayment under this Agreement.
8.03 Acquisitions, Consolidations and Mergers
----------------------------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, enter into any Acquisition, merge, consolidate with or into, or
acquire (whether in one transaction or in a series of transactions) any Person
or all or substantially all of its assets of any Person, except:
(a) any Domestic Subsidiary may merge with a Credit Party (provided
that such Credit Party shall be the continuing or surviving corporation),
or with any one or more Subsidiaries, provided that if any transaction
shall be between a Domestic Subsidiary and a Wholly-Owned Subsidiary that
is a Domestic Subsidiary, the Wholly-Owned Subsidiary that is a Domestic
Subsidiary shall be the continuing or surviving corporation;
(b) on and after the Squeeze-Out Date, a Credit Party or a Subsidiary
Guarantor or, subject to the limitations set forth below, a Wholly-Owned
Subsidiary of the Company which is not a Subsidiary Guarantor or a Credit
Party may enter into an Acquisition provided that (i) any such Acquisition
(whether in one transaction or a series of related transactions) the
aggregate consideration of which exceeds $15,000,000 for a single
Acquisition and $25,000,000 for all Acquisitions effected after the Initial
Funding Date, shall not be permitted without the prior written approval of
the Majority Lenders, (ii) no Default or Event of Default is in existence
both before and after giving effect to such Acquisition (and/or as set
forth in clause (vi) below, the creation of a new Subsidiary), (iii) such
Acquisition is undertaken in all material respects in accordance with all
applicable Requirements of Law, (iv) the target business of, or the assets
subject to, such Acquisition are shown in good faith by the Company to have
generated positive EBITDA on a pro forma basis for the twelve month period
immediately preceding the date of such Acquisition based on assumptions
showing cost savings reasonably acceptable to the Agent, (v) the prior,
effective written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained, (vi)
such Acquisition shall be structured as an asset acquisition by a Credit
Party or a Subsidiary Guarantor, or subject to the limitations set forth
below, a Wholly-Owned Subsidiary of the Company which is not a Subsidiary
Guarantor or a Credit Party or the purchase of all of the capital stock of
the target of such Acquisition by a Credit Party or a Subsidiary Guarantor
or, subject to the limitations set forth below, a Wholly-Owned Subsidiary
of the Company which is not a Subsidiary Guarantor or a Credit Party,
provided that such target will be merged with and into a Credit Party or a
Subsidiary
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Guarantor or, subject to the limitations set forth below, a Wholly-Owned
Subsidiary of the Company which is not a Subsidiary Guarantor or a Credit
Party on the date of the Acquisition or shall execute a counterpart of and
become a party to a Guaranty (pursuant to documentation reasonably
acceptable to the Agent), (vii) the business being acquired is otherwise
permitted by Section 8.13 and (viii) the Agent (on behalf of the Lenders)
will be granted a first priority perfected security interest (subject to
Permitted Liens) in any assets being so acquired and any capital stock if a
new Subsidiary is being formed; provided, however, that Wholly-Owned
-------- -------
Subsidiaries which are not Credit Parties or Subsidiary Guarantors shall
not enter into any Acquisition if the aggregate consideration of all such
Acquisitions exceeds $5,000,000; and provided further, that up to an
aggregate amount of $5,000,000 are exempt from the requirements set fourth
in clause (vi) that the target of such Acquisition shall be merged with or
into a Credit Party or Subsidiary and the requirements set fourth in clause
(viii);
(c) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any Foreign
Subsidiary so long as in each case at least 65% of the total combined
voting power of all classes of capital stock of all first-tier Foreign
Subsidiaries are pledged pursuant to the relevant Pledge Agreement;
(d) the assets of any Foreign Subsidiary may be transferred to a
Credit Party or any of its Domestic Subsidiaries, and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated into,
a Credit Party or any of its Domestic Subsidiaries so long as such Credit
Party or such Domestic Subsidiary is the surviving corporation of any such
merger, dissolution or liquidation; and
Notwithstanding anything to the contrary set forth hereunder, the Offer and the
Transaction shall be permitted pursuant to Sections 5.02 and 7.16.
8.04 Loans and Investments
---------------------
No Credit Party shall purchase or acquire, nor suffer or permit any of
its Subsidiaries to purchase or acquire, or make any commitment therefor, any
capital stock, equity interest, or any obligations or other securities of, or
any interest in, any Person, or make or commit to make any Acquisitions, or make
or commit to make any advance, loan, extension of credit or capital contribution
to or any other investment in, any Person including any Affiliate of a Credit
Party (together, "Investments"), except for:
(a) Investments held by a Credit Party or any of its Subsidiaries in
the form of Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business;
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(c) Investments in Joint Ventures permitted by Section 8.09 and
Investments constituting intercompany loans permitted by Section 8.21;
------------
(d) Investments, subject to Section 8.09 (other than clause (c)
thereof, incurred in order to consummate Acquisitions otherwise permitted
herein;
(e) Investments constituting Permitted Swap Obligations or payments
or advances under Swap Contracts relating to Permitted Swap Obligations;
(f) Investments existing as of the Announcement Date and listed on
Schedule 8.04 (as such Schedule is updated on the Initial Funding Date with
the consent of the Agent);
(g) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(h) advances or loans to officers, directors, and employees of a
Credit Party or any of its Subsidiaries in an amount not to exceed
$2,500,000 in the aggregate for all such loans and advances to all such
Persons;
(i) advances to employees of a Credit Party or any of its
Subsidiaries in respect of reasonable relocation expenses incurred by such
employees;
(j) advances to employees of a Credit Party or any of its
Subsidiaries in the nature of advances against anticipated sales
commissions and advances for travel and/or other ordinary business
expenses, provided that the aggregate principal amount of all such employee
advances outstanding at any time shall not exceed $150,000;
(k) the Offer and Transaction shall be permitted pursuant to Sections
--------
5.02 and 7.16, which shall in any event exclude any open market or other
----
purchases of Target's Shares before the Initial Funding Date;
(l) On or prior to the Squeeze-Out Date, (A) the Company may make (x)
intercompany loans to Bidco Holding and Bidco and (y), purchases of the
shares of Bidco Holding and Bidco and (B) Bidco and Bidco Holdings may make
intercompany loans to Target and Target Subsidiaries, in each case so long
as (A) 100% of the proceeds of all such Investments shall be utilized by
Bidco to purchase Target Shares pursuant to the Offer or to refinance
Indebtedness of Target or the Target Subsidiaries to be refinanced in
connection with the Transaction, (B) such intercompany loans shall conform
to the requirements of Section 8.21 and (C) the ratio of clauses (x) to (y)
------------
above shall be approximately 1.0 to 1.0;
(m) the Company and its Subsidiaries may make intercompany loans
permitted pursuant to Section 8.21; and
------------
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(n) other Investments permitted by this Agreement (but not otherwise
permitted under this Section 8.04) not to exceed $1,000,000 in the
aggregate for all such Investments made in any fiscal year, which shall in
any event exclude any open market or other purchases of Target's Shares
before the Initial Funding Date.
8.05 Limitation on Indebtedness
--------------------------
No Credit Party shall, nor shall suffer or permit any of its Subsidiaries to,
create, incur, assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.08 or of intercompany loans permitted under Section
-------
8.21;
----
(c) Indebtedness existing on the Announcement Date and set forth in
Schedule 8.05 (as such Schedule is updated on the Initial Funding Date with
-------------
the consent of the Agent);
(d) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.10;
(e) $100,000,000 principal amount of Indebtedness of the Company
evidenced by the Senior Subordinated Note Documents;
(f) Indebtedness of AGI and Klearfold with respect to the IRB Debt
with a principal amount of $11,640,000;
(g) unsecured Indebtedness owing to any selling party incurred in
connection with Acquisitions permitted under Section 8.03 hereof (other
------------
than clause (e) of such Section), provided such indebtedness is incurred
----------
pursuant to promissory notes and other agreements containing terms and
conditions satisfactory to the Agent and fully subordinated to the prior
payment in full in cash of the Loans and the other Obligations on terms and
conditions satisfactory to the Agent (any such Indebtedness, "Permitted
---------
Seller Debt") including, without limitation, terms related to aggregate
-----------
outstanding principal amounts, interest rates and payment terms acceptable
to Agent;
(h) other Indebtedness in addition to Indebtedness permitted above in
an aggregate amount outstanding not to exceed $3,500,000 (including
Indebtedness secured by Liens permitted by Section 8.01(i) and (j));
--------------- ----
(i) Indebtedness under the Bidco Loan Notes owing to the sellers of
the Target Shares and secured by the Bidco Loan Notes Credit Support; and
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(j) intercompany Indebtedness permitted by Section 8.04(l) and (m)
-------------- -
and Section 8.21;
-------------
provided, however, that in no event will any Credit Party or any of its
Subsidiaries incur more than $3,500,000 of Indebtedness under Section 4.09(x) of
the Senior Subordinated Note Indenture as in effect on the Announcement Date
(whether or not permitted by this Section 8.05) except Indebtedness incurred
------------
pursuant to this Agreement.
8.06 Transactions with Affiliates
----------------------------
Except as set forth on Schedule 8.06, no Credit Party shall, nor shall
-------------
suffer or permit any of its Subsidiaries to, enter into any transaction with any
Affiliate (other than a Wholly-Owned Subsidiary) of a Credit Party, except upon
fair and reasonable terms no less favorable to such Credit Party or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of such Credit Party or such Subsidiary, except the
Offer shall be permitted.
8.07 Use of Proceeds
---------------
(a) No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act.
(b) None of the proceeds of any Loans may be used in any way which
infringes Section 151 of the Companies Act or any similar or other statutory
obligation whether in the United Kingdom or elsewhere.
8.08 Contingent Obligations
----------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Contingent
Obligations except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations;
(c) Unsecured and subordinated guarantees by a Subsidiary of the
Company of the Company's obligations with respect to the Senior
Subordinated Notes incurred pursuant to and subject to the subordination
terms of the Senior Subordinated Note Indenture, and provided that such
Subsidiary has provided an unlimited guaranty to the Agent, on behalf of
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itself, the Issuing Bank and the Lenders, with respect to the Obligations
and fully pledged all of its assets in support of such guaranty.;
(d) Contingent Obligations of the Company and its Subsidiaries
existing as of the Announcement Date and listed in Schedule 8.08 (as such
-------------
Schedule is updated on the Initial Funding Date without the consent of the
Agent ); and
(e) Guarantees by the Credit Parties and their subsidiaries of the
Obligations under this Agreement.
8.09 Joint Ventures; Foreign Assets; New Subsidiaries
------------------------------------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, (a)enter into Joint Ventures requiring an aggregate investment
for all such joint ventures (whether in cash, property, or contributions of
personnel or management or otherwise) in excess of $1,000,000, (b)permit any of
their assets or properties to be maintained outside the United States of
America, except that (i) KF- International, Inc. may maintain up to $1,000,000
of assets outside the United States of America and (ii) Klearfold may maintain
up to $500,000 of inventory assets in Puerto Rico and (iii) any Foreign
Subsidiary acquired pursuant to the Offer or otherwise in accordance with the
terms of this Agreement may maintain their assets outside of the United States
of America or (c)create or acquire any Subsidiary except (x) in connection with
a transaction permitted by clause (a) above, (y) in connection with a
Acquisition permitted by Section 8.03(b) and (z) as described in the Offer
Documents.
8.10 Lease Obligations
-----------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, create or suffer to exist any obligations for the payment of
rent for any property under lease or agreement to lease, except for:
(a) leases of a Credit Party and of its Subsidiaries in existence on
the Initial Funding Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by a Credit Party or any of its
Subsidiaries after the Initial Funding Date in the ordinary course of
business; provided that the aggregate annual rental payments for all such
operating leases shall not exceed in any fiscal year $1,500,000; and
(c) Capital Leases other than those permitted under clause (a) of
this Section, entered into by a Credit Party or any of its Subsidiaries
after the Initial Funding Date to finance the acquisition of equipment;
provided that the aggregate Capital Lease Obligations for all such Capital
Leases shall not at any time exceed $1,500,000.
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8.11 Restricted Payments; No Permitted Restrictions for Subsidiaries
---------------------------------------------------------------
(a) No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of its capital stock, or purchase, redeem or otherwise
acquire for value any shares of its capital stock or any warrants, rights or
options to acquire such shares, now or hereafter outstanding, except that (i)
any Wholly-Owned Subsidiary may declare and make dividend payments or other
distributions to a Credit Party or a Wholly-Owned Subsidiary of a Credit Party,
(ii) so long as no Default or Event of Default then exists or would result after
giving effect thereto and such Restricted Payment is permitted under Section
4.07 of the Senior Subordinated Note Indenture (as in effect on the Original
Closing Date), the Company may purchase, redeem, acquire or retire any common
stock of the Company (or options in respect thereof) held by any member of the
Company's management (who were employed full time by the Company immediately
prior to such transaction) pursuant to any management equity subscription
agreement, stock option agreement or employment agreement ("Management Equity
Redemption") provided that such Management Equity Redemption together with the
aggregate amount of all other Management Equity Redemptions made by the Company
after the Announcement Date is less than the sum, without duplication, of (I)
50% of the Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after the
Announcement Date to the end of the Company's most recently ended fiscal quarter
for which financial statements in accordance with Section 7.01 are available and
have been delivered to the Agent at the time of such Management Equity
Redemptions (or, if such Net Income for such period is a deficit, less 100% of
such deficit) plus (II) 100% of the aggregate Net Proceeds received by the
Company from the sale or issuance of its common stock after the Announcement
Date to the extent such Net Proceeds have not already been counted or used under
Section 8.20(b) to permit the prepayment of the Subordinated Debt; provided,
--------
that the restrictions in clause (ii) above will not prohibit any Management
Equity Redemptions so long as (A) the aggregate amount paid for all such
Management Equity Redemptions shall not exceed $2,500,000 in any twelve-month
period or (B) such Management Equity Redemptions are funded with the net cash
proceeds received by the Company from any key man life insurance or disability
insurance policies purchased by the Company to specifically finance such
Management Equity Redemption and no Default or Event of Default shall have
occurred and be continuing immediately after each such transaction and (iii) so
long as no Default or Event of Default then exists or would result after giving
effect thereto, and (x) such Restricted Payment is permitted under Section 4.07
of the Senior Subordinated Note Indenture (as in effect on the Announcement
Date), (y) the Interest Coverage Ratio was equal to or greater than 2.25 to 1.00
for the twelve month period most recently ended, and (z) in connection with the
Transaction, the shareholders of the Company acquired new capital stock for
consideration, and/or made capital contributions to the Company, in an aggregate
amount in excess of $60,000,000 (plus any additional minimum amount required by
the Lenders if the Offer Price is ever increased) (such excess amount, the
"Excess Amount"), the Company may redeem, repurchase, acquire or retire any
-------------
capital stock in the Company, or pay dividends or make a distribution in respect
of its capital stock, in an aggregate amount equal to such Excess Amount from or
to such Contributing Shareholders.
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(b) The Company shall not permit any of its Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Subsidiary to (I) pay
dividends or make any other distributions to the Company or any of its other
Subsidiaries (1) on its capital stock or (2) with respect to any other interest
or participation in, or measured by, its profits, (II) pay any indebtedness owed
to the Company or any of its other Subsidiaries, (III) make loans or advances to
the Company or any of its other Subsidiaries, or (IV) transfer any of its
properties or assets to the Company or any of its other Subsidiaries
(collectively, "Encumbrances"), except for such Encumbrances existing under or
by reason of (1) this Agreement, (2) applicable law, (3) customary non-
assignment provisions in leases entered into in the ordinary course of business
and consistent with past practices, or (4) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in paragraph (b)(IV) above on the property so acquired.
8.12 ERISA
No Credit Party shall, nor shall suffer or permit any of its Subsidiaries
to, (i) terminate any Plan subject to Title IV of ERISA so as to result in any
material (in the opinion of the Majority Lenders) liability to a Credit Party or
any ERISA Affiliate, (ii) permit to exist any ERISA Event or any other event or
condition, which presents the risk of a material (in the opinion of the Majority
Lenders) liability to any member of the Controlled Group, (iii) make a complete
or partial withdrawal (within the meaning of ERISA Section 4201) from any
Multiemployer Plan so as to result in any material (in the opinion of the
Majority Lenders) liability to a Credit Party or any ERISA Affiliate, (iv) enter
into any new Plan or modify any existing Plan so as to increase its obligations
thereunder which could result in any material (in the opinion of the Majority
Lenders) liability to any member of the Controlled Group, or (v) permit the
present value of all nonforfeitable accrued benefits under any Plan (using the
actuarial assumptions utilized by the PBGC upon termination of a Plan)
materially (in the opinion of the Majority Lenders) to exceed the fair market
value of Plan assets allocable to such benefits, all determined as of the most
recent valuation date for each such Plan.
8.13 Change in Business
------------------
(a) No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, engage in any material line of business substantially different
from those lines of business carried on by a Credit Party and its Subsidiaries
on the Announcement Date (or, in the case of Target and each Target Subsidiary,
on the Unconditional Date) and lines of business reasonably ancillary or
complimentary to such current lines of business.
(b) The Company will not permit (x) Bidco Holding to engage in any
business activities other than in connection with its ownership interest in
Bidco and the execution, delivery and performance of the Collateral Documents to
which it is a party and (y) Bidco to engage in any business activities other
than those necessary (i) to effect the Offer, (ii) with respect to its ownership
interest in Target, (iii) with respect to the issuance of, and payments pursuant
to, the Bidco Loan
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Notes and (iv) in connection with the execution, delivery and performance of the
Collateral Documents to which it is a party.
8.14 Accounting Changes.
------------------
No Credit Party shall, nor shall suffer or permit any of its
Subsidiaries to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year or
fiscal quarter of such Person.
8.15 Total Leverage Ratio.
--------------------
The Company shall not permit, as of the last day of each calendar quarter during
the periods listed below, its Total Leverage Ratio at such time for the twelve
month period (taken as one accounting period) then ended, to be greater than the
ratio set forth below opposite the respective period in which the determination
is being made:
Period Ratio
- ------ -----
From and including the Initial Funding Date through 6.85:1.00
and including December 30, 1999
From and including December 31, 1999 through 6.50:1.00
and including December 30, 2000
From and including December 31, 2000 through 6.00:1.00
and including December 30, 2001
From and including December 31, 2001 through 5.00:1.00
and including December 30, 2002
Thereafter 4.50:1.00 4.50:1.00
8.16 Senior Leverage Ratio.
---------------------
The Company shall not permit, as of the last day of each calendar
quarter during the periods listed below, its Senior Leverage Ratio at such time
for the twelve month period (taken as one accounting period) then ended, to be
greater than the ratio set forth below opposite the respective period in which
the determination is being made:
Period Ratio
------ -----
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Period Ratio
- ------ -----
From and including the Initial Funding Date 3.85:1.00
through and including December 30, 1999
From and including the Initial Funding Date 3.50:1.00
through and including December 31, 1999
From and including December 31, 2000 through and 3.00:1.00
including December 30, 2001
Thereafter 2.00:1.00
8.17 Interest Coverage Ratio.
-----------------------
The Company shall not permit, as of the last day of each calendar
quarter during the periods listed below, its Interest Coverage Ratio at such
time for the twelve month period (taken as one accounting period) then ended, to
be less than the ratio set forth below opposite the respective period in which
the determination is being made:
Period Ratio
- ------ -----
From and including the Initial Funding Date 1.75:1.00
through and including December 30, 1999
From and including December 31, 1999 2.25:1.00
through and including December 30, 2000
Thereafter 2.50:1.00
8.18 Fixed Charge Coverage Ratio.
---------------------------
The Company shall not permit, as of the last day of each calendar
quarter during the periods listed below, its Fixed Charge Coverage Ratio at such
time for the twelve month period (taken as one accounting period) then ended, to
be less than the ratio set forth below opposite the respective period in which
the determination is being made:
Period Ratio
- ------ -----
From and including the Initial Funding Date 1.70:1.00
through and including December 30, 1999
Thereafter 2.00:1.00
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8.19 [Intentionally Omitted].
8.20 Amendments to Organization Documents, Subordinated Debt, IRB Debt;
-----------------------------------------------------------------
Equity Document, Bidco Loan Notes; No Preferred Stock.
- -----------------------------------------------------
No Credit Party shall, nor shall it cause or permit any of its
Subsidiaries to do any of the following:
(i) other than pursuant to the Supplemental Indenture, change or
amend the terms of any Subordinated Debt, IRB Debt or Bidco Loan Notes (or
any indenture, note or other agreement in connection therewith, including,
without limitation, the Senior Subordinated Note Indenture and the Bidco
Loan Notes Instrument) if the effect of such amendment is to: (1) increase
the interest rate on such Subordinated Debt, IRB Debt or Bidco Loan Notes;
(2) change the dates upon which payments of principal or interest are due
on such Subordinated Debt, IRB Debt other than to extend such dates; (3)
change any default or event of default relating thereto other than to
delete or make less restrictive any default provision therein, or add any
covenant with respect to such Subordinated Debt, IRB Debt or Bidco Loan
Notes; (4) change the redemption or prepayment provisions of such
Subordinated Debt, IRB Debt or Bidco Loan Notes other than to extend the
dates therefor or to reduce the premiums payable in connection therewith;
(5) grant any security or Lien to secure such Subordinated Debt, IRB Debt
or Bidco Loan Notes other than the pledge of the Klearfold Bonds or the AGI
Bonds or the delivery of a Letter of Credit by Issuing Bank as security for
the IRB Debt; (6) change any subordination provisions, terms or conditions;
or (7) change or amend any other term if such change or amendment would
materially increase the obligations of the obligor or confer additional
material rights to the holder of such Subordinated Debt, IRB Debt or Bidco
Loan Notes in a manner adverse to a Credit Party or any of its
Subsidiaries, the Agent or any Lender;
(ii) prepay, defease or purchase any Subordinated Debt, except (1)
for entering into the Exchange Offer with respect to the Senior
Subordinated Notes whereby the Senior Subordinated Notes are exchanged for
"Exchange Notes" (as defined in the Senior Subordinated Note Indenture) and
provided that the terms of the Exchange Notes are identical to those of the
Senior Subordinated Notes except that the Exchange Notes may not contain
identical transfer restrictions, (2) if a "Change of Control" as specified
in the Senior Subordinated Note Indenture with respect to the Senior
Subordinated Notes as in effect on the Announcement Date shall occur, or if
the Company or its Subsidiaries shall have received "Excess Proceeds" in an
amount so as to require it to make an "Asset Sale Offer" (as such terms are
defined in the Senior Subordinated Note Indenture), then in any such case
the Company may prepay such Senior Subordinated Notes if required only
after payment in full of the Obligations hereunder (whether or not then due
and owing) and the termination of the Commitments and financing
arrangements contemplated hereby, (3)so long as no Default or Event of
Default then exists or would result after giving effect thereto, the
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Company may repay (but not prepay) the Permitted Seller Debt in accordance
with the stated repayment terms for such Permitted Seller Debt as approved
under Section 8.05(h), and (4) the Company may apply the Net Proceeds (in
excess of amounts required under clause (ii) below) it receives in cash
after the Announcement Date upon any sale of any common stock equity
securities of the Company issued in a Qualified Public Offering to the
prepayment or repurchase of all or part of the Senior Subordinated Notes so
long as (i) no Event of Default or Default has occurred and is continuing
or would result after giving effect thereto and (ii) the Company has first
repaid in full all outstanding Term Loans in an amount sufficient to cause
the Senior Leverage Ratio for the immediately preceding four fiscal
quarters then last ended to be equal to 2.00:1.0 based on a pro forma
calculation using such lower debt threshold, as applicable;
(iii) change the mode of interest or interest rate period in effect
on the Announcement Date with respect to any IRB Debt; or
(iv) make any amendment or modification to any terms or provisions
of its Organization Documents which is materially adverse to the Agent or
the Lenders or issue any preferred stock.
8.21 Intercompany Loans.
------------------
In addition to the other restrictions contained in this Article VIII,
------------
each Credit Party may make loans to its Subsidiaries (and such Persons may incur
the Indebtedness related thereto and repay such Indebtedness) after the
Announcement Date subject to the following terms and conditions:
(i) such loans are unsecured and available on a revolving
credit basis, evidenced by a promissory note or loan agreement and payable
on demand, and each Credit Party agrees that all such Indebtedness shall be
subordinated in right of payment to the final payment in full in cash of
the Obligations at all times after the occurrence of any Event of Default;
(ii) no Default or Event of Default shall then exist and be
continuing or would result after giving effect thereto (including, without
limitation, under the Senior Subordinated Indenture), and after giving
effect to each such intercompany loan, both the Credit Party making such
loan and the recipient thereof shall be Solvent;
(iii) except as otherwise permitted in Section 8.04(l), each
recipient of such a loan shall use the proceeds thereof solely for its own
working capital requirements arising in the ordinary course of its
business;
(iv) the Company shall deliver to the Agent at the end of each
fiscal quarter a current list of intercompany loans outstanding; and
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(v) in no event shall the aggregate amount of such intercompany
Indebtedness owing by the Subsidiaries other than the Credit Parties to the
Credit Parties exceed the amount permitted pursuant to Section 8.04(l) plus
$20,000,000, provided, however, that no more than $10,000,000 of such
amount shall be intercompany loans to Van De Steeg Packaging B.V., and no
more than (x) at any time prior to the date the Target delivers the Target
Security Document, $10,000,000 and (y) thereafter $5,000,000, shall be
attributable to intercompany loans made to a Subsidiary that is not a
Subsidiary Guarantor.
8.22 Target Operations.
-----------------
For a period of forty-five (45) days (the "Cure Period") after the
Squeeze-Out Date, the representations and warranties set out in Sections 6.05,
-------------
6.06, 6.09, 6.10, 6.11(b), 6.15, 6.17, 6.18, 6.21, 6.22 and 6.26 and the
- ---- ---- ---- ------- ---- ---- ---- ---- ---- ----
negative covenants set out in Sections 8.01, 8.04, 8.05, 8.06, 8.08, 8.09, 8.10
----
and 8.21(v) shall not apply in respect of events or circumstances existing on
----
the Initial Funding Date (a "Cure Period Event") with respect to Target and each
Target Subsidiary and not capable of immediate remedy; provided that:
(i) the Company agrees to notify the Agent promptly upon
learning of any such Cure Period Event that would, but for this covenant,
be defaults or breaches under this Agreement;
(ii) such Cure Period Event would not have a Material Adverse
Effect;
(iii) such Cure Period Event is capable of being cured within the
Cure Period and no Event of Default (as defined in the Senior Substituted
Note Documents) is then continuing thereunder;
(iv) the aggregate amount that will be required to cure such
Cure Period Event is not in excess of $34,000,000; and
(v) if at the end of such Cure Period the Cure Period Event
still exists, it shall be an immediate Event of Default.
ARTICLE IX
EVENTS OF DEFAULT.
9.01 Event of Default.
----------------
Any of the following shall constitute an "Event of Default":
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(a) Non-Payment.
-------------
Any Credit Party fails to pay, (i) when and as required to be
paid herein, any amount of principal of any Loan or of any L/C Obligation, or
(ii) within five days after the same becomes due, any interest, fee or any other
amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty.
--------------------------
Any representation or warranty by a Credit Party or any of its
Subsidiaries made or deemed made herein, in any other Loan Document, or which is
contained in any certificate, document or financial or other statement by a
Credit Party or any of its Subsidiaries, or any Responsible Officer, furnished
at any time under this Agreement, or in or under any other Loan Document, is
incorrect in any material respect on or as of the date made or deemed made; or
(c) Specific Defaults.
-----------------
Any Credit Party fails to perform or observe any term, covenant
or agreement contained in any of Section 7.01, 7.02, 7.03, 7.06, 7.12 or 7.16 or
------------ ---- ---- ---- ---- ----
in Article VIII; or
------------
(d) Other Defaults.
--------------
Any Credit Party or any of its Subsidiaries party thereto fails
to perform or observe any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue unremedied for a period
of 30 days after the earlier of (i) the date upon which a Responsible Officer
knew or reasonably should have known of such failure or (ii) the date upon which
written notice thereof is given to the Company by the Agent or any Lender; or
(e) Cross-Default.
-------------
(i) Any Credit Party or any of its Subsidiaries (A)fails to
make any payment in respect of any Indebtedness or Contingent Obligation (other
than in respect of Swap Contracts), having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
$5,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B)fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries)
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to cause such Indebtedness to be declared to be due and payable prior to its
stated maturity, or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded; or (ii)there occurs under any Swap
Contract an Early Termination Date (as defined in such Swap Contract) resulting
from (1)any event of default under such Swap Contract as to which the Company or
any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or
(2)any Termination Event (as so defined) as to which the Company or any
Subsidiary is an Affected Party (as so defined), and, in either event, the Swap
Termination Value owed by such Credit Party or such Subsidiary as a result
thereof is greater than $5,000,000; or
(f) Insolvency.
----------
Voluntary Proceedings. Any Credit Party or any of its
Subsidiaries (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings.
-----------------------
(i) Any involuntary Insolvency Proceeding is commenced or filed
against any Credit Party or any of its Subsidiaries, or any writ, judgment,
warrant of attachment, execution or similar process, is issued or levied against
a substantial part of such Person's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within 60 days after commencement, filing or levy; (ii) any Credit Party or any
of its Subsidiaries admits the material allegations of a petition against it in
any Insolvency Proceeding, or an order for relief (or similar order under non-
U.S. law) is ordered in any Insolvency Proceeding; or (iii) any Credit Party or
any of its Subsidiaries acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its property or
business; or
(h) ERISA.
-----
(i) An ERISA Event shall occur with respect to a Pension Plan
or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the a Credit Party under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$375,000 the aggregate amount of Unfunded Pension Liability among all Pension
Plans at any time exceeds $375,000; or (iii) any Credit Party or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any instalment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $375,000; or
(i) Monetary Judgments.
------------------
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One or more non-interlocutory judgments, non-interlocutory
orders, decrees or arbitration awards is entered against any Credit Party or any
of its Subsidiaries involving in the aggregate a liability (to the extent not
covered by independent third- party insurance as to which the insurer does not
dispute coverage) as to any single or related series of transactions, incidents
or conditions, of $3,000,000 or more, and the same shall remain unsatisfied,
unvacated or unstayed pending appeal for a period of 30 days after the entry
thereof; or
(j) Non-Monetary Judgments.
----------------------
Any non-monetary judgment, order or decree is entered against
any Credit Party or any of its Subsidiaries which does or would reasonably be
expected to have a Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(k) Collateral.
----------
(i) any provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable against any Credit
Party or any of its Subsidiaries party thereto or any such Person shall so
state in writing or bring an action to limit its obligations or liabilities
thereunder; or
(ii) any Collateral Document shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security interest in
the Collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority security
interest subject only to Permitted Liens; or
(l) Change of Control.
There occurs any Change of Control; or
(m) Guaranty Defaults.
Any Person party thereto fails in any material respect to
perform or observe any term, covenant or agreement in any Guaranty or any
Guaranty is for any reason partially (including with respect to future advances)
or wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or any Person party thereto or any other Person contests in any manner
the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder; or any event described at clauses (f) or (g)
of this Section occurs with respect to such Person party to a Guaranty; or
(n) Invalidity of Subordination Provisions.
--------------------------------------
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The subordination provisions of any Subordinated Debt is for any
reason revoked or invalidated, or otherwise ceases to be in full force and
effect or enforceable or any noteholder or trustee with respect thereto denies
that it has any further liability or obligation thereunder, or the Loans and the
other Obligations hereunder entitled to receive the benefits of any Loan
Document are for any reason subordinated or do not have the priority
contemplated by this Agreement or such subordination provisions;
(o) Cross Default to IRBs.
---------------------
Any default, violation, material breach or tax event (which
causes or requires a redemption of the AGI Bonds or Klearfold Bonds) of any kind
shall occur under any AGI Bond Documents or Klearfold Bond Documents resulting
in or permitting a redemption of the AGI Bonds or the Klearfold Bonds, or an
acceleration of the loans with respect thereto; or
(p) Collateral Documents.
--------------------
Bidco Holding, Bidco, the Target, Target Ireland or any Target
UK Subsidiary shall have failed for any reason (including, without limitation,
as a result of applicable law) to deliver the documents and otherwise take the
actions referred to by Section 7.16(j) and (k) by the 90th day following the
Initial Funding Date; or
(q) Relevant Event of Default.
-------------------------
A Relevant Event of Default occurs and is continuing at any
time.
9.02 Relevant Events of Default with respect to Offer.
------------------------------------------------
Notwithstanding the provisions of Section 9.01, until the expiration
of the Certain Funds Period the events set out below shall be the only Events of
Default upon the occurrence of which Agent and/or the Lenders shall be entitled
to exercise their powers under Section 9.03 with respect to Term Loan A, Term
Loan B and the Bidco Loan Notes Credit Support (a"Relevant Event of Default")
whether or not caused by any reason outside the control of any Credit Party:
(a) the Company fails to comply with any of its respective Relevant
Undertakings and, if such event is, in the opinion of the Agent, capable of
remedy, within 15 days after the earlier of the Agent becoming aware of
such default or written notice from the Agent to the Company requiring the
failure to be remedied, the Company shall have failed to cure such default;
or
(b) any of the Relevant Representations and Warranties made or
deemed to be repeated during the Certain Funds Period is incorrect in any
respect when made or deemed to be repeated, in each case by reference to
the facts and circumstances then subsisting; or
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(c) any Event of Default with respect to any Credit Party pursuant
to Section 9.01(f) or (g); or
-------------- -
(d) an order is made for the winding up of Bidco Holding, Bidco, the
Target or any Material Target Subsidiary, provided that this clause (d)
---------
shall not apply to any members' voluntary or other solvent winding up on
terms previously approved by the Agent; or
(e) an administration order is made in relation to or an
administrative or other receiver or manager is appointed of Bidco Holding,
Bidco, the Target, Van de Steeg Packaging B.V., James Upton B.V., James
Upton-Swindon Limited, James Upton Limited, Printing Resources Limited and
Sonicon Limited) or any such Person is not Solvent; or
(f) a resolution is passed for the winding up of Bidco Holding,
Bidco, the Target or any Material Target Subsidiary provided that this
paragraph(e) shall not apply to any members' voluntary or other solvent
winding up on terms previously approved by the Agent;
; provided, however, that in the event that a Default or Event of Default shall
have occurred during the Certain Funds Period that would not constitute a
Relevant Event of Default, the Credit Parties hereby acknowledge and agree that
the Agent and the Lenders shall not be deemed to have waived such Default or
Event of Default by the making of any Term Loan A or any Term Loan B to the
Company during the Certain Funds Period and that such Default or Event of
Default shall be continuing and otherwise actionable in accordance with the
terms of this Agreement.
9.03 Remedies.
--------
(a) If any Event of Default (or during the Certain Funds Period, a
Relevant Event of Default) occurs, the Agent shall, at the request of, or may,
with the consent of, the Majority Lenders:
(i) declare the commitment and obligation of each Lender to
make Loans and any obligation of the Issuing Bank to Issue Letters of
Credit to be terminated, whereupon such commitments and obligation shall be
terminated;
(ii) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing under
any outstanding Letters of Credit (whether or not any beneficiary shall
have presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under such Letters of Credit) to be
immediately due and payable (including, without limitation, satisfying the
obligations under paragraph (c) below), and declare the unpaid principal
amount of all outstanding Loans, all interest accrued and unpaid thereon,
and all other amounts owing or payable hereunder or under any other Loan
Document to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived by the Company;
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(iii) exercise on behalf of itself and the Lenders all rights
and remedies available to it and the Lenders under the Loan Documents or
applicable law;
(iv) notify the AGI Bond Issuer, Klearfold Bond Issuer, the AGI
Trustee and/or the Klearfold Trustee that an Event of Default has occurred
hereunder (including without limitation delivering the notice in the form
of Exhibit 6 to the AGI Letter of Credit, which Event of Default shall be
deemed to include a default under Section 6 of the AGI Reimbursement
Agreement) and ask them to take any and all appropriate actions including,
without limitation, accelerating the maturity of the AGI Bonds and
Klearfold Bonds and requiring drawings against the AGI Letter of Credit and
Klearfold Letter of Credit in respect thereof;
(b) If an Event of Default exists: (i) the Agent shall have for the
benefit of the Lenders, in addition to all other rights of the Agent and the
Lenders, the rights and remedies of a secured party under the UCC; (ii) the
Agent may, at any time, take possession of the Collateral and keep it on the
applicable Credit Party's or any Subsidiary Guarantor's premises, at no cost to
the Agent or any Lenders, or remove any part of it to such other place or places
as the Agent may desire, or the Company shall, upon the Agent's demand, at the
Credit Party's cost, assemble the Collateral and make it available to the Agent
at a place reasonably convenient to the Agent; and (iii) the Agent may sell and
deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as the Agent deems advisable, in
its sole discretion, and may, if the Agent deems it reasonable, postpone or
adjourn any sale of the Collateral by an announcement at the time and place of
sale or of such postponed or adjourned sale without giving a new notice of sale.
Without in any way requiring notice to be given in the following manner, each
Credit Party agrees that any notice by the Agent of sale, disposition or other
intended action hereunder or in connection herewith, whether required by the UCC
or otherwise, shall constitute reasonable notice to a Credit Party if such
notice is mailed by registered or certified mail, return receipt requested,
postage prepaid, or is delivered personally against receipt, at least ten (10)
Business Days prior to such action. The Agent is hereby granted a license or
other right to use, without charge, the Credit Parties' and the Subsidiary
Guarantors' labels, patents, copyrights, name, trade secrets, trade names,
trademarks, and advertising matter, or any similar property, in completing
production of, advertising or selling any Collateral, and the Credit Parties'
and the Guarantors' rights under all licenses and all franchise agreements shall
inure to the Agent's benefit. The proceeds of sale shall be applied in
accordance with this Agreement and the Credit Parties shall remain liable for
any deficiency.
(c) If any Letter of Credit is outstanding upon the termination of
this Agreement or the Commitments or if an Event of Default has occurred and is
continuing, then upon such termination or during the continuation of such Event
of Default the relevant Credit Party shall with respect to each Letter of Credit
then outstanding, as the Majority Lenders, in their sole discretion shall
specify, either (A) deposit with Agent a standby letter of credit (a "Supporting
Letter of Credit") in form and substance satisfactory to the Agent, issued by an
issuer satisfactory to the Agent and in an amount equal to the greatest amount
for which such Letter of Credit may be drawn, under
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which Supporting Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments made by the Agent
and the Revolving Lenders under such Letter of Credit or under any credit
support or enhancement provided through the Agent with respect thereto, or (B)
deposit with BofA cash in amounts necessary to reimburse the Agent and the
Revolving Lenders for payments made or to be made (including, without
limitation, the amount that the Agent estimates will be necessary to cover its
expenses and legal fees in connection therewith) by the Agent or the Revolving
Lenders under such Letter of Credit or under any credit support or enhancement
provided through the Agent with respect thereto, and grant the Agent (on behalf
of the Lenders) a security interest in such deposited funds. Such Supporting
Letter of Credit shall be held by Agent and any deposit of cash shall be held by
BofA, pursuant to Section 2.07(g), for the ratable benefit of the Agent and the
---------------
Revolving Lenders as security for, and to provide for the payment of, the
aggregate undrawn amount of such Letters of Credit remaining outstanding.
(d) Notwithstanding the foregoing, upon the occurrence of any event
specified in Sections 9.01(f) or (g) (in the case of clause (i) of Section
---------------- - -------
9.01(g) upon the expiration of the 60-day period mentioned therein), the
- ------
commitment and obligation of each Revolving Lenders to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit shall automatically
terminate and the unpaid principal amount of all outstanding Revolving Loans and
all interest and other amounts and obligations as aforesaid (including, without
limitation, under clause (c) above) shall automatically become due and payable
without further act of the Agent, the Issuing Bank or any Revolving Lenders.
9.04 Rights Not Exclusive.
--------------------
The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
9.05 Permitted Swap Contract Remedies.
--------------------------------
Notwithstanding any other provision of this Article IX, each swap
----------
provider shall have the right, with prior notice to the Agent, but without the
approval or consent of the Agent or the Lenders, with respect to any Permitted
Swap Obligations of such swap provider, (a)to declare an event of default,
termination event or other similar event thereunder, (b)to determine net
termination amounts in accordance with the terms of such Permitted Swap
Obligation, and (c) to prosecute any legal action against any Credit Party to
enforce net amounts owing to such swap provider.
ARTICLE X
THE AGENT.
10.01 Appointment and Authorization; "Agent"
-------------------------------------
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(a) Each Lender hereby irrevocably (subject to Section 10.09)
-------------
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Lenders with respect
to any Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Agent may agree at the request of
the Majority Lenders to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i)provided to the Agent in this Article X with respect to any acts
---------
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent", as used in this Article X, included the Issuing Bank with
---------
respect to such acts or omissions, and (ii)as additionally provided in this
Agreement with respect to the Issuing Bank.
10.02 Delegation of Duties.
--------------------
The Agent may execute any of its duties under this Agreement or any
other Loan Document by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agent or attorney-in-fact that it selects with reasonable care.
10.03 Liability of Agent.
------------------
None of the Agent-Related Persons shall (i) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by any Credit Party or any Subsidiary or
Affiliate of any Credit Party, or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness,
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genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of any Credit Party or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Credit Party or any of Subsidiary or
Affiliate of any Credit Party.
10.04 Reliance by Agent
-----------------
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the Credit
Parties), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Lenders as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Lenders and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Sections 5.01, 5.02 or 5.03, each Lender that has executed this
------------- ---- ----
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Agent to such
Lender for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the Lender.
10.05 Notice of Default.
-----------------
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest and fees required to be paid to the Agent
for the account of the Lenders, unless the Agent shall have received written
notice from a Lender or the a Credit Party referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Lenders of its receipt of any
such notice. The Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Lenders in accordance with
Article IX; provided, however, that unless and until the Agent has received any
- ---------- -------- -------
such request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.
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10.06 Credit Decision
---------------
Each Lender acknowledges that none of the Agent-Related Persons has
made any representation or warranty to it, and that no act by the Agent
hereinafter taken, including any review of the affairs of each Credit Party and
each of its Subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of each Credit Party and each of its Subsidiaries, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to each Credit Party and each of its Subsidiaries hereunder. Each Lender
also represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of each Credit Party. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of any
Credit Party which may come into the possession of any of the Agent-Related
Persons.
10.07 Indemnification of Agent
------------------------
Whether or not the transactions contemplated hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of a Credit Party and without limiting the
obligation of such Credit Party to do so), pro rata, from and against any and
all Indemnified Liabilities; provided, however, that no Lender shall be liable
for the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of a Credit Party. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
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10.08 Agent in Individual Capacity
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BofA and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, enter into Swap Contracts with,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with a Credit Party and its
Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing
Bank hereunder and without notice to or consent of the Lenders. The Lenders
acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding a Credit Party or its Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Credit Party or such Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, L/C
Obligations and Bidco Loan Notes Credit Support Obligations BofA shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent or the Issuing Bank.
10.09 Successor Agent
---------------
The Agent may, and at the request of the Majority Lenders shall,
resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under
this Agreement, the Majority Lenders shall appoint from among the Lenders a
successor agent for the Lenders which successor agent shall be approved by the
Credit Parties. If no successor agent is appointed prior to the effective date
of the resignation of the Agent, the Agent may appoint, after consulting with
the Lenders and the Credit Parties, a successor agent from among the Lenders.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article X and Sections 11.04 and 11.05 shall inure to its benefit as to any
--------- -------------- -----
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Lenders appoint a successor agent as provided for
above. Notwithstanding the foregoing, however, BofA may not be removed as the
Agent at the request of the Majority Lenders unless BofA shall also
simultaneously be replaced as "Issuing Bank" and "Swing Line Lender" hereunder
pursuant to documentation in form and substance reasonably satisfactory to BofA.
10.10 Withholding Tax
---------------
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Lender agrees with and in favor of the Agent, to deliver to the Agent:
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(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid
under this Agreement; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of a Credit Party to such Lender, such Lender agrees to notify
the Agent of the percentage amount in which it is no longer the beneficial owner
of Obligations of a Credit Party to such Lender. To the extent of such
percentage amount, the Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of a Credit Party to
such Lender, such Lender agrees to undertake sole responsibility for complying
with the withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by clause
(a) of this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
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(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or was not properly executed, or because such
Lender failed to notify the Agent of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective, or for any
other reason) such Lender shall indemnify the Agent fully for all amounts paid,
directly or indirectly, by the Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Lenders under this Section
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
10.11 Collateral Matters
------------------
(a) The Agent is authorized on behalf of all the Lenders, without
the necessity of any notice to or further consent from the Lenders, from time to
time to take any action with respect to any Collateral or the Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to the Collateral
Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i)upon termination of the Commitments and payment in full of all
Loans and all other Obligations known to the Agent and payable under this
Agreement or any other Loan Document; (ii)constituting property sold or to be
sold or disposed of as part of or in connection with any disposition permitted
hereunder; (iii)constituting property in which the Company or any Subsidiary
owned no interest at the time the Lien was granted or at any time thereafter;
(iv)constituting property leased to the Company or any Subsidiary under a lease
which has expired or been terminated in a transaction not prohibited under this
Agreement or is about to expire and which has not been, and is not intended by
the Company or such Subsidiary to be, renewed or extended; (v)consisting of an
instrument evidencing Indebtedness or other debt instrument, if the indebtedness
evidenced thereby has been paid in full; or (vi)if approved, authorized or
ratified in writing by the Majority Lenders or all the Lenders, as the case may
be, as provided in Section 11.01(f). Upon request by the Agent at any time, the
----------------
Lenders will confirm in writing the Agent's authority to release particular
types or items of Collateral pursuant to this Section 10.11(b), provided that
----------------
the absence of any such confirmation for whatever reason shall not affect the
Agent's rights under this Section 10.11.
-------------
(c) While an Event of Default has occurred and is continuing, the
Agent shall deliver a "Payment Blockage Notice" (as defined in the Senior
Subordinated Note Indenture) to the trustee under the Senior Subordinated Note
Indenture at the direction or with the consent of the Majority Lenders.
10.12 Agent as English Trustee
------------------------
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(a) The Agent in its capacity as trustee or otherwise under the
Loan Documents governed by English law:
(i) is not liable for any failure, omission, or defect in
perfecting or registering the security constituted or created by any Loan
Document;
(ii) may accept without inquiry such title as any Credit Party
or any of its Subsidiaries may have to any asset secured by any Loan
Document; and
(iii) is not under any obligation to hold any Loan Document or
any other document in connection with the Loan Documents or the assets
secured by any Loan Document (including title deeds) in its own possession
or take any steps to protect or preserve the same. The Agent may permit any
Credit Party or any of its Subsidiaries to retain any Loan Document or
other document in its possession.
(b) Except as otherwise provided in the Loan Documents governed by
English law, all moneys which under the trusts contained in the Loan Documents
are received by the Agent in its capacity as trustee or otherwise may be
invested in the name of or under the control of the Agent in any investment
authorized by English law for the investment by trustee of trust money or in any
other investments which may be selected by the Agent. Additionally, the same may
be placed on deposit in the name or under the control of the Agent of such
Lender or institution (including the Agent itself) and upon such terms as the
Agent may think fit.
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers
----------------------
No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by the
applicable Credit Party or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Lenders
(or by the Agent at the written request of the Majority Lenders) and the
applicable Credit Party and acknowledged by the Agent, and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and the Credit
Parties and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to Section 9.02);
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(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (iii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any of
them to take any action hereunder;
(e) amend this Section, or Section 2.14, the definition of "Majority
------------
Lenders" or any provision herein providing for consent or other action by all
Lenders; or
(f) release all or substantially all of the Collateral except in
connection with a repayment in full of all Obligations and Loans and a
termination of the Commitments.
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Majority Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Issuing
Bank under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Agent
under this Agreement or any other Loan Document, (iii) no amendment, waiver or
consent shall, unless in writing and signed by the Swing Line Lender in addition
to the Majority Lenders or all Lenders, as the case may be, affect the rights or
duties of the Swing Line Lender under this Agreement, (iv) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed by the
parties thereto.
11.02 Notices
-------
(a) All notices, requests, consents, approvals, waivers and other
communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by facsimile (i) shall be immediately confirmed by a telephone call
to the recipient at the number specified on Schedule 11.02, and (ii) shall be
--------------
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number specified for notices on
Schedule 11.02; or, as directed to a Credit Party or the Agent and/or the Swing
- --------------
Line Lender, as the case may be, to such other address as shall be designated by
such party in a written notice to the other parties, and as directed to any
other party, at such other address as shall be designated by such party in a
written notice to the Company and the Agent.
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(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent and/or the Swing Line
---------- --- -
Lender, as the case may be, shall not be effective until actually received by
the Agent and/or the Swing Line Lender, as the case may be, and notices pursuant
to Article III to the Issuing Bank shall not be effective until actually
-----------
received by the Issuing Bank at the address specified for the "Issuing Bank" on
the applicable signature page hereof.
(c) Any agreement of the Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of a Credit Party. The Agent and the Lenders shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by the
relevant Credit Party to give such notice and the Agent and the Lenders shall
not have any liability to such Credit Party or other Person on account of any
action taken or not taken by the Agent or the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of each Credit Party to repay the
Loans and L/C Obligations shall not be affected in any way or to any extent by
any failure by the Agent and the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and the Lenders of a
confirmation which is at variance with the terms understood by the Agent and the
Lenders to be contained in the telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies
------------------------------
No failure to exercise and no delay in exercising, on the part of
the Agent or any Lender, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
11.04 Costs and Expenses
------------------
Each Credit Party:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within five Business Days after demand (subject to Section
-------
5.01(e)) for all reasonable out-of-pocket costs and expenses incurred by
--------
BofA (including in its capacity as Agent and Issuing Bank) in connection
with the development, preparation, delivery, administration and execution
of, and any amendment, supplement, waiver or modification to (in each case,
whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby,
including, without limitation, reasonable Attorney Costs incurred by BofA
(including in its capacity as Agent and Issuing Bank) with respect thereto
and all fees
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and expenses for title and lien searches, appraisals, surveys, title
commitment and insurance costs and corporate search fees; and
(b) pay or reimburse the Agent and each Lender within five Business
Days after demand (subject to Section 5.01(e)) for all reasonable out-of-
----------------
pocket costs and expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or preservation of
any rights or remedies under this Agreement or any other Loan Document
during the existence of a Default or an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).
11.05 Company Indemnification
-----------------------
Whether or not the transactions contemplated hereby are consummated,
each Credit Party hall indemnify, defend and hold the Agent-Related Persons, and
each Lender and each of its respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs) of any kind or nature whatsoever which may at any time
(including at any time following repayment of the Loans, the termination of the
Letters of Credit and the termination, resignation or replacement of the Agent
or replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of a Credit Party entering
into this Agreement or any document contemplated by or referred to herein, or
the transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or Letters of Credit or the use of the proceeds thereof, whether or
not any Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); provided, that no Credit Party shall have any
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities which have been finally determined by a court of competent
jurisdiction to be the direct and sole result of the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
11.06 Payments Set Aside
------------------
To the extent that a Credit Party makes a payment to the Agent or
the Lenders, or the Agent or the Lenders exercise their right of set-off, and
such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the Agent or
such Lender in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred, and (b) each
Lender severally agrees
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to pay to the Agent upon demand its pro rata share of any amount so recovered
from or repaid by the Agent.
11.07 Successors and Assigns
----------------------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that no Credit Party may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the Agent
and each Lender.
11.08 Assignments, Participations, etc.
--------------------------------
(a) Any Lender may, with the written consent of the Agent, the
Issuing Bank, Swing Line Lender and, so long as no Default or Event of Default
has occurred and is continuing, the Company, which consents shall not be
unreasonably withheld, at any time assign and delegate to one or more Eligible
Assignees (provided that no written consent of the Agent, the Issuing Bank, the
Swing Line Lender or the Company shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender) (each an "Assignee") all of, or any part of, the
Loans, the Commitments, the L/C Obligations and the other rights and obligations
of such Lender hereunder, in a minimum aggregate Dollar Equivalent of $5,000,000
(or, if less, the entire amount of such Lender's Loans and Commitments, and such
Loans and Commitments may consist of the Revolving Loan Commitments, the Term
Loan A Commitments and the Term Loan B Commitments as determined by the
assigning Lender) calculated by aggregating the Commitments, Loans and L/C
Obligations held by an Eligible Assignee which are Affiliates; provided,
however, that each Credit Party and the Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to each Credit Party and the Agent by such Lender and the
Assignee; (ii)such Lender and its Assignee shall have delivered to each Credit
Party and the Agent an Assignment and Acceptance in the form of Exhibit E
("Assignment and Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Lender or Assignee has paid to the Agent a
processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor
Lender that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
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(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in
accordance with Section 11.08(a)), the relevant Credit Party shall execute and
deliver to the Agent, new Notes evidencing such Assignee's assigned Loans and
Commitments and, if the assignor Lender has retained a portion of its Loans and
its Commitments, replacement Notes in the principal amount of the Loans retained
by the assignor Lender (such Notes to be in exchange for, but not in payment of,
the Notes held by such Lender). Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement shall
be deemed to be amended to the extent, but only to the extent, necessary to
reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitments allocated to each Assignee shall
reduce such Commitments of the assigning Lender pro tanto.
(d) Any Lender may at any time sell to one or more commercial banks
or other Persons not Affiliates of a Credit Party (a "Participant")
participating interests in any Loans, the Commitments of that Lender and the
other interests of that Lender (the "originating Lender") hereunder and under
the other Loan Documents; provided, however, that (i)the originating Lender's
obligations under this Agreement shall remain unchanged, (ii)the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) each Credit Party, the Issuing Bank, the Swing Line Lender and the Agent
shall continue to deal solely and directly with the originating Lender in
connection with the originating Lender's rights and obligations under this
Agreement and the other Loan Documents, and (iv)no Lender shall transfer or
grant any participating interest under which the Participant has rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Lenders as required
pursuant to the first proviso to Section11.01. In the case of any such
participation, the Participant shall not have any rights under this Agreement,
or any of the other Loan Documents, and all amounts payable by the Credit
Parties hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Notes held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
(f) No assignee, participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Article IV than
----------
such Lender would have been entitled to receive with respect to the rights
transferred or by reason of the provisions of Article IV requiring
----------
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such Lender to designate a different Applicable Lending office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
11.09 Confidentiality
---------------
Each Lender agrees to take and to cause its Affiliates to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by a
Credit Party and provided to it by a Credit Party or any Subsidiary of a Credit
Party, or by the Agent on such Person's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with any Credit Party or any of its
Subsidiaries; except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by the Lender, or
(ii) was or becomes available on a non-confidential basis from a source other
than a Credit Party, provided that such source is not bound by a confidentiality
agreement with a Credit Party known to the Lender; provided, however, that any
Lender may disclose such information (A) at the request or pursuant to any
requirement of any Governmental Authority to which the Lender is subject or in
connection with an examination of such Lender by any such authority; (B)
pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Agent, any Lender or their respective Affiliates may be party; (E) to
the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Lender's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder;
(H) as to any Lender or its Affiliate, as expressly permitted under the terms of
any other document or agreement regarding confidentiality to which a Credit
Party or any Subsidiary of a Credit Party is party or is deemed party with such
Lender or such Affiliate; and (I) to its Affiliates.
11.10 Set-off
-------
In addition to any rights and remedies of the Lenders provided by
law, if an Event of Default exists or the Loans have been accelerated, each
Lender is authorized at any time and from time to time, without prior notice to
a Credit Party, any such notice being waived by each Credit Party to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the
account of the relevant Credit Party or any Subsidiary Guarantor against any and
all Obligations owing to such Lender, now or hereafter existing, irrespective of
whether or not the Agent or such Lender shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Lender agrees promptly to notify the relevant Credit Party or
any Subsidiary Guarantor and
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the Agent after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
11.11 Automatic Debits of Fees
------------------------
With respect to any principal or interest due on the Loans,
unreimbursed L/C Obligation, Commitment Fees, arrangement fee, letter of credit
fee or other fee, or any other cost or expense (including Attorney Costs) due
and payable to the Agent, the Issuing Bank, the Swing Line Lender or BofA under
the Loan Documents, each Credit Party hereby irrevocably authorizes BofA to
debit any deposit account of the relevant Credit Party with BofA in an amount
such that the aggregate amount debited from all such deposit accounts does not
exceed such fee or other cost or expense. If there are insufficient funds in
such deposit accounts to cover the amount of the fee or other cost or expense
then due, such debits will be reversed (in whole or in part, in BofA's sole
discretion) and such amount not debited shall be deemed to be unpaid. No such
debit under this Section shall be deemed a set-off.
11.12 Notification of Addresses, Lending Offices, etc.
------------------------------------------------
Each Lender shall notify the Agent in writing of any changes in the
address to which notices to the Lender should be directed, of addresses of any
Lending Office, of payment instructions in respect of all payments to be made to
it hereunder and of such other administrative information as the Agent shall
reasonably request.
11.13 Counterparts
------------
This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument.
11.14 Severability
------------
The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
11.15 No Third Parties Benefited
--------------------------
This Agreement is made and entered into for the sole protection and
legal benefit of the Credit Parties, the Lenders, the Agent and the Agent-
Related Persons, and their permitted successors and assigns, and no other Person
shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
146
<PAGE>
11.16 Governing Law and Jurisdiction
------------------------------
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF ILLINOIS;
PROVIDED THAT THE PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE CREDIT PARTIES, THE AGENT, THE
ISSUING BANK AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE CREDIT
PARTIES, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH CREDIT PARTY, THE AGENT AND THE LENDERS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY ILLINOIS LAW.
(c) EACH OF THE COMPANY AND KLEARFOLD HEREBY IRREVOCABLY
DESIGNATES, APPOINTS AND EMPOWERS AGI WITH OFFICES ON THE DATE HEREOF AT 1950
RUBY ROAD, MELROSE PARK, ILLINOIS 60160, AS ITS DESIGNEE, APPOINTEE AND AGENT TO
RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH
DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH
OF THE COMPANY AND KLEARFOLD AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND
AGENT IN ILLINOIS ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE AGENT UNDER THIS AGREEMENT. EACH OF THE COMPANY AND
KLEARFOLD FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY
AND KLEARFOLD AT ITS ADDRESS SET FORTH ON SCHEDULE 11.02, SUCH SERVICE TO BECOME
EFFECTIVE 10 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE AGENT UNDER THIS AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY
147
<PAGE>
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT
PARTY IN ANY OTHER JURISDICTION.
11.17 Waiver of Jury Trial
--------------------
EACH CREDIT PARTY, THE LENDERS AND THE AGENT EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Entire Agreement
----------------
Subject to Section 11.21, this Agreement, together with the other
-------------
Loan Documents, embodies the entire agreement and understanding among the Credit
Parties, the Lenders and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof including, without limitation, the
commitment letter among BofA, BancAmerica Robertson Stephens and the Company,
dated February 17, 1998.
11.19 Agent for Service of Process
----------------------------
AGI hereby irrevocably accepts its appointment as agent for service
of process for the Company and Klearfold set forth in Section 11.16(c) and
----------------
agrees that it (i) shall inform the Agent promptly in writing of any change of
its address in the State of Illinois, (ii) shall terminate any of the agency
relationships created by Section 11.16(c) only upon 60 days prior written notice
----------------
to the Agent, and (iii) shall perform its obligations as such agent in
accordance with the provisions of Section 11.16(c). AGI, as process agent, and
----------------
its successor or successors agrees to discharge the above-mentioned obligations
(and similar duties and obligations to the extent AGI is appointed by any
Subsidiary of a Credit Party under any Loan Document from time to time) and will
not refuse fulfillment of such obligations under Section 11.16(c) or the Loan
----------------
Documents, as the case may be.
148
<PAGE>
AGI agrees that it will maintain an office in Melrose Park, Illinois until such
time as the Company and Klearfold shall have entered into a letter agreement in
form and substance satisfactory to the Agent appointing another agent for
service of process in the State of Illinois, which agent shall be acceptable to
the Agent.
11.20 Judgment Currency
-----------------
If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under any other Loan Document in one
currency into another currency, the rate of exchange used shall be that at which
in accordance with normal banking procedures the Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given. The obligation of any Credit Party in respect of any
such sum due from it to the Agent or any Lender hereunder or under the other
Loan Documents shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than that in which such sum is denominated in accordance with
the applicable provisions of this Agreement (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by the
Agent or such Lender of any sum adjudged to be so due in the Judgment Currency,
the Agent or such Lender may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency. If the amount of the
Agreement Currency so purchased is less than the sum originally due to the Agent
or such Lender in the Agreement Currency, the Company agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the Agent or such
Lender or the Person to whom such obligation was owing against such loss. If the
amount of the Agreement Currency so purchased is greater than the sum originally
due to the Agent or such Lender in such currency, the Agent or such Lender
agrees to return the amount of any excess to the Company (or to any other Person
who may be entitled thereto under applicable law).
11.21 Amendment and Restatement
-------------------------
(a) On and after the Initial Funding Date, this Agreement will
automatically and without further action of any kind amend and restate in its
entirety the Prior Loan Document and, upon the Initial Funding Date the terms
and provisions of the Prior Loan Document shall, subject to this Section 11.21,
-------------
be superseded hereby and thereby; provided, however, that notwithstanding the
amendment and restatement of the Prior Loan Document by this Agreement, the
Credit Parties shall continue to be liable to BofA and the Agent-Related Persons
(as defined in the Prior Loan Document)with respect to agreements on the part of
the Credit Parties under the Prior Loan Document to indemnify and hold BofA
(individually and as Agent) and the Agent-Related Persons harmless from and
against all claims, demands, liabilities, damages, losses, costs, charges and
expenses to which BofA (individually and as Agent) and the Agent-Related Persons
may be subject arising in connection with any action taken, failure to take
action or transaction contemplated in or under the Prior Loan Document during
the period that such agreement was in effect. Without limiting the generality of
the foregoing, Section 11.05 and 4.01, 4.03, 4.04, and 4.09 of the Prior Loan
------------- ---- ---- ---- ----
Document shall not be superseded, modified or otherwise affected by this
Agreement.
149
<PAGE>
(b) Notwithstanding the amendment and restatement of the Prior Loan
Document by this Agreement, the Loans under, and as defined in, the Prior Loan
Document ("Continuing Loans") owing to the Lenders by the Company and the L/C
Borrowers remain outstanding as of the date hereof, and will remain outstanding
as of the Initial Funding Date, and will constitute continuing Obligations
hereunder and shall continue to be secured by the Collateral.
(c) The Continuing Loans and the Liens securing payment thereof
shall in all respects be continuing, and this Agreement shall not be deemed to
evidence or result in a novation or repayment and re-borrowing of the Continuing
Loans. In furtherance of and without limiting the foregoing (i) all amounts
owing with respect to the Continuing Loans, other than the principal amount
thereof, but including, accrued interest, fees and expenses with respect to the
Continuing Loans shall have been paid currently on and as of the Initial Funding
Date and (ii) from and after the Initial Funding Date, the terms, conditions,
and covenants governing the Continuing Loans shall be solely as set forth in
this Agreement, which shall supersede the Prior Loan Document in its entirety.
(d) In the interim period between the Announcement Date and the
Initial Funding Date, both the Prior Loan Document and this Agreement will be
effective, and the Credit Parties hereby acknowledge and agree that the security
interests and Collateral granted under both such agreements uses the same
Collateral Documents shall secure and support equally both the Obligations under
this Agreement and the Obligations under, and as defined in, the Prior Loan
Document.
[Signature pages to follow]
---------------------------
150
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
IMPAC GROUP, INC.
By: /s/ David C. Underwood
----------------------
Title: Chief Financial Officer
AGI INCORPORATED
By: /s/ David C. Underwood
----------------------
Title: Chief Financial Officer
KLEARFOLD, INC.
By: /s/ David C. Underwood
----------------------
Title: Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION, as Agent
By: /s/ David A. Johanson
----------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
Individually as a Lender, Swing Line
Lender and as the Issuing Bank
By: /s/ George C. Ryan
----------------------
Title: Vice President
<PAGE>
SCHEDULE 1(a)
CALCULATION OF THE MANDATORY COST
(a) The Mandatory Cost for a Loan for each of its Interest Periods is the rate
determined by the Agent to be equal to the following formulae:
in relation to a Loan denominated in Sterling:
BY + S(Y-Z) + F x 0.01 % per annum = Mandatory Cost
----------------------
100-(B + S)
in relation to any other Loan:
F x 0.01 % per annum = Mandatory Cost
--------
300
where on the day of application of the formula:
B is the percentage of the Agent's eligible liabilities (in excess of
any stated minimum) which the Bank of England requires the Agent to
hold on a non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which Sterling deposits are offered by the Reference
Bank to leading banks in the London interbank market at or about 11.00
a.m. on that day for the relevant period;
S is the percentage of the Agent eligible liabilities which the Bank of
England requires the Agent to place as a special deposit;
Z is the interest rate per annum allowed by the Bank of England on
special deposits; and
F is the charge payable by the Agent to the Financial Services Authority
under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations
but where for this purpose, the figure in paragraph 2.02b and 2.03b
will be deemed to be zero expressed in pounds per (Pounds)1 million of
the fee base of the Agent.
(b) For the purposes of this Schedule 3:
(i) "eligible liabilities" and "special deposits" have the meanings given
to them at the time of application of the formula by the Bank of
England; and
<PAGE>
(ii) "fee base" has the meaning given to it in the Fees Regulations;
(iii) "Fees Regulations" means:
(1) prior to 31st March, 1999, the Banking Supervision (Fees)
Regulations 1998; and
(2) on and after 31st March, 1999, any regulations governing the
payment of fees for banking supervision.
(ii) "relevant period" in relation to each Interest Period, means:
(A) if it is three months or less, that Interest Period; or
(B) if it is more than three months, each successive period of three
months and any necessary shorter period comprised in that
Interest Period.
(c) In the application of the formula, B, Y, S and Z are included in the
formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY
is calculated as 0.5 x 15.
(d) If the Agent can not determine a rate for the Agent, the applicable
Mandatory Cost will be determined on the basis of the rate(s) supplied by
reference banks selected by the Agent.
(e) (i) The formula is applied on the first day of each relevant period
comprised in the relevant Interest Period.
(ii) The Agent can not determine each rate calculated in accordance with
the formula is, if necessary, rounded upward to four decimal places.
(e) If the Agent determines that a change in circumstances has rendered, or
will render, the formula inappropriate, the Agent (after consultation with
the Lenders) shall notify the Company of the manner in which the Mandatory
Cost will subsequently be calculated. The manner of calculation so notified
by the Agent shall, in the absence of manifest error, be binding on all the
Parties.
<PAGE>
SCHEDULE 2.01
-------------
COMMITMENTS
-----------
AND PRO RATA SHARES
-------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Revolving
Loan Pro Rata Term Loan Pro Rata Term Loan Pro Rata
Lender Commitment Share A Share B Share
- ------ ---------- ----- - ----- - -----
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bank of
America
National
Trust & $53,000,000 100% $37,000,000 100% $70,000,000 100%
Savings
Association
- ---------------------------------------------------------------------------------------
TOTAL $53,000,000 100% $37,000,000 100% $70,000,000 100%
---------- --- ---------- --- ---------- ---
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 11.02
AGENT AND LENDER NOTICE INFORMATION
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
as Agent
Bank of America National Trust &
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Agency Management Services
Tel: 312/828-6228
Fax: 312/974-9102
AGENT'S PAYMENT OFFICE:
Bank of America National Trust &
Savings Association
Concorde, California
ABA No.: 121-000-358
Account No.: 12334-16101
Attn: AMS #33499
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
as a Lender
Bank of America National Trust &
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Agency Management Services
Tel: 312/828-6228
Fax: 312/974-9102
<PAGE>
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust &
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: George Lyman
Tel: 312/828-6773
Fax: 312/828-1974
Payment Instructions:
Bank of America NT & SA
Concorde, California
ABA No.: 121-000-358
Account No.: 12334-16101
Attn: AMS #33499
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
as Issuing Bank
Bank of America National Trust &
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Gail Miller
Tel: 312/923-5924
Fax: 312/987-6828
Payment Instructions:
Bank of America NT & SA
Concorde, California
ABA No.: 121-000-358
Account No.: 12334-16101
Attn: AMS #33499
<PAGE>
BANK AMERICA
NATIONAL TRUST & SAVINGS ASSOCIATION, as Swing Line Lender
One Alie Street
London E18 DE England
Attn:
Tel:
Fax:
Payment Instructions:
CREDIT PARTY NOTICE INFORMATION
IMPAC Group, Inc.
1950 N. Ruby Street
Melrose Park, Illinois 60160
Attn:David Underwood
Tel: (708) 344-9100
Fax:(708) 344-0083
AGI Incorporated
1950 N. Ruby Street
Melrose Park, Illinois 60160
Attn:David Underwood
Tel:(708) 344-9100
Fax:(708) 344-0083
Klearfold, Inc.
364 Valley Road
Warrington, Pennsylvania 18976
Attn:Daniel Santry
Tel: (215) 443-5065
Fax:(215) 443-7012
<PAGE>
Exhibit 10.59
HERITAGE FUND I, L.P.
HERITAGE FUND II, L.P.
30 Rowes Wharf, Suite 300
Boston, Massachusetts 02110
July 7, 1998
IMPAC Group, Inc.
1950 North Ruby Street
Melrose Park, IL 60160
Attention: Mr. Richard Block
President and Chief Executive Officer
BT Wolfensohn
1 Appold Street
Broadgate
London EC2A 2HE
England
Attention: Mr. Charles Smith
Vice President
Gentlemen:
We are pleased to advise you that Heritage Fund I, L.P., a Delaware limited
partnership ("Heritage Fund I"), and Heritage Fund II, L.P., a Delaware limited
-------- ---- -
partnership ("Heritage Fund II", and together with Heritage Fund I, "Heritage")
-------- ---- -- --------
hereby commit to purchase the Investment Amount (as defined below) of Series A
Common Stock, $0.001 par value per share ("Common Stock"), of IMPAC Group, Inc.,
------ -----
a Delaware corporation (the "Company"), or of such other class of capital stock
-------
of the Company as may be agreed between the Company and Heritage in accordance
with the terms of this commitment letter (together with the Common Stock, being
referred to herein as "Stock"), for the purpose of permitting the Company to
-----
fund the purchase (through its subsidiaries) of the issued and to-be-issued
share capital of [WRAPPER], an English public limited company ("Wrapper"), at
-------
the price per share and on the other terms set forth in the Offer Announcement,
as defined below (such purchase being referred to herein as the "Transaction").
-----------
In the event that either the Company and/or any of its subsidiaries makes
purchases on the open market of Wrapper shares after the date hereof but prior
to the effectiveness of the conditions referred to in Sections 1 and 2 of this
commitment letter, then, and in each case with the prior written consent
<PAGE>
IMPAC Group, Inc.
BT Wolfensohn
July 7, 1998
Page 2
of the other parties to this commitment letter, such purchases shall be funded
by Heritage's making equity contributions to the Company or by Heritage's
purchasing shares of Stock in the amount of the purchase price for such Wrapper
shares. The amount of any purchase price so funded by Heritage, together with
the dollar equivalent (at the spot rate of exchange at 11:00 a.m. London time on
the date of such purchase) of the purchase price for any Wrapper shares
purchased on the open market by Heritage or any of its affiliates after the date
hereof but prior to the effectiveness of the conditions referred to in Sections
1 and 2 below, is referred to herein as the "Open-Market Purchase Amount".
----------- -------- ------
The "Investment Amount", as used in this commitment letter, shall mean an
---------- ------
amount of shares of Stock with an aggregate purchase price in an amount at least
equal to $59,000,000 less the Open-Market Purchase Amount, or, if greater, such
----
amount as may be required so as to ensure that, in completing the Transaction,
the total amount of term loan indebtedness borrowed from Bank of America
National Trust and Savings Association ("BofA") under the BofA Credit Agreement
----
(as defined below) is incurred in compliance with the 2.0 to 1 Fixed Charge
Coverage Ratio under Section 4.09 (Incurrence of Indebtedness and Issuances of
Preferred Stock) of the Indenture, dated as of March 12, 1998 by and between the
Company and State Street Bank and Trust Company, as Trustee, with respect to the
Company's Series A and Series B 10 1/8% Senior Subordinated Notes due March 15,
2008, provided that, in any event the Investment Amount shall not exceed
$65,000,000 less the Open-Market Purchase Amount. The Investment Amount may be
----
reduced below the minimum amount set forth in this paragraph only with the
written consent of BT Wolfensohn, a division of Bankers Trust International PLC
("BTW"), such consent not to be unreasonably withheld or delayed.
---
Heritage shall invest the Investment Amount in the Company by purchases of
shares of Common Stock, at a purchase price per share of not less than $72.25
per share. The Company, by its acceptance hereof, hereby represents and
warrants to Heritage and BTW that, as of the date hereof, the Company has
sufficient authorized and unissued shares of Common Stock to permit the issuance
of shares of Common Stock with an aggregate purchase price of $65,000,000 at a
per-share valuation of not less than $72.25.
Heritage Fund I's commitment to fund the Investment Amount shall not exceed
$11,000,000. It is intended that Heritage Fund II would fund the remainder of
the Investment Amount.
<PAGE>
IMPAC Group, Inc.
BT Wolfensohn
July 7, 1998
Page 3
Heritage will fund the Investment Amount either (a) through mandatory
capital calls upon the limited partners of Heritage Fund I and Heritage Fund II,
respectively, pursuant to and in accordance with their respective Agreements of
Limited Partnership, or (b) through drawings on Heritage's revolving credit
facilities under the Credit Agreement dated as of June 16, 1995, among Heritage
Fund I, Heritage Fund I Investment Corporation and The First National Bank of
Boston (now known as BankBoston, N.A.), and the Credit Agreement dated as of
July 18, 1997, among Heritage Fund II, Heritage Fund II Investment Corporation
and BankBoston, N.A., in each case as amended and in effect from time to time.
For the avoidance of doubt, Heritage hereby confirms that its rights and ability
to make the capital calls described in clause (a) above, or to draw on its
credit facilities described in clause (b) above, are not conditioned upon
fulfillment of either of the conditions set forth in Sections 1 and 2 below.
Heritage's commitment hereunder to purchase the Investment Amount is
subject only to the following conditions:
1. Fulfillment or waiver of the conditions precedent set forth in Section
5.02 of the $160,000,000 Amended and Restated Multicurrency Credit Agreement,
dated as of March 12, 1998, and as amended and restated as of July 6, 1998 (the
"BofA Credit Agreement"), by and among the Company, AGI Incorporated, Klearfold,
---- ------ ---------
Inc., the Lenders referred to therein, and BofA, as Agent, Letter of Credit
Issuing Bank and Swing Line Lender, to the making of the initial "Credit
Extensions" thereunder, other than the condition precedent set forth in Section
5.02(f) of the BofA Credit Agreement requiring completion of the "Equity
Investment" referred to therein.
2. The Offer (the "Offer") under and as defined in the Announcement of
-----
Recommended Cash Offer (the "Offer Announcement") made on the date hereof by
----- ------------
BTW, on behalf of the Company, becoming or being declared unconditional in all
respects.
Heritage shall purchase the Investment Amount upon satisfaction of such
conditions, and the Company shall procure that, not later than for value on the
Initial Funding Date (as defined in the BofA Credit Agreement), the sterling
equivalent (such equivalent being calculated on the same basis as the swap
contract referred to above) of the Investment Amount is paid to the receiving
bank appointed by the Company in
<PAGE>
IMPAC Group, Inc.
BT Wolfensohn
July 7, 1998
Page 4
relation to the Offer, to be held to the order of IMPAC Europe PLC pending the
despatch of consideration proceeds to accepting Wrapper shareholders.
For the avoidance of doubt, should Heritage not purchase the Investment
Amount in accordance with the provisions above, Heritage irrevocably and
unconditionally undertakes to contribute an amount equal to the Investment
Amount to the capital of the Company on or prior to the Initial Funding Date,
and thereafter (A) within forty-five days after the date of the Company's
receipt of the Investment Amount, the Company shall have retained a firm of
independent corporate appraisers or investment bankers with at least ten years'
prior experience in similar valuations and reasonably acceptable to Heritage,
who shall have delivered to the Board of Directors of the Company and to
Heritage an appraisal of the Common Stock (the "Appraisal") setting forth a
---------
calculation of the per-share valuation of the Common Stock after taking into
consideration Heritage's contribution of an amount equal to the Investment
Amount, which Appraisal in the absence of manifest error shall be conclusive and
binding on Heritage and the Company, and (B) within ten days after the date of
the delivery of the Appraisal, the Company shall issue to Heritage Fund I and
Heritage Fund II an aggregate number of shares of Common Stock equal to (x) the
Investment Amount received by the Company, divided by (y) the per-share
valuation of the Common Stock determined in the Appraisal.
Upon the Company's acceptance of this commitment letter as provided below
and in consideration of the time and resources devoted by Heritage to this
transaction, the Company hereby agrees that it will be responsible for all of
Heritage's out-of-pocket expenses, including, without limitation, fees and
disbursements of legal counsel and accountants, whether or not the Transaction
contemplated hereby closes.
Heritage's commitment hereunder shall expire at the time the "Aggregate
Commitment", as defined in the BofA Credit Agreement, is reduced to zero in
accordance with Section 2.07(a) of the BofA Credit Agreement, unless Heritage
shall elect, in its sole and absolute discretion, to extend such commitment.
This commitment letter shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts (other than its conflict-of-
laws rules).
<PAGE>
IMPAC Group, Inc.
BT Wolfensohn
July 7, 1998
Page 5
We are delighted to have this further opportunity to work with you and your
team, and look forward to the successful completion of the Transaction.
Very truly yours,
HERITAGE FUND I, L.P.
By: HF Partners I, L.P.,
its general partner
By: /s/ Michael F. Gilligan
-------------------------------
Title: General Partner
HERITAGE FUND II, L.P.
By: HF Partners II, L.L.C.,
its general partner
By: /s/ Michael F. Gilligan
-------------------------------
Title: Member
Agreed to and Accepted this
7th day of July, 1998
IMPAC GROUP, INC.
By: /s/ Richard Block
-----------------------
Title: President
<PAGE>
IMPAC Group, Inc.
BT Wolfensohn
July 7, 1998
Page 6
BT WOLFENSOHN, a division of
Bankers Trust International PLC
By: /s/ A. Grabowski
--------------------------
Title: Managing Director
<PAGE>
Exhibit 12.1
IMPAC Group, Inc.
Computation of Ratio of Earnings to Fixed Charges
($ in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 31, For the Three Months Ended
----------------------------------------------- --------------------------------
1993 1994 1995 1996 1997 March 31, 1997 March 31, 1998
---- ---- ---- ---- ---- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations
before taxes $3,165 $4,642 $5,695 $4,937 $2,146 $564 ($363)
----------------------------------------------- --------------------------------
Fixed Charges:
Interest expense 1,013 1,020 1,197 2,324 3,469 766 1,222
Appropriate portion (1/3) of rentals 329 418 577 665 678 165 205
----------------------------------------------- --------------------------------
Total fixed charges 1,342 1,438 1,774 2,989 4,147 931 1,427
Capitalized interest 0 0 0 0 0 0 0
----------------------------------------------- --------------------------------
Total Fixed Charges and Capitalized
Interest 1,342 1,438 1,774 2,989 4,147 931 1,427
----------------------------------------------- --------------------------------
Income from continuing operations
before taxes plus fixed charges $4,507 $6,080 $7,469 $7,926 $6,293 $1,495 $1,064
=============================================== ================================
Ratio of earnings to fixed charges and
capitalized interest 3.4 4.2 4.2 2.7 1.5 1.6 0.7
=============================================== ================================
<CAPTION>
Pro Forma Pro Forma w/ Tinsley
------------------------------------- -----------------------------------
Three Months Ended Three Months Ended
Year Ended ----------------------- Year Ended --------------------
December 31, March 31, March 31, December 31, March 31,
1997 1997 1998 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before taxes $5,012 $75 ($1,298) $ 5,253 ($2,232)
-------------------------------------------------------------------------------
Fixed Charges:
Interest expense 11,398 2,845 2,884 21,751 5,494
Appropriate portion (1/3) of rentals 1,530 371 388 3,647 917
-------------------------------------------------------------------------------
Total fixed charges 12,928 3,216 3,272 25,398 6,411
Capitalized interest 16 9 9 16 9
-------------------------------------------------------------------------------
Total Fixed Charges and Capitalized
Interest 12,944 3,225 3,281 25,414 6,420
-------------------------------------------------------------------------------
Income from continuing operations
before taxes plus fixed charges $17,956 $3,300 $1,983 $30,667 $4,188
===============================================================================
Ratio of earnings to fixed charges and
capitalized interest 1.4 1.0 0.6 1.2 0.7
===============================================================================
</TABLE>
