<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission on March 15, 1999
Registration No. 333-_____
______________________________________________________________________
______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________
MAIL-WELL I CORPORATION
AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 2677 84-1250533
-------- (Primary Standard ----------
(State or Other Industrial (I.R.S. Employer
Jurisdiction of Classification Code Identification No.)
Incorporation or Number)
Organization)
23 INVERNESS WAY EAST, SUITE 160
ENGLEWOOD, CO 80112
(303) 790-8023
(Address, Including Zip Code and Telephone Number,
Including Area Code, of
Registrant's Principal Executive Offices)
_________________________
COPIES TO:
Mail-Well, Inc. Herbert H. Davis III Esq.
Roger Wertheimer, Esq. Rothgerber Johnson & Lyons LLP
23 Inverness Way, Suite 160 1200 Seventeenth Street, Suite 3000
Englewood, CO 80112 Denver, Colorado 80202
(303) 790-8023 (303) 623-9000
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service for the Registrant)
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC: As soon as practicable after
this Registration Statement becomes effective.
_________________________
If the securities being registered on this form are being
offered in connection with the formation of a holding
company and there is compliance with General Instruction G,
check the following box. [ ]
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<PAGE>
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant
to Rule 42(d) under the Securities Act, check the following
box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering. [ ]
_________________________
<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE<F1> FEE<F2>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Series B Senior Subordinated
Notes Due 2008 $300,000,000 100% $300,000,000 $88,500
Guarantees of the 8 3/4% Series B
Senior Subordinated Notes Due 2008
by affiliates of Mail-Well I
Corporation <F3> <F3> <F3> <F3>
========================================================================================================
<FN>
<F1> Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457 of the Securities Act of 1933, as
amended.
<F2> Calculated pursuant to Rule 457(f)(2) based on the book value on
March 12, 1999, of the notes to be received by the Registrant in
the exchange described herein.
<F3> Pursuant to Rule 457(n) under the Securities Act of 1933, no
registration fee is required with respect to the guarantees.
</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 this Registration Statement shall become effective on such date
as the Commission, acting pursuant to said section 8(a), may determine.
<PAGE>
<PAGE>
<TABLE>
SCHEDULE OF ADDITIONAL AFFILIATE GUARANTORS
<CAPTION>
Exact Name of Guarantor Primary Standard I.R.S. Employer
Registrants as Specified in State of Industrial Identification
Their Respective Charters Formation Classification Number Number
------------------------- --------- --------------------- ---------------
<S> <C> <C> <C>
Graphics Arts Center, Inc. Delaware 2752 93-1008554
Mail-Well Commercial Printing, Inc. Delaware 2752 84-1461875
Mail-Well Canada Holdings, Inc. Delaware 6719 84-1313090
Mail-Well, Inc. Colorado 6719 84-1250533
Mail-Well Label Holdings, Inc. Colorado 6719 84-1449291
Mail-Well Label USA, Inc. Colorado 2752 84-1449292
Mail-Well West, Inc. Delaware 2677 84-1313079
Murray Envelope Holdings, Inc. Colorado 6719 84-1421627
Murray Envelope Corporation Mississippi 2677 64-0271038
N-M Envelope, Inc. Mississippi 2677 64-0840384
National Graphics Company Colorado 2761 84-0692676
Poser Business Forms, Inc. Delaware 2761 75-2195786
Wisco II, L.L.C. Delaware 2677 84-1313080
Wisco Envelope Corp. Tennessee 2677 62-1555311
</TABLE>
<PAGE>
<PAGE>
****************************************************************************
* THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE *
* CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION *
* STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS *
* EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND *
* IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE *
* THE OFFER OR SALE IS NOT PERMITTED. *
****************************************************************************
Subject to completion, dated March 15, 1999
PROSPECTUS
Offer to Exchange All Outstanding
8 3/4% Senior Subordinated Notes due 2008 for
8 3/4% Series B Senior Subordinated Notes due 2008 of
Mail-Well I Corporation
We are offering, on the terms and conditions described in this
Prospectus, to exchange all of our outstanding 8 3/4% Senior
Subordinated Notes due 2008 for our registered 8 3/4% Series B Senior
Subordinated Notes due 2008. We issued the old notes on December 16,
1998, and a total principal amount of $300 million is outstanding. The
terms of the new notes are identical to the terms of the old notes
except that the new notes are registered under federal securities laws
and will not contain any legends restricting their transfer.
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THE COMPANY:
We are a leader in the highly fragmented printing industry. We operate
in four segments of the printing industry: envelopes, commercial
printing, printing for distributors and labels.
Mail-Well I Corporation is a direct, wholly owned subsidiary of
Mail-Well, Inc., a Colorado corporation, whose common stock is traded on
the New York Stock Exchange under the symbol "MWL"
Unless specifically stated otherwise, all financial information
presented in this Prospectus is that of Mail-Well, Inc. on a
consolidated basis
Mail-Well I Corporation
c/o Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
(303) 790-8023
(303) 397-7400 (Fax)
TRADING FORMAT:
The over-the-counter market. No active public market is anticipated
THESE NOTES:
Maturity: December 15, 2008
Interest Payment: semi-annually in cash in arrears on June 15 and
December 15, commencing June 15, 1999
Redemption: redeemable on or after December 15, 2003, in whole or in
part, at our option. Up to 35% of these notes will be redeemable prior
to December 15, 2001, with the proceeds from common stock offerings in
some circumstances
Ranking: these notes are general unsecured obligations of Mail-Well I
Corporation and:
* are subordinated to indebtedness under our bank credit agreement
* are subordinated to our other senior indebtedness and the senior
indebtedness of the guarantors of the notes
* are of equal rank with our other existing and future indebtedness
(and our other obligations and those of the guarantors) unless the
terms of that indebtedness or other obligations expressly provide
otherwise
Guarantees: these notes are guaranteed by Mail-Well, Inc. and our
domestic operating subsidiaries
THE EXCHANGE OFFER:
Our offer to exchange old notes for new notes will be open until 5:00
p.m., New York City time, on ____________, 1999, unless we extend the
offer
You should carefully review the procedures for tendering the old notes
beginning on page 20 of this Prospectus
If you fail to tender your old notes, you will continue to hold
unregistered securities and your ability to transfer them could be
adversely affected
<PAGE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 13.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is , 1999
------------------<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. . . . . . .3
CURRENCY TRANSLATION . . . . . . . . . . . . . . . . . . . .4
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . .5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . 13
EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . 20
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . 27
COMPARATIVE CONSOLIDATED HISTORICAL FINANCIAL DATA . . . . 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . .29
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 39
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 57
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . 60
DESCRIPTION OF OUTSTANDING INDEBTEDNESS. . . . . . . . . .105
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . .108
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . .111
WHERE YOU CAN FIND MORE INFORMATION. . . . . . . . . . . .112
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . .113
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . .113
Printed by Color-Art Financial Printing
A Mail-Well Company
<PAGE>
<PAGE>
We are not making an offer of the new notes in any jurisdiction
except where an offer or sale is legally permitted. You should
understand that you may be required to bear the financial risks of your
investment until the new notes mature.
Portions of this Prospectus are based on information provided by
us and by other sources that we believe are reliable. We cannot assure
you that this information is accurate or complete. This Prospectus
summarizes certain documents and other information and we refer you to
them for a more complete understanding of what we discuss in this
Prospectus. In making an investment decision, you must rely on your own
examination of our company and the terms of the exchange offer and the
new notes, including the merits and risks involved.
This Prospectus incorporates important business and financial
information about the company that is not included in or delivered with
this Prospectus. This information is available without charge to
security holders upon written or oral request to Mail-Well, Inc.,
Attention: Investor Relations, 23 Inverness Way East, Suite 160,
Englewood, Colorado 80112, telephone: (303) 790-8023. To obtain timely
delivery of such information, you must request the information no later
than _____________, 1999.
We are not making any representation to any purchaser of the new
notes regarding the legality of an investment in the new notes by such
purchaser under any legal investment or similar laws or regulations.
You should not consider any information in this Prospectus to be legal,
business or tax advice. You should consult your own attorney, business
advisor and tax advisor for legal, business and tax advice regarding an
investment in the new notes.
You should rely only on the information contained or incorporated
by reference in this Prospectus. We have not authorized any other
person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this Prospectus
is accurate as of the date on the front cover of this Prospectus only.
Our business, financial condition, results of operations and prospects
may have changed since that date.
BOOK ENTRY FORM
The new notes will be available initially only in book-entry form.
The new notes will be issued in the form of Global Notes and will be
deposited with, or on behalf of, The Depository Trust Company and
registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in such new notes will be shown on, and transfers
thereof will be effected through, records maintained by DTC and its
participants. See "Description of the Notes--Book-Entry; Delivery; Form
and Transfer."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this Prospectus are forward-looking
in nature and are not statements that are historical facts. The
occurrence of the events described, and the achievement of the intended
results, depend on many events, some or all of which are not predictable
or within our control. Actual results may differ materially from those
anticipated in any forward-looking statements. Many risks and
uncertainties are inherent in the printing industry. Others are more
specific to the operations of our company. Many of the significant
risks related to our business are described in this Prospectus. These
include, among others, risks associated with product demand and sales,
growth rate, ability to
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<PAGE>
obtain assumed productivity savings, quality controls, availability of
acquisition opportunities and their related costs, cost savings due to
integration and synergies associated with acquisitions, ability to
obtain additional financing, interest rates, foreign currency exchange
rates, paper and raw material costs, waste paper prices, ability to pass
through paper costs to customers, postage rates, changes in the direct
mail industry, competition, ability to develop new products, effect on
our business resulting from the availability and proliferation of
alternative delivery media such as the Internet, labor costs, labor
relations and advertising costs. See "Risk Factors."
CURRENCY TRANSLATION
We report our financial statements in U.S. dollars. Unless
otherwise indicated, references to dollars or "$" are to U.S. dollars.
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<PAGE>
SUMMARY
The following is a summary of the more detailed information
appearing elsewhere in this Prospectus and in the documents incorporated
herein by reference. You should read the entire Prospectus, including
the "Risk Factors" and the financial statements (including all the
notes). Unless the context otherwise requires, references to "the
Company," mean Mail-Well I Corporation, a Delaware corporation,
references to "the Parent Company" mean Mail-Well, Inc., a Colorado
corporation, and references to "Mail-Well," as well as "we," "us" and
"our" mean, collectively, the Company, the Parent Company and all of
their consolidated subsidiaries. The Parent Company is a holding
company which is not engaged in any business other than holding the
capital stock of the Company.
The data used in this Prospectus are drawn from the financial
condition, results of operations and cash flows of the Parent Company
and its subsidiaries on a consolidated basis. Because the Parent
Company has immaterial operating assets, revenues and expenses (other
than through ownership of the Company), the financial condition and
results of operations of the Company and its subsidiaries on a
consolidated basis do not materially differ from those of the Parent
Company (consolidated). The Parent Company will guarantee all of the
Company's obligations under the new notes.
THE COMPANY
The Company is a leading consolidator in the printing industry,
with revenues of $1.5 billion for the year ended December 31, 1998. The
printing industry is one of the largest and most fragmented industries
in the United States with total estimated 1997 sales of $142 billion
among an estimated 52,000 printing businesses, according to the Printing
Institute of America, Inc. We compete in the following four market
segments of the printing industry:
* Envelopes
* Commercial Printing
* Printing for Distributors
* Labels
Since our inception in February 1994 through March 10, 1999, we
have completed 44 acquisitions in the printing industry, for purchase
prices ranging from $2.5 million to $97.4 million. We are the largest
printer and manufacturer of envelopes in the United States and Canada
and one of the leading commercial printers in the United States. We are
also the largest printer of custom business documents for the
distributor market in the United States and a leading printer of
glue-applied paper labels for the food and beverage industry. We
currently operate 100 printing facilities throughout North America,
serving over 40,000 customers.
We believe that we have competitive advantages in the printing
industry, including the ability to (1) utilize our network of
strategically located plants and sales offices to attract customers that
require production from multiple locations, (2) realize cost savings as
a result of volume related purchases of paper, ink and other raw
materials, (3) reduce overhead expense through the consolidation of most
administrative functions for insurance, employee benefits and financial
management, (4) increase
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<PAGE>
profitability through the optimization of equipment utilization among
facilities, (5) offer customers greater flexibility in meeting their
needs due to more available capacity and equipment capabilities and (6)
combine the responsiveness of a local or regional facility with
resources of a large national company.
Our principal executive offices are located at 23 Inverness Way
East, Suite 160, Englewood, Colorado 80112; our telephone number is
(303) 790-8023.
Please refer to Note 12 of Mail-Well's consolidated financial
statements included elsewhere in this Prospectus for additional
information concerning our operating and geographic segments.
GROWTH STRATEGY
Our objective is to continue to increase our cash flows and
profits, and to maximize shareholder value, through acquisitions and an
operating strategy that enhances operating leverage and achieves cost
efficiencies. The key elements of our strategy include:
* PROVIDING A BROAD RANGE OF QUALITY PRODUCTS AND SERVICES.
* ACQUIRING PROFITABLE BUSINESSES IN MARKETS WITH ATTRACTIVE
GROWTH OPPORTUNITIES.
* USING OUR SIZE TO ACHIEVE COST SAVINGS.
* CONSOLIDATING AND COORDINATING CURRENT OPERATIONS AND
OPERATIONS WE ACQUIRE IN THE FUTURE.
* USING OUR NATIONAL SALES AND MARKETING PROGRAM.
* EXPANDING THE PRODUCTS AND SERVICES WE SELL TO EXISTING
CUSTOMERS AND ADDING NEW CUSTOMERS.
THE PRINTING INDUSTRY
The printing industry is one of the largest and most fragmented
industries in the United States with total estimated 1997 sales of $142
billion among an estimated 52,000 printing businesses according to the
PIA. The printing industry includes envelope printing, general
commercial printing, financial printing, printing and publishing of
books, newspapers and periodicals, quick printing and production of
business forms, labels and greeting cards. Due to the fragmented nature
of the printing industry, we believe an abundance of acquisition
opportunities exist. The printing industry is characterized by a
significant number of locally oriented, privately held businesses, many
of which are viable acquisition candidates. Owners of these independent
companies are often motivated to sell their printing businesses to
access the financial capital and other operating strengths we have to
offer to grow the business, increase their personal financial liquidity
or facilitate retirement. Moreover, by consolidating independent
companies we can achieve the substantial economies of scale of a large
multi-plant and geographically diverse organization.
THE EXCHANGE OFFER
Issuer Mail-Well I Corporation.
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<PAGE>
<PAGE>
Exchange Offer On December 16, 1998, we issued
$300,000,000 aggregate principal amount
of the Company's 8 3/4% Senior
Subordinated Notes due 2008 in a
transaction that was exempt from the
registration requirements of the
Securities Act of 1933, as amended. We
are now offering to exchange $1,000
principal amount of the Company's 8 3/4%
Series B Senior Subordinated Notes due
2008 for each $1,000 principal amount of
old notes. As of the date of this
Prospectus, old notes representing
$300,000,000 aggregate principal amount
are outstanding. The terms of the new
notes and the old notes are identical in
all material respects, except that the
new notes will be freely transferable by
the holders except as otherwise
described in this Prospectus. See
"Description of the Notes."
Based on interpretations by the staff of
the Securities and Exchange Commission,
as set forth in no-action letters issued
to persons unrelated to us, we believe
that new notes issued pursuant to this
exchange offer in exchange for old notes
may be offered for resale, resold or
otherwise transferred by holders without
compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that the new
notes are acquired in the ordinary
course of the holders' business and the
holders have no arrangement with any
person to engage in a distribution of
new notes. Furthermore, each holder,
other than a broker-dealer, must
acknowledge that it is not engaged in,
and does not intend to engage in, a
distribution of the new notes and has no
arrangement or understanding to
participate in a distribution of new
notes. Each broker-dealer that
receives new notes for its own account
in this exchange offer must acknowledge
that it will comply with the prospectus
delivery requirements of the Securities
Act in connection with any resale of the
new notes. Broker-dealers that acquired
old notes directly from us and not as a
result of market-making activities or
other trading activities may not rely on
the staff's interpretations discussed
above or participate in the exchange
offer and must comply with the
prospectus delivery requirements of the
Securities Act in order to resell the
old notes.
Please note that the Commission has not
considered this exchange offer in the
context of a no-action letter and we
cannot be sure that the staff of the
Commission would make a similar
determination with respect to this
exchange offer as it did in the no-
action letters to the unrelated persons.
Registration Rights Agreement We sold the old notes on December 16,
1998, in a private placement relying on
Section 4(2) of the Securities Act. The
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old notes were immediately resold by the
initial purchasers in reliance on Rule
144A under the Securities Act. In
connection with the sale, we entered
into a Registration Rights Agreement
with the initial purchasers requiring us
to make this exchange offer. The
Registration Rights Agreement also
provides that we must use our reasonable
best efforts to (1) cause the
Registration Statement for this exchange
offer to be declared effective within
180 days of the date on which we issued
the old notes and (2) consummate this
exchange offer no earlier than 20 and no
later than 30 business days after the
effective date of the Registration
Statement for this exchange offer.
Expiration Date The exchange offer will expire at 5:00
p.m., New York City time, on
__________________, 1999, or a later
date and time to which we extend it.
Withdrawal You may withdraw your tender of the old
notes pursuant to the exchange offer at
any time prior to 5:00 p.m., New York
City time, on ______________, 1999, or a
later date and time to which we extend
the offer. We will return any old notes
that we do not accept for exchange for
any reason without expense to the
tendering holder as soon as practicable
after the exchange offer expires or
terminates.
Interest on the New Notes
and the Old Notes Interest on the new notes will accrue
from the date of the original issuance
of the old notes or from the date of the
last periodic payment of interest on the
old notes, whichever is later. No
additional interest will be paid on old
notes tendered and accepted for
exchange.
Conditions of the Exchange
Offer The exchange offer is subject to
customary conditions, some of which we
may waive. See "The Exchange Offer--
Conditions of Exchange Offer."
Procedures for Tendering
Old Notes To accept the exchange offer, you must
complete, sign and date the letter of
transmittal in accordance with the
instructions contained in this
Prospectus and in the letter of
transmittal, and send the letter of
transmittal and the old notes and any
other required documentation to the
exchange agent at the following address:
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<PAGE>
State Street Bank and Trust Company,
Exchange Agent
Attn: Corporate Trust Division:
Mail-Well I Corporation
Two International Place
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5376
If you hold the old notes through the
Depository Trust Company, to accept the
exchange offer you must use the DTC's
Automated Tender Offer Program, by which
each tendering participant will agree to
be bound by the letter of transmittal.
By executing or agreeing to be bound by
the letter of transmittal, each holder
will represent to us that, among other
things, (1) the new notes acquired
pursuant to the exchange offer are being
obtained in the ordinary course of
business of the person receiving the new
notes, whether or not the person is the
registered holder of the old notes, (2)
the holder is not engaging in and does
not intend to engage in a distribution
of the new notes, (3) the holder does
not have an arrangement or understanding
with any person to participate in the
distribution of the new notes, and (4)
the holder is not an "affiliate," as
defined under Rule 405 promulgated under
the Securities Act, of the Company.
We will accept for exchange any and all
old notes which are properly tendered
and not withdrawn in the exchange offer
prior to 5:00 p.m., New York City time,
on ______________, 1999. The exchange
agent will deliver the new notes issued
pursuant to the exchange offer promptly
following the expiration date. See "The
Exchange Offer--Terms of the Exchange
Offer; Period for Tendering Old Notes."
Federal Income Tax
Considerations In the opinion of special tax counsel,
the exchange of old notes for new notes
in the exchange offer should not
constitute an exchange of the old notes
under Section 1001 of the Internal
Revenue Code of 1986, as amended. See
"Taxation."
Effect of Not Tendering Old notes that are not tendered or that
are tendered but not accepted will,
following the completion of the exchange
offer, continue to be subject to the
existing restrictions on transfer. We
will have no further obligation to
provide for the registration under the
Securities Act of the old notes.
Holders of old notes do not have any
appraisal or dissenters' rights in
connection with the exchange offer.
Securities $300,000,000 aggregate principal amount
of the Company's8 3/4% Series B Senior
Subordinated Notes due 2008.
Maturity Date December 15, 2008.
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<PAGE>
Interest Payment Dates Interest on the new notes will accrue at
the rate of 8 3/4% per year, payable
semi-annually in cash in arrears on June
15 and December 15 of each year,
commencing June 15, 1999.
Optional Redemption We can redeem the new notes, in whole or
in part, on or after December 15, 2003,
at the redemption prices set forth in
this Prospectus, plus accrued and unpaid
interest. In addition, before December
15, 2001, we can redeem up to 35% of the
new notes at 108.75% of their principal
amount, plus accrued and unpaid
interest, with the net cash proceeds
from common stock offerings in some
circumstances. See "Description of the
Notes--Optional Redemption."
Guarantees The new notes will be unconditionally
guaranteed by the Parent Company (the
owner of all of the outstanding stock of
the Company) as well as by our existing
domestic operating subsidiaries and
significant future domestic operating
subsidiaries. These guarantees will be
subordinated in right of payment to all
existing and future senior indebtedness
of the guarantors, including guarantees
of indebtedness by substantially all of
our domestic subsidiaries under our
existing senior bank credit agreement.
These guarantees will rank equal to
other existing and future senior
subordinated indebtedness of the
guarantors and senior in right of
payment to all of the existing and
future obligations of the guarantors
that are expressly subordinated in right
of payment to the guarantees of the new
notes. See "Description of the
Notes--Note Guarantees; Restrictions on
Parent Company and Subsidiaries."
Change of Control Upon the occurrence of certain change of
control events, you may require us to
repurchase all or a portion of your new
notes at 101% of their principal amount,
plus accrued and unpaid interest. See
"Description of the Notes--Repurchase at
the Option of Holders--Change of
Control."
Ranking The new notes will be general unsecured
obligations of the Company and will rank
equally with all of the Company's other
existing and future senior subordinated
indebtedness and senior in right of
payment to existing and future
obligations expressly subordinated in
right of payment to the new notes. The
new notes will rank junior to all
existing and future senior debt. In
addition, the new notes will effectively
rank junior to all existing and future
indebtedness and other liabilities of
our foreign subsidiaries. See
"Description of the Notes--Subordination."
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<PAGE>
Anti-Layering We will not, and will not permit any of
our subsidiaries to, incur any
indebtedness that is subordinate in
right of payment to any of our senior
debt and senior in right of payment to
the new notes.
Covenants in the Indenture The indenture governing the new notes
contains covenants that, among other
things, limit our ability and the
ability of our subsidiaries to:
* pay or permit payment of dividends
on, or redeem or repurchase,
capital stock;
* make investments;
* incur additional indebtedness;
* allow the imposition of dividend
restrictions on subsidiaries;
* sell assets;
* guarantee indebtedness;
* issue capital stock;
* create liens;
* engage in certain transactions
with affiliates; and
* consolidate or merge or sell all
or substantially all our assets
and the assets of our
subsidiaries.
All of these limitations are subject to
important exceptions and qualifications
described under "Description of the
Notes--Covenants in the Indenture."
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that
are required in order to complete the exchange offer.
RISK FACTORS
An investment in the new notes involves risks associated with our
business, the printing industry and the exchange offer. For a more
detailed discussion of these risks, see "Risk Factors" on page 13.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary of historical consolidated financial data presented
below is derived from the historical audited consolidated financial
statements of the Parent Company and its predecessors, the envelope
business of Georgia-Pacific and Pavey Envelope and Tag Corp., and in the
opinion of management reflect all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of such
information. The operations of the acquisitions accounted for under the
purchase method have been included in the historical income statement
data of the Parent Company from their respective dates of acquisitions.
Amounts derived from the consolidated financial statements for periods
subsequent to February 23, 1994 (inception), have been restated as
appropriate to reflect mergers accounted for as poolings of interests.
The data presented below should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of
Operations, the consolidated financial statements and the related notes
thereto included elsewhere in this document.
- 11 -
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Predecessor
Period Companies
from ---------
Feb. 24 Period
1994 from
Year Ended December 31 through Jan. 1, 1994
----------------------------------------------- December Feb. 23,
1998 1997 1996 1995 1994 1994
---- ---- ---- ---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,504.7 $1,073.9 $944.5 $758.9 $389.3 $36.6
Income (loss) before extraordinary
item 25.8<Fc> 35.0 21.2 15.4 9.4 (1.3)
Net income (loss) 21.7<Fc> 28.9 21.2 13.0 9.4 (1.3)
Earnings per basic share: <Fb>
Income per share before extraordinary
item $ 0.55 $ 0.86 $ 0.53 $ 0.58 $ 0.42 <Fa>
Extraordinary item (0.08) (0.15) -- (0.09) --
-------- -------- ------ ------ ------
Net income per basic share $ 0.47 $0.71 $ 0.53 $ 0.49 $ 0.42 <Fa>
======== ======== ====== ====== ======
Earnings per diluted share: <Fb>
Income per share before extraordinary
item $ 0.53<Fc> $ 0.82 $ 0.52 $ 0.56 $ 0.42 <Fa>
Extraordinary item (0.08) (0.14) -- (0.09) --
-------- $------- ------ ------ ------
Net income per diluted share $ 0.45 $ 0.68 $ 0.52 $ 0.47 0.42 <Fa>
======== ======== ====== ====== ======
Total assets $1,128.0 $ 671.4 $552.0 $582.6 $392.5 N/A
Total long-term debt 583.4 330.4 237.8 347.4 259.1 N/A
Book value per share $ 6.13 $ 3.99 $ 3.29 $ 2.80 $ 1.90 N/A
Ratio of earnings to fixed charges <Fd> 2.1x<Fc> 2.6x 1.9x 1.7x 1.7x N/A
<FN>
- -----------
<Fa> Earnings per share is not presented for these periods as
operations were those of predecessor companies.
<Fb> Earnings per share data has been retroactively restated to reflect
the 3:2 stock split in June 1997 and the 2:1 stock split in June
1998.
<Fc> The 1998 results include an after-tax charge of $21.8 million
($28.9 million pre-tax), or $0.41 per diluted share related to the
restructuring of the Envelopes and Commercial Printing segments
and the termination of a leveraged Employee Stock Ownership Plan
(see Note 11 of notes to the consolidated financial statements
included elsewhere herein). Excluding the restructuring and other
unusual charge, the amounts would be as follows:
Income before extraordinary item $47.6
Net income 43.5
Income per diluted share before extraordinary item 0.94
Ratio of earnings to fixed charges 2.7x
<Fd> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges
(other than capitalized interest) and amortization of previously
capitalized interest. Fixed charges consist of interest expense
and debt issuance cost, capitalized interest and that portion of
rental expenses representative of the interest factor, deemed to
be one-third.
</TABLE>
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<PAGE>
<PAGE>
RISK FACTORS
An investment in the new notes involves a high degree of risk.
You should consider carefully the following factors, in addition to the
other information contained in this Prospectus, in evaluating the risks
of the new notes.
WHAT ARE THE RISKS RELATED TO THE NEW NOTES?
WE HAVE SIGNIFICANT LEVERAGE AND DEBT SERVICE REQUIREMENTS
Our level of debt may affect our operations and our ability to
make payments on the new notes. We have incurred substantial amounts
of debt in order to finance acquisitions and operations. As of
December 31, 1998, our total indebtedness was $591.5 million,
representing approximately 1.98 times total shareholders' equity.
The amount of debt we owe could have several important effects
on future operations of our business. For example:
* our ability to obtain additional financing for working
capital, acquisitions, capital expenditures or other
corporate purposes in the future may be limited;
* a substantial portion of our cash flow from operations is
dedicated to the payment of principal and interest on
indebtedness, and is not available to fund working capital,
capital expenditures, acquisitions and other business
purposes;
* we may be more vulnerable to economic downturns or other
adverse developments than less leveraged competitors;
* borrowings under our bank credit agreement bear interest at
fluctuating rates which could result in higher interest
expense in the event of an increase in interest rates; and
* we may be unable to repurchase all of the new notes tendered
to us if we undergo a change of control (see "Description of
the Notes--Repurchase at the Option of Holders--Change of
Control").
Our ability to make scheduled payments of principal or interest
on, or to reduce or refinance, indebtedness depends on our future
operating performance and resulting cash flow. To some extent, future
performance will be subject to prevailing economic conditions and
financial, competitive and other factors beyond our control. We cannot
be certain, however, that our business, or businesses that we acquire in
the future, will generate sufficient cash flow from operations to enable
us to service all of our debt (including the new notes). We may need
additional funding from either debt or equity offerings in the future in
order to refinance existing debt (including the new notes) or to
continue to grow our business through acquisitions or internally. We
cannot be sure that we will have access to any such sources of funding
on satisfactory terms or on a timely basis or at all.
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<PAGE>
<PAGE>
THERE ARE ADDITIONAL BORROWINGS AVAILABLE TO US
Despite current debt levels, we may be able to incur substantial
additional indebtedness in the future. The terms of the indenture for
the new notes do not fully prohibit us from doing so. Our bank credit
agreement permits additional borrowings of up to $207.0 million and all
of those borrowings would be senior to the new notes and the guarantees
on the new notes. If new debt is added to our current debt levels, the
related risks that we now face could intensify.
See "Selected Historical Consolidated Financial Data,"
"Description of the Notes--Repurchase at the Option of Holders--Change
of Control" and "Description of Outstanding Indebtedness--The Credit
Agreement."
NOT ALL OF OUR SUBSIDIARIES ARE GUARANTORS
Your right to receive payments on the new notes could be adversely
affected if any of our non-guarantor subsidiaries declare bankruptcy,
liquidate or reorganize.
Some but not all of our subsidiaries guarantee the new notes. In
the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness and their
trade creditors will generally be entitled to payment of their claims
from the assets of those subsidiaries before any assets are made
available for distribution to us. As of December 31, 1998, the old
notes were effectively junior to $81.5 million of indebtedness and other
liabilities (including trade payables) of these non-guarantor
subsidiaries. In addition, an indeterminate amount may be available to
those subsidiaries for future borrowing. The non-guarantor subsidiaries
generated 10.3% of our consolidated revenues in the year ended
December 31, 1998, and held 14.6% of our consolidated assets as of
December 31, 1998. See "Description of the Notes--Notes Guarantees;
Restrictions on Parent Company and Subsidiaries." Please refer to Note
14 of Mail-Well's consolidated financial statements included elsewhere
in this Prospectus for additional information concerning guarantor and
non-guarantor subsidiaries.
FRAUDULENT CONVEYANCE LAWS COULD VOID GUARANTEES
Federal and state statutes allow courts, under specific
circumstances, to void guarantees and require noteholders to return
payments received from guarantors.
Under the federal bankruptcy law and comparable provisions of
state fraudulent transfer laws, a guarantee could be voided, or claims
in respect of a guarantee could be subordinated to all other debts of
that guarantor if, among other things, the guarantor, at the time it
incurred the indebtedness evidenced by its guarantee, received less than
reasonably equivalent value or fair consideration for the incurrence of
such guarantee and:
* was insolvent or rendered insolvent by reason of such
incurrence;
* was engaged in a business or transaction for which the
guarantor's remaining assets constituted unreasonably small
capital; or
* intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature.
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<PAGE>
<PAGE>
In addition, any payment by a guarantor of the new notes pursuant
to its guarantee could be voided and required to be returned to the
guarantor, or to a fund for the benefit of the creditors of the
guarantor.
The measures of insolvency for purposes of these fraudulent
transfer laws vary depending upon the law applied in any proceeding
to determine whether a fraudulent transfer has occurred. Generally,
however, a guarantor would be considered insolvent if:
* the sum of its debt, including contingent liabilities, was
greater than the fair saleable value of all of its assets;
* the present fair saleable value of its assets was less than
the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
* it could not pay its debts as they become due.
THE NEW NOTES AND GUARANTEES ARE SUBORDINATED TO SENIOR CREDITORS
The new notes and the guarantees of the new notes are unsecured,
which means that you have no recourse to specific assets of the Company
or the guarantors upon any event of default under the indenture. In
addition, we may borrow up to $300.0 million under an existing bank
credit agreement. Under the terms of the indenture for the new notes,
we may borrow additional funds from our banks in the future, subject to
important limitations. Your right to be repaid principal and interest
on the new notes is secondary to the right of our lenders to be repaid
for all current and future borrowings under the bank credit agreement
and other senior debt. We may also issue additional senior subordinated
debt which will rank equally with your right to be repaid. Your right
to be repaid amounts owing under the guarantees of the new notes ranks
equally to the rights of other senior subordinated obligations of the
guarantors. Under some circumstances, we may also incur secured debt to
creditors who will have the right to be repaid out of specific property.
If we default on the new notes, become bankrupt, liquidate or
reorganize:
* from our remaining assets, you would be entitled to be
repaid only after any secured creditors have been paid out
of proceeds from the sale of their collateral;
* from our remaining assets, you would be paid principal and
interest on the new notes only after all of our senior debt
has been paid; and
* to the extent there are assets available after all of the
foregoing creditors have been paid, then you will be
entitled to be repaid on a pro rata basis with and only to
the extent that there are sufficient assets to repay the
holders of any obligations of the Company and its
subsidiaries which rank equally with the new notes in right
of payment.
In addition, all payments on the new notes and the guarantees will
be blocked in the event of a payment default on senior debt and may be
blocked for up to 179 or 365 consecutive days in the event of certain
non-payment defaults on senior debt.
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<PAGE>
<PAGE>
In the event of a bankruptcy, liquidation or reorganization or
similar proceeding relating to the Company or the guarantors of the new
notes, if we have senior debt, the holders of the new notes will
participate with all other holders of our subordinated indebtedness in
the assets remaining after we have paid all senior debt, including trade
and other general creditors. In any such case, we may not have
sufficient funds to pay all of our creditors in which event holders of
new notes would receive less, ratably, than the holders of senior debt.
If, at the time of a bankruptcy, liquidation, reorganization or similar
proceeding relating to the Company or the guarantors, we had no senior
debt, holders of the new notes would participate ratably with trade and
other general creditors and all other holders of our subordinated
indebtedness in our assets.
As of December 31, 1998, the old notes and the guarantees of the
old notes were subordinated to $139.4 million of senior debt and
approximately $207.0 million was available for borrowing as additional
senior debt under our bank credit agreement. We will be permitted to
borrow substantial additional indebtedness, including senior debt, in
the future under the terms of the indenture for the new notes. See
"Description of the Notes--Covenants in the Indenture--Incurrence of
Indebtedness."
WE MAY NOT BE ABLE TO FINANCE A CHANGE OF CONTROL OFFER
We may not have the ability to raise the funds necessary to
finance the change of control offer required by the indenture for the
new notes.
Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding
notes. However, it is possible that we will not have sufficient funds
at the time of the change of control to make the required repurchase of
notes, or that restrictions in our bank credit agreement will not allow
such repurchases. In addition, certain important corporate events, such
as leveraged recapitalizations that would increase the level of our
indebtedness, would not constitute a "Change of Control" under the
indenture for the new notes. See "Description of the Notes--Repurchase
at the Option of Holders--Change of Control."
THERE IS NO PUBLIC MARKET FOR THE NEW NOTES
The new notes will be a new issue of securities for which there
will be a limited trading market. However, the new notes will be traded
in the over-the-counter market.
The initial purchasers of the old notes have advised us that they
are making a market in the old notes and will do so for the new notes.
However, the initial purchasers are not obligated to continue to do so,
and may discontinue any market-making activities with respect to the new
notes at any time without notice. In addition, such market-making
activities are subject to the limitations imposed by the Securities Act
and the Securities Exchange Act of 1934, as amended, and may be limited
during this exchange offer.
If an active market for the new notes were to develop, the new
notes might trade at prices lower than the initial offering price of the
old notes. The trading price would depend on many factors, such as
prevailing interest rates and the market for similar securities, general
economic conditions and our financial condition, performance and
prospects. We do not intend to apply for listing or quotation of the
new notes on any securities exchange or automated quotation system.
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<PAGE>
<PAGE>
THERE ARE CROSS DEFAULT PROVISIONS IN OUR DEBT INSTRUMENTS
Our bank credit agreement and the indenture for the new notes
contain numerous financial and operating covenants and require us to
meet certain financial ratios and tests. Our failure to comply with the
obligations contained in the bank credit agreement or the indenture
could result in an event of default under the bank credit agreement or
the indenture, which could result in the related debt and the debt
issued under other instruments to become immediately due and payable.
In this event, we would need to raise funds through any number of
alternative available sources, which funds may not be available on
favorable terms, on a timely basis or at all. Alternatively, such a
default would require us to sell assets and otherwise curtail operations
in order to pay our creditors.
WHAT ARE THE RISKS RELATED TO OUR BUSINESS?
THE AVAILABILITY, FINANCING AND INTEGRATION OF ACQUISITIONS ARE
MATERIAL TO OUR BUSINESS
We have grown rapidly through acquisitions. Although we believe
that our experience in making acquisitions is an important asset, we
cannot be certain that current management, personnel and other corporate
infrastructure will be adequate to manage continued growth. In
addition, to the extent that our continued growth and success depend on
making further acquisitions, we cannot be certain that we will be able
to continue to identify and acquire other businesses on favorable terms
or that, if we are able to acquire businesses on favorable terms, we
will be able to successfully integrate the acquired businesses into our
current business or profitably manage them. There may also be increased
competition for acquisition candidates, in which event we may have fewer
acquisition opportunities available to us, or be faced with the prospect
of paying higher prices for target companies, and we may generate less
cash flow as a result.
In addition, the acquisition of target companies outside of our
traditional business of envelope converting and printing may create
additional risks due to management's lack of familiarity with new
markets and other factors. In particular, should we be able to
identify, acquire and successfully integrate acquired businesses into
our own, we may incur substantial costs, delays or other operational or
financial problems in doing so, and we may not be able to profitably
manage them. Furthermore, each particular acquisition may involve a
number of special risks, including possible adverse effects on the
acquired company's operating results, diversion of management's
attention, failure to retain key acquired personnel, unanticipated
events or liabilities and amortization of acquired intangible assets,
some or all of which could have a material adverse effect on our
business, cash flow and profitability.
We may finance future acquisitions through any one of the
following:
* additional indebtedness, under our bank credit agreement or
otherwise;
* cash from operations;
* the issuance of common stock or other securities to the
sellers;
* the sale of common stock or other securities in public or
private offerings; or
* any combination of the above.
In the event that any of these financing structures are
unavailable, our ability to make acquisitions would be limited. We
cannot be certain that we will be able to obtain all the financing we
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<PAGE>
<PAGE>
will need in the future on satisfactory terms or at all. Our failure to
obtain such financing may require us to curtail our growth plans which
may in turn make it more difficult for us to repay our debt.
THE PRINTING BUSINESS DOES NOT GENERALLY USE LONG-TERM AGREEMENTS
The printing industry in which we compete is generally
characterized by individual orders from customers or short-term
contracts. Most of our customers are not contractually obligated to
purchase products or services from us. Most customer orders are for
specific printing jobs, and repeat business largely depends on our
customers' satisfaction with the work we do. Although our business is
not dependent upon any one customer or group of customers, we cannot be
sure that any particular customer will continue to do business with us
for any period of time even though we believe that we have and will
continue to have the ability to provide the highest quality printed
products and services to our customers. In addition, the timing of
particular jobs or types of jobs at particular times of year may cause
fluctuations in the operating results of our various printing operations
in any given quarter.
OUR INDUSTRY IS HIGHLY COMPETITIVE
The North American printing industry in which we compete is
extremely fragmented and highly competitive. In the envelope market, we
compete primarily with a few multi-plant and many single-plant
companies servicing regional and local markets. In the commercial
printing, consumer labels and custom business communications documents
printing markets, we compete against a number of large, diversified and
financially stronger printing companies, as well as regional and local
commercial printers, many of which are capable of competing with us on
volume, price and production quality. We are constantly seeking ways to
reduce our costs and become more efficient competitors, and we believe
that our consolidation strategy in each of our markets has been and will
continue to be successful in achieving these goals. However, we cannot
be certain that these efforts will continue to be successful or that our
competitors will not be more successful in their similar efforts to
reduce costs and become more efficient. If we fail to reduce costs and
increase productivity, we may face decreased profit margins in markets
where we encounter price competition, which in turn could reduce our
cash flow and profitability.
THE UNITED STATES AND CANADIAN POSTAL SERVICES CAN INDIRECTLY
AFFECT OUR BUSINESS
Because the great majority of envelopes used in the United States
and Canada are sent through the mail, postal rates are a significant
factor affecting envelope usage. Historically, increases in postal
rates, relative to changes in the cost of alternative delivery means
and/or advertising media, have resulted in temporary reductions in the
growth rate of mail sent, including direct mail, which is a significant
portion of our envelope volume. The U.S. Postal Commission recently
approved rate increases of approximately 4% for direct mail and 3% for
first class mail, effective January 1999. The Canadian Post Corporation
increased the basic postal rate by approximately 6.7% in 1996,
contributing to a leveling off of the growth rate of mail sent. The CPC
raised rates a further 4.7% in 1998. These postal rate increases are
significantly less than the cumulative rate of inflation since the last
postal rate increases. We cannot be sure that direct mail marketers will
not reduce their volume as a result of these increases. Because rate
increases in the U.S. and Canada are largely outside our control, we can
provide no assurance that future increases in U.S. and/or Canadian
postal rates will not have a negative effect on the level of mail sent,
or the volume of envelopes purchased, in either or both countries. In
such event, we would expect to experience a decrease in cash flow and
profitability or financial position.
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<PAGE>
<PAGE>
WE DEPEND ON GOOD LABOR RELATIONS
As of December 31, 1998, we had approximately 12,100 full-time
employees, of whom approximately 3,000 were members of various local
labor unions. If unionized employees were to engage in a concerted
strike or other work stoppage, or if other employees were to become
unionized, we could experience a disruption of operations, higher labor
costs or both. A lengthy strike could result in a material decrease in
cash flow or profitability.
THE COST AND AVAILABILITY OF PAPER IS MATERIAL TO OUR BUSINESS
The cost of paper represents a significant portion of our cost of
materials. Increases in paper costs could have a material adverse effect
on our business. Historically, we have been able to maintain gross
profit on a dollars per unit basis when paper prices increase by passing
paper price increases on to our customers and by receiving increased
proceeds from waste paper sales. We cannot be certain, however, that we
will be able to continue to pass on future increases in the cost of
paper. Moreover, rising paper costs and their consequent impact on our
pricing could lead to a decrease in our volume of units sold. For
example, successive paper price increases during the latter part of 1995
and early 1996 resulted in a decline in demand for our products,
particularly from the direct-mail advertising industry. Although we
have been successful in negotiating favorable pricing relationships with
paper vendors, the overall paper market is largely beyond our control.
As a result, we cannot be certain that future paper price increases will
not result in decreased volumes and decreased cash flow and
profitability.
Due to the significance of paper in the manufacture of most of our
products, we are dependent upon the availability of paper. During
periods of tight paper supply, many paper producers allocate shipments
of paper based on the historical purchase levels of customers. As a
result of our large volume paper purchases from several paper producers,
we generally have not experienced difficulty in obtaining adequate
quantities of paper, although we have occasionally experienced minor
delays in delivery. Although we believe that our attractiveness to
vendors as a large volume paper purchaser will continue to enable us to
receive adequate supplies of paper in the future, unforeseen
developments in world paper markets coupled with shortages of raw paper
could result in a decrease in supply, which would cause a decrease in
the volume of product we could produce and sell, and a corresponding
decrease in cash flow and profitability.
THE AVAILABILITY OF ALTERNATIVE DELIVERY MEDIA MAY ADVERSELY
AFFECT OUR BUSINESS
Our envelope printing and manufacturing business is highly
dependent upon the demand for envelopes sent through the mail. Such
demand comes from utility companies, banks and other financial
institutions, among others. Our printing business also depends upon
demand for printed advertising and business forms, among others. Usage
of the Internet and other electronic media continues to grow. Consumers
use these media to purchase goods and services, and for other purposes
such as paying utility and credit card bills. Advertisers use them for
targeted campaigns directed at specific electronic user groups. Large
and small businesses use electronic media to conduct business, send
invoices and collect bills. We expect the demand for envelopes and
other printed materials for these purposes to decline. Although we
expect countervailing trends, for example the growth of targeted direct
mail campaigns based upon mailing lists generated by electronic
purchases, to cause overall demand for envelopes and other printed
materials to continue to grow at rates comparable to recent historical
levels, we cannot be certain that the acceleration of the trend towards
electronic media such as the Internet and other
- 19 -
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<PAGE>
alternative media will not cause a decrease in the demand for our
products, which would result in a decrease in our sales, cash flow and
profitability.
ENVIRONMENTAL LAWS MAY AFFECT OUR BUSINESS
Our operations are subject to federal, state and local
environmental laws and regulations relating to air emissions, waste
generation, handling, management and disposal, and at some of our
facilities, wastewater treatment and discharge. In addition, some of
the sellers from whom we have bought businesses in the past have been
designated as potentially responsible parties under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 with
respect to off-site disposal of hazardous waste. We believe that we
have minimal exposure as a result of such designations, as a result of
indemnities obtained in the course of acquisitions or because of the de
minimis nature of the claims, or both. We also believe that our current
operations are in substantial compliance with applicable environmental
laws and regulations. We cannot be certain, however, that currently
unknown matters, new laws and regulations, or stricter interpretations
of existing laws and regulations will not materially affect our business
or operations in the future.
WE DEPEND ON KEY MANAGEMENT
Our success will continue to depend to a significant extent on our
executive officers and other key management personnel. We do not, as a
matter of policy, have employment agreements with executive officers.
We cannot be certain that we will be able to retain our executive
officers and key personnel or attract additional qualified management in
the future. In addition, the success of our acquisitions may depend, in
part, on our ability to retain management personnel of the acquired
companies. We do not carry key-person insurance on any of our
managerial personnel.
YEAR 2000 ISSUES MAY AFFECT OUR BUSINESS
The Year 2000 issue concerns the potential exposures related to
the erroneous generation of business and financial information resulting
from the fact that many computer systems and programs use two digits,
rather than four, to define the applicable year of business
transactions. These programs do not properly recognize a year that
begins with "20" instead of the familiar "19." These programs may
process data incorrectly or stop processing data altogether. We rely
upon our own and vendor-supplied technology and recognize the potential
business risk to our assets and systems associated with the arrival of
the Year 2000. Failure to be Year 2000 compliant could have a material
adverse effect on our results of operations, business, prospects and
financial condition.
EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Company originally issued and sold the $300,000,000 aggregate
principal amount of Senior Subordinated Notes due 2008 on December 16,
1998, in an offering that was exempt from registration under the
Securities Act pursuant to Section 4(2), Rule 144A and Regulation S of
the Securities Act. Accordingly, the old notes may not be transferred
in the United States unless registered under the Securities Act or
unless an exemption from the registration requirements of the Securities
Act and applicable state securities laws is available.
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<PAGE>
As a condition to the sale of the old notes, we entered into a
Registration Rights Agreement dated as of December 16, 1998, with the
initial purchasers of the old notes. In the Registration Rights
Agreement, we agreed to file with the Securities and Exchange Commission
a registration statement under the Securities Act no later than
March 16, 1999, with respect to the $300,000,000 aggregate principal
amount of 8 3/4% Series B Senior Subordinated Notes due 2008 offered by
this Prospectus, and to use our reasonable best efforts to have it
declared effective within 90 days after March 16, 1999. We also agreed
to use our best efforts to cause the registration statement to be
effective continuously, to keep the exchange offer open for a period of
not less than 20 business days and to cause the exchange offer to be
consummated no later than the 30th business day after the registration
statement is declared effective by the Commission. Pursuant to the
exchange offer, holders of the old notes may exchange their old notes
for registered new notes. For each old note surrendered pursuant to the
exchange offer, the holder of the old note will receive a new note
having a principal amount equal to that of the surrendered old note.
Interest on each new note will accrue from the last interest payment
date on which interest was paid on the old note surrendered in exchange
for the new note or, if no interest has been paid on such old note, from
the date the old note was issued. To participate in the exchange offer,
each holder must represent that it is not an "affiliate" of the Company,
as defined in Rule 405 of the Securities Act, 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 that
are issued in the exchange offer, and it is acquiring the new notes in
the exchange offer in its ordinary course of business; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving
new notes in the exchange offer will have a prospectus delivery
requirement with respect to resales of the new notes. The Commission
has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to new notes (other
than a resale of an unsold allotment from the original sale of the old
notes) with this Prospectus. Under the Registration Rights Agreement,
we are required to allow Participating Broker-Dealers and other persons,
if any, with similar prospectus delivery requirements to use this
Prospectus in connection with the resale of the new notes. The Parent
Company filed a copy of the Registration Rights Agreement as an exhibit
to its Annual Report on Form 10-K for the year ended December 31, 1998.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Commission
to persons who are not associated with us, we believe that the new notes
issued in exchange for old notes pursuant to this exchange offer will in
general be freely transferable after this exchange offer without further
registration under the Securities Act and without the holder's delivery
of a prospectus under the Securities Act, if the holder of the new notes
represents as follows: (1) that it is not an "affiliate" (as defined in
Rule 405 of the Securities Act) of the Company; (2) that it is acquiring
the new notes in the ordinary course of its business; (3) that 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 (within
the meaning of the Securities Act) of the new notes; and (4) if such
holder is a broker-dealer, that it will receive new notes for its own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of the new notes.
However, the Commission has not considered this exchange offer in the
context of a no-action letter and there can be no assurance that the
staff of the Commission would make a similar determination with respect
to this exchange offer as it made in the no-action letters to the
unrelated persons. Holders of old notes wishing to accept this exchange
offer must complete and sign the enclosed letter of transmittal which
contains the representations listed in (1), (2), (3) and (4) above, and
which states that the signing holder agrees to comply with its
agreements and covenants set forth in the Registration Rights
- 21 -
<PAGE>
<PAGE>
Agreement. This Prospectus, as it may be amended or supplemented from
time to time, may be used by Participating Broker-Dealers in connection
with resales of new notes received in exchange for old notes where the
old notes were acquired by the Participating Broker-Dealer as a result
of market-making activities or other trading activities. A
Participating Broker-Dealer that signs a letter of transmittal and
delivers a prospectus to purchasers in connection with resales may be
deemed to be an "underwriter" within the meaning of the Securities Act;
however, the holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this
Prospectus and in the letter of transmittal, we will accept for exchange
any and all old notes which are properly tendered on or prior to
_____________, 1999 (the "Expiration Date"), and are not withdrawn as
permitted below. We will issue $1,000 principal amount of new notes in
exchange for each $1,000 principal amount of outstanding old notes
surrendered pursuant to this exchange offer. Old notes may be tendered
only in integral multiples of $1,000.
The form and terms of the new notes are the same as the form and
terms of the old notes except that (1) the new notes will be registered
under the Securities Act and hence the new notes will not bear legends
restricting their transfer and (2) holders of the new notes will not be
entitled to most rights under the Registration Rights Agreement, which
will terminate upon the closing of the exchange offer. The new notes
will evidence the same debt as the old notes and will be issued under,
and be entitled to the benefits of, the same indenture.
As of the date of this Prospectus, an aggregate of $300,000,000 in
principal amount of the old notes is outstanding. This Prospectus,
together with the letter of transmittal, is first being sent on or about
_________________, 1999, to all holders of old notes known to us.
Holders of the old notes do not have any appraisal or dissenters'
rights under the indenture in connection with the exchange offer. We
intend to conduct the exchange offer in accordance with the provisions
of the Registration Rights Agreement and the applicable requirements of
the federal securities laws. See "Description of the Notes--
Registration Rights; Liquidated Damages."
We expressly reserve 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 old notes, by giving
written notice of the extension to the holders as described below.
During the extension, all old notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by the
Company. We will return any old notes not accepted for exchange for any
reason without expense to the tendering holder as promptly as
practicable after the expiration of the exchange offer.
We reserve the right to amend or terminate the exchange offer if
any of the conditions of the exchange offer specified below under "--
Conditions of the Exchange Offer" occur. We will give written notice of
any extension, amendment, nonacceptance or termination to the holders of
the old notes as promptly as practicable. Any extension to be issued by
means of a press release or other public announcement will be issued no
later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
- 22 -
<PAGE>
<PAGE>
PROCEDURES FOR TENDERING OLD NOTES
Your tender to the Company of old notes as described below and our
acceptance of the old notes will create a binding agreement between you
and us upon the terms and subject to the conditions set forth in this
Prospectus and in the letter of transmittal. Except as set forth below,
a holder who wishes to tender old notes for exchange must send a
completed and signed letter of transmittal, including all other
documents required by the letter of transmittal, to the exchange agent,
State Street Bank and Trust Company, at the address set forth below
under "--Exchange Agent" on or before the Expiration Date. In addition,
either (1) certificates for the old notes must be received by the
exchange agent, or (2) a timely confirmation of a book-entry transfer of
the old notes into the exchange agent's account at The Depository Trust
Company pursuant to the procedure for book-entry transfer described
below, must be received by the exchange agent before the Expiration
Date, or (3) the holder must comply with the guaranteed delivery
procedures described below.
The method of delivery of old notes, letters of transmittal and
all other required documents is at the election and risk of the holders.
If the delivery is by mail, it is recommended that registered mail,
properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to assure timely delivery. No letters
of transmittal or old notes should be sent to the Company.
Any beneficial owner whose old notes are registered in the name of
a broker, dealer, commercial bank, trustee or other nominee and who
wishes to tender should contact the registered holder of the old notes
promptly and instruct the registered holder to tender on behalf of the
beneficial owner. If the beneficial owner wishes to tender on its own
behalf, the beneficial owner must, prior to completing and executing the
letter of transmittal and delivering its old notes, either make
appropriate arrangements to register ownership of the old notes in the
beneficial owner's name or obtain a properly completed power of attorney
from the registered holder of the old notes. The transfer of record
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal
need not be guaranteed if the old notes surrendered for exchange are
tendered (1) by a registered holder of the old notes who has not
completed the box entitled "Special Issuance instructions" or "Special
Delivery Instructions" on the letter of transmittal or (2) for the
account of an Eligible Institution (as defined below). In the event
that signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a commercial bank or
trustee having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If old notes are registered in
the name of a person other than a signer of the letter of transmittal,
the old notes surrendered for exchange must be endorsed by the
registered holder, or be accompanied by appropriate powers of attorney
or by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion,
signed by the registered holder with the signature guaranteed by an
Eligible Institution.
We will determine all questions as to the validity, form,
eligibility and acceptance of old notes tendered for exchange in our
sole discretion, and our determination shall be final and binding. We
reserve the absolute right to reject any tenders of any particular old
notes not properly tendered or not to accept any particular old notes
whose acceptance might, in our judgment or the judgment of our counsel,
be unlawful. We also reserve the absolute right to waive any defects or
irregularities or conditions of the exchange offer as to any particular
old notes either
- 23 -
<PAGE>
<PAGE>
before or after the Expiration Date, including the right to waive the
ineligibility of any holder who seeks to tender old notes in the
exchange offer. Our interpretation of the terms and conditions of the
exchange offer as to any particular old notes either before or after the
Expiration Date shall be binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes for
exchange must be cured within a reasonable period of time as we shall
determine. Neither the Company, the exchange agent nor any other person
shall be under any duty to give notification of any defect or
irregularity with respect to any tender of old notes for exchange, nor
shall any of them incur any liability for failure to give the
notification.
If the letter of transmittal or any old 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, those persons should so indicate
when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be
submitted.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the Expiration Date, all
old notes properly tendered and will issue the new notes promptly after
acceptance of the old notes. See "--Conditions of the Exchange Offer"
below. For purposes of the exchange offer, we will be deemed to have
accepted properly tendered old notes for exchange when, as and if we
have given oral or written notice to the exchange agent, with written
confirmation of any oral notice to be given promptly after.
The new notes will bear interest at the same rate and on the same
terms as the old notes. Consequently, cash interest on the new notes
will accrue at a rate of 8 3/4% per annum and will be payable
semiannually in arrears commencing on June 15, 1999, and thereafter on
December 15 and June 15 of each year. Interest, if any, on each new
note will accrue from the last interest payment date on which interest
was paid on the surrendered old note or, if no interest has been paid on
the old note, from the issue date of the old note. Consequently,
holders whose old notes are accepted for exchange will be deemed to have
waived the right to receive any accrued but unpaid interest on the old
notes.
In all cases, the issuance of new notes for old notes that are
accepted for exchange pursuant to the exchange offer will be made only
after timely receipt by the exchange agent of certificates for the old
notes or a timely book-entry confirmation of the old notes into the
exchange agent's account at DTC, a completed and signed letter of
transmittal and all other required documents. If any tendered old notes
are not accepted, or if old notes are submitted for a greater amount
than the holder desires to exchange, the unaccepted or non-exchanged old
notes will be returned without expense to the tendering holder (or, in
the case of old notes tendered by book-entry procedures described below,
the non-exchanged old notes will be credited to an account maintained
with DTC designated by the tendering holder) as promptly as practicable
after the exchange offer expires or terminates.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, we will not
be required to accept for exchange, or to issue new notes in exchange
for, any old notes and may terminate or amend the exchange offer prior
to the Expiration Date, if any of the conditions to the exchange offer
are not met. These conditions include (1) that the exchange offer, or
the making of any exchange by a holder of old notes, does not violate
applicable law or any applicable interpretation of the staff of the
Commission, (2) that no action or proceeding has been instituted or
threatened in any court or by or before any governmental agency or body
with respect to the exchange offer, (3) that there has not been adopted
or enacted any law, statute, rule or regulation, (4) that there has not
been declared by United States federal or New York
- 24 -
<PAGE>
<PAGE>
State authorities a banking moratorium, (5) that trading on the New York
Stock Exchange or generally in the United States over-the-counter market
has not been suspended by order of the Commission or any other
governmental authority and (6) such other conditions as may be
reasonably acceptable to the initial purchasers of the old notes, in
each of clauses (2) through (5), which, in our judgment, would
reasonably be expected to impair our ability to proceed with the
exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will request to establish an account for the
old notes at DTC for the exchange offer within two business days after
the date of this Prospectus, and any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes
by causing DTC to transfer the old notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer.
However, although delivery of old notes may be effected through book-
entry transfer at DTC, the letter of transmittal or facsimile, or an
agent's message, with any required signature guarantees and any other
required documents, must, in any case, be received by the exchange agent
at the address set forth below under "--Exchange Agent" on or before the
Expiration Date or the guaranteed delivery procedures described below
must be complied with.
The term "agent's message" means a message, transmitted by DTC to,
and received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express
acknowledgment from the tendering participant stating that the
participant has received and agrees to be bound by the terms of the
letter of transmittal, and the Company may enforce the letter of
transmittal against the participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes wishes to tender the old
notes and the old notes are not immediately available, or time will not
permit the holder's old notes or other required documents to reach the
exchange agent before the Expiration Date, or the procedure for book-
entry transfer cannot be completed on time, a tender may be effected if
(1) the tender is made through an Eligible Institution; (2) prior to the
Expiration Date, the exchange agent has received from the Eligible
Institution a completed and signed letter of transmittal (or a
facsimile) and notice of guaranteed delivery substantially in the form
provided by the Company, setting forth the name and address of the
holder of the old notes and the amount of old notes, stating that the
tender is being made thereby and guaranteeing that within five Nasdaq
National Market trading days after the date of execution of the notice
of guaranteed delivery the certificates for all physically tendered old
notes, in proper form for transfer, or a book-entry confirmation, and
any other documents required by the letter of transmittal will be
deposited by the Eligible Institution with the exchange agent; and (3)
the certificates for all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation and all other documents
required by the letter of transmittal, are received by the exchange
agent within five Nasdaq National Market trading days after the date of
signing the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent at the address set
forth below under "--Exchange Agent." Any notice of withdrawal must
specify the name of the person who tendered the old notes to be
withdrawn, identify the old notes to be withdrawn (including
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<PAGE>
<PAGE>
the amount of the old notes), and specify the name in which the old
notes are registered, if different from that of the withdrawing holder.
If certificates for old notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates the withdrawing holder must also submit the serial numbers
of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless
the holder is an Eligible Institution. If old notes have been tendered
pursuant to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the account at
DTC to be credited with the withdrawn old notes and otherwise comply
with the procedures of DTC. We will determine all questions as to the
validity, form and eligibility of the notices, and our determination
shall be final and binding on all parties. Any old notes so withdrawn
will be deemed not to have been validly tendered for exchange for
purposes of the exchange offer. Any old notes that have been tendered
for exchange but that are not exchanged for any reason will be returned
to the holder without cost to the holder (or, in the case of old notes
tendered by book-entry transfer into the exchange agent's account at DTC
pursuant to the book-entry transfer procedures described above, the old
notes will be credited to an account with DTC specified by the holder)
as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn old notes may be
re-tendered by following one of the procedures described under "--
Procedures for Tendering Old Notes" above at any time on or before the
Expiration Date.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the
exchange agent for the exchange offer. All signed letters of
transmittal should be directed to the exchange agent at the address set
forth below. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery should be directed to the
exchange agent addressed as follows:
Delivery to: State Street Bank and Trust Company, Exchange Agent
Two International Place, Fourth Floor
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5290
Attention: Susan Lavey, Corporate Actions
Delivery of a letter of transmittal to an address other than as
set forth above or transmission of instructions via facsimile other than
as set forth above does not constitute a valid delivery of the letter of
transmittal.
FEES AND EXPENSES
We will pay the cash expenses we will incur in connection with the
exchange offer. Also, in connection with the registration statement for
the new notes, we will reimburse the holders for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the
holders of a majority in principal amount of the old notes for whose
benefit the registration statement has been prepared.
- 26 -
<PAGE>
<PAGE>
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a
result of the exchange offer. The expenses of the exchange offer will
be amortized over the term of the new notes.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be
required to pay any transfer taxes, except that holders who instruct the
Company to register new notes in the name of, or request that old notes
not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be responsible
for paying any applicable transfer tax.
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that
are required in order to complete the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Holders of the
old notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take. See "Taxation."
The old notes that are not exchanged for the new notes in the
exchange offer will remain restricted securities. Accordingly, those
old notes may only be transferred (1) to the Company or any of its
subsidiaries, (2) to a person whom the seller reasonably believes is a
qualified institutional buyer purchasing for its own account or for the
account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (3) in an offshore transaction meeting the
requirements of Rule 903 or Rule 904 under the Securities Act, (4) in a
transaction meeting the requirements of Rule 144 under the Securities
Act, (5) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
acceptable to the Company), or (6) pursuant to an effective registration
statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other
applicable jurisdiction. See "Description of the Notes--Registration
Rights; Liquidated Damages."
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new
notes or the consummation of this exchange offer or any sale of new
notes to any broker-dealer.
COMPARATIVE CONSOLIDATED HISTORICAL FINANCIAL DATA
The comparative consolidated historical financial data for the
periods ended December 31, 1994, through 1998 are derived from our
audited consolidated financial statements and notes.
Since the information presented below is only a summary and does
not provide all of the information contained in our financial
statements, including the related notes, you should read "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements.
- 27 -
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
FEB. 24, 1994
(INCEPTION)
THROUGH DEC. 31 YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $389,262 $758,903 $944,494 $1,073,937 $1,504,686
Costs of sales 302,374 596,359 740,665 834,212 1,185,373
-------- -------- -------- ---------- ----------
Gross profit 86,888 162,544 203,829 239,725 319,313
Selling, administrative and other 58,870 105,739 133,697 53,897 200,193
Restructuring and other unusual charge -- -- -- -- 28,922
Merger costs -- -- -- -- 3,318
-------- -------- -------- ---------- ----------
Operating income 28,018 56,805 70,132 85,828 86,880
Interest expense 16,456 33,154 34,869 30,157 38,127
Other (income) expense (991) 152 478 (2,088) (1,036)
Provision for income taxes 3,134 8,118 13,627 22,783 23,948
Extraordinary charge -- 2,412 -- 6,100 4,132
-------- -------- -------- ---------- ----------
Net income $ 9,419 $ 12,969 $ 21,158 $ 28,876 $ 21,709
======== ======== ======== ========== ==========
OTHER DATA:
Depreciation and amortization<F1> 11,665 19,262 25,949 26,373 39,640
Capital expenditures 28,229 24,977 22,039 36,838 87,335
Ratio of earnings to fixed charges<F2> 1.7x 1.7x 1.9x 2.6x 2.1x
<CAPTION>
DECEMBER 31
-------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT YEAR END):
Working capital (including cash and
cash equivalents) $ 79,313 $101,305 $ 32,225 $105,442 $ 152,198
Total assets 392,459 582,567 551,986 671,411 1,127,956
Total debt (including current maturities) 280,606 348,923 258,394 337,152 583,580
Shareholders' equity 43,778 121,999 143,411 171,820 299,375
<FN>
- ------------
<F1> Depreciation and amortization excludes amortization of deferred
financing costs, which is included in interest expense.
<F2> For purposes of computing the ratio of earnings to fixed charges,
earnings consist of income before income taxes plus fixed charges
(other than capitalized interest) and amortization of previously
capitalized interest. Fixed charges consist of interest expense
and debt issuance cost, capitalized interest and that portion of
rental expenses representative of the interest factor, deemed to
be one-third.
</TABLE>
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<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the consolidated
historical financial statements and related notes of the Parent Company
and its subsidiaries included elsewhere in this Prospectus. In addition
to the historical information contained herein, this report contains
forward-looking statements. The reader of this information should
understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. Mail-
Well's actual results could differ materially from those suggested by
such forward-looking statements. Factors which could cause or
contribute to such differences include, but are not limited to, product
demand and sales, growth rate, ability to obtain assumed productivity
savings, quality controls, availability of acquisition opportunities and
their related costs, cost savings due to integration and synergies
associated with acquisitions, ability to obtain additional financing and
bank debt restructuring, interest rates, foreign currency exchange
rates, paper and raw material costs, waste paper prices, ability to pass
through paper costs to customers, postage rates, changes in the direct
mail industry, competition, ability to develop new products, labor
costs, labor relations and advertising costs. This entire Prospectus
should be read to put such forward-looking statements in context and to
gain a more complete understanding of the uncertainties and risks
involved in Mail-Well's business.
OVERVIEW, HISTORICAL FINANCIAL DATA BY SEGMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales
Envelopes $ 795,881 $ 709,531 $638,153
Commercial printing 522,801 353,977 306,341
Printing for distributors 113,590 10,429 --
Labels 72,414 -- --
---------- ---------- --------
Total net sales 1,504,686 1,073,937 944,494
---------- ---------- --------
Operating income
Envelopes 88,241 82,212 68,440
Commercial printing 34,519 20,273 15,341
Printing for distributors 8,943 532 --
Labels 4,280 -- --
Corporate (16,863) (17,189) (13,649)
Restructuring and other unusual charge (28,922) -- --
Merger costs (3,318) -- --
---------- ---------- --------
Total operating income 86,880 85,828 70,132
Interest expense (38,127) (30,157) (34,869)
Other income (expense) 1,036 2,088 (478)
Income tax expense (23,948) (22,783) (13,627)
---------- ---------- --------
Income before extraordinary item 25,841 34,976 21,158
Extraordinary item, net of tax benefit (4,132) (6,100) --
---------- ---------- --------
Net income $ 21,709 $ 28,876 $ 21,158
========== ========== ========
</TABLE>
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<PAGE>
<PAGE>
YEAR ENDED DECEMBER 31, 1998, COMPARED TO THE YEAR ENDED DECEMBER 31,
1997
Net sales for 1998 increased 40.1% to $1,504.7 million compared to
net sales of $1,073.9 million for 1997. This increase in net sales was
attributable to sales from companies acquired during 1998, a full year
of sales from companies acquired during 1997 and internal growth in each
segment, offset by declines in the Canadian exchange rate and pricing
declines. Gross profit of $319.3 million for 1998 represents a 33.2%
increase over 1997. Expressed as a percent of net sales, gross profit
decreased by 1.1% to 21.2% for 1998 compared to 22.3% for 1997 primarily
due to the impact of acquisitions. Expressed as a percent of net sales,
selling, administrative and other expense decreased 1.0% to 13.3% in
1998 from 14.3% in 1997 due to efficiency improvements as a result of
the assimilation of acquisitions. Operating income, before
restructuring and other unusual charge (see Note 11 of the Notes to
Consolidated Financial Statements) and merger costs, of $119.1 million
for 1998 increased 38.8% from 1997 primarily due to acquisitions.
Earnings for 1998 before extraordinary item and restructuring and
other unusual charge increased 36.0% to $47.6 million from $35.0 million
in the prior year. Earnings per diluted share before extraordinary item
and the effect of the restructuring and other unusual charge increased
14.6% to $0.94 in 1998 from $0.82 in 1997. Due primarily to the effect
of the restructuring and other unusual charge, earnings per diluted
share decreased to $0.45 in 1998 from $0.68 in 1997.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO THE YEAR ENDED DECEMBER 31,
1996
Net sales for 1997 increased to $1,073.9 million, 13.7% higher
than net sales of $944.5 million for 1996. This increase in net sales
was primarily attributable to a full year of sales from companies
acquired during 1996 and acquisitions in 1997. Excluding acquisitions,
sales volume increases for 1997 were offset by price declines
attributable to the pass through of lower paper cost and competitive
pressure. Gross profit of $239.7 million for 1997 reflected a 17.6%
increase over 1996. Expressed as a percent of net sales, gross profit
increased by 0.7% to 22.3% for 1997 compared to 21.6% for 1996. This
increase was mainly due to reductions of material cost as a percent of
sales resulting from mix changes and efficiency improvements. Expressed
as a percent of net sales, selling, administrative and other expense
increased 0.1% to 14.3% in 1997 from 14.2% in 1996. Operating income,
expressed as a percent of net sales increased from 7.4% in 1996 to 8.0%
in 1997 primarily due to efficiency gains from assimilation of
acquisitions.
Income before extraordinary item for the year ended December 31,
1997, was $35.0 million, an increase of 65.3% over the same period in
1996. Earnings per diluted share before extraordinary item increased
57.7% to $0.82 for 1997, up from $0.52 for 1996.
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
ENVELOPES
The following table presents historical financial data for the
Envelopes operations of Mail-Well, including acquisitions from their
purchase dates.
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------
1998 1997 1996
-------------------- -------------------- --------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $795,881 100.0% $709,531 100.0% $638,153 100.0%
Cost of sales 615,590 77.3 543,217 76.6 495,278 77.6
Operating expenses 92,050 11.6 84,102 11.8 74,435 11.7
-------- ----- -------- ----- -------- -----
Operating income $ 88,241 11.1 $ 82,212 11.6 $ 68,440 10.7
======== ===== ======== ===== ======== =====
</TABLE>
Year Ended December 31, 1998, Compared to the Year Ended December 31,
1997
Net Sales. Net sales in sales increased by $86.4 million (12.2%)
for the year ended December 31, 1998 compared to the year ended December
31, 1997. The average selling price per thousand units increased 6.5%
to $20.79 for the year ended December 31, 1998, from $19.52 for the year
ended December 31, 1997, due to companies acquired in 1997 and 1998
selling higher value added product. Excluding acquisitions, the average
selling price per thousand units decreased 3.0% in 1998 compared to 1997
due to lower paper costs. Because paper cost changes have historically
been passed through to customers, Mail-Well uses volumes of units sold
and material gross margin (that is, net sales less cost of materials net
of waste recovery revenue) as revenue trend indicators in its envelope
operations. Unit volume increased 5.2% to 38.3 billion units for the
year ended December 31, 1998 from 36.4 billion units for the year ended
December 31, 1997, driven by the impact of acquisitions and internal
growth. Material gross margin per thousand units sold increased 6.7% to
$12.03 for the year ended December 31, 1998 from $11.27 for the year
ended December 31, 1997.
Cost of Sales. Total cost of sales, as a percent of sales,
increased from 76.6% for the year ended December 31, 1997 to 77.3% for
the year ended December 31, 1998, primarily due to the effect of
acquisitions. Cost of sales includes paper net of waste recovery
revenue, labor, depreciation and other manufacturing and distribution
costs. Before the effect of higher cost products from acquisitions,
material cost per thousand units sold decreased 3.2% in 1998 versus 1997
due primarily to lower paper costs. On a per thousand units sold basis,
other manufacturing and distribution costs, excluding the product mix
effect from acquisitions, decreased 2.0% in 1998 compared to 1997.
Inflationary cost increases were offset by efficiency improvements and
volume increases.
Operating expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1998,
operating expenses, as a percent of sales, decreased 0.2% to 11.6% from
11.8% in the prior year due to efficiency improvements as acquisitions
were assimilated in 1998.
Year Ended December 31, 1997, Compared to the Year Ended December 31,
1996
Net Sales. Net sales in sales increased by $71.4 million (11.2%)
for the year ended December 31, 1997, compared to the year ended
December 31, 1996, due to acquisitions. The average selling price per
thousand units decreased 2.8% to $19.52 for the year ended December 31,
1997, from $20.08 for the year ended December 31, 1996, due to product
mix changes as a result of acquisitions as well as lower paper costs.
Because paper cost changes have historically been passed through to
customers, Mail-Well uses volumes of units sold and material gross
margin (that is, net sales less cost of materials net of waste recovery
revenue) as revenue trend indicators in its envelope operations. Unit
volume increased 14.5% to 36.4 billion units for the year ended December
31, 1997 from 31.8 billion units for the year ended
- 31 -
<PAGE>
<PAGE>
December 31, 1996, driven by the impact of acquisitions and internal
growth. Material gross margin per thousand envelopes sold increased
2.5% to $11.27 for the year ended December 31, 1997, from $10.99 for the
year ended December 31, 1996.
Cost of Sales. Total cost of sales, as a percent of sales,
decreased from 77.6% for the year ended December 31, 1996 to 76.6% for
the year ended December 31, 1997. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material cost per thousand units sold decreased
9.2% in the year ended December 31, 1997, versus 1996 due primarily to
lower paper costs. On a per thousand units sold basis, other
manufacturing and distribution costs increased 3.1% in the year ended
December 31, 1997 versus 1996, due primarily to inflationary cost
increases offset by efficiency improvements and volume increases, as
well as the product mix effect from acquisitions.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1997,
operating expenses, as a percent of sales, increased 0.1% to 11.8% from
11.7% compared to the prior year, primarily as a result of the decrease
in selling prices. On a per thousand units sold basis, operating
expenses decreased 1.3% in the year ended December 31, 1997 versus 1996,
due to efficiency improvements and assimilation of acquisitions offset
by inflationary cost increases.
COMMERCIAL PRINTING
The following table presents historical financial data for the
Commercial Printing segment, including acquisitions from their purchase
dates. The results also include those of the merged businesses
described in Note 2 to the Consolidated Financial Statements (accounted
for under the pooling of interests method), except that the results of
IPC Graphics have been included with the Printing for Distributors
segment beginning January 1, 1997.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $522,801 100.0% $353,977 100.0% $306,341 100.0%
Cost of sales 415,902 79.6 280,069 79.1 245,192 80.0
Operating expenses 72,380 13.8 53,635 15.2 45,808 15.0
-------- ----- -------- ----- -------- -----
Operating income $ 34,519 6.6 $ 20,273 5.7 $ 15,341 5.0
======== ===== ======== ===== ======== =====
</TABLE>
Year Ended December 31, 1998, Compared to the Year Ended December 31,
1997
Net Sales. Net sales for the year ended December 31, 1998, were
up 47.7% over the year ended December 31, 1997, primarily due to
acquisitions in 1997 and 1998. Without acquisitions net sales were
essentially unchanged, as volume gains in the financial services sector
and advertising literature were offset by declining paper prices.
Cost of Sales. Total cost of sales, as a percent of sales,
increased from 79.1% for the year ended December 31, 1997 to 79.6% for
the year ended December 31, 1998. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material
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<PAGE>
<PAGE>
costs net of waste recovery revenue, as a percentage of sales, were
35.6% and 34.2% for the years ended December 31, 1998 and 1997,
respectively. This increase is attributable to material cost increases
not passed through to customers due to competitive pricing pressure.
Other manufacturing costs, as a percent of sales, decreased from 44.9%
for the year ended December 31, 1997 to 44.0% for the year ended
December 31, 1998. This decline is attributable to increased web
capacity in 1998 versus 1997 as well as other plant efficiency
improvements offset by inflationary cost increases.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1998, operating
expenses, as a percent of sales, decreased 1.4% to 13.8% from 15.2% in
the year ended December 31, 1997. Operating expenses decreased, as a
percent of sales, due to the assimilation of acquisitions and
consolidation of selling and administrative functions, offset by
inflationary cost increases.
Year Ended December 31, 1997, Compared to the Year Ended December 31,
1996
Net Sales. Net sales for the year ended December 31, 1997
increased 15.5% as compared to sales for the year ended December 31,
1996, primarily due to acquisitions in 1996 and 1997, offset by a 6.9%
decline in sales of the base business. The reasons for the sales decline
of the base business include high turnover in sales staff at the
Portland facility in 1996 resulting in the temporary loss of business
from some significant accounts and the continuing trend of computer
related companies to utilize electronic medium as opposed to printed
manuals. In addition average paper costs declined in 1997 compared to
1996 resulting in approximately a 1.0% decline in sales prices as the
lower cost was passed through to customers.
Cost of Sales. Cost of sales, as a percentage of sales, decreased
to 79.1% for the year ended December 31, 1997, as compared to 80.0% for
the year ended December 31, 1996. Cost of sales includes material net
of waste recovery revenue, labor, depreciation and other manufacturing
and distribution costs. Material costs net of waste recovery revenue,
as a percentage of sales, were 34.2% and 35.7% for the years ended
December 31, 1997 and 1996, respectively. This decrease is attributable
to material cost decreases as well as changes in product mix resulting
from acquisitions, which were primarily sheet fed operations. Other
manufacturing costs, as a percent of sales, increased from 44.3% for the
year ended December 31, 1996 to 44.9% for the year ended December 31,
1997. This increase is attributable to increased sheet fed production
in 1997 versus 1996 as well as inflationary cost increases.
Operating Expenses. Operating expenses include selling and
administrative expenses. For the year ended December 31, 1997,
operating expenses, as a percent of sales, increased 0.2% to 15.2% from
15.0% in the year ended December 31, 1996. Operating expenses
increased, as a percent of sales, due to the decline in sales prices and
inflationary cost increases.
CORPORATE EXPENSES
Corporate expenses include amortization expense related to
intangibles, administrative expenses and loss (gain) on disposal of
assets. Some of our major production equipment is accounted for as an
operating lease on a consolidated basis while treated as a purchase on a
segment level. Mail-Well also classifies the excess of the operating
lease expense over depreciation (the Operating Lease Expense) as a
corporate expense in analyzing segment operations.
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<PAGE>
<PAGE>
Corporate expenses for the year ended December 31, 1998 decreased
1.9% over the year ended December 31, 1997, primarily due to the
increase in gain on disposal of assets of $3.9 million and Operating
Lease Expense of $0.9 million offset by an increase in amortization
expense of $4.5 million. Amortization expense has increased as a result
of the significant number of acquisitions made in the years ended
December 31, 1998 and 1997. Corporate expense for the year ended
December 31, 1997 increased 25.9% over the year ended December 31, 1996
primarily due to Operating Lease Expense, as the first operating leases
were initiated in November 1996.
Restructuring and Other Unusual Charge. In November 1998 Mail-
Well committed to implement a restructuring program affecting the
Envelopes and Commercial Printing segments and recorded a pre-tax
provision of $16.0 million, of which $11.7 million represents non-cash
charges for asset write-offs and impairments. Mail-Well also incurred
$0.8 million of restructuring costs in December 1998 relating to the
relocation of personnel, equipment and inventory which under generally
accepted accounting principles cannot be accrued up front as part of
Mail-Well's restructuring initiative. In October 1998 the Parent
Company committed to release all shares of stock held by the leveraged
Employee Stock Ownership Plan ("ESOP") to plan participants and recorded
a non-cash, pre-tax charge of $12.2 million. For more information on
these charges please refer to Note 11 of the Notes to Consolidated
Financial Statements.
Merger Costs. Effective May 30, 1998, Mail-Well completed its
mergers with six commercial printing companies and one distributor
company through the exchange of common stock. In connection with the
mergers, transaction costs incurred of $3.3 million were expensed in
1998. These costs consist primarily of investment banking, legal and
accounting fees. For more information on these mergers please refer to
Note 2 of the Notes to Consolidated Financial Statements.
Interest Expense. Interest expense for the year ended December
31, 1998, compared to the prior year increased $8.0 million as a result
of higher average bank debt balances, primarily due to acquisitions,
offset by lower average interest rates resulting from the November 1997
issuance of 5.0% convertible subordinated notes and decreased
amortization of deferred financing costs. Since the proceeds from the
5.0% convertible subordinated notes were used to repay debt for which a
major portion of the deferred financing costs were incurred,
amortization of deferred financing costs decreased $1.4 million in 1998
compared to 1997. In November 1996, the Company and some of its
subsidiaries entered into a five-year accounts receivable securitization
agreement whereby it can sell, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts
receivable up to a maximum of $100.0 million. At December 31, 1998,
1997 and 1996 $52.6, $72.0 and $71.0 million, respectively, had been
sold under this agreement. Interest expense for the year ended December
31, 1997, decreased $4.7 million from 1996 primarily as a result of
lower average bank debt balances as well as a decrease in amortization
of deferred financing costs resulting from the early retirement of debt.
Income Taxes. The effective tax rate for all periods was higher
than the federal statutory rate due to state and provincial income taxes
and certain goodwill amortization and a major portion of the leveraged
employee stock ownership plan contribution that are not tax deductible.
The effective tax rate also reflects the impact of merging various
commercial printing companies that had elected nontaxable status prior
to the mergers on May 30, 1998. See Notes 2 and 9 of the Notes to
Consolidated Financial Statements. For 1999 Mail-Well expects its
effective tax rate to be approximately 41.0%.
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<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL CASH FLOW
Net cash flow provided by operating activities was $93.1 million,
$94.4 million and $95.3 million for the years ended December 31, 1998,
1997 and 1996, respectively. Acquisitions required cash payments of
$351.6 million, $82.9 million and $64.3 million for the years ended
December 31, 1998, 1997 and 1996, respectively. Other investing
activities include capital expenditures which were $87.3 million, $36.8
million and $22.0 million for the years ended December 31, 1998, 1997
and 1996, respectively. The capital expenditures were offset by the
proceeds of $9.7 million, $1.8 million and $35.4 million from the
disposal of assets for the years ended December 31, 1998, 1997 and 1996,
respectively (including $30.0 million in 1996 from an equipment
sale/leaseback transaction). Net cash flow from financing activities
was negatively affected by the decrease in receivables sold under the
securitization agreement at December 31, 1998, of $19.4 million
compared to December 31, 1997. Net cash flow from financing activities
in 1996 was positively impacted by the $71.0 million sale of accounts
receivable under the securitization program initiated in November 1996
offset by the increase in receivables sold of $9.5 million.
At December 31, 1998, the Company had approximately $207.0 million
of available credit under the $300.0 million Bank of America credit
facility. In addition, at December 31, 1998, the Company had sold $52.6
million of receivables under the $100.0 million securitization facility.
DEBT OBLIGATIONS
In November 1998, the Company issued the old notes, the net
proceeds of which were used to legally extinguish the $85.0 million of
10 1/2% senior subordinated notes and repay a portion of the Bank of
America unsecured credit facility. In March 1998, the Company closed a
new five-year unsecured line of credit for up to $300.0 million with
Bank of America, the lead agent for a syndicate of banks, at an interest
rate of LIBOR plus a margin based on the Company's leverage ratio. In
November 1997, the Parent Company issued $152.1 million of convertible
subordinated notes due in 2002 with interest payable at 5% per annum.
The notes are convertible at the option of the holder at any time into
shares of the Parent Company's common stock at a conversion price of
$19.00 per common share. Proceeds were used to pay off outstanding
amounts on a revolving credit facility and a bank term loan and these
facilities were canceled. Concurrently, Supremex, the Company's
Canadian subsidiary, signed an unsecured demand note with a bank for
$60.0 million at an interest rate of LIBOR plus 0.75% per annum. These
proceeds were used to pay off Supremex's outstanding term loan which was
also canceled. The demand note was subsequently replaced by the bank
credit agreement and a term loan with the same bank.
SECURITIES OFFERINGS
On November 13, 1997, the Parent Company's shelf registration
statement on Form S-3 was declared effective by the Securities and
Exchange Commission. The shelf permits the Parent Company to issue up
to $300.0 million in debt securities, common stock, preferred stock or
warrants over the two-year period following the effective date. The
convertible subordinated notes were issued under the shelf registration
statement and, in February 1998 the Parent Company raised $90.7 million
in net proceeds from the sale of its common stock off of the shelf
through a group of underwriters. Proceeds were used
- 35 -
<PAGE>
<PAGE>
for general corporate purposes. At December 31, 1998, there was
availability to issue another $52.0 million of securities under
the shelf registration statement.
CAPITAL REQUIREMENTS
Mail-Well estimates that, based on current utilization of its
equipment and expected volume growth at existing businesses it will
spend $65.0 to $70.0 million per year on capital expenditures. This is
in addition to the capital expenditures required for systems upgrades as
discussed below under "--Year 2000."
INFLATION
The effects of inflation have not been material to Mail-Well
However, due to the competitive nature of its business, it may not
always be able to pass on inflationary cost increases in the future.
FOREIGN CURRENCY
The effects of foreign currency exchange have not been material to
Mail-Well to date. With the strengthening U.S. Dollar, Mail-Well's
foreign currency exposure currently relates to its Canadian operations.
The average Canadian Dollar exchange rate was 0.674, 0.723 and 0.734
USD for the years ended December 31, 1998, 1997 and 1996, respectively.
The Canadian Dollar exchange rate at December 31, 1998 was 0.648 USD.
Net sales provided by the Canadian operations for the years ended
December 31, 1998, and 1997 was USD $154.5 million and USD $115.3
million, respectively.
SEASONALITY AND ENVIRONMENT
The effects of seasonality and environmental matters had no
material financial impact on the historical operations of Mail-Well and
are not expected to have a material effect on Mail-Well's liquidity and
capital resources.
RECENT DEVELOPMENTS
The following developments have occurred since December 31, 1998.
ACQUISITIONS
On February 2, 1999, Mail-Well acquired Colorhouse, Inc., a pre-
press company located in Minneapolis, Minnesota, with approximate annual
sales of $20.7 million. On February 4, 1999, Mail-Well acquired Hill
Graphics, a sheetfed commercial printer located in Houston, Texas, with
approximate annual sales of $20.5 million.
POSTAL RATE INCREASE
On January 10, 1999, the U.S. Postal Service increased rates for
the first time in nearly four years. The average increase was 2.9% for
all types of domestic mail. Management does not believe the new rates
will negatively affect mail volume.
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<PAGE>
<PAGE>
YEAR 2000
Mail-Well completed an assessment of its existing computer systems
in 1997 and expects to spend and capitalize approximately $9 to $11
million through 1999 to purchase and install new systems. The new
systems are capable of distinguishing between the year 1900 and the Year
2000. Mail-Well is also conducting an evaluation of actions required to
ensure its remaining business critical computer systems will not be
disrupted with respect to dating in the Year 2000. Mail-Well has
completed or is engaged in the process of updating, replacing and
testing certain of its computer systems so as to operate without
disruption due to Year 2000 issues. These actions are scheduled to be
completed through the third quarter of 1999 and, based on current
information available, Mail-Well does not anticipate the costs of
remedial actions, which are being expensed as incurred, will be
material. Since there can be no assurance that remedial actions can be
completed on a timely basis contingency plans will be developed by the
third quarter of 1999 to address business critical systems which may not
be Year 2000 compliant.
All business critical vendors and customers have been identified
and contacted for information on their actions to mitigate Year 2000
disruptions. Mail-Well is in the process of evaluating information
supplied to date and contacting those who have not responded to our
inquiries. If Year 2000 issues of our business critical vendors and
customers are not addressed satisfactorily, there could be a disruption
in our business that may cause a decline in earnings. These theoretical
consequences are of a kind and magnitude not unique to Mail-Well, but
are generally shared with other manufacturing companies. Contingency
plans will be developed by the third quarter of 1999 to address Year
2000 issues related to our business critical vendors and customers.
Although there is inherent uncertainty with respect to these Year 2000
issues, particularly with respect to the Year 2000 readiness of our
vendors and customers, at this time management does not believe that
Mail-Well's business will be materially affected by Year 2000 issues.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (the "Statement"). The
Statement, which will be effective for the year 2000, requires
derivative instruments to be recorded in the balance sheet at their fair
value with changes in fair value being recognized in earnings unless
specific hedging accounting criteria are met. Although the Company
believes it has a minimal current level of hedging and derivative
activity, it has not determined the impact of this statement on its
operations and financial position.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Mail-Well is exposed to market risks, including foreign currency
and interest rate risks. The foreign currency risk for foreign currency
denominated debt obligations (US$25,461,000 at December 31, 1998) and
the interest rate risk for the investment in accounts receivable
securitization ($41,669,000 at December 31, 1998) are not considered to
be significant since the fair values and carrying values are not
material to Mail-Well's financial position. Mail-Well's cash flows from
operations and earnings are affected by changes in short-term interest
rates since a large portion of its credit agreements includes rates
variable with LIBOR. As of December 31, 1998, $93 million of variable
rate debt was outstanding. The fair value of Mail-Well's fixed rate
long-term debt is affected by changes in long-term interest rates.
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<PAGE>
<PAGE>
If LIBOR were to increase 1% from the rate at December 31, 1998,
and Mail-Well borrowed the maximum amount available under its variable
rate debt ($320 million), Mail-Well's interest expense would increase
and income after income taxes would decrease by approximately $2.0
million. The marginal income tax rate of 38.5% was used. This analysis
does not consider the effects of the reduced level of overall economic
activity that could exist in such an environment. Further, in the event
of a change of such magnitude, management would likely take actions to
further mitigate its exposure to the change. For example, in November
1998, Mail-Well paid down its variable rate debt with proceeds from
fixed rate debt to manage its interest rate risk. However, due to the
uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analysis assumes no changes in Mail-
Well's financial structure.
If the interest rates were to decrease 1%, the fair value of Mail-
Well's fixed rate debt, excluding other long-term debt ($457.4 million
at December 31, 1998), would decrease by approximately $25.3 million.
The fair values were determined based on the discounted values of their
related cash flows. The sensitivity analysis does not consider the
impact of changes in Mail-Well's stock price on the fair value of its
convertible subordinated notes or the conversion of the convertible
debt. The change in other long-term debt is immaterial to Mail-Well's
financial position.
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<PAGE>
<PAGE>
BUSINESS
We are a leading consolidator in the highly fragmented printing
industry, competing in the following market segments:
* Envelopes
* Commercial Printing
* Printing for Distributors
* Labels
Since our inception in February 1994, we have completed 44
acquisitions in the printing industry, for purchase prices ranging from
$2.5 million to $97.4 million. We are the largest printer and
manufacturer of envelopes in the United States and Canada and one of the
leading commercial printers in the United States. We are also the
largest printer of custom business documents for the distributor market
in the United States and a leading printer of glue-applied paper labels
for the food and beverage industry. We currently operate 100 printing
facilities throughout North America, serving over 40,000 customers.
We believe that we have competitive advantages in the printing
industry, including the ability to (1) utilize our network of
strategically located plants and sales offices to attract customers that
require production from multiple locations, (2) realize cost savings as
a result of volume related purchases of paper, ink and other raw
materials, (3) reduce overhead expense through the consolidation of most
administrative functions for insurance, employee benefits and financial
management, (4) increase profitability through the optimization of
equipment utilization among facilities, (5) offer customers greater
flexibility in meeting their needs due to more available capacity and
equipment capabilities and (6) combine the responsiveness of a local or
regional facility with the resources of a large national company.
Please refer to Note 12 of our consolidated financial statements
included elsewhere in this Prospectus for additional information
concerning our operating and geographic segments.
GROWTH STRATEGY
Our objective is to continue to increase our cash flows and
profits, and to maximize shareholder value, through acquisitions and an
operating strategy that enhances operating leverage and achieves cost
efficiencies. The key elements of our strategy include:
BROAD RANGE OF QUALITY PRODUCTS AND SERVICES
We have chosen to operate in areas of the printing industry in
which we believe we can capture a larger share of our customers'
business by offering a broad array of high quality products and
services, cost-effective distribution, advanced technological
capabilities and competitive pricing. We intend to continue to increase
our services and expand our geographic presence in order to provide our
customers a full range of digital archiving, prepress, printing and
print management needs. Our commitment to quality, combined with our
broad range of services offered, has formed the basis for deepening our
long-
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<PAGE>
<PAGE>
standing customer relationships. As a result of our diverse product
mix, geographic presence and reputation for quality, we have been able
to attract new customers as well as capture incremental sales from
existing customers.
STRATEGIC ACQUISITIONS
We believe that the industry is highly fragmented and presents
significant opportunities for consolidation. Our growth strategy
includes the acquisition of established and profitable printing
businesses in markets with attractive growth opportunities. We seek
acquisition targets with strong management infrastructures and
opportunities to increase operating efficiencies as well as to expand
our customer base, presence in geographic areas and product lines. Our
management team has extensive experience in identifying attractive
acquisition targets and integrating acquired businesses into our
operations.
OPERATING LEVERAGE
We believe that we will continue to realize cost savings as a
result of volume related purchases of paper, ink and other raw materials
used in the printing process. As we acquire additional businesses in
each of our market segments, we believe we will be able to leverage
these cost structures to realize additional savings. We have also
achieved cost savings through the consolidation of insurance
administration, financial management and other administrative functions.
We believe that by continuing to centralize administrative and support
functions the management of our operating subsidiaries and businesses
acquired in the future will be able to focus on pursuing new customers
and business opportunities and increasing capacity utilization.
OPERATING EFFICIENCIES
We believe that there are opportunities to eliminate redundant
facilities and equipment by consolidation or through coordination among
our current operations as well as operations to be acquired in the
future. We periodically review our operations at the local, regional
and national operating levels (as well as examining other industry
practices) in order to identify "best practices" that can be
standardized and implemented throughout our operations.
NATIONAL SALES AND MARKETING PROGRAM
We have established a sales and marketing program targeting
national accounts as a means to expand our printing businesses. This
program allows us to both utilize our current network of strategically
located plants and sales offices to attract new customers that require
production from multiple locations, as well as to increase sales to
existing customers by offering greater flexibility in meeting their
product needs due to more available capacity and equipment capabilities.
INTERNAL SALES GROWTH
A component of our strategy is to accelerate internal sales growth
for all of our printing segments. The key elements of our internal
growth strategy include the expansion of the products and services sold
to existing customers and the addition of new customers. We believe
that we have the ability to combine the responsiveness of a local
facility with the full service advantages of a large national company.
We intend to increase growth in each of our regions by adding
manufacturing
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<PAGE>
<PAGE>
facilities to expand our product offerings and complement our product
lines on a regional basis. By targeting markets in which we believe
there is demand for additional product lines, we believe we may be able
to achieve significant internal growth.
THE PRINTING INDUSTRY
The printing industry is one of the largest and most fragmented
industries in the United States with total estimated 1997 sales of $142
billion among an estimated 52,000 printing businesses, according to the
Printing Industry of America, Inc. The printing industry includes
general commercial printing, financial printing, printing and publishing
of books, newspapers and periodicals, quick printing and production of
business forms and greeting cards. Due to the fragmented nature of the
printing industry, we believe an abundance of acquisition opportunities
exist. The printing industry is characterized by a significant number
of locally oriented, privately held businesses, many of which are viable
acquisition candidates. Owners of these independent companies are often
motivated to sell their printing businesses to access the financial
capital and other operating strengths we have to offer to grow the
business, increase their personal financial liquidity or facilitate
retirement. Moreover, by consolidating independent companies we expect
to achieve the substantial economies of scale of a large multi-plant and
geographically diverse organization.
ACQUISITIONS
The Parent Company commenced operations in February 1994 with the
acquisition of the Mail-Well envelope division of Georgia Pacific and
Pavey Envelope and Tag Corp. From 1994 to 1997 we made 12 acquisitions
in the envelope and commercial printing segments. During 1998, we
completed the following 30 acquisitions in various printing segments:
<TABLE>
<CAPTION>
Company Location Date Segment Revenues<F1>
- ------- -------- ---- ------- ------------
<S> <C> <C> <C> <C>
Poser Business Forms, Inc. Fairhope, Alabama January Distributor $ 90
Rono Graphic Communications Co. Portland, Oregon March Commercial 12
Lawson Mardon Label Division Toronto, Ontario March Labels 81
Denver Forms Company Denver, Colorado March Distributor 12
National Graphics Company Denver, Colorado March Envelopes 8
EPX Denver Denver, Colorado March Distributor 4
Blue Line Envelope Montreal, Quebec April Envelopes 6
South Press, Inc. Dallas, Texas April Commercial 12
Century Index Corporation Anaheim, California May Envelopes 8
Label Division, IP Paper Bowling Green, Kentucky May Labels 30
Anderson Lithograph Los Angeles, California May Commercial 135
Color Art, Inc. St. Louis, Missouri May Commercial 76
Accu-color, Inc. St. Louis, Missouri May Commercial 14
Industrial Printing Company Toledo, Ohio May Commercial 20
IPC Graphics, Inc. Toledo, Ohio May Distributor 11
United Lithograph, Inc. Somerville, Mass. May Commercial 21
French Bray, Inc. Glen Burnie, Maryland May Commercial 23
Clarke Printing Co. San Antonio, Texas May Commercial 11
Illinois Envelope, Inc. Kalamazoo, Michigan June Envelopes 7
Gould Packaging, Inc. Vancouver, Washington June Envelopes 14
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<PAGE>
<PAGE>
Graphics Illustrated, Inc. West Palm Beach, Florida August Commercial 11
McLaren, Morris and Todd Ltd. Mississauga, Ontario August Commercial 34
John D. Lucas Printing Co. Baltimore, Maryland August Commercial 27
Armstrong-White, Inc. Bloomfield Hills, Michigan August Commercial 2
Richtman Printing Englewood, Colorado Sept. Commercial 6
Production Press, Inc. Jacksonville, Illinois Sept. Commercial 9
APICO Corp. and Perfection Forms Girard, Kansas October Distributor 20
Trafton Printing, Inc. Amarillo, Texas October Commercial 9
Imperial Litho & Dryography Phoenix, Arizona Nov. Commercial 26
----
Total $739
<FN>
________________________
<F1> Represents most recent revenues in millions for the full twelve-
month period for which financial information was available
immediately preceding the acquisition as provided to the Parent
Company by the respective sellers and may not be indicative of
revenue generated or to be generated following the date of
acquisition. In many cases, these estimated revenue amounts were
not derived from audited financial statements and may not
coincide with the revenue generated by the acquired business for
a full fiscal year prior to the date of acquisition. The
information relating to estimated revenue prior to the date of
acquisition set forth above is presented solely for the purpose
of providing information with respect to the relative sizes of
the businesses acquired and is not intended to depict information
relating to profitability or cash flow.
</TABLE>
Please refer to Notes 2 and 3 of our consolidated financial
statements included elsewhere in this Prospectus for additional
information concerning our acquisitions.
PRODUCTS
ENVELOPES
The approximately $3.2 billion United States and Canadian
envelope market is divided into two primary segments: (1) the consumer
direct segment, which consists of customized conventional and specialty
envelopes and packaging products sold directly to end users or to
independent distributors who sell to end users, and (2) the wholesale
segment, which consists of envelope and other products sold to
wholesalers, paper merchants, printers, brokers, office product
establishments and superstores.
In the consumer direct segment, we offer printed customized
conventional envelopes to direct mail marketers and other end-users,
such as banks, brokers and credit card companies. We have focused a
significant part of our marketing efforts on the direct mail market and
have developed envelopes with assorted features such as vivid graphics,
multiple colors, various closures, and interactive devices such as
pull-tabs, scratch-offs, perforations and three-dimensional viewing
devices. These customized features are designed to catch the attention
of the recipient, and therefore increase responses to the solicitation.
By doing so, these envelopes are more valuable to our direct mail
customers who are therefore willing to pay the higher cost of producing
them.
We also compete in the wholesale segment, particularly in the
office products market. Through our Quality Park Products and Murray
Envelope divisions, we manufacture and print a broad line of custom
envelopes, which are featured in national catalogs for the office
products market or offered through office products retailers, including
contract stationers.
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We sell the following envelope products:
* Customized Conventional Envelopes
* Specialty Envelopes and Packaging Products
* Commodity Oriented Products
* Two-Way Envelopes
For the fiscal year ended December 31, 1998, customized
conventional envelopes accounted for approximately 64.9% and commodity-
oriented products accounted for approximately 20.3% of the envelope
segment's net sales, respectively.
COMMERCIAL PRINTING
Our commercial printing group was recently formed by the
combination of our High Impact Color Printing Division, which was
formed with the acquisition of Graphic Arts Center in 1996, and the
General Commercial Printing Division, which was formed in May 1998 with
the simultaneous merger of six geographically dispersed commercial
printing businesses. This group produces a wide range of printing,
from premium color printing requiring sophisticated graphic design
techniques to more commonplace printed materials. We consider each of
our commercial printers to be a market leader in the geographic area it
serves.
The group prints virtually every type of product in the
commercial market including:
* Advertising Literature * High-end Catalogs
* Annual Reports * Calendars and Posters
* Brochures * Manuals
* Catalogs * Financial Printing
* Advertising Circulars * Point of Purchase Displays (POPs)
* Maps * Direct Mail
* Magazines * Greeting Cards
* Web In-line Products
The commercial printing group offers a wide range of commercial
printing services to its customers, including electronic pre-press,
digital archiving, direct-to-plate technology and high-speed web and
sheet-fed presses.
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PRINTING FOR DISTRIBUTORS
This division, which was acquired in 1998, prints a diverse line
of custom products addressing the business document needs of small and
medium-sized end users. This is a market made up of businesses with
generally less than 500 employees and average annual purchases of
business forms of between $5,000 and $200,000. These products include
both traditional and specialty products, many of which are targeted for
non-impact laser applications designed to meet the desktop needs of the
end-user, as well as the growing use of minicomputers and local area
networks.
* Custom Continuous Forms--forms printed from a continuous roll
of paper
* Snap-a-Parts--designed for quick separation
* Very Short Run (VSR) Forms--produced in small quantities (from
500 to 10,000 units)
* Mailers--continuous forms with glued margins and custom carbon
or carbonless coatings
* Cut Sheets--forms primarily used in non-impact laser printers
* Labels and Label Forms--made of paper or film and temporarily
affixed to carrier sheets with pressure sensitive adhesive
We also offer the following specialized products:
* VersaSeal(TM)--This is a proprietary print-to-mail system that
allows the user to print data on a single ply cut sheet form that is
then folded and sealed automatically so that the form becomes an
outgoing envelope. We offer stand alone and desktop folders that also
seal the form. Applications include checks, notices, packing slips,
invoices, grade reports and transcripts. These forms may also be used
for smaller, customized direct mail advertising campaigns.
* High-Color/Offline Finishing--High-color, or web, products are
typically forms that are printed in larger quantities with multiple
colors. They are printed on our heat set web offset presses. Offline
finishing features include foil stamping, embossing, die cutting and
other processes which enhance the design, security and effectiveness of
the product. Their main application is in marketing and sales,
including direct mail.
LABELS
In 1998, we acquired substantially all of the assets of the North
American paper label division of Lawson Mardon Packaging, a leading
supplier of glue-applied labels to the North American food and beverage
markets. We operate this division under the name "Mail-Well Label."
Mail-Well Label is one of the largest suppliers in the $6.5 billion
North American label printing market. It currently operates five
production facilities, two in Canada and three in the United States,
producing glue-applied labels primarily for the food and beverage
markets.
The primary function of a label is to decorate a container such
as a metal can, glass container or plastic bottle or jar. The label
plays a key role in creating a brand image and in communicating product
information. Glue-applied labels are typically printed for application
to various container formats by
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customers or third party packing operations. These products are
generally divided into two categories: conventional labels and premium
labels.
* Conventional Labels. Conventional labels are typically offset
printed in up to 7 colors on coated one sided paper with standard press
varnishes and either square cut or die cut into other simple shapes.
Conventional labels are then applied to food and beverage containers by
the customer.
* Premium Labels. Premium labels are typically characterized by
superior print fidelity, often in 8 or more colors, unique or specialty
substrates, high gloss or matte coatings, and specialized finishes such
as embossing, foil stamping and tailored die-cut shapes.
SERVICES
We believe that the success of all of our printing businesses is
largely due to our emphasis on customer responsiveness and service.
Our sales force works closely with customers from product design to
delivery. Most of our products are made to customer specifications.
We also offer our customers related services, such as digital
archiving, flexible "just-in-time" delivery programs, warehousing,
inventory management systems and electronic communications systems. We
have a large number of customers across diverse geographic and product
markets. Many of our customers have been supplied by the Parent
Company or its predecessors for over ten years.
We provide the following services to our customers:
* Prepress. The traditional design phase typically requires us
to set type, incorporate customer-submitted graphics, photograph the
artwork, develop the negative and prepare a plate from which to print.
* Electronic Prepress. This is a fully automated electronic
process which allows the customer to submit its artwork and other data
in digital format, either on a diskette or via modem, or in hard copy
that can be computer-scanned. We can then manipulate the image,
prepare color separations and edit the design on a computer to create
the negative from which the printing plate is made. Electronic
prepress greatly reduces the time and the number of people involved in
the production of plates, and we believe that we are an industry leader
in fully automated electronic prepress operations.
* Digital Archiving. We allow customers to store digitally
rendered artwork on our file servers. The artwork can then be accessed
and retrieved either at the plant during the prepress stage, or from a
remote site via high speed transmission during the design stage.
* Delivery Systems. We offer a flexible "just-in-time" delivery
program. This program allows customers to receive their products just
prior to when they are needed.
* Warehousing Services. A customer will often place an order for
significantly more envelopes than it may need at the time. When this
occurs, we offer to store the finished product and drop-ship the
envelopes on an "as-needed" basis.
* Inventory Management Systems. We offer this service primarily
to large national organizations with centralized purchasing and supply
departments that service multiple locations. We
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facilitate order processing by giving customers information on usage by
item and/or available supply in our warehouses and provide for summary
billing.
* Electronic Data Communications Interface ("EDI"). EDI is a
direct computer link between customers and our plant which allows
customers to send orders electronically. This allows streamlining of
the order process, which in turn allows for quicker order delivery and
more efficient and accurate communications with our customers. EDI
also allows customers to make payments electronically.
Our goal is to offer the highest standards in meeting our
printing customers' needs with our primary focus on responding quickly
and competitively to customer demands and requirements. Many of our
production facilities are open 24 hours a day, seven days a week, to
allow for timely production of materials. At some facilities we also
offer a number of unique services to our customers such as
complimentary transportation between the airport and our offices, in-
plant overnight accommodations, on-site meeting rooms and lounge,
travel and hotel arrangements and computers for use by the customers
when on-site.
At some of our advanced printing facilities we offer digital
direct-to-plate technology, which eliminates the production of film and
several manual functions in the platemaking process. This technology
offers a complete digital workflow, providing a better printed product
with faster turn around without additional cost.
We believe that the ongoing consolidation of the printing
industry is being driven in part by the rapid pace of technological
change. Recent advances in computer-based prepress equipment, for
example, now enable printers to output plate-ready film directly from
digital files, allowing for faster and more precise manipulation of
images and text prior to printing. Similarly, recent advances in photo
imaging technology have greatly increased the quality of the final
image produced in the printing process. These advances have increased
the capital requirements for maintaining technologically advanced
equipment. We believe that many smaller local and regional commercial
printers will find it increasingly difficult to obtain adequate
financial resources to remain competitive in the segments of the
commercial printing market in which we operate.
MARKETING AND DISTRIBUTION
ENVELOPES
As a result of the wide array of applications, customer
preferences and order sizes, our envelope marketing and advertising
efforts vary significantly among markets and by region. We believe
that our customer responsiveness and service have resulted in the long-
term retention of a significant number of our customers. Although our
marketing efforts have traditionally been local or regional, we
continue to emphasize a more focused national account program to
attract customers whose needs are national or cover multiple regions.
We market the majority of our envelopes and packaging products
through sales representatives, who generally work with customers from
the initial product design stage through product delivery to ensure
that finished products meet the customers' applications and marketing
needs. Our sales representatives are the primary points of contact for
customers in the consumer direct market segment. Accordingly, our goal
is to retain an experienced, well-qualified sales force by providing
appropriate training and competitive compensation. Compensation is
typically either salary plus commission or
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straight commission depending on several factors including customer
size and type, plant location and order size. Our plans call for
increased coordination among regions, which will help us to compete for
national account business, enhance the internal dissemination of
successful new product ideas, efficiently allocate our production
equipment, share technical expertise and increase company-wide selling
of specialty products manufactured at selected facilities.
Products not marketed by our own sales force are sold through
distributors to better serve selected wholesale markets, geographic
regions without direct sales representation and certain specialty
markets, including the medical and photo finishing packaging markets.
Our office products sales staff attends trade shows to market products.
These products are also featured in national catalogs produced for the
office products market.
COMMERCIAL PRINTING
The vast majority of commercial printing is sold through sales
representatives, the exception being occasional "house" or company
accounts. Our sales representatives work closely with customers from
the initial concept through prepress, proofing and finally the press
run. Because our sales representatives are our primary contacts with
our customers, our goal is to attract, train and retain an experienced,
qualified sales force in the commercial printing group. Sales
representatives are typically compensated by straight commission.
Commissions generally depend on such factors as order size, prepress
work, reruns or rework and overall profitability of the job.
The group's marketing efforts differ between two broad product
areas: high impact color products, such as auto brochures, annual
reports and high end catalogs, and general commercial work. We market
high impact printing primarily on a regional basis, through sales
representatives working out of sales offices across the United States.
Our customers include Fortune 500 companies, graphic designers and
advertising agencies. We maintain one of the largest sales staffs in
the industry dedicated to marketing to and through the graphic design
community. This sales staff represents the primary point of contact
for many customers and reinforces our policy of providing the highest
level of customer service possible.
Because of the fragmented nature of the commercial printing
business, and the wide array of customer needs and preferences, we
market general commercial printing locally. Each of our commercial
printing facilities is a leader in their respective commercial printing
markets. Our sales efforts vary by market, but typically our sales
representatives work closely with our design, prepress and pressroom
teams to implement the customer solutions we offer. We believe that
our customer responsiveness, combined with our state of the art
facilities, distinguish us from our competitors in the commercial
printing markets we serve. We also believe that our ability to cross
sell throughout the commercial printing group products and services
that have not been available to our local plants will enhance our
leadership position in these markets.
We believe that the level of quality and customer service that we
provide is well-suited for buyers in these market segments who require
superior printed materials to complement the quality and features of
their products, services and corporate images. We serve a broad base
of customers, including manufacturers, retailers, service organizations
and advertising agencies. Due to the project-oriented nature of the
commercial printing industry, sales to particular customers may vary
significantly from year to year depending upon the number and size of
their projects.
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PRINTING FOR DISTRIBUTORS
We sell custom printed business documents through 83 sales
service representatives to over 7,000 independent distributor customers
located throughout the United States. These distributors resell the
products to hundreds of thousands of end users.
We believe that the key to a successful sales and marketing
effort in this segment is maintaining frequent contact with our
distributor customers. Account development is driven through the use
of written sales plans that profile targeted distributors for sales
development. Our sales plans provide for a coordinated approach in
developing accounts with specific roles and responsibilities within the
sales organization. We have made a strong commitment to direct and
personalized marketing to both existing and potential distributor
accounts. This strategy is different from that of the majority of
distributor manufacturers who primarily market using direct mail.
Sales service representatives and telemarketing representatives
are located at each plant to assist specifically assigned customers and
new prospect development. Sales office managers co-ordinate the
activities of sales service representatives and monitor customer
interaction. National account managers have responsibility for
developing new "key accounts," providing distributor education,
attending industry trade shows, and maintaining and developing business
relations. Call schedules and reports are automated on each national
account manager's laptop computer and disseminated to the division in
which a lead is generated. Senior management actively maintains an
ongoing relationship with our largest accounts as well as those that
indicate the most opportunity for growth.
LABELS
We market our label printing through a sales force that is
specialized according to product lines and geographic coverage, and is
supported by a team of customer service representatives located at each
plant. The sales and marketing function is organized into national and
regional teams. The sales force is supported by a technical service
team which provides customers with highly customized label solutions.
All of our label printing facilities have Customer Service
Representatives (CSR's) that work with the sales team and the customers
to manage orders efficiently and effectively. In some cases, the
customer service representatives have direct responsibility for
accounts. CSR's report to local Customer Service Managers who in
return report to General Managers.
Our customer supply agreements are on an order by order basis or
for a specified period of time. We sell exclusively through our own
sales force and management has close direct relationships with the
major customers supported by technical service staff.
PRINTING AND MANUFACTURING
ENVELOPES
Envelopes are produced from either flat sheets or rolls of paper.
The paper is folded into an envelope, which is glued at the seems and
on the flap, and then printed as required. There are essentially two
types of folding machines used in the envelope converting process: (1)
high-speed web machines, capable of folding and printing directly from
paper rolls and (2) die cut machines, which require a preliminary step
to provide die cut envelope blanks from paper sheets. Webs are
typically used for larger runs with multiple colors and numerous
features, and die cut machines are used primarily for smaller
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orders typically including customized value added features. The
manufacturing process used is dependent upon the size of a particular
order, custom features required, machine availability and delivery
requirements.
We purchase most of the paper we use in envelope printing in
rolls. In the die cut process, typically used for small to medium-
sized orders of 500,000 units or less, paper is cut into varying sizes
by a sheeter. Stacks of sheets are then cut into envelope blanks using
either manually-placed dies or by computer-controlled die-cutting
machines. In almost all cases, envelopes are imprinted on one or both
sides, either in-line on the folding machine or off-line preceding or
subsequent to the folding process. Large volume envelope orders
(generally over 500,000 units) can bypass the separate sheeting and
cutting operations to be manufactured directly from the paper roll
using the web machine process. The paper is fed as one continuous roll
through the equipment where it is printed, cut, folded and glued,
emerging as finished envelopes ready for packing and shipping.
Envelope manufacturing equipment typically has a relatively long
useful life. Our manufacturing personnel are skilled at maintaining
and rebuilding equipment, and can convert existing equipment to that
needed for specialized products, such as those sold to the medical,
photo finishing packaging and diskette markets.
We have also established programs to implement new production
technologies related to flexographic printing, lithographic web
printing and variable imaging technology. Flexographic printing has
long been the mainstay of the envelope industry and we have
flexographic printing capabilities at virtually all of our facilities.
We continue to implement improvements to our flexographic printing
processes which we believe will provide higher-quality products. In
addition, we are trying to combine lithographic technology with web
converting capability, which will improve the quality of our graphics.
We believe that we can enhance our competitive position in the
envelope industry by using improved management systems. We are in the
process of implementing management systems designed to improve order
flow, improve turnaround capabilities and provide more information with
respect to equipment utilization, asset management, customer
requirements and product line profitability. All of these systems will
also be able to distinguish between the Year 1900 and the Year 2000,
avoiding interruptions in our envelope business at the turn of the
century.
COMMERCIAL PRINTING
The commercial printing group combines advanced prepress
technology with high-quality color presses and extensive binding and
finishing operations. Many of our facilities are open 7 days a week,
24 hours a day to meet customer printing requirements.
The typical commercial printing job involves one or more of the
following steps and services:
* Prepress. Our prepress services include all the processes
necessary to prepare the media (art, photographs, typed copy),
photographically duplicate and/or digitally produce images, separate
color images into process colors, assemble films and reproduce (or
"burn") film images onto plates using photochemical processes. We use
electronic technology to compose the elements of the individual pages
of the project and to create screen tints, produce color blends and
retouch photos. These images can then be reviewed for exact color and
content. The digital information is then processed to a film plotter
for film output. Our film plotters are capable of plotting 3600 dots
per inch resolution, giving a clean detail
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of the imagery. We have also developed an advanced screening process
which allows larger quantities of ink to be used in the printing
process, thereby producing a higher quality image than is available
using conventional techniques.
* Electronic Prepress. This is a fully-automated electronic
process which allows the customer to submit its design in digital
format, either on a diskette or via modem, or in hard copy that can be
computer-scanned. We then edit the design on a computer to create the
negative from which the printing plate is made. Electronic prepress
greatly reduces the time and the number of people involved in the
production of plates, and we believe that we are an industry leader in
fully-automated electronic prepress operations.
* Digital Archiving. We offer customers the opportunity to store
their artwork in digital form on our data storage facilities. These
images are then accessible by the customer from our file servers,
either on location at our plant or in-house via electronic file
transfer. This allows the customer to update or re-use specific
artwork in repeat jobs.
* Printing. We currently operate heatset web presses, including
half-webs, full-webs and double-web presses, as well as sheet-fed
presses at our printing facilities. We primarily use sheet-fed presses
for short to medium run jobs. The sheet-fed presses are capable of
printing up to eight colors, running at standard press speeds of 6,000
to 10,000 sheets per hour. The web presses are higher-production
presses which start with a roll of paper at one end, print on both
sides and produce a product which may be folded, glued and perforated
on the press. Our web presses are capable of simultaneously printing
up to 16 colors at one time.
* Postpress and Fulfillment. We provide extensive postpress and
fulfillment services in the final stages of the production cycle.
These services include cutting, folding, binding, finishing and
distribution of the finished product. We also provide warehousing,
packaging and distribution services to customers, a critical element to
quality service. In addition, we maintain a catalog packaging assembly
line which uses both computer-printed mailing labels and ink-jet
applied addresses to facilitate its customers' mass mailings.
PRINTING FOR DISTRIBUTORS
We offer our customers design services using desktop publishing.
Each of our plants has multiple laser composition equipment which uses
both Windows and Macintosh platforms. This hardware, along with
various industry application software packages, enables us to create
documents, add custom text and logos, and produce negatives.
Distributors can also send documents to us electronically or on disk
which can be turned into a negative by the laser image setting devices,
thereby reducing customer lead times. This equipment enables us to
perform a laser composition of a document, thereby providing additional
tone and density to the logo and other design features of the document.
Design services have become particularly valuable in the VSR and short-
run continuous form market and have given us a distinct competitive
advantage. In addition, this "state of the art" equipment enables us
to easily make changes to repeat order and produce the documents as
cost effectively as an exact repeat.
The majority of our orders are accompanied by a "camera-ready"
copy of the document. Once the pre-press area receives hard copy, our
camera professionals produce a negative on film. The negative is used
by our plate making machines to create a metal plate. The plate will
be mounted on the web press to produce a custom document. During the
pre-press stage, particular care is taken to detect
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imperfections in the camera-ready copy, negative or plate to ensure
that each is perfect in form and content.
Our equipment includes a variety of single web presses using the
web offset process. The majority of our equipment is designed to feed
roll-to-roll and roll-to-fold, and, in the case of the VSR equipment, a
pack-to-pack feed. These presses print at high speeds in one or
multiple colors and on one or both sides of the paper. Our presses
vary by cylinder size and web width to accommodate the short run
customer orders and are between 17" to 33" widths. The majority of our
presses are narrow web widths and are used for short to medium-run
production jobs.
Set-up for our presses involves adjusting the press, feeding the
roll paper, filling ink stations, and running several trial runs. Once
the press operator is satisfied with the print quality, the final
sample document is checked by the shift foreman and approved prior to
running an order. Paper enters the press in the unwind section and
passes through an adjustable feed device, which regulates the tension
in the paper. In the printing section of the press, an inked plate on
the cylinder is rotated against a rubber blanket on the blanket
cylinder and then against the blank paper to transfer the image.
Subsequently, the press can number, punch, or perforate depending on
the desired format of the document.
The finished imprinted roll or pack of documents is automatically
collated, packed and transferred to the warehouse section of the
facility for shipping. Orders are usually shipped to the end-user in
boxes labeled with the distributor's name or, in the case of orders
from larger distributors, delivered to the distributor's warehouse.
LABELS
Label printing consists of four main processes: film preparation,
printing, cutting and finishing. Finished labels are then stored and
distributed. Conventional labels tend to require printing and cutting
only, while Premium labels generally make use of all three processes.
Film preparation requires prepress capabilities similar to
commercial printing. Customer art work is prepared and refined
digitally, and film is produced to make printing plates.
Label printing is usually lithographic, although we also offer
rotogravure and flexographic processes. For conventional labels,
printing is a single operation; however, for Premium labels, multiple
printing operations are often used. We use sheet-fed lithography at
all facilities.
Cutting is usually a combination of square cutting, using
guillotines, and PMC die cutting. Some premium labels are cut on
flatbed die cutters--which also may combine embossing. Labels are
generally produced in bundles of 500 to 1,000 each (cut and stacked).
Finishing encompasses a number of technologies: embossing to add
texture, bronzing and/or foil stamping to add metallic effects. We use
all of these processes in our label printing operations.
Because much of the focus of quality assurance within the labels
plants relates to the control of the printing process, the day-to-day
control activities are undertaken by the equipment operators. The
focus is on real-time process control rather than inspection after the
fact. The more modern press equipment has enhanced color control
systems to help operators manage color and print issues very
effectively. On more mature equipment, more manual effort is involved
and the systems are not close-looped (i.e., information from the
systems does not automatically feed back to process controls). As far
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as finishing operations are concerned, cutting variances have been
greatly improved as a result of newly installed cutters. In most
facilities, the finishing operations are automated so as to reduce the
risk of mixing one product label with another. Four of our facilities
are registered to the ISO 9002 quality standards.
MATERIALS AND SUPPLY ARRANGEMENTS
The primary materials used in each of our printing divisions are
paper, ink, film, offset plates, chemicals and cartons, with paper
accounting for the majority of total material costs. We purchase these
materials from a number of suppliers and have not experienced any
significant difficulties in obtaining the raw materials necessary for
operations. We have implemented an inventory management system in
which a limited number of paper suppliers supply all of our paper
needs. These suppliers are responsible for delivering paper on a
"just-in-time" basis directly to our facilities. We believe that this
system has allowed us to enhance the flexibility and speed with which
we can serve customers, improve pricing on paper purchases, eliminate a
significant amount of paper inventory and reduce costs by reducing
warehousing capacity.
PATENTS, TRADEMARKS AND BRAND NAMES
We market products under a number of trademarks and brand names.
We also hold or have rights to use various patents relating to our
envelope business, which expire at various times through 2012. Our
sales do not materially depend upon any single or related group of
patents.
COMPETITION
ENVELOPES
We are the largest envelope printer in North America. We compete
with a few multi-plant and many single-plant companies that primarily
service regional and local markets. We also face competition from
alternative sources of communication and information transfer such as
facsimile machines, electronic mail, the Internet, interactive video
disks, interactive television and electronic retailing. Although these
sources of communication and advertising may eliminate some domestic
envelope sales in the future, we believe that we will experience
continued demand for envelope products due to (1) the ability of our
customers to obtain a relatively low-cost information delivery vehicle
that may be customized with text, color, graphics and action devices to
achieve the desired presentation effect, (2) the ability of our direct
mail customers to penetrate desired markets as a result of the
widespread delivery of mail to residences and businesses through the
United States Postal Service and the Canadian Post Corporation and (3)
the ability of our direct mail customers to include return materials in
their mail-outs. Principal bases of competition are quality, service
and price. Although all three are equally important, various customers
may emphasize one or more over the others.
COMMERCIAL PRINTING
The commercial printing industry is highly competitive and
fragmented. We are one of the leading commercial printers in the
United States. We compete against a number of large, diversified and
financially stronger printing companies, as well as regional and local
commercial printers, many of which are capable of competing with us in
both volume and production quality. Although we believe customers are
price sensitive, we also believe that customer service and high-quality
products are important
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competitive factors. We believe we provide premium quality and
customer service while maintaining competitive prices through
stringent cost control efforts. The main competitive factors in
our markets are customer service, product quality, reliability,
flexibility, technical capabilities and price. We believe we
compete effectively in each of these areas.
PRINTING FOR DISTRIBUTORS
We are the largest printer of custom business documents for the
distributor market in the United States. Our closest competitors are
other document printers with nationwide manufacturing locations and
regional/local printers, which typically sell within a 100 to 300-mile
radius of their plants. To a limited extent we compete with much
larger direct selling forms manufacturers. We compete mainly on the
breadth of our product offerings and close customer relationships.
LABELS
We are a leading printer of glue applied paper labels for the
food and beverage industry. The labels industry is highly fragmented
with a few large manufacturers with significant North American market
presence. As a result of recent merger and acquisition activity, the
food and beverage manufacturers have started to move toward centralized
corporate purchasing. Premium or specialty labels are popular at the
higher price and higher quality end of the market, usually premium
branded beverages, such as spirits and wines. However, we expect that
conventional glue-applied labels will continue to remain the industry
label of choice due to increasingly cost conscious grocery shoppers,
stiff pressure from large retailers to keep prices low, low
inflationary levels and recent increases in commodity food prices.
SEASONALITY
Several consumer direct market segments served by our Envelopes
division, such as photo finishing packaging and certain segments of the
direct mail market, experience seasonality, with a higher percentage of
the volume of products sold to these markets occurring during the
fourth quarter of the year. This seasonality is due to the increase in
sales to the direct mail market due to holiday purchases. Seasonality
is offset by the diversity of our other products and markets which are
not materially affected by seasonal conditions.
The commercial printing industry experiences seasonal variations.
Our revenues from annual reports are generally concentrated from
February through April. Revenues associated with holiday catalogs and
automobile brochures tend to be concentrated from July through October
and calendars from May to September. As a result of these seasonal
variations, we are at or near capacity at certain times during these
periods.
EMPLOYEES
We employ approximately 12,100 people. Approximately 3,000
people employed at the various facilities are represented by unions
affiliated with the AFL-CIO or Affiliated National Federation of
Independent Unions. These employees are governed by collective
bargaining agreements, each of which covers the workers at a particular
facility, expires from time to time and is negotiated separately.
Accordingly, we believe that no single collective bargaining agreement
is material to our operations as a whole.
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ENVIRONMENTAL MATTERS
Our operations are subject to federal, state and local
environmental laws and regulations relating to air emissions, waste
generation, handling, management and disposal, and at some facilities,
wastewater treatment and discharge. We have implemented environmental
programs designed to ensure that we operate in compliance with the
applicable laws and regulations governing environmental protection.
Our policy is that management at all levels be aware of the
environmental impact of operations and direct such operations in
compliance with applicable standards. We believe we are in substantial
compliance with applicable federal, state and local laws and
regulations relating to environmental protection.
Although we do not anticipate that material capital expenditures
will be required to achieve or maintain compliance with environmental
laws and regulations, changing environmental laws and regulations might
affect the printing industry as well as the manufacture or
transportation of envelopes and related packaging products. For
example, we will be subject to regulations being developed by the
federal Environmental Protection Agency and state environmental
agencies to implement the Clean Air Act Amendments of 1990.
Accordingly, there can be no assurance that environmental matters
resulting in material liabilities or expenditures will not be
discovered or that, in the future, material expenditures for
environmental matters will not be required by changes in law or
regulations.
The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (also known as the "Superfund"
legislation), imposes joint and several liability, without regard to
fault or the legality of the original conduct, on certain classes of
persons for the costs of investigation and remediation of sites at
which there have been releases or threatened releases of hazardous
substances. These persons, known as potentially responsible parties
("PRPs"), include the owners and operators of property and persons that
generated, disposed of or arranged for the disposal of hazardous
substances found at a site. Many states have similar programs.
Although certain of our predecessors have been designated as PRPs under
CERCLA with respect to off-site disposal of hazardous waste, we believe
that we have minimal exposure as a result of such designation,
particularly because of the indemnifications described below. We have
not been named as a PRP at any Superfund sites as a result of ongoing
operations. Due to our waste management and minimization programs and
our current use of permitted hazardous waste disposal facilities, we do
not believe that our current operations will give rise to future
material liability under CERCLA.
In the asset purchase agreement related to the Georgia Pacific
acquisition, GP agreed to retain all liabilities arising from releases
of hazardous substances at any off-site locations occurring prior to
the closing date of the GP acquisition (other than the migration of
hazardous substances from adjacent locations to the plants or from the
plants to adjacent locations. Accordingly, except for liability
associated with migration, if any, the GP acquisition should not expose
us to liability under CERCLA for historical off-site disposal
practices.
Additionally, GP also agreed to indemnify and hold us harmless
from damages that relate to the use, condition, ownership or operation
of any purchased assets or the conduct of its envelope business on or
prior to the closing date of the GP acquisition, including
environmental third party claims. Such damages include on-site
liabilities under CERCLA or corresponding state laws attributable to
operations prior to the closing date. GP's indemnification obligation
is subject to (1) a $35.0 million limitation and (2) a six-year term
limit. This indemnity also is subject to contribution arrangements
with us, which begin with GP paying 90% of the indemnifiable damages in
the first two years and decreasing annually to 50% in the sixth year.
The indemnity for environmental third party claims is not subject to
any
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contribution arrangements. Conversely, we have agreed to indemnify GP
for (1) environmental liabilities incurred subsequent to the closing
date, (2) environmental cleanup liabilities at the sites or related to
migration to or from such sites incurred prior to the closing date,
subject to contribution arrangements with GP, which begin with our
paying 10% of the indemnifiable damages in the first two years
increasing annually to 50% in the sixth year, and (3) third party
claims for pre-closing events arising six years after the closing date.
Georgia-Pacific guaranteed all of GP's obligations under the asset
purchase agreement related to the GP acquisition.
In the asset purchase agreement related to the American Envelope
Company acquisition, American Envelope agreed to indemnify and hold us
harmless from certain liabilities and obligations. In addition to an
indemnification for certain retained liabilities, the indemnification
provides that (1) American Envelope's indemnification obligation for
out of pocket costs arising out of or related to certain disclosed
environmental matters and the presence of any hazardous materials on
the purchased assets ("Costs of Remediation") is subject to a $25.0
million limitation and a six year claims period, and (2) to the extent
that a claim consists of costs and expenses related to any Costs of
Remediation as to which American Envelope is obligated to indemnify us,
the parties shall contribute and share in the items on a sliding scale,
such that American Envelope bears 90% of each item of Costs of
Remediation for which a claim has been made during the first two years
after closing of the American Envelope acquisition, with American
Envelope's share decreasing by 10% each year thereafter until the sixth
anniversary of such closing date, when American Envelope's
indemnification obligations related to unclaimed Costs of Remediation
matters cease. These sharing percentages are fixed based upon the date
the claim is made with respect to any claim for Costs of Remediation
and the parties' relative obligations with respect to any such claim do
not change thereafter. The indemnity for environmental third party
claims is not subject to any contribution by the Parent Company.
In connection with the American Envelope acquisition, American
Envelope and the Parent Company applied to and/or filed notices with
regulatory agencies for the transfer or issuance of all material
permits or authorizations relating to the operations of its plants and
related facilities, including but not limited to, wastewater permits
and air permits. All such permits and authorizations have been
transferred or issued, as applicable.
Environmental claims relating to the properties acquired in our
various other acquisitions are not subject to separate indemnification
provisions, but are subsumed under the general indemnification
provisions of the applicable purchase agreements. Management is not
aware of any existing environmental claims in connection with these
acquired properties, and we believe that the indemnities provided will
be adequate should any future claims arise.
PROPERTIES
At December 31, 1998, we operated 100 printing facilities in the
United States and Canada, of which 51 were owned and 49 leased. In
addition to on-site storage at each of the foregoing facilities, we
also store products in 13 warehouses, of which 2 are owned. We also
lease 12,000 square feet of office space for our corporate headquarters
and 9,500 square feet for the Envelope division headquarters in
Englewood, Colorado, and an additional 5,000 square feet of office
space in Chicago, Illinois for information systems support persons. We
believe that we have adequate facilities for the conduct of current and
future operations.
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LEGAL PROCEEDINGS
From time to time we may be involved in claims or lawsuits that
arise in the ordinary course of business. Accruals for claims or
lawsuits have been provided for to the extent that losses are deemed
probable and estimable. Although the ultimate outcome of these claims
or lawsuits cannot be ascertained, on the basis of present information
and advice received from counsel, it is our opinion that the
disposition or ultimate determination of such claims or lawsuits will
not have a material adverse effect on the Company. In the case of
administrative proceedings related to environmental matters involving
governmental authorities, management does not believe that any
imposition of monetary damages or fines would be material.
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MANAGEMENT
Under the terms of the Parent Company's Articles of Incorporation
and Bylaws, each of the Directors named below is to serve until the next
annual meeting of shareholders.
<TABLE>
<CAPTION>
Name Age Position Director Since
- ---- --- -------- --------------
<S> <C> <C> <C>
Gerald F. Mahoney<F1> 55 Director, Chairman of the Board and
Chief Executive Officer 1994
Paul V. Reilly 46 Director, President & Chief Operating Officer 1998
V. Bruce Thompson 51 Senior Vice President, Corporate Development
Michael Zawalski 39 Senior Vice President, Chief Financial Officer
Douglas A. Mahoney 50 Vice President, Controller
Robert Meyer 42 Vice President, Treasury and Tax
Roger Wertheimer 39 Vice President, General Counsel and Secretary
Frank P. Diassi<F2> 65 Director 1993
Frank J. Hevrdejs<F2> 53 Director 1993
Jerome W. Pickholz<F1><F3> 66 Director 1994
William R. Thomas<F3> 70 Director 1998
<FN>
- ------------
<F1> Member of the Nominating Committee.
<F2> Member of the Compensation Committee.
<F3> Member of the Audit Committee.
</TABLE>
Gerald F. Mahoney has been a director, Chairman of the Board and
Chief Executive Officer of the Parent Company since February 1994. He
was Chairman of the Board, President and Chief Executive Officer of
Pavey Envelope and Tag Corp. from January 1991, until it became a
subsidiary of the Parent Company in February 1994. From September 1987
to September 1989, Mr. Mahoney served as President of Transkrit Corp., a
business forms manufacturing company. Mr. Mahoney serves as Chairman of
the Nominating Committee of the Board of Directors.
Paul V. Reilly has been a director, President and Chief Operating
Officer of the Parent Company since January 1998. Prior to that, Mr.
Reilly was Senior Vice President--Finance and Chief Financial Officer of
the Parent Company from September 1995. Mr. Reilly spent 14 years with
Polychrome Corporation, a prepress supplier to the printing industry,
where he held a number of positions including Assistant Corporate
Treasurer, Corporate Treasurer, Vice President and Chief Financial
Officer, and General Manager of United States Operations. During 1994
and 1995, Mr. Reilly worked with Saddle
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River Capital, an investment banking firm which purchased and managed
small businesses and as Vice President with a direct marketer of
educational materials. Mr. Reilly is a Certified Public Accountant.
V. Bruce Thompson has been Senior Vice President, Corporate
Development of the Parent Company since August 1998. From 1994 until
August 1998, Mr. Thompson was Senior Vice President, Marketing &
Administration and General Counsel of Forest Oil Corporation, a publicly
held exploration and production company. From 1993 to 1994, Mr.
Thompson was Vice President, Legal Affairs for Mid-America Dairymen,
Inc. From 1990 to 1993 he served as Chief of Staff for James M. Inhofe,
currently a U.S. Senator for Oklahoma.
Michael Zawalski has been Senior Vice President and Chief
Financial Officer of the Parent Company since August 1998. From 1997 to
1998, Mr. Zawalski was Chief Financial Officer of Ryder TRS, Inc. a
moving and transportation business, responsible for all facets of
finance including investor and bank relations. From 1996 to 1997, Mr.
Zawalski was Vice President--Finance with the Coleman Company, directing
worldwide planning and analysis, tax, accounting and reporting. Prior to
1996, Mr. Zawalski also held various executive positions with Quaker
Oats. Mr. Zawalski, a Certified Public Accountant, began his career with
Arthur Andersen & Co.
Douglas A. Mahoney has been Vice President, Controller of the
Parent Company since July 1997. From 1991 until July 1997, Mr. Mahoney
was Senior Vice President Administration and Chief Financial Officer of
Quality Park Products, a manufacturer of envelopes and filing supplies
which was acquired by the Parent Company in March 1996. Prior to that,
Mr. Mahoney spent ten years with Tetra Pak, the U.S. division of a
worldwide packaging equipment and paperboard converter supplying the
food and beverage industry, holding a variety of position including
Director of Finance, Vice President and Controller. Mr. Mahoney is a
Certified Public Accountant.
Robert Meyer has been Vice President, Treasury and Tax of the
Parent Company since October 1998. Mr. Meyer is a licensed attorney,
Certified Public Accountant and Certified Financial Planner. From 1988
to 1998, Mr. Meyer was with the accounting firm of Deloitte & Touche
LLP, as a Partner in their tax function.
Roger Wertheimer has been Vice President--General Counsel and
Secretary since February 1995. Mr. Wertheimer began practicing law in
1984 and served as Corporate Counsel for PACE Membership Warehouse, Inc.
from 1988 to 1994. After that, Mr. Wertheimer had a private practice
from March 1994 until February 1995, when he joined the Parent Company.
Frank P. Diassi has been a director of the Parent Company since
its inception in November 1993. Mr. Diassi has been Chairman of
Sterling Chemicals, Inc., a manufacturer of commodity chemicals, pulp
chemicals, acrylic and fibers, since August 1996. He was a founding
director of Arcadian Corporation, the largest nitrogen fertilizer
company in North America. Mr. Diassi was formerly a Director and
Chairman of the Finance Committee of Arcadian Corporation from 1989 to
1994. Mr. Diassi is a member of the Board of Directors of Fiberglass
Holdings, Inc., Amerlux Corp. and Software Plus, Inc. Mr. Diassi serves
as a member of the Compensation Committee of the Board of Directors.
Frank J. Hevrdejs has been a director of the Parent Company since
its inception in November 1993. In 1982, Mr. Hevrdejs co-founded The
Sterling Group, Inc., a major management buyout company. Mr. Hevrdejs
is a principal and president of The Sterling Group, Inc. Additionally,
he is
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<PAGE>
Chairman of First Sterling Ventures, Corp., an investment company,
Enduro Holdings, Inc., a structural and electrical manufacturing
company, and Fiberglass Holdings, Inc., a truck accessory manufacturer.
He is also a board member of Eagle U.S.A., an air-freight company and a
board member of Sterling Chemicals, Inc., a petroleum chemical company.
Mr. Hevrdejs serves as Chairman of the Compensation Committee of the
Board of Directors.
Jerome W. Pickholz has been a director of the Parent Company since
September 1994. From 1978 until 1994, he was Chief Executive Officer of
Ogilvy & Mather Direct Worldwide, a direct advertising agency. From
1994 until September 1995, he served as Chairman of the Board of Ogilvy
& Mather Direct worldwide where he is now Chairman Emeritus. Since
January 1, 1996, Mr. Pickholz has served as founder and Chairman of
Pickholz, Tweedy, Cowan, L.L.C., a marketing communications company.
Mr. Pickholz serves as the Chairman of the Audit Committee and as a
member of the Nominating Committee of the Board of Directors.
William R. Thomas has been a director of the Parent Company since
November 3, 1998. He has served as Chairman of the Board of Directors
of Capital Southwest Corporation, a publicly owned venture capital
investment company, since July 1982 and as President of that company
since 1980. In addition, Mr. Thomas has been a director of Capital
Southwest Corporation since 1972 and was previously Senior Vice
President from 1969 to 1980. Mr. Thomas also serves as a director of
Alamo Group, Inc., Encore Wire Corporation and Palm Harbor Homes, Inc.
Mr. Thomas is a member of the Audit Committee.
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DESCRIPTION OF THE NOTES
In this description, the word "Company" refers only to Mail-Well I
Corporation and not to the Parent Company or any Subsidiaries of the
Company. Also, several defined terms are used in this description, and
their definitions are in the "--Definitions in the Indenture" section
beginning on page 89.
The Company will issue the new notes under an indenture among
itself, the Guarantors and State Street Bank and Trust Company, as
trustee. The terms of the new notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939.
The following description is a summary of the material provisions
of the indenture for the old notes and the new notes. The description
does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the indenture. We
incorporate the indenture into this Prospectus by this reference. A
copy of the indenture has been filed as an exhibit to the Parent
Company's Annual Report on Form 10-K for the year ended December 31,
1998. You may obtain a copy of the indenture from the Commission, the
Company or from any of the initial purchasers of the old notes.
BRIEF DESCRIPTION OF THE NEW NOTES AND THE GUARANTEES
THE NEW NOTES
These new notes:
* are identical to the old notes in all material respects,
including the Guarantees, except that the new notes are
registered under federal securities laws and will not
contain any legends restricting their transfer;
* are general unsecured obligations of the Company;
* are subordinated in right of payment to the existing and any
future Senior Debt of the Company, including borrowings
under the Company's bank credit agreement;
* are equal in right of payment to any senior subordinated
debt incurred by the Company in the future;
* are senior in right of payment to existing and any future
subordinated Indebtedness of the Company, including existing
intercompany subordinated Indebtedness from the Company to
the Parent Company, that expressly provides by its terms
that is subordinated to the new notes; and
* are unconditionally guaranteed by the Guarantors.
THE GUARANTEES
The new notes are unconditionally guaranteed on an unsecured
senior subordinated basis, jointly and severally, by the Parent Company
and each of the current Subsidiaries of the Company (other than special
purpose financing vehicles) that was formed under the laws of a state of
the United States
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(including the District of Columbia) and has its principal place of
business within the United States (the "Subsidiary Guarantors"). The
following is a list of the Subsidiary Guarantors as of the date of this
Prospectus:
Graphics Arts Center, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Canada Holdings, Inc.
Mail-Well Label Holdings, Inc.
Mail-Well Label USA, Inc.
Mail-Well West, Inc.
Murray Envelope Holdings, Inc.
Murray Envelope Corporation
N-M Envelope, Inc.
National Graphics Company
Poser Business Forms, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
The following former Subsidiaries of the Company were Guarantors
of the old notes, but were merged into the Company or one of the
Subsidiary Guarantors on December 31, 1998:
Anderson Lithograph Company
Armstrong-White, Inc.
Barkley, Inc.
Denver Forms Company
Digital X-Press, Inc.
Gould Packaging, Inc.
Graphics Illustrated, Inc.
Griffin Envelope, Inc.
Imperial Litho and Dryography, Inc.
John D. Lucas Printing Co.
Production Press, Inc.
Richtman's Printing of Colorado, LLC
Trafton Printing, Inc.
The new notes will be guaranteed by each new Restricted Subsidiary
of either the Company or the Parent Company (other than special purpose
financing vehicles) that is or becomes a Significant Subsidiary of the
Company or the Parent Company, as applicable, is formed under the laws
of a state of the United States (including the District of Columbia) and
has its principal place of business with the United States.
The Guarantees of these new notes:
* are general unsecured obligations of each Guarantor;
* are subordinated in right of payment to all existing and any
future Senior Debt of each Guarantor including Guarantees of
each Guarantor of Senior Debt of the Company;
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* are equal in right of payment to all existing and any future
senior subordinated debt of each Guarantor, including
Guarantees of any future senior subordinated debt of the
Company; and
* are senior in right of payment to any existing and future
subordinated Indebtedness of each Guarantor that expressly
provides by its terms that it is subordinated to the
Guarantee of such Guarantor.
As of December 31, 1998, the old notes and the Guarantees were
subordinated to $139.4 million of Senior Debt and approximately $207.0
million available under our bank credit agreement. As indicated above
and as discussed in detail below under the subheading "Subordination,"
payments on the new notes and under the Guarantees will be subordinated
to the payment of Senior Debt. The indenture permits the Company and
the Guarantors to incur additional Senior Debt.
As of the issue date of the old notes, all Subsidiaries of either
the Company or the Parent Company (other than special purpose financing
vehicles) were "Restricted Subsidiaries." However, under the
circumstances described below under the subheading "Covenants in the
Indenture--Designation of Restricted and Unrestricted Subsidiaries," we
will be permitted to designate certain of our Subsidiaries as
"Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants in the indenture.
Unrestricted Subsidiaries will not guarantee the new notes.
Not all of our Subsidiaries will guarantee the new notes. In the
event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor Subsidiaries, these non-guarantor Subsidiaries will pay
the holders of their debt and their trade creditors before they will be
able to distribute any of their assets to us. The non-guarantor
Subsidiaries generated 10.3% of our consolidated revenues in the year
ended December 31, 1998, and held 14.6% of our consolidated assets as of
December 31, 1998.
PRINCIPAL, MATURITY AND INTEREST
The Company will issue new notes with an aggregate principal
amount of $300 million in exchange for the old notes, which have an
aggregate outstanding principal amount of $300 million. The Company
will issue new notes in denominations of $1,000 and integral multiples
of $1,000 in exchange for each $1,000 and integral multiple of $1,000 in
old notes. The new notes will mature on December 15, 2008.
Interest on the new notes will accrue at the rate of 8 3/4% per
annum and will be payable semiannually in arrears on June 15 and
December 15 commencing on June 15, 1999. The Company will make each
interest payment to the Holders of record of the new notes on the
immediately preceding June 1 and December 1.
Interest on the new notes will accrue from the date of original
issuance of the old notes or, if interest has already been paid on the
old notes, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day
months.
NOTE GUARANTEES; RESTRICTIONS ON PARENT COMPANY AND SUBSIDIARIES
The Guarantors, which, as of the issue date of the old notes
included the Parent Company and each of the current Subsidiaries of the
Company (other than special purpose financing vehicles) that was
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formed under the laws of a state of the United States, including the
District of Columbia, and has its principal place of business within the
United States, jointly and severally guarantee the Company's obligations
under the new notes. The new notes will also be guaranteed by each new
Restricted Subsidiary of either the Company or the Parent Company (other
than special purpose financing vehicles) that is a Significant
Subsidiary of either the Company or the Parent Company formed under the
laws of a state of the United States (including the District of
Columbia) with its principal place of business within the United States.
Each Note Guarantee will be subordinated to the prior payment in full of
all existing and future Senior Debt of that Guarantor and the Guarantees
of that Guarantor of the Company's Senior Debt. Each Note Guarantee
will be equal in rank with all senior subordinated debt of that
Guarantor and the Guarantees of that Guarantor of the Company's existing
and any future senior subordinated debt.
The Guarantees will rank at least on a parity with claims of all
unsecured creditors (including unsecured trade creditors and tort
claimants), other than holders of Senior Debt, of the respective
Guarantors; however, because of the subordination provisions of the
Guarantees, unless sufficient sums are available to pay the full amounts
required under the Guarantees and to pay the unsecured creditors of the
respective Guarantors, such other unsecured creditors of the Guarantors
may recover more, ratably, than the holders of the new notes would
recover with respect to the Guarantees. Each Guarantor will be
prohibited from making payments under its Guarantee if defaults and
certain other events with respect to Senior Debt of a Guarantor have
occurred that prohibit the Guarantor from making payment on the new
notes pursuant to the Guarantees.
The obligations of each Guarantor under its Note Guarantee will be
limited as necessary to prevent that Note Guarantee from constituting a
fraudulent conveyance under applicable law. See "Risk Factors--What are
the Risks Related to the New Notes--Fraudulent Conveyance Matters."
Neither the Parent Company nor any Restricted Subsidiary may sell
or otherwise dispose of all or substantially all of its assets, or
consolidate with or merge with or into (whether or not the Parent
Company or Restricted Subsidiary, as applicable, is the surviving
Person), another Person (other than another Restricted Subsidiary)
unless:
(1) either: (a) the Parent Company or Restricted Subsidiary is
the surviving corporation; or (b) the Person formed by or
surviving any such consolidation or merger (if other than
the Parent Company or Restricted Subsidiary) or to which
such sale, assignment, transfer, 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 or the jurisdiction in
which the Restricted Subsidiary is organized and under the
laws of which it is existing;
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Parent Company, or Restricted
Subsidiary, or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been
made) assumes all the obligations of the Parent Company or
Restricted Subsidiary, as applicable, under the Note
Guarantees and the indenture, as applicable, pursuant to
agreements reasonably satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
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(4) the Parent Company, the Restricted Subsidiary or the Person
formed by or surviving any such consolidation or merger (if
other than the Parent Company or Restricted Subsidiary) will
have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net
Worth of the Parent Company or Restricted Subsidiary
immediately preceding the transaction.
In addition, neither the Parent Company nor any Restricted
Subsidiary may, directly or indirectly, sell or lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person.
The Note Guarantee of a Subsidiary Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Subsidiary Guarantor
(including by way of merger or consolidation), if the
Company applies the Net Proceeds of that sale or other
disposition in accordance with the applicable provisions of
the indenture; or
(2) in connection with any sale of all of the capital stock of a
Subsidiary Guarantor, if the Company applies the Net
Proceeds of that sale in accordance with the applicable
provisions of the indenture.
See "--Repurchase at the Option of Holders--Asset Sales."
SUBORDINATION
The payment of principal, premium, Liquidated Damages (as defined
under the caption "--Registration Rights; Liquidated Damages") and
interest, if any, on the new notes will be subordinated to the prior
payment in full of all Senior Debt of the Company.
The holders of Senior Debt will be entitled to receive payment in
full of all Obligations due in respect of Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of new notes
will be entitled to receive any payment with respect to the new notes,
in the event of any distribution to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the new
notes if:
(1) a payment default on Designated Senior Debt occurs and is
continuing beyond any applicable grace period; or
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(2) any other default occurs and is continuing on Designated
Senior Debt that permits holders of the Designated Senior
Debt to accelerate its maturity and the trustee receives a
notice of such default (a "Payment Blockage Notice") from
the Company or the holders of any Designated Senior Debt.
Payments on the new notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which
such default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until
365 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice.
No nonpayment default that existed or 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 cured or waived for a period of not less than 90
days.
The Company must promptly notify holders of Senior Debt if payment
of the new notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in
the event of a bankruptcy, liquidation or reorganization of the Company,
Holders of the new notes may recover less ratably than creditors of the
Company who are holders of Senior Debt. See "Risk Factors--What are the
Risks Related to the New Notes--The New Notes and Guarantees are
Subordinated to Senior Creditors."
OPTIONAL REDEMPTION
The new notes will not be redeemable at the Company's option prior
to December 15, 2003.
After December 15, 2003, the Company may redeem all or a part of
the new notes 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 thereon, if any, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on December 15 of the years indicated below:
Year Percentage
---- ----------
2003 104.375%
2004 102.917%
2005 101.458%
2006 and thereafter 100.000%
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Notwithstanding the foregoing, prior to December 15, 2001, the
Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount of new notes originally issued under the
indenture at a redemption price of 108.75% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, with
the net cash proceeds of one or more Equity Offerings; provided that:
(1) at least $130 million in aggregate principal amount of new
notes remains outstanding immediately after the occurrence
of such redemption (excluding new notes held by the Parent
Company, the Company and their Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the
closing of such Equity Offering.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of new notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's new notes
pursuant to the offer described below (the "Change of Control Offer").
In the Change of Control Offer, the Company will offer a "Change of
Control Payment" in cash equal to 101% of the aggregate principal amount
of new notes repurchased plus accrued and unpaid interest thereon, if
any, to the date of purchase. Within 30 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and
offering to repurchase new notes on the Change of Control Payment Date
specified in such notice, pursuant to the procedures required by the
indenture and described in such notice. The Company will comply with
the requirements of Rule 14e-l 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 new
notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful;
(1) accept for payment all new 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 new notes or portions
thereof so tendered; and
(3) deliver or cause to be delivered to the trustee the new
notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of new notes or
portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of new notes so
tendered the Change of Control Payment for such new notes, and the
trustee will promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a replacement new note equal in principal
amount to any unpurchased portion of the new notes surrendered, if any;
provided that each such replacement new note will be in a principal
amount of $1,000 or an integral multiple thereof.
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Prior to complying with any of the provisions of this "Change of
Control" covenant, but in any event within 90 days following a Change of
Control, the Company 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 new notes required
by this covenant. The Company 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 provisions described above that require the Company to make a
Change of Control Offer following a Change of Control will be applicable
regardless of 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 new notes to require that the Company repurchase or
redeem the new notes in the event of a takeover, recapitalization or
similar transaction.
In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing new notes, the Company could seek the
consent of its senior lenders to the purchase of new notes or could
attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing new notes. In such case,
the Company's failure to purchase tendered new notes would constitute an
Event of Default under the indenture which would, in turn, constitute a
default under such Senior Debt. In such circumstances, the
subordination provisions in the indenture would likely restrict payments
to the Holders of new notes.
The Company 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 the Company and purchases all new 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 the Company and its Subsidiaries
taken as a whole. Although there is a limited body of 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 new notes to require the Company to
repurchase such new notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group
may be uncertain.
ASSET SALES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (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 of the assets or Equity
Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined by the Company's Board
of Directors and evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to
the trustee; and
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(3) at least 80% of the Net Proceeds received by the Company or
such Restricted Subsidiary is in the form of cash. For
purposes of this provision, each of the following shall be
deemed to be cash:
(a) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by
their terms subordinated to the new notes or any Note
Guarantee) that are used by the transferee of any such
assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary
from further liability; and
(b) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from
such transferee that are contemporaneously (subject to
ordinary settlement periods) converted by the Company
or such Restricted Subsidiary into cash (to the extent
of the cash received in that conversion).
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company, or a Restricted Subsidiary must apply such Net
Proceeds:
(1) by reinvesting in the business of the Company or such
Restricted Subsidiary;
(2) by repaying outstanding Senior Debt; or
(3) by offering to purchase the new notes at 100% of principal
amount, plus accrued and unpaid interest, if any.
SELECTION AND NOTICE
If less than all of the new notes are to be redeemed at any time,
the trustee will select new notes for redemption on a pro rata basis, by
lot or by such method as the trustee shall deem fair and appropriate.
No new 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 new notes
to be redeemed at its registered address. Notices of redemption may not
be conditional.
If any new note is to be redeemed in part only, the notice of
redemption that relates to that new note shall state the portion of the
principal amount thereof to be redeemed. A replacement new note in
principal amount equal to the unredeemed portion of the original new
note will be issued in the name of the Holder thereof upon cancellation
of the original new note. New notes called for redemption become due on
the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on new notes or portions of them called for
redemption.
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COVENANTS IN THE INDENTURE
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any
merger or consolidation involving the Company or any of its
Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity
Interests of the Company or a Restricted Subsidiary or to
the Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any
merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of
the Company or any Restricted Subsidiary of the Company
(other than any such Equity Interests owned by the Company
or any Restricted Subsidiary of the Company);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any
Indebtedness that is of equal rank with or subordinated to
the new notes or the Note Guarantees (other than the new
notes or the Note Guarantees), except a payment of interest
or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) the Company, 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, would 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
(3) such Restricted Payment, together with the aggregate amount
of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the indenture
(excluding Restricted Payments permitted by clauses (2),
(3), (4), (6), (8) and (9) of the next succeeding
paragraph), is less than the sum, without duplication, of
(a) 50% of the Consolidated Net Income (minus 100% of any
Consolidated Net Loss) of the Company since January 1,
1999, plus
(b) the aggregate net cash proceeds received after the
issue date of the old notes from the sale of Equity
Interests or any Indebtedness that is convertible into
Capital Stock and has been so converted, plus
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(c) the aggregate cash received by the Company as capital
contributions after the issue date of the old notes,
plus
(d) $15 million.
So long as no Default has occurred and is continuing or would be
caused thereby, the preceding provisions will not prohibit:
(1) 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;
(2) the repurchase, redemption, defeasance, retirement or other
acquisition of any equal rank or subordinated Indebtedness
of the Company or any Guarantor or of any Equity Interests
of the Company or any Restricted Subsidiary in exchange for,
or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company)
of, Equity Interests of the Company;
(3) the redemption, repurchase, defeasance, retirement or other
acquisition of any equal rank or subordinated Indebtedness
of the Company or any Guarantor with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of
the Company to the holders of its common Equity Interests on
a pro rata basis;
(5) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Parent
Company or the Company or any Restricted Subsidiary of the
Company held by any member of the Parent Company's or
Company's (or any of its Subsidiaries') management pursuant
to any management equity subscription agreement or stock
option agreement in effect as of the date of the indenture;
provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests
shall not exceed $1 million in any twelve-month period;
(6) the making of any Restricted Investment, directly or
indirectly, out of the net cash proceeds of substantially
concurrent sales (other than to a Subsidiary) of Equity
Interests of the Company;
(7) the repurchase, redemption, retirement or other acquisition
of Equity Interests of the Company or any Restricted
Subsidiary issued, or Indebtedness incurred, by the Company
or any Restricted Subsidiary in connection with the
acquisition of any Person or any assets to the former owners
of such Person or assets; and
(8) Permitted Payments to the Parent Company.
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 the
Company or such Restricted Subsidiary, as the case may be, pursuant to
the Restricted Payment. The fair market value of any assets or
securities that are required to be valued by this covenant shall be
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determined by the Board of Directors whose resolution with respect
thereto shall be delivered to the trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if
the fair market value exceeds $5 million. Not later than 15 days after
the end of the fiscal quarter in which any Restricted Payment is made,
the Company 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 this "Restricted Payments"
covenant, were computed, together with a copy of any fairness opinion or
appraisal required by the indenture.
INCURRENCE OF INDEBTEDNESS
The Company will not, and will not permit any of its Restricted
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); provided, however, that the
Company and any Restricted Subsidiary may incur Indebtedness (including
Acquired Debt), 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 would have been at least
2 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 at the beginning of such four-quarter
period.
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and any Restricted Subsidiary
of the Indebtedness under Credit Facilities; provided that
the aggregate principal amount of all Indebtedness, under
such Credit Facilities does not exceed an amount equal to
$300 million;
(2) the incurrence by the Company and its Subsidiaries of
Existing Indebtedness;
(3) the incurrence by the Company and the Subsidiary Guarantors
of Indebtedness represented by the new notes and the Note
Guarantees;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money
obligation, 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 Restricted
Subsidiary, in an aggregate principal amount not to exceed
$25 million at any time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries 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 of this
covenant or clause (2) or (3) of this paragraph;
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(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
the Company and any of its Wholly Owned Restricted
Subsidiaries; provided, however, that:
(a) if the Company or any Subsidiary Guarantor is the
obligor on such Indebtedness, such Indebtedness must
be expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the new
notes, in the case of the Company, or the Note
Guarantee of such Subsidiary Guarantor, in the case of
a Subsidiary Guarantor; and
(b) (1) 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 Wholly
Owned Restricted Subsidiary thereof and (2) any sale
or other transfer of any such Indebtedness to a Person
that is not either the Company or a Wholly Owned
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 (6);
(7) the incurrence by the Company or any of its Restricted
Subsidiaries 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 the indenture to be outstanding;
(8) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company that was permitted to be incurred
by another provision of this covenant;
(9) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accrued 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 (9), not to
exceed $50 million;
(10) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; 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 the Company that was not permitted by this
clause (10);
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in respect of judgment, appeal,
surety, performance and other like bonds, bankers
acceptances and letters of credit provided by the Company
and its Subsidiaries in the ordinary course of business
(including any Indebtedness incurred to refinance, retire,
renew, defease, refund or otherwise replace any Indebtedness
referred to in this clause (11)); and
(12) Indebtedness incurred by the Company or any of its
Subsidiaries arising from agreements or their respective
bylaws providing for indemnification, adjustment of purchase
price or
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similar obligations, or from guarantees of letters of
credit, surety bonds or performance bonds securing the
performance of the Company or any of its Subsidiaries to any
Person acquiring all or a portion of such business or assets
of a Subsidiary of the Company for the purpose of financing
such acquisition.
For purposes of determining compliance with this "Incurrence of
Indebtedness" covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this
covenant, the Company will be permitted to classify such item of
Indebtedness on the date of its incurrence in any manner that complies
with this covenant.
ANTI-LAYERING
The Company 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 of the Company and senior
in any respect in right of payment to the new notes. 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
any Senior Debt of such Guarantor and senior in any respect in right of
payment to such Guarantor's Note Guarantee.
LIENS
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to own any Lien of any kind securing Indebtedness, Attributable Debt or
trade payables on any asset now owned or hereafter acquired, except
Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective
any encumbrance or restriction on the ability of any Restricted
Subsidiary to pay dividends or make any other distributions or pay
Indebtedness to the Company or any of the Company's Restricted
Subsidiaries, or with respect to any other interest or participation in,
or measured by, its profits, or pay any indebtedness owed to the Company
or any of the Company's Restricted Subsidiaries.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not, directly or indirectly: (1) consolidate or
merge with or into another Person (whether or not the Company is the
surviving corporation); or (2) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or
assets, in one or more related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b)
the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale,
assignment, transfer, 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;
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(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which
such sale, assignment, transfer, conveyance or other
disposition shall have been made, expressly assumes all the
obligations of the Company under the new notes and the
indenture pursuant to agreements reasonably satisfactory to
the trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
(4) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company):
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the
transaction; and
(b) will, on the date of such transaction after giving pro
forma effect thereto and any related financing
transactions as if the same 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."
In addition, the Company may not, directly or indirectly, lease
all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. This "Merger, Consolidation,
or Sale of Assets" covenant will not apply to a merger, consolidation,
sale, assignment, transfer, conveyance or other disposition of assets
between or among the Company and any of its Wholly Owned Subsidiaries.
TRANSACTIONS WITH AFFILIATES
The Company 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 (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person; and
(2) the Company delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $1 million, a resolution of
the Board of Directors set forth in the Officers'
Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
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(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $10 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.
The following items shall not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the provisions of
the prior paragraph:
(1) any employment agreement entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the
Company or such Restricted Subsidiary;
(2) indemnification agreements permitted by law entered into by
the Company or any of its Restricted Subsidiaries with any
of its Affiliates who are directors, employees or agents of
the Company or any of its Restricted Subsidiaries;
(3) transactions between or among the Company and/or its
Restricted Subsidiaries;
(4) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company; and
(5) Restricted Payments that are permitted by the provisions of
the indenture described above under the caption
"--Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If the Company, the Parent Company or any Restricted Subsidiary of
the Company acquires or creates another Restricted Subsidiary (other
than a special purpose finance vehicle) and such Restricted Subsidiary
is formed under the laws of a state of the United States (including the
District of Columbia) and has its principal place of business within the
United States, then as such time as such Restricted Subsidiary first
becomes a Significant Subsidiary of the Company or the Parent Company,
as applicable, that newly acquired or created Restricted Subsidiary must
become a Guarantor and execute a supplemental indenture satisfactory to
the trustee and deliver an opinion of counsel to the trustee within 10
Business Days of the date on which it was acquired or created.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
As of the issue date of the old notes, all of the Subsidiaries of
the Company (other than special purpose financing vehicles) were
Restricted Subsidiaries. The Board of Directors may designate any
Subsidiary to be an Unrestricted Subsidiary if that designation would
not cause a Default. If a Subsidiary is designated as an Unrestricted
Subsidiary, all outstanding Investments owned by the Company and its
Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of
the covenant described above under the caption "--Restricted Payments"
or Permitted Investments, as applicable. All such outstanding
Investments will be valued at their fair market value at the time of
such designation. In addition, such designation will only be permitted
if such Restricted Payment would be permitted at that time and if such
Subsidiary otherwise meets the definition of an Unrestricted
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Subsidiary. The Board of Directors may redesignate any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation would not
cause a Default.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
The Company will not permit any of its Restricted Subsidiaries
that is not a Guarantor of the new notes, directly or indirectly, to
Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company or the Parent Company unless such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture
providing for the Guarantee of the payment of the new notes by such
Restricted Subsidiary to the same extent as such Guarantee of such other
Indebtedness, which Guarantee shall be senior to or of equal rank with
such Restricted Subsidiary's Guarantee of or pledge to secure such other
Indebtedness, unless such other Indebtedness is Senior Debt, in which
case the Guarantee of the new notes may be subordinated to the Guarantee
of such Senior Debt to the same extent as the new notes are subordinated
to such Senior Debt.
Notwithstanding the preceding paragraph, any Note Guarantee of the
new notes provides by its terms that it will be automatically and
unconditionally released and discharged under the circumstances
described above under the caption "Note Guarantees; Restrictions on
Parent Company and Subsidiaries." The form of the Note Guarantee is
attached as an exhibit to the indenture.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses.
ADVANCES TO SUBSIDIARIES
Any advance made by the Company to a Restricted Subsidiary that is
not a Guarantor will be evidenced by an Intercompany Note in favor of
the Company. Each Intercompany Note will be payable upon demand and
will bear interest at the same rate as the new notes. A form of
Intercompany Note is attached as an exhibit to the indenture.
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to
or for the benefit of any Holder of new notes for or as an inducement to
any consent, waiver or amendment of any of the terms or provisions of
the indenture or the new notes unless such consideration is offered to
be paid and is paid to all Holders of the new 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.
REPORTS
Whether or not required by the Commission, so long as any new
notes are outstanding, the Company will furnish to the Holders of new
notes, within the time periods specified in the Commission's rules and
regulations:
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(1) all 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 the Company 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
on the annual financial statements by the Company's
certified independent accountants; and
(2) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to
file such reports.
The quarterly and annual financial information required by the
preceding paragraph shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, of the financial condition and
results of operations of the Company and its Subsidiary Guarantors
separate from the financial condition and results of operations of the
other Subsidiaries of the Company.
In addition, whether or not required by the Commission, the
Company will file a copy of all of the information and reports referred
to in clauses (1) and (2) above 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.
The foregoing reporting obligation may be satisfied by reports
prepared and filed by the Parent Company on a consolidated basis under
the requirements of the Exchange Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Guarantors (the "Obligors") and the initial
purchasers of the old notes entered into the Registration Rights
Agreement on December 16, 1998. In the Registration Rights Agreement,
the Obligors agreed, among other things, to file with the Commission the
Registration Statement of which this Prospectus is a part. See "The
Exchange Offer."
If (1) this exchange offer is not permitted by applicable law or
Commission policy; (2) this exchange offer is not consummated within 210
days of the issue date of the old notes; or (3) any Holder of the old
notes which are Transfer Restricted Securities notifies the Company
prior to the 20th business day following the consummation of the
exchange offer that (a) it is prohibited by law or Commission policy
from participating in the exchange offer, (b) it may not resell the new
notes acquired by it in the exchange offer to the public without
delivering a prospectus, and the prospectus contained in the
Registration Statement is not appropriate or available for such resales
by it, or (c) it is a broker-dealer and holds the old notes acquired
directly from the Company or any of the Company's affiliates, the
Obligors (x) will cause to be filed on or prior to 30 days after the
date on which the Company determines that it is not required to file the
Registration Statement pursuant to clause (1) above, 30 days after the
date on which the obligation specified in clause (2) above becomes not
satisfied or 30 days after the date on which the Company receives the
notice specified in clause (3) above, a Shelf Registration Statement
relating to all Transfer Restricted Securities and (y) will use their
best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act on or prior to 90 days after the date
on which the Obligors become obligated to file such Shelf Registration
Statement and keep the Shelf Registration Statement effective until the
earlier of (A) the time when the old notes covered by the Shelf
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Registration Statement can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144 and (B)
three years from the issue date of the old notes. The Company will, in
the event the Shelf Registration Statement is filed, among other things,
provide to each Holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is part of the Shelf Registration
Statement, notify each such Holder when the Shelf Registration Statement
has become effective and take certain other actions as are required to
permit unrestricted resales of the old notes or the new notes, as the
case may be. A Holder selling such old notes or new notes pursuant to
the Shelf Registration Statement generally would be required to be named
as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such
sales and will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound
by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification
obligations).
For the purposes of the Registration Rights Agreement, "Transfer
Restricted Securities" means each old note until the earliest on the
date of which (1) such old note is exchanged in the exchange offer and
entitled to be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the Securities
Act, (2) such old note has been disposed of in accordance with the Shelf
Registration Statement, (3) such old note is disposed of by a
broker-dealer pursuant to the "Plan of Distribution" contemplated by the
Registration Statement (including delivery of the Prospectus) or (4)
such old note is distributed to the public pursuant to Rule 144 under
the Securities Act.
The Registration Rights Agreement provides that (1) if the
Obligors fail to file the Registration Statement with the Commission on
or prior to the 90th day after the issue date of the old notes, (2) if
the Registration Statement is not declared effective by the Commission
on or prior to the 180th day after the issue date of the old notes, (3)
if the exchange offer is not consummated on or before the 30th business
day after the Registration Statement is declared effective, (4) if
obligated to file the Shelf Registration Statement and the Obligors fail
to file the Shelf Registration Statement with the Commission on or prior
to the 30th business day after such filing obligation arises (but no
earlier than 90 days after the issue date of the old notes), (5) if
obligated to file a Shelf Registration Statement and the Shelf
Registration Statement is not declared effective on or prior to the 90th
day after the obligation to file a Shelf Registration Statement arises
(but no earlier than 180 days after the issue date of the old notes), or
(6) if the Registration Statement or the Shelf Registration Statement,
as the case may be, is declared effective but thereafter ceases to be
effective or useable in connection with resales of the Transfer
Restricted Securities, for such time of non-effectiveness or
non-usability (each, a "Registration Default"), the Obligors agree to
pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages ("Liquidated Damages") in an amount equal to $0.05
per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of
the Liquidated Damages shall increase by an additional $0.05 per week
per $1,000 in principal amount of Transfer Restricted Securities at the
beginning of and for each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.50 per week, per $1,000 in principal amount of
Transfer Restricted Securities. The Obligors shall not be required to
pay Liquidated Damages for more than one Registration Default at any
given time. No Holder of Transfer Restricted Securities will be
entitled to receive Liquidated Damages pursuant to the Registration
Rights Agreement unless and until such Holder has provided certain
information to the Company for use in connection with the applicable
Shelf Registration
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Statement. Following the cure of all Registration Defaults, the accrual
of Liquidated Damages will cease.
All accrued Liquidated Damages shall be paid by the Obligors to
Holders entitled thereto in the same manner as interest payments on the
old notes on semi-annual damages payment dates which correspond to
interest payment dates for the old notes.
The summary herein of provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement. We incorporate the Registration Rights
Agreement into this Prospectus by this reference. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Parent
Company's Annual Report on Form 10-K for the year ended December 31,
1998, and is available from the Company or the Commission upon request.
See "Where You Can Find More Information."
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on,
or Liquidated Damages with respect to, the new notes,
whether or not prohibited by the subordination provisions of
the indenture;
(2) default in payment when due of the principal of or premium,
if any, on the new notes, whether or not prohibited by the
subordination provisions of the indenture for the new notes;
(3) failure by the Company or any of its Restricted Subsidiaries
to comply with the provisions described under the captions
"--Change of Control," "--Asset Sales," "--Restricted
Payments," "--Incurrence of Indebtedness" or "--Merger,
Consolidation, or Sale of Assets";
(4) failure by the Company or any of its Restricted Subsidiaries
to comply with any of the other agreements in the indenture
for 60 days after notice to the Company by the trustee or
the Holders of at least 25% in aggregate principal amount of
the new notes then outstanding;
(5) default under any mortgage, indenture or instrument under
which they may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company
or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the indenture, if
that default:
(a) is caused by a failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment
Default"); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity,
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and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $10 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $10 million,
which judgments are not paid, discharged or stayed for a
period of 60 days;
(7) except as permitted by the indenture, any Note Guarantee
shall be held in any judicial proceeding to be unenforceable
or invalid 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 Note Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding new notes will become due and payable
immediately without further action or notice. If any other Event of
Default occurs and is continuing, the trustee or the Holders of at least
25% in principal amount of the then outstanding new notes may declare
all the new notes to be due and payable immediately.
Holders of the new notes may not enforce the indenture or the new
notes except as provided in the indenture. Subject to limitations,
Holders of a majority in principal amount of the then outstanding new
notes may direct the trustee in its exercise of any trust or power.
The Holder of a majority in aggregate principal amount of the new
notes then outstanding by notice to the trustee may on behalf of the
Holders of all of the new 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 new notes.
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 the
Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem
the new 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 new notes. If an Event of Default occurs prior to December 15,
2003, by reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the new notes prior to December 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 new notes.
The Company is required to deliver to the trustee annually a
statement regarding compliance with the indenture. Upon becoming aware
of any Default or Event of Default, the Company is required to deliver
to the trustee a statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any
obligations of the Company or the Guarantors under the new notes, the
indenture, the Note Guarantees, or for any claim based on, in respect
of, or by reason of, such obligations or their creation.
Each Holder of new notes by accepting a new note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the new notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company may terminate its obligations and the obligations of
the Guarantors under the new notes, the indenture, and the Guarantees
when (1) either (A) all outstanding new notes have been delivered to the
trustee for cancellation or (B) all such new notes not therefore
delivered to the trustee for cancellation have become due and payable,
will become due and payable within one year or are to be called for
redemption within one year under irrevocable arrangements satisfactory
to the trustee for the giving of notice of redemption by the trustee in
the name and at the expense of the Company, and the Company has
irrevocably deposited or caused to be deposited with the trustee funds
in an amount sufficient to pay and discharge the entire indebtedness on
the new notes not theretofore delivered to the trustee for cancellation,
for principal of (premium, if any, on) and interest to the date of
deposit or Stated Maturity or date of redemption; (2) the Company has
paid or caused to be paid all sums then due and payable by the Company
under the indenture; and (3) the Company has delivered an Officers'
Certificate and an opinion of counsel relating to compliance with the
conditions set forth in the indenture.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all
of its obligations discharged with respect to the outstanding new notes
("Legal Defeasance"), except for:
(1) the rights of Holders of outstanding new notes to receive
payments in respect of the principal of, premium, if any,
and interest and Liquidated Damages on such new notes when
such payments are due from the trust referred to below;
(2) the Company's obligations with respect to the new notes
concerning issuing temporary new notes, registration of new
notes, mutilated, destroyed, lost or stolen new notes and
the maintenance of an office or agency for payment and money
for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and the Company's obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any failure to comply with such obligations shall not
constitute a Default or
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Event of Default with respect to the new notes. In the event Covenant
Defeasance occurs, certain events (other than nonpayment, bankruptcy,
receivership, rehabilitation and insolvency events) described under
"Events of Default and Remedies" will no longer constitute an Event of
Default with respect to the new notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance,
(1) the Company must irrevocably deposit with the trustee, in
trust, for the benefit of the Holders of the new 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 new notes on the stated maturity or on the
applicable redemption date, as the case may be, and the
Company must specify whether the new notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall deliver
to the trustee an opinion of counsel in the United States
reasonably acceptable to the trustee confirming that (A) the
Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the issue
date of the old notes, 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 new 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;
(3) in the case of Covenant Defeasance, the Company 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 new 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;
(4) no Event of Default or Default shall have occurred and be
continuing on the date of such deposit (other than an Event
of Default or Default resulting from the borrowing of funds
to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result
in a breach or violation of, or constitute a default under,
the Company's bank credit agreement, Credit Facilities or
any other material agreement or instrument (other than the
indenture) to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company 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;
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(7) the Company must deliver to the trustee an Officers'
Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of new
notes over the other creditors of the Company with the
intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the trustee an Officers'
Certificate and an opinion of counsel, each stating that all
conditions precedent provided for, in the case of the
Officers' Certificate, (1) through (7) and, in the case of
the opinion of counsel, clauses (1) (with respect to the
validity and perfection of the security interest), (2), (3)
and (5) of this paragraph relating to the Legal Defeasance
or the Covenant Defeasance, as applicable, have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any new notes held by a non-consenting
Holder):
(1) reduce the principal amount of new notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
new note or alter or waive the provisions with respect to
the redemption of the new notes (other than provisions
relating to the covenants described above under the caption
"--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of
interest on any new note;
(4) waive a Default or Event of Default in the payment of
principal or premium, if any, or Liquidated Damages or
interest on the new notes (except a rescission of
acceleration of the new notes by the Holders of at least a
majority in aggregate principal amount of the new notes and
a waiver of the payment default that resulted from such
acceleration);
(5) make any new note payable in money other than that stated in
the new notes;
(6) make any change in the provisions of the indenture relating
to waivers of past Defaults or the rights of Holders of new
notes to receive payments of principal of or premium, if
any, or Liquidated Damages or interest on the new notes;
(7) waive a redemption payment with respect to any new note
(other than a payment required by one of the covenants
described above under the caption "--Repurchase at the
Option of Holders"); or
(8) release any Guarantor from any of its obligations under its
Note Guarantee or the indenture, or amend the provisions of
the indenture relating to the release of Guarantors; or
(9) make any change in the preceding amendment and waiver
provisions.
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In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of
the Holders of the new notes will require the consent of the Holders of
at least 75% in aggregate principal amount of new notes then
outstanding.
Notwithstanding the preceding, without the consent of any Holder
of new notes, the Company and the trustee may amend or supplement the
indenture or the new notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated new notes in addition to or in
place of certificated new notes;
(3) to provide for the assumption of the Company's obligations
to Holders of new notes in the case of a merger or
consolidation or sale of all or substantially all of the
Company's assets;
(4) to make any change that would provide any additional rights
or benefits to the Holders of new notes or that does not
adversely affect the legal rights under the indenture of any
such Holder; or
(5) 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
If the trustee becomes a creditor of the Company or any Guarantor,
the indenture limits its right to obtain payment of claims in certain
cases, or to realize on certain property received in aspect 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 new 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 exceptions. The indenture provides that in
case an Event of Default shall occur and be continuing, the trustee will
be required, in the exercise of its power, to use the degree of care of
a prudent person 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
new notes, unless such Holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES
If a Holder has given wire transfer instructions to the Company,
the Company will make all principal, premium, Liquidated Damages and
interest payments on those new notes in accordance with those
instructions. All other payments on these new notes will be made at the
office or agency of the Paying Agent and Registrar within the City and
State of New York unless the Company elects to make interest payments by
check mailed to the Holders at their address set forth in the register
of Holders.
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PAYING AGENT AND REGISTRAR FOR THE NEW NOTES
The trustee will initially act as Paying Agent and Registrar. The
Company may change the Paying Agent or Registrar without prior notice to
the Holders of the new notes, and the Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The new notes initially will be in the form of one or more
registered global notes without interest coupons (collectively, the
"Global Notes"). Upon issuance, the U.S. Global Notes will be deposited
with the trustee, as custodian for The Depository Trust Company in New
York, New York and registered in the name of DTC or its nominee for
credit to the accounts of DTC's Direct Participants and Indirect
Participants (each as defined).
The Global Notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor DTC or its nominee in
certain limited circumstances. Beneficial interests in the Global Notes
may be exchanged for new notes in certificated form in certain limited
circumstances. See "--Transfer of Interests in Global Notes for
Certificated Notes." Such Certificated Notes may, unless the Global
Note has previously been exchanged for Certificated Notes, be exchanged
for an interest in the Global Note representing the principal amount of
new notes being transferred. In addition, transfer of beneficial
interests in Global Notes will be subject to the applicable rules and
procedures of DTC and its Direct Participants or Indirect Participants
(including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
The new notes may be presented from registration of transfer and
exchanged at the offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Direct Participants") and to facilitate the
clearance and settlement of transactions in those securities between
Direct Participants through electronic book-entry changes in accounts of
Participants. The Direct Participants include securities brokers and
dealers (including the initial purchasers of the old notes), banks,
trust companies, clearing corporations and certain other organizations,
including the Euroclear System ("Euroclear") and CEDEL Bank, societe
anonyme ("CEDEL"). Access to DTC's system is also available to other
entities that clear through or maintain a direct or indirect, custodial
relationship with a Direct Participant (collectively, the "Indirect
Participants"). DTC may hold securities beneficially owned by other
persons only through the Direct Participants or Indirect Participants
and such other person's ownership interest and transfer of ownership
interest will be recorded only on the records of the Direct Participant
and/or Indirect Participant and not on the records maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's
procedures, (1) upon deposit of the Global Notes, DTC will credit the
accounts of Direct Participants with portions of the principal amount of
the Global Notes allocated to them by the initial purchasers, and (2)
DTC will maintain records of the ownership interests of such Direct
Participants in the Global Notes and the transfer of ownership interests
by and between Direct Participants. DTC will not maintain records of the
ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial
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interests in the Global Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests
of, and the transfer of ownership interests by and between, Indirect
Participants and other owners of beneficial interests in the Global
Notes. The Company expects that payments by Direct Participants to
owners of beneficial interests in such Global Notes held through such
Direct Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the
accounts of customers registered in the name of nominees for such
customers. Such payments will be the responsibility of such Direct
Participants.
Investors in the Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or
indirectly through organizations that are Direct Participants in DTC.
Euroclear and CEDEL will hold interests in the Global Notes on behalf of
their participants through customers' securities accounts in their
respective names on the books of their respective depositaries, which
are Morgan Guaranty Trust Company of New York, Brussels office, as
operator and depositary of Euroclear, and Citibank, N.A. as the operator
and depositary of CEDEL (each a "Nominee" of Euroclear and CEDEL,
respectively). The depositaries, in turn, will hold such interests in
the Global Notes in customers' securities accounts in the depositaries'
names on the books of DTC. All ownership interests in any Global Notes,
including those of customers' securities accounts held through Euroclear
or CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states in the United States require that certain
persons take physical delivery in definitive, certificated form, of
securities that they own. This may limit or curtail the ability to
transfer beneficial interests in a Global Note to such persons. Because
DTC can act only on behalf of Direct Participants, which in turn act on
behalf of Indirect Participants and others, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to
persons or entities that are not Direct participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by
the lack of physical certificates evidencing such interests. For certain
other restrictions on the transferability of the new notes see
"--Transfers of Interests in Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "--TRANSFERS OF INTEREST IN GLOBAL NOTES
FOR CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
NOTES WILL NOT HAVE NEW NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF NEW NOTES IN CERTIFICATED FORM AND WILL NOT
BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE
INDENTURE FOR ANY PURPOSE.
Under the terms of the indenture, the Company, the Guarantors and
the trustee will treat the persons in whose names the new notes are
registered (including new notes represented by Global Notes) as the
owners thereof for the purpose of receiving payments and for any and all
other purposes whatsoever. Payments in respect of the principal,
premium, Liquidated Damages, if any, and interest on Global Notes
registered in the name of DTC or its nominee will be payable by the
trustee to DTC or its nominee as the registered holder under the
indenture. Consequently, none of the Company, the Guarantors, the
trustee or any agent of the Company, the Guarantors or the trustee has
or will have any responsibility or liability for (1) any aspect of DTC's
records or any Direct Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership
interests in the Global Note or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in
any Global Note or (2) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect
Participants.
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DTC has advised the Company that its current payment practice (for
payments of principal, interest and the like) with respect to securities
such as the new notes is to credit the accounts of the relevant Direct
Participants with such payment on the payment date in amounts
proportionate to such Direct Participant's respective ownership
interests in the Global Notes as shown on DTC's records. Payments by
Direct Participants and Indirect Participants to the beneficial owners
of the new notes will be governed by standing instructions and customary
practices between them and will not be the responsibility of DTC, the
trustee, the Company or the Guarantors. None of the Company, the
Guarantors or the trustee will be liable for any delay by DTC or its
Direct Participants or Indirect Participants in identifying the
beneficial owners of the new notes, and the Company and the trustee may
conclusively rely on and will be protected in relying on instructions
from DTC or its nominee as the registered owner of the new notes for all
purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will
be effected in accordance with DTC's procedures, and will be settled in
immediately available funds. Transfers between Indirect Participants
(other than Indirect Participants who hold an interest in the new notes
through Euroclear or CEDEL) who hold an interest through a Direct
Participant will be effected in accordance with the procedures of such
Direct Participant but generally will settle in immediately available
funds. Transfers between and among Indirect Participants who hold
interests in the new notes through 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 new notes described herein, cross-market transfers between Direct
Participants in DTC, on the one hand, and Indirect Participants who hold
interests in the new notes through Euroclear or CEDEL, on the other
hand, will be effected by Euroclear's or CEDEL's respective Nominee
through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL; however, delivery of instructions relating to crossmarket
transactions must be made directly to Euroclear or CEDEL, as the case
may be, by the counterparty in accordance with the rules and procedures
of Euroclear or CEDEL and within their established deadlines (Brussels
time for Euroclear and U.K. time for CEDEL). Indirect Participants who
hold interest in the new notes through Euroclear and CEDEL may not
deliver instructions directly to Euroclear's or CEDEL's Nominee.
Euroclear or CEDEL will, if the transaction meets its settlement
requirements, deliver instructions to its respective Nominee to deliver
or receive interests on Euroclear's or CEDEL's behalf in the relevant
Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day funds settlement applicable to DTC.
Because of time zone differences, the securities of accounts of an
Indirect participant who holds an interest in the new notes through
Euroclear or CEDEL purchasing an interest in a Global Note from a Direct
Participant in DTC will be credited, and any such crediting will be
reported to Euroclear or CEDEL during the European business day
immediately following the settlement date of DTC in New York. Although
recorded in DTC's accounting records as of DTC's settlement date in New
York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest
in a Global Note to a DTC Participant until the European business day
for Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted
to be taken by a holder of new notes only at the direction of one or
more Direct Participants to whose account interest in the Global Notes
are credited and only in respect of such portion of the aggregate
principal amount of the new notes to which such Direct Participant or
Direct Participants has or have given direction. However, if there is
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an Event of Default under the new notes, DTC reserves the right to
exchange Global Notes (without the direction of one or more of its
Direct Participants) for legended new notes in certificated form, and to
distribute such certificated forms of new notes to its Direct
Participants. See "--Transfers of Interests in Global Notes for
Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing
procedures to facilitate transfers of interest in the Global Notes among
Direct Participants, including 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. None of the Company,
the Guarantors, the initial purchasers or the trustee shall have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct Participants and Indirect Participants of their
respective obligations under the rules and procedures governing any of
their operations.
The information in this section concerning DTC, Euroclear and
CEDEL and their book-entry systems has been obtained from sources that
the Company believes to be reliable, but the Company takes no
responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive new notes in
registered, certificated form with interest coupons ("Certificated
Notes") if (1) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Notes and the Company
thereupon fails to appoint a successor depositary within 90 days or (y)
has ceased to be a clearing agency registered under the Exchange Act,
(2) the Company, at its option, notifies that trustee in writing that it
elects to cause the issuance of Certificated Notes or (3) there shall
have occurred and be continuing a Default or an Event of Default with
respect to the new notes. In any such case, the Company will notify the
trustee in writing that, upon surrender by the Direct Participants and
Indirect Participants of their interest in such Global Note,
Certificated Notes will be issued to each person that such Direct
Participants and Indirect Participants and the DTC identify as being the
beneficial owner of the related new notes.
Beneficial interests in Global Notes held by any Direct
Participants or Indirect Participant may be exchanged for Certificated
Notes upon request to DTC, by such Direct Participant (for itself or on
behalf of an Indirect Participant), to the trustee in accordance with
customary DTC procedures. Certificated Notes delivered in exchange for
any beneficial interests in any Global Note will be registered in the
names, and issued in any approved denominations, requested by DTC on
behalf of such Direct Participants or Indirect Participants (in
accordance with DTC's customary procedures).
None of the Company, the Guarantors or the trustee will be liable
for any delay by the holder of any Global Note or DTC in identifying the
beneficial owners of new notes, and the Company and the trustee may
conclusively rely on, and will be protected in relying on, instructions
from the holder of the Global Note or DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture will require that payments in respect of the new
notes represented by the Global Notes (including principal, premium, if
any, interest and liquidated damages, if any) be made by wire transfer
of immediately available same day funds to the accounts specified by the
Holder of interests in such Global Note. With respect to Certificated
Notes, the Company will make all payments of principal,
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premium, if any, interest and Liquidated Damages, if any by wire
transfer of immediately available same day funds to the accounts
specified by the holders thereof or, if no such account is specified, by
mailing a check to each such Holder's registered address. The Company
expects that secondary trading in the Certificated Notes will also be
settled in immediately available funds.
DEFINITIONS IN THE INDENTURE
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:
(1) 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, whether or not such Indebtedness
is incurred in connection with, or in contemplation of, such
other Person merging with or into, or becoming a Subsidiary
of, such specified Person; and
(2) 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. For purposes of this
definition, "control," 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. For purposes of this definition,
the terms "controlling," "controlled by" and "under common control with"
shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any
assets or rights, including sales and leasebacks, but
excluding 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 the Company and its
Restricted Subsidiaries taken as a whole will be governed by
the provisions of the indenture described above under the
caption "Repurchase at the Option of Holders--Change of
Control," and/or the provisions described above under the
caption "Covenants in the Indenture--Merger, Consolidation,
or Sale of Assets" and not by the provisions described under
the caption "Repurchase at the Option of Holders--Asset
Sale"; and
(2) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in
any of its Subsidiaries,
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
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(1) any single transaction or series of related transactions
that: (a) involves assets having a fair market value of
less than $5 million; or (b) results in net proceeds to the
Company and its Restricted Subsidiaries of less than $5
million;
(2) a transfer of assets between or among the Company and its
Wholly Owned Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary; and
(4) a Restricted Payment that is permitted by the covenant
described above under the caption "--Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation
of the lessee for net rental payments during the remaining term of the
lease included in such sale and leaseback transaction including any
period for which such lease has been extended or may, at the option of
the lessor, be extended. Such present value shall be calculated using a
discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule
l3d-3 and Rule l3d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular "person" (as such term is
used in Section 13(d)(3) of the Exchange Act), such "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.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and
all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or
limited); and
(4) 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.
"Change of Control" means the occurrence of any of the following:
(1) the sale, 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 a Principal or a Related Party
of a Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
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(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the Beneficial
Owner, directly or indirectly, of more than 35% of the
Voting Stock of the Company or the Parent Company, measured
by voting power rather than number of shares;
(4) the first day on which a majority of the members of the
Board of Directors of the Company or the Parent Company are
not Continuing Directors; or
(5) the Company or the Parent Company consolidates with, or
merges with or into, any Person, or any Person consolidates
with, or merges with or into, the Company or the Parent
Company, in any such event pursuant to a transaction in
which any of the outstanding Voting Stock of the Company or
the Parent Company is converted into or exchanged for cash,
securities or other property, other than any such
transaction where the Voting Stock of the Company or the
Parent Company outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock
of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person immediately after giving
effect to such issuance.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) 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
(2) 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 deducted in computing such
Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its
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,
imputed interest with aspect to Attributable Debt,
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), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash expenses
of such Person and its 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
(5) non-cash items increasing such Consolidated Net Income for
such period, other than items that were accrued in the
ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP.
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Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company
only to the extent that a corresponding amount would be permitted at the
date of determination to be dividended to the Company by such Subsidiary
without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable
to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified
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:
(1) 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
specified Person or a Wholly Owned Subsidiary thereof;
(2) 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) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted
Subsidiary or its stockholders;
(3) 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;
(4) the Net Income (but not loss) of any Unrestricted Subsidiary
shall be excluded, whether or not distributed to the
specified Person or one of its Subsidiaries; and
(5) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of:
(1) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date;
plus
(2) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of
preferred 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.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company or the Parent Company
who:
(1) was a member of such Board of Directors on the Issue Date;
or
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(2) 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 the Board of Directors of the
Parent Company at the time of such nomination or election.
"Credit Facilities" means, with respect to the Company or any
Restricted Subsidiary, one or more debt facilities or commercial paper
facilities, in each case with banks 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, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part
from time to time.
"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:
(1) all Senior Debt under the Credit Facilities; and
(2) any Senior Debt permitted under the indenture the principal
amount of which is $50 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Equity Interests" mean 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).
"Equity Offering" means any private or underwritten public
offering of common stock of the Company or the Parent Company in which
the gross proceeds to the Company or the Parent Company, as applicable,
are at least $50 million and, in the case of an offering by the Parent
Company, the net proceeds are contributed to the Company.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issue Date.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of:
(1) 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, imputed interest
with respect to Attributable Debt, 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; plus
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such
period; plus
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(3) 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; plus
(4) all cash dividend payments on any series of preferred stock
of such Person or any of its Restricted Subsidiaries.
"Fixed Charge Coverage Ratio" means, with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such
Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees
or redeems 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 or redemption 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 calculating the Fixed Charge Coverage
Ratio:
(1) acquisitions that have been made by the specified Person 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 (3) of
the proviso set forth in the definition of Consolidated Net
Income;
(2) 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
(3) the Fixed Charges attributable to discontinued operations,
as determined in accordance with 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 specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
"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
from time to time.
"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
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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.
"Guarantors" means each of:
(1) the Parent Company,
(2) each Subsidiary Guarantor; and
(3) any other Subsidiary of the Company or the Parent Company
that executes a Note 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:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or the value
of currencies purchased or received by such Person in the
ordinary course of business.
"Holder" means the Person in whose name a new note or an old note,
as applicable, is registered on the Registrar's books.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an
accrued expense or trade payable; or
(6) representing any Hedging Obligations
if and to the extent any of the preceding item (other than letters of
credit and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP.
In addition, the term "Indebtedness" includes all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not
such Indebtedness is assumed by the specified Person) and, to the extent
not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person.
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The amount of any Indebtedness outstanding as of any date shall
be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of
any other Indebtedness.
"Intercompany Notes" means the intercompany notes issued by
Restricted Subsidiaries that are not Guarantors of the Company in favor
of the Company to evidence advances by the Company, in the form attached
as Annex B to the indenture.
"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 would be classified as investments on a
balance sheet prepared in accordance with GAAP excluding Hedging
Obligations. If the Company or any Restricted Subsidiary of the Company
sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition
equal to the fair market value of 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 "Covenants in the Indenture--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 and any filing of
or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person and its Restricted Subsidiaries, determined in
accordance with GAAP and before any reduction in respect of preferred
stock dividends, excluding, however:
(1) 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; or (b) the disposition
of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) 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 by the
Company 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
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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, in each case after taking into account any
available tax credits or deductions and any tax sharing arrangements and
amounts required to be applied to the repayment of Indebtedness, other
than Senior Debt, 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.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company 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;
(2) 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 new notes) of the Company 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
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of
the Company 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 Businesses" means the printing business generally
including the business conducted by the Company and its Subsidiaries as
of the Issue Date and any other business or businesses ancillary,
complementary or related thereto.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary
of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) 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;
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(4) 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 Holder--Asset
Sales";
(5) Investments existing as of the Issue Date;
(6) any acquisition of assets solely in exchange for the
issuance of Equity Interests of the Company;
(7) accounts receivable, endorsements for collection, deposits
or similar Investments arising in the ordinary course of
business;
(8) any Investment by the Company or a Restricted Subsidiary in
assets of a Permitted Business or assets to be used in a
Permitted Business;
(9) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing
to the Company or any Subsidiary or in satisfaction of
judgments;
(10) the acceptance of notes payable from employees of the
Company or its Subsidiaries in payment for the purchase of
Capital Stock by such employees; and
(11) any other Investment 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 (11) since the date of the Issue
Date and existing at the time such Investment was made, did
not exceed $25 million.
"Permitted Liens" means:
(1) Liens securing Senior Debt;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens when the new notes are secured by such Lien on an
equal and ratable basis unless the Obligation secured by any
such Lien is subordinate or junior in right of payment to
the new notes, in which case the Lien securing such
Obligation must be subordinate and junior to the Lien
securing the new notes with the same or lesser relative
priority as such Obligation shall have been with respect to
the new notes;
(4) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the
Company or any Restricted Subsidiary of the Company,
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 the Company or the Restricted
Subsidiary;
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(5) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the
Company, provided that such Liens were in existence prior to
the contemplation of such acquisition;
(6) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course
of business;
(7) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second paragraph
of the covenant entitled "Incurrence of Indebtedness"
covering only the assets acquired with such Indebtedness;
(8) Liens existing on the date of the indenture;
(9) Liens on assets of Restricted Subsidiaries to secure Senior
Debt of such Restricted Subsidiaries that was permitted by
the indenture to be incurred;
(10) 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;
(11) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security,
old age pension or public liability obligations or to secure
the payment or performance of bids, tenders, statutory or
regulatory obligations, surety, stay, or appeal bonds,
performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(12) easements, rights-of-way, restrictions, defects or
irregularities in title and other similar charges or
encumbrances not interfering in any material respect with
the business of the Company or any of its Subsidiaries;
(13) purchase money liens (including extensions and renewals
thereof);
(14) Liens securing reimbursement obligations with respect to
letters of credit which encumber only documents and other
property relating to such letters of credit and the products
and proceeds thereof;
(15) judgment and attachment Liens not giving rise to an Event of
Default;
(16) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements;
(17) Liens arising out of consignment or similar arrangements for
the sale of goods;
(18) any interest or title of a lessor in property subject to any
Capital Lease Obligation or operating lease;
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(19) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen
and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being
contested in good faith by appropriate proceeding, if such
reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;
(20) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment,
or storage of such inventory or other goods;
(21) Liens securing Hedge Obligations that are otherwise
permitted under the indenture;
(22) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the
Company and its Subsidiaries;
(23) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(24) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of custom duties in
connection with the importation of goods;
(25) Liens in favor of collecting or payor banks having a right
of setoff, revocation, refund or chargeback with respect to
money or instruments of the Company or any Subsidiary on
deposit with or in possession of such bank;
(26) Liens to secure Non-Recourse Indebtedness; and
(27) Liens not otherwise permitted by clauses (1) through (26)
that are incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to
obligations that do not exceed $10 million at any one time
outstanding.
"Permitted Payments to Parent Company" means
(1) payments to the Parent Company in an amount sufficient to
permit the Parent Company to pay reasonable and necessary
operating expenses and other general corporate expenses to
the extent such expenses relate or are fairly allocable to
the Company and its Subsidiaries including any reasonable
professional fees and expenses not in excess of $1 million
in the aggregate during any consecutive 12-month period; and
(2) payment to the Parent Company to enable the Parent Company
to pay foreign, federal, state or local tax liabilities
("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by the Company
and its Subsidiaries to the appropriate taxing authorities
if they filed separate tax returns, to the extent that the
Parent Company has an obligation to pay such tax liabilities
relating to the operations, assets or capital of the Company
or its Subsidiaries; provided, however that (a),
notwithstanding the foregoing, in the case of determining
the amount of a Tax Payment that is permitted to be paid by
the Company and any of its U.S. Subsidiaries in respect of
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their Federal income tax liability, such payment shall be
determined assuming that the Company is the parent company
of an affiliated group (the "Company Affiliated Group")
filing a consolidated federal income tax return and that the
Parent Company and each such U.S. Subsidiary is a member of
the Company's Affiliated Group and (b) any Tax Payments
shall either by used by the Parent Company to pay such tax
liabilities within 90 days of the Parent Company's receipt
of such payment or refunded to the party from whom the
Parent Company received such payments.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company any of its Restricted Subsidiaries issued in exchange for, or
the net of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of the Company or any of its Restricted
(other than intercompany Indebtedness); provided that:
(1) 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 including premiums paid, if any, to the Holders
thereof);
(2) 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;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the new notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment
to, the new notes on terms at least as favorable to the
Holders of new notes as those contained in the documentation
governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company 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 the officers and directors of the Parent
Company at the Issue Date, their Affiliates (as such term is defined
under the Exchange Act) and the Parent Company's and Company's Employee
Stock Ownership Plan and Trust.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, 80% or more owned Subsidiary,
or spouse or immediate family member (in the case of an
individual) of such Principal; or
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(2) 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 and/ or such other Persons,
referred to in the immediately preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referenced Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all
Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by the
Company 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 new notes; and
(3) all Obligations with respect to the items listed in the
preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior
Debt will not include:
(1) any liability for federal, state, local or other taxes owed
or owing by the Company;
(2) any Indebtedness of the Company to any of its Subsidiaries
or other Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the
indenture other than Indebtedness under a Credit Facility
that is incurred on the basis of a representation by the
Company to the applicable lenders that it is permitted to
incur such as Indebtedness under the indenture.
"Shelf Registration Statement" means that certain shelf
registration statement filed by the Company with the Commission to
register resales of the old notes or the new notes.
"Significant Subsidiary" means any Subsidiary that is, or would
be, a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act of 1933, 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.
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"Subsidiary" means, with respect to any Person:
(1) 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
(2) 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).
"Unrestricted Subsidiary" means any Subsidiary of the Company or
the Parent Company 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:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary
of the Company unless the terms of any such agreement,
contract, arrangement of understanding are no less favorable
to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the Company 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;
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company
or any of its Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is
not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company or the Parent
Company as an Unrestricted Subsidiary 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 preceding conditions
and was permitted by the covenant described above under the caption
"Covenants in the Indenture--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding 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 the Company or the Parent Company 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 "Incurrence of
Indebtedness," the Company shall be in default of such covenant. The
Board of Directors of the Company may at any time designate any
Unrestricted
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Subsidiary to be a Restricted Subsidiary; provided that such designation
shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if
(1) such Indebtedness is permitted under the covenant described under
the caption "Covenants in the Indenture--Incurrence of Indebtedness,"
calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) 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:
(1) 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
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary 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 and/or by
one or more Wholly Owned Restricted Subsidiaries of such Person.
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DESCRIPTION OF OUTSTANDING INDEBTEDNESS
The following descriptions of significant outstanding indebtedness
of the Company and the Parent Company do not purport to be complete and
are qualified in their entirety by reference to the provisions of the
various agreements and indentures related thereto, copies of which may
be obtained from the Company.
THE CREDIT AGREEMENT
On March 16, 1998, the Company entered into a bank credit
agreement and the Company's Canadian subsidiary Supremex, Inc. also
entered into a bank credit agreement, in each case with Bank of America
National Trust & Savings Association acting as administrative agent for
a syndicate of financial institutions (collectively, the "Credit
Agreement"). The Credit Agreement establishes a five year, unsecured
revolving loan facility in the maximum principal amount of $300 million,
of which $100 million (in U.S. dollar equivalents) may be borrowed by
Supremex in Canadian dollars. The Credit Agreement also provides a
letter of credit subfacility which the Company has yet to utilize. The
subfacility does not increase the maximum principal amount of the Credit
Agreement. All current and future debt outstanding under the Credit
Agreement will constitute Senior Debt.
Borrowings under the Credit Agreement bear interest at the
Applicable Margin (as defined in the Credit Agreement) plus, at the
Company's option, either (1) the base rate, which is the higher of (a)
50 basis points above the most recently published Federal Funds Rate or
(b) BA's most recently published "reference rate"; or (2) the prime
rate, which is the rate publicly announced by Bank of America Canada in
Toronto, Ontario as its "prime rate"; or (3) offshore rate, which is the
quotient of the London Interbank Offer Rate for deposits in U.S. or
Canadian dollars, as applicable, divided by one minus the regulatory
reserve requirement for Eurocurrency funding. The Applicable Margin is
fixed at 0.0% for base rate and prime rate loans, and varies based on
the Company's ratio of Consolidated Funded Debt to EBITDA, each as
defined in the Credit Agreement. Outstanding borrowings under the
Credit Agreement currently bear interest at the offshore rate plus an
Applicable Margin of 0.75%.
The obligations of the Company under the Credit Agreement are
guaranteed by the Parent Company and by each of the Company's existing
or after-acquired Material Subsidiaries (as defined in the Credit
Agreement). Generally, a "Material Subsidiary" is defined as a
subsidiary of the Company which either (1) exceeds 10% of the Company's
consolidated assets, (2) the Company's investments in such subsidiary
exceed 10% of the Company's consolidated assets, or (3) the Company's
income from such subsidiary exceeds 10% of the Company's consolidated
income. The obligations of Supremex under the Credit Agreement are
guaranteed by the Parent Company and the Company. The obligations are
not otherwise secured.
The Credit Agreement contains covenants and provisions that
restrict, among other things, the Company and its subsidiaries' ability
to (1) incur liens; (2) dispose of assets outside the ordinary course of
business; (3) effect certain mergers, consolidations or bulk asset
sales; (4) make certain loans or investments, other than investments in
similar businesses that do not otherwise cause a default under the
Credit Agreement; (5) incur additional secured indebtedness and certain
contingent obligations; (6) engage in certain transactions with
affiliates; (7) pay dividends and other distributions on, and make
repurchases or redemptions of, capital stock; and (8) modify or prepay
certain debt and other agreements. In addition, the Credit Agreement
requires the Company to satisfy certain financial requirements,
including (A) maintaining a minimum consolidated net worth not less than
the sum of 85% of the
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Company's consolidated net worth as of September 30, 1997, plus 50% of
consolidated net income through the end of each fiscal quarter
thereafter, and 75% of the net proceeds from the sale of equity
securities since such date, (B) not to exceed a Maximum Leverage Ratio
(as defined in the Credit Agreement) of 3.75 to 1.00, which ratio may be
reduced to 3.25 to 1.00 under certain circumstances, and (C) a Minimum
Interest Coverage Ratio of less than 2.00 to 1.00.
The events of default under the Credit Agreement include the
following: (1) failure to pay interest within three days after it
becomes due; (2) failure to pay the principal when due; (3) breach of
any representation or warranty; (4) failure to perform any covenant or
agreement in the Credit Agreement (in some cases only if the failure
continues for a certain period of time); (5) certain defaults under
other agreements, debts and other obligations, including certain
contingent obligations; (6) imposition of certain judgments or decrees
against the Company or any subsidiary; (7) certain events of bankruptcy,
insolvency or reorganization; (8) certain violations of the Employee
Retirement Income Security Act; (9) certain changes of control of the
Company; and other customary provisions.
The Company's Supremex subsidiary is also party to an unsecured
term loan directly with BA in Canada. At December 31, 1998, the Company
owed $25.5 million under the loan, which matures in 2003, bearing
interest at 6.88%. This term loan will constitute Senior Debt under the
indenture.
5% CONVERTIBLE SUBORDINATED NOTES
The Parent Company has outstanding $152.1 million in aggregate
principal amount of 5% Convertible Subordinated Notes due November 1,
2002. The convertible notes are direct, unsecured obligations of the
Parent Company. The convertible notes may be converted at the option of
the holder into shares of Parent Company Stock at a conversion price of
$19.00 per share (equivalent to a conversion rate of 13.1579 shares per
$1,000 principal amount of new notes), subject to adjustments. The
convertible notes are traded on the NYSE under the symbol "MWL 02."
Subject to exceptions, the convertible notes are subordinated to
all current and future Senior Debt of the Company. The indenture
governing the convertible notes defines Senior Debt as indebtedness of
the Parent Company that is not expressly made, by its governing
instruments, subordinate to or of equal rank with the convertible notes.
The convertible notes are also effectively subordinated to all existing
and future indebtedness and liabilities of subsidiaries of the Parent
Company, including the Company. The convertible notes will be
effectively subordinated to the new notes.
Approximately $147.5 million of the proceeds of the convertible
notes were loaned to the Company by the Parent Company under a loan
agreement that will be subordinated to the new notes.
The indenture for the convertible notes does not restrict the
amount of senior debt or other indebtedness that may be incurred in the
future by the Parent Company or any subsidiary of the Parent Company.
The Parent Company may from time to time reduce the conversion
price of the convertible notes by any amount for any period of at least
20 days, in which case the Parent Company must give at least 15 days'
notice of such reduction, if the Board of Directors of the Parent
Company has made a determination that such reduction would be in the
best interests of the Parent Company.
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The events of default under the indenture for the convertible
notes include the following: (1) failure to pay interest upon any
convertible note when it becomes due and payable, and continuance of
such default for a period of 30 days; (2) failure to pay the principal
of (or premium, if any, on) any convertible note at its maturity; (3)
failure to pay the redemption price or the repurchase price when and as
due; (4) failure to perform any covenant or agreement in the indenture
for the convertible notes which continues for 60 days after written
notice; (5) certain defaults under any mortgage, indenture or instrument
of indebtedness of the Parent Company or any of its subsidiaries (or the
payment of which is guaranteed by the Parent Company or any of its
subsidiaries); (6) imposition of certain judgments or decrees against
the Parent Company or any subsidiary; and (7) certain events of
bankruptcy, insolvency or reorganization of the Parent Company or
certain subsidiaries.
The convertible notes may be redeemed at the option of the Parent
Company, in whole or in part, at any time on or after November 1, 2000,
at the redemption prices set forth below, together with accrued and
unpaid interest, if any, to the date of redemption. The redemption
price beginning on November 1, 2000, is 102% of the principal amount;
the redemption price beginning on November 1, 2001, is 101% of the
principal amount; and the redemption price beginning on November 1, 2002
is 100% of the principal amount.
In case of the acquisition of more than 50% of Parent Company
Stock by another person, any merger or consolidation of the Parent
Company or the sale or conveyance by the Parent Company of all or
substantially all of its assets (each, a "Change in Control"), or
termination of trading in Parent Company stock on a national securities
exchange, each holder of convertible notes will have the right, at such
holder's option, to require the Parent Company to purchase all or part
of such holder's convertible notes at a redemption price equal to 101%
of the principal amount thereof, together with accrued and unpaid
interest thereon provided that a Change in Control shall not be deemed
to have occurred if (1) the sales price of Parent Company Stock is at
least equal to 110% of the conversion price or (2) at least 90% of the
consideration for the Change in Control transaction consists of common
stock trading on a national exchange or the over the counter system.
The right to require the Parent Company to repurchase convertible notes
as a result of a change of control could have the effect of delaying or
preventing a change of control or other attempts to acquire control of
the Parent Company unless arrangements have been made to enable the
Parent Company to repurchase all the convertible notes.
In case of any merger or consolidation of the Parent Company or
the sale or conveyance by the Parent Company of all or substantially all
its assets, the holder of each outstanding convertible note will have
the right to convert such convertible note into the kind and amount of
shares of stock and other securities and property (including cash)
received in such transaction by a holder of the number of shares of
Parent Company stock into which such convertible note was convertible
immediately prior to the effective date of such transaction.
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TAXATION
The following discussion is a summary of certain of the expected
material United States federal income tax considerations with respect to
the new notes relevant to each Holder who, except as noted below, is a
U.S. Holder (as defined below) of the old notes, and who (1) purchased
the old notes from the Company for cash, (2) exchanges the old notes for
new notes in this exchange offer, and (3) holds the old notes and the
new notes as capital assets. This discussion does not purport to deal
with the tax consequences of owning the new notes to all categories of
investors, some of which (such as insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, investors
who own 5% or more of our shares, and investors whose functional
currency is not the U.S. dollar) may be subject to special rules.
Prospective holders of new notes are advised to consult their own tax
advisors concerning the overall tax consequences arising in their own
particular situations under U.S. federal, state, local or foreign law of
the ownership of the new notes.
FEDERAL INCOME TAX CONSIDERATIONS
This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing,
temporary and proposed Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This
discussion does not address the tax consequences to subsequent
purchasers of new notes and is limited to purchasers who hold the new
notes as capital assets within the meaning of section 1221 of the Code.
Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular
Holders in light of their personal circumstances (including, for
example, persons subject to the alternative minimum tax provisions of
the Code), or to certain types of initial purchasers (such as certain
financial institutions, insurance companies, tax-exempt entities,
dealers in securities, persons holding new notes as part of a hedging or
conversion transaction, straddle or other risk reduction transactions or
U.S. expatriates or persons who have hedged the risk of owning a Senior
Note) and purchasers whose functional currency is not U.S. dollars.
This discussion also does not address any aspect of foreign, state or
local tax law, or U.S. federal estate and gift tax law.
Holders are urged to consult their own tax advisors as to the
particular tax consequences to them of the exchange, ownership and
disposition of the new notes, including the applicability of any U.S.
federal tax laws or any foreign, state or local tax laws, and any
changes (or proposed changes) in applicable tax laws or interpretations
thereof.
U.S. FEDERAL INCOME TAXATION OF THE EXCHANGE OF OLD NOTES FOR NEW
NOTES
The federal income tax regulations provide that gain or loss is
realized on the sale of property or on the "exchange of property for
other property differing materially, either in kind or in extent."
Treas. Reg. Section 1.1001-1(a).
Earlier this decade, the United State Supreme Court reviewed this
regulation in Cottage Savings Association v. Commissioner, 499 U.S.
-------------------------------------------
554 (1991). In Cottage, a savings and loan association engaged in a
-------
series of purchases and sales of mortgage participation interests. In
each transaction, the taxpayer sold mortgage participation interests to
another financial institution and purchased substantially identical
mortgage participation interests from the other institution. Although
cast as sales and purchases, the holders exchanged mortgage
participation interests. The taxpayer treated the exchanges as
realization
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<PAGE>
events under section 1001 of the Code and claimed losses. The I.R.S.
sought to disallow the losses on the ground that the exchanged
properties were economically equivalent and thus did not differ
materially within the meaning of Section 1.1001-1(a) of the
regulations.
The Court held that the taxpayer had realized a loss. After
concluding that Section 1.001-1 of the regulations is a reasonable
interpretation of section 1001(a) of the Code, the Court determined
that, because the participation interests exchanged by the taxpayer were
derived from loans made to different obligors and secured by different
homes, the exchanged interests embodied legally distinct entitlements
and therefore were materially different. Thus, the transaction resulted
in a taxable sale or disposition under section 1001 of the Code.
In response to the issues raised by the Cottage decision, and in
-------
an effort to provide certainty, the I.R.S. issued regulations under
section 1001 of the Code to deal explicitly with the modification of
debt instruments. The regulations define when a modification will be
deemed to be an exchange of the original instrument or a modified
instrument that differs materially either in kind or in extent.
The new regulations are found in Treas. Reg. Section 1.1001-3.
Under the general rule, a "significant modification" of a debt
instrument is treated as an exchange of the original instrument for a
modified instrument that differs materially either in kind or extent.
Modifications that are not significant modifications are not exchanges.
As special tax counsel, Rothgerber Johnson & Lyons LLP has issued
an opinion that the exchange of the old notes for the new notes will not
constitute an exchange as set forth in the regulations. The Company
encourages holders of the old notes to refer to the full text of this
legal opinion attached as an exhibit to this Prospectus.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
As used herein, the term "U.S. Holder" means a beneficial owner of
a new note that is, for U.S. federal income tax purposes, (1) an
individual who is a citizen or resident of the United States, (2) a
corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United States or
of any state thereof (including the District of Columbia), (3) an estate
the income of which is includable in gross income for U.S. federal
income tax purposes regardless of its source or (4) a trust if a U.S.
court is able to exercise primary supervision over the trust's
administration and one or more U.S. persons have authority to control
all substantial decisions of such trust.
TAXATION OF INTEREST
This discussion assumes that the new notes will be treated as
debt, not equity, for U.S. federal income tax purposes. Interest paid or
accrued on a new note will be taxable to a U.S. Holder as ordinary
interest income, generally at the time it is received or accrued, in
accordance with such holder's regular method of accounting for U.S.
federal income tax purposes.
We intend to take the position (which generally will be binding on
all U.S. Holders) that the new notes are not issued with original issue
discount ("OID") for U.S. federal income tax purposes and that no
amounts other than stated interest will be treated as interest. This
position is based on the assumption that the price at which the new
notes are sold to the public will equal their face amount (or will be
within the de minimis exception for OID). This position also is based
on the view that the likelihood of the
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<PAGE>
payment of Liquidated Damages, as of the date the new notes are issued,
is remote. In the unlikely event that Liquidated Damages are paid, then
such Liquidated Damages may be treated as OID, includable by a U.S.
Holder in income as such interest accrues, in advance of receipt of any
cash payment thereof.
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
Upon the sale, redemption, retirement at maturity or other taxable
disposition of a new note, a U.S. Holder generally will recognize gain
or loss equal to the difference (if any) between (1) the sum of cash
plus the fair market value of all other property received on such
disposition (except to the extent such cash or property is attributable
to accrued but unpaid interest not previously included in income, which
will be taxable as ordinary income) and (2) such U.S. Holder's tax basis
in the new note (generally its cost).
Gain or loss recognized on the disposition of a new note generally
will be capital gain or loss and will be long-term capital gain or loss
if, at the time of such disposition, the new note had been held for more
than one year. In the case of a U.S. Holder who is an individual, the
maximum long-term capital gains rate is 20%.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting requirements may apply to certain payments
made by a U.S. paying agent or other U.S. intermediary of principal,
premium, if any, and interest on a new note and to proceeds of the sale
or other disposition of a new note. In addition, backup withholding at
the rate of 31% may apply to such payments if a U.S. Holder fails to
furnish its taxpayer identification number (social security or employer
identification number), certify that such number is correct, certify
that such U.S. Holder is not subject to backup withholding or otherwise
comply with the applicable requirements of the backup withholding rules.
Certain U.S. Holders, including corporations, generally are not subject
to backup withholding and information reporting. Recently issued
Treasury Regulations modify certain of the certification requirements
for backup withholding. These modifications generally will apply to
payments made after December 31, 1998. Any amounts withheld under the
backup withholding rules from a payment to a U.S. Holder generally will
be allowed as a credit against such U.S. Holder's U.S. federal income
tax and may entitle the U.S. Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a new note that is not a U.S.
Holder (a "Non-U.S. Holder").
PAYMENT OF INTEREST ON NEW NOTES
Payment of interest on the new notes to a Non-U.S. Holder
generally will be exempt from U.S. federal income and withholding tax if
such interest is not effectively connected with the conduct of a trade
or business within the United States by such Non-U.S. Holder and such
Non-U.S. Holder (1) does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the
Company, (2) is not a controlled foreign corporation with respect to
which the Company is a "related person" within the meaning of the Code,
and (3) certifies, under penalties of perjury, that such holder is not a
U.S. person and provides such holder's name and address.
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<PAGE>
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
A Non-U.S. Holder generally will not be subject to U.S. federal
income tax (and generally no tax will be withheld) with respect to gain
realized on the sale, redemption, retirement at maturity or other
disposition of a new note unless (1) the Non-U.S. Holder is an
individual who is present in the United States for 183 or more days in
the taxable year of the sale, redemption, retirement at maturity or
other disposition of the new note and certain other conditions are met,
or (2) the gain is treated as effectively connected with a U.S. trade or
business conducted by the Non-U.S. Holder.
WITHHOLDING, REPORTING AND CERTIFICATION REQUIREMENTS
New regulations effective for payments made after December 31,
1999, do not alter the substantive withholding and incorporation
reporting requirements, but unify current certification procedures
regarding withholding, backup withholding and information reporting on
certain amounts paid to persons other than "United States persons"
within the meaning of the Code. Prospective investors should consult
their tax advisors concerning the effect, if any, of these new
regulations on an investment in the new notes.
THE FOREGOING SUMMARY OF UNITED STATES TAX CONSEQUENCES IS BASED
ON THE APPLICABLE UNITED STATES LAW AND REGULATIONS, ADMINISTRATIVE
RULINGS AND PRACTICES OF THE UNITED STATES, ALL AS THEY EXIST AS OF THE
DATE OF THIS PROSPECTUS. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT
MAY BE RELEVANT TO PROSPECTIVE INVESTORS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS,
ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account
pursuant to this exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of the new notes. A broker-
dealer may use this Prospectus, as it may be amended or supplemented
from time to time, in connection with resales of new notes received in
exchange for old notes where such old notes were acquired as a result of
market-making activities or other trading activities. The Company has
agreed to make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of new
notes by any broker-dealer. New notes received by broker-dealers for
their own account pursuant to this 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 resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
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 this exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and
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<PAGE>
any profit on any such resale of new notes and any commissions or
concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the letter of transmittal. The Company has
agreed to pay all expenses incident to the Company's performance of, or
compliance with, the Registration Rights Agreement and all expenses
incident to this exchange offer (including the expenses of one counsel
for the Holders of the old notes) other than commissions or concessions
of any brokers or dealers, and will indemnify the Holders (including any
broker-dealers) against certain liabilities, including liabilities under
the Securities Act.
The Company has not entered into any arrangements or
understandings with any person to distribute the new notes to be
received in this exchange offer.
There is no existing market for the new notes and although the new
notes will be traded in the over-the-counter market, there can be no
assurance as to the liquidity of any market that may develop for the new
notes, the ability of the holders of the new notes to sell their new
notes or the price at which holders would be able to sell their new
notes. Future trading prices of the new notes will depend on many
factors, including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The
Company has been advised by the initial purchasers of the old notes that
the initial purchasers are making a market in the old notes, and intend
to make a market in the new notes, subject to the limits imposed by the
Securities Act and the Exchange Act; however, they are not obligated to
do so, and may discontinue such market-making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the
trading market for the new notes. In addition, such market-making
activities may be limited during the exchange offer and the pendency of
any Shelf Registration Statement relating to the new notes.
This Prospectus does not constitute an offer to purchase or a
solicitation of an offer to sell any of the new notes offered hereby in
any jurisdiction in which such an offer or a solicitation is unlawful.
WHERE YOU CAN FIND MORE INFORMATION
The Company has filed the Registration Statement with the
Commission which registers the new notes being offered by this
Prospectus. The Registration Statement, including its attached exhibits
and schedules, contains additional relevant information about the
Company and the new notes. The rules and regulations of the Commission
allow us to omit certain information included in the Registration
Statement from this Prospectus. Such additional information is
available for inspection and copying at the offices of the Commission.
The Parent Company files annual, quarterly and current reports,
proxy statements and other information with the Commission. You may
read and copy any reports, statements or other information that the
Parent Company files at the following locations of the Commission:
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024 13th Floor Suite 1400
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661
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<PAGE>
Please call the Commission at 1-800-SEC-0330 for further
information. The Parent Company's public filings are also available
from commercial document retrieval services and at the Internet web site
maintained by the Commission at http://www.sec.gov.
The Commission allows the Company to "incorporate by reference"
information into this Prospectus, which means that the Company can
disclose important information to investors by referring them to another
document filed separately by the Parent Company with the Commission.
The information incorporated by reference is deemed to be part of this
Prospectus, except for any information superseded by information
contained directly in this document. This Prospectus incorporates by
reference the Parent Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-12551, the Parent Company's Current
Report on Form 8-K filed March 9, 1998, File No. 1-12551, and the
following sections of the Parent Company's Proxy Statement for the 1999
annual meeting of shareholders, filed on March ___, 1999: "Executive
Officers and Executive Compensation--Executive Compensation"; "--Stock
Option Plans"; "--Employee Benefits"; "Compensation Committee Report on
Executive Compensation"; and "Stock Price Performance Graph." These
documents contain important information about the Parent Company and its
financial condition.
Additional documents that the Parent Company may file with the
Commission between the date of this Prospectus and the date this
exchange offer is terminated are also incorporated by reference. These
include any periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as any proxy statements.
You can obtain any of the documents incorporated by reference in,
but not included with, this Prospectus from the Company without charge,
excluding all exhibits unless the Company has specifically incorporated
by reference an exhibit in this Prospectus, by requesting them in
writing or by telephone from the following address:
Mail-Well, Inc.
Attn: Investor Relations
23 Inverness Way East, Suite 160
Englewood, Colorado 80112
Telephone: (303) 790-8023
LEGAL MATTERS
Certain legal matters relating to the exchange offer will be
passed upon for the Company by Rothgerber Johnson & Lyons LLP, Denver,
Colorado, a limited liability partnership. Members of the firm
collectively hold 13,449 shares of Parent Company Stock.
EXPERTS
The financial statements of the Parent Company and its
consolidated subsidiaries, except the 1997 and 1996 consolidated
financial statements of Color Art, Inc. and Subsidiaries, as of December
31, 1998, and 1997 and for each of the three years in the period ended
December 31, 1998, and the related financial statement schedules
included and incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are included and incorporated by reference herein.
The 1997 and 1996 financial statements of Color Art, Inc. and Subsidiaries
(consolidated with those of the Parent Company) have been audited by
Rubin, Brown, Gornstein & Co., LLP, independent auditors, as stated in
their reports, which are included and incorporated by reference herein.
Such financial statements of the Parent Company and its consolidated
subsidiaries have been included and incorporated by reference herein in
reliance upon the respective reports of such firms given upon their
authority as experts in accounting and auditing.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Changes in Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Condensed Balance Sheets as of December 31, 1998 and
1997, Condensed Statements of Operations and Cash Flows
for the Years Ended December 31, 1998, 1997 and 1996 F-39
Valuation and Qualifying Accounts for the Years Ended
December 31, 1998, 1997 and 1996 F-43
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Mail-Well, Inc.
We have audited the accompanying consolidated balance sheets of Mail-
Well, Inc. and Subsidiaries ("Company") as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included the financial
statement schedules listed in the Index. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our
audits. We did not audit the financial statements of Color Art, Inc.
and Subsidiaries as of December 31, 1997 and for the years ended
December 31, 1997 and 1996, which reflect total assets of $31,414,000 as
of December 31, 1997 and total revenues of $76,099,000 and $66,023,000
for the years ended December 31, 1997 and 1996. Those financial
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for Color Art, Inc. and Subsidiaries for such periods, is based
solely on the report of such other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Mail-Well, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 28, 1999
F-2
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Color Art, Inc.
St. Louis, Missouri
We have audited the consolidated balance sheets of Color Art, Inc., an S
Corporation, and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash
flows for the years then ended (which are not included herein). 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 consolidated 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
Color Art, Inc. and subsidiaries as of December 31, 1997 and 1996 and
the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
March 6, 1998 (Except for Notes 7
and 13, which are dated May 15,
1998 and May 22, 1998, respectively)
F-3
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<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
DECEMBER 31,
----------------------------------
1998 1997
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,375 $ 40,911
Receivables, net 135,923 64,958
Investment in accounts receivable securitization 41,669 22,319
Accounts receivable-other 23,401 10,307
Inventories, net 114,131 86,268
Other current assets 19,351 10,135
---------- --------
Total current assets 335,850 234,898
PROPERTY, PLANT AND EQUIPMENT, NET 437,732 262,797
GOODWILL, NET 322,149 153,927
OTHER ASSETS, NET 32,225 19,789
---------- --------
TOTAL $1,127,956 $671,411
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 87,023 $ 53,641
Accrued compensation and vacation 41,401 32,729
Other current liabilities 47,192 32,553
Current portion of long-term debt and capital
leases 8,036 10,533
---------- --------
Total current liabilities 183,652 129,456
LONG-TERM DEBT AND CAPITAL LEASES 583,427 330,357
DEFERRED INCOME TAXES 47,534 29,299
OTHER LONG-TERM LIABILITIES 10,468 6,979
---------- --------
Total liabilities 825,081 496,091
---------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
MINORITY INTEREST IN NON VOTING STOCK OF SUBSIDIARY 3,500 3,500
---------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value; 25,000 shares
authorized, none issued and outstanding - -
Common stock, $0.01 par value; 100,000,000 shares
authorized, 48,846,904 and 43,042,959 shares issued
at 1998 and 1997, respectively (including 3,896,544
shares held by ESOP) 488 430
Paid-in capital 217,218 102,475
Retained earnings 90,740 72,541
Unearned ESOP compensation - (2,406)
Accumulated other comprehensive income (loss) (9,071) (1,220)
---------- --------
Total shareholders' equity 299,375 171,820
---------- --------
TOTAL $1,127,956 $671,411
========== ========
See notes to consolidated financial statements.
</TABLE>
F-4
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<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
NET SALES $1,504,686 $1,073,937 $944,494
COST OF SALES 1,185,373 834,212 740,665
---------- ---------- --------
GROSS PROFIT 319,313 239,725 203,829
OTHER OPERATING COSTS
Selling, administrative and other 200,193 153,897 133,697
Restructuring and other unusual charge 28,922 - -
Merger costs 3,318 - -
---------- ---------- --------
Total other operating costs 232,433 153,897 133,697
---------- ---------- --------
OPERATING INCOME 86,880 85,828 70,132
OTHER (INCOME) EXPENSE
Interest expense 38,127 30,157 34,869
Other (income) expense (1,036) (2,088) 478
---------- ---------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 49,789 57,759 34,785
PROVISION FOR INCOME TAXES 23,948 22,783 13,627
---------- ---------- --------
INCOME BEFORE EXTRAORDINARY ITEM 25,841 34,976 21,158
EXTRAORDINARY ITEM, NET OF TAX
BENEFIT OF $2,587 and $3,814 (4,132) (6,100) -
---------- ---------- --------
NET INCOME $ 21,709 $ 28,876 $ 21,158
========== ========== ========
EARNINGS PER SHARE - BASIC
BEFORE EXTRAORDINARY ITEM $ 0.55 $ 0.86 $ 0.53
EXTRAORDINARY ITEM (0.08) (0.15) -
EARNINGS PER SHARE - BASIC $ 0.47 $ 0.71 $ 0.53
EARNINGS PER SHARE - DILUTED
BEFORE EXTRAORDINARY ITEM $ 0.53 $ 0.82 $ 0.52
EXTRAORDINARY ITEM (0.08) (0.14) -
EARNINGS PER SHARE - DILUTED $ 0.45 $ 0.68 $ 0.52
WEIGHTED AVERAGE SHARES - BASIC 46,499 40,575 39,663
========== ========== ========
WEIGHTED AVERAGE SHARES - DILUTED 48,585 43,027 40,449
========== ========== ========
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,709 $ 28,876 $ 21,158
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 30,678 21,590 21,602
Amortization 9,576 7,696 7,935
Extraordinary loss on early retirement of
debt - pre-tax 6,719 9,914 -
Restructuring charges 15,961 - -
Deferred income taxes 12,204 8,512 9,328
ESOP compensation expense 14,326 2,614 1,973
(Gain) loss on disposal of assets (1,196) 2,719 1,785
Other (202) 38 533
Changes in operating assets and liabilities,
net of effects of acquired businesses:
Receivables (2,151) 11,177 11,220
Inventories 10,339 47 22,800
Accounts payable (7,164) (5,576) 4,213
Other working capital (13,787) 4,525 2,149
Other assets and other long-term
liabilities (3,934) 2,277 (9,378)
--------- --------- ---------
Net cash provided by operating
activities 93,078 94,409 95,318
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition costs, net of cash acquired (351,603) (82,874) (64,316)
Capital expenditures (87,335) (36,838) (22,039)
Proceeds from sale of assets and other 9,661 1,817 35,354
--------- --------- ---------
Net cash used in investing
activities (429,277) (117,895) (51,001)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes due to accounts receivable
securitization, net (19,350) (12,814) 61,495
Net proceeds from common stock issuance 92,336 1,202 294
Proceeds from issuance of convertible
subordinated notes, net of issuance costs - 147,436 -
Proceeds from long-term debt 799,111 139,616 323,963
Repayments of long-term debt and capital
leases (556,736) (219,125) (416,206)
Debt issuance costs (9,184) - (1,800)
Repurchase of stock, dividends and
distributions by pooled entities (3,738) (5,254) (1,862)
--------- --------- ---------
Net cash provided by (used in)
financing activities 302,439 51,061 (34,116)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5,776) 1,039 (282)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (39,536) 28,614 9,919
BALANCE AT BEGINNING OF YEAR 40,911 12,297 2,378
--------- --------- ---------
BALANCE AT END OF YEAR $ 1,375 $ 40,911 $ 12,297
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<CAPTION>
Accumulated Other Total
Common Paid-In Retained Comprehensive Shareholders'
Stock Capital Earnings Other Income (Loss) Equity
----- ------- -------- ----- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $436 $ 97,871 $29,166 $(5,243) $ (231) $121,999
Comprehensive income:
Net income 21,158 21,158
Other comprehensive income (loss),
net of tax:
Pension liability adjustment 101 101
Currency translation adjustments (95) (95)
Unrealized loss on investments (49) (49)
--------
Other comprehensive income (loss) (43)
--------
Total comprehensive income 21,115
Issuance of common stock 254 254
Exercise of stock options 40 40
Change in unearned ESOP 1,231 634 1,865
Repurchase of stock by pooled entities (109) (109)
Distributions by pooled entities (1,753) (1,753)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996 436 99,287 48,571 (4,609) (274) 143,411
Comprehensive income:
Net income 28,876 28,876
Other comprehensive income (loss),
net of tax:
Pension liability adjustment 37 37
Currency translation adjustments (917) (917)
Unrealized loss on investments (66) (66)
--------
Other comprehensive income (loss) (946)
--------
Total comprehensive income 27,930
Issuance of common stock 7 2,713 2,720
Exercise of stock options 2 199 201
Retirement of treasury stock (14) (1,699) 1,713 -
Change in unearned ESOP 2,322 490 2,812
Distributions by pooled entities (4,161) (4,161)
Repurchase of stock by pooled entities
and other (1) (347) (745) (1,093)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997 430 102,475 72,541 (2,406) (1,220) 171,820
Comprehensive income:
Net income 21,709 21,709
Other comprehensive income (loss),
net of tax:
Pension liability adjustment (80) (80)
Currency translation adjustments (7,648) (7,648)
Unrealized loss on investments (123) (123)
--------
Other comprehensive income (loss) (7,851)
--------
Total comprehensive income 13,858
Issuance of common stock 53 104,216 104,269
Costs incurred from issuance of stock (4,733) (4,733)
Exercise of stock options 5 1,763 1,768
Changes in unearned ESOP 11,367 2,406 13,773
Adjustment to deferred tax asset for
pooled entities 2,358 2,358
Distributions by pooled entities (3,290) (3,290)
Repurchase of stock by pooled entities - (228) (220) (448)
---- -------- ------- ------- ------- --------
BALANCE AT DECEMBER 31, 1998 $488 $217,218 $90,740 $ - $(9,071) $299,375
==== ======== ======= ======= ======= ========
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Mail-Well, Inc. and subsidiaries
(collectively referred to as the "Company") is one of the largest
printers in North America. The Company prints and manufactures
envelopes in the United States and Canada and is a leading
commercial printer in the United States. The Company is also a
printer of custom business documents for the distributor market
and a printer of labels for the food and beverage industry. Within
envelope printing, the Company competes primarily in the consumer
direct segment in which envelopes are designed and manufactured to
customer specifications. In addition, the Company manufactures
stock envelopes sold in the office products and merchant/printer
markets. The Company is also a leading commercial printer
specializing in printing advertising literature, high-end
catalogs, annual reports, calendars and computer instruction books
and is recognized as an innovative provider of quality printed
products to leading companies in the United States. Printing for
Distributors products include both traditional and specialty
products for small and medium-sized end users. The Company
commenced operations on February 24, 1994 with the acquisition of
the envelope businesses of Georgia-Pacific Corporation ("GP
Envelope") and Pavey Envelope and Tag Corp. ("Pavey").
PRINCIPLES OF CONSOLIDATION - The Company, headquartered in
Englewood, Colorado, is organized under Colorado law and its
common stock is traded on the New York Stock Exchange. Mail-Well
I Corporation ("MWI"), a wholly-owned subsidiary of Mail-Well,
Inc., conducts most of the business of Mail-Well, Inc. MWI,
together with its subsidiaries, is the owner of the Company's
operating assets and the borrower of the debt (exclusive of the
Convertible Subordinated Notes). All significant intercompany
accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents includes
cash on hand, demand deposits, and short-term investments with
original maturities of three months or less. The Company's
domestic banking system provides for the daily replenishment of
major bank accounts for check clearing requirements. Accordingly,
outstanding checks that have not yet been paid by the banks at
year end are reflected in accounts payable in the consolidated
balance sheets.
INVESTMENTS IN ACCOUNTS RECEIVABLE SECURITIZATION - In November
1996, the Company entered into a five-year accounts receivable
securitization arrangement (the "Securitization") whereby it can
sell, on a revolving basis, an undivided percentage ownership
interest in a designated pool of accounts receivable up to a
maximum of $100.0 million. The securitization represents a
retained interest in the accounts receivable sold and is recorded
at fair market value, with the unrealized gains and losses, net of
tax, reported in other comprehensive income.
INVENTORIES - Inventories are valued at the lower of first-in,
first-out ("FIFO") cost or market and include the cost of
materials, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
recorded at cost. Replacements of major units of property are
capitalized and the replaced properties are retired. Replacements
of minor units of property and repair and maintenance costs are
charged to expense as incurred.
Depreciation for financial reporting purposes is calculated using
the straight-line method based on the estimated useful lives of
the respective assets (or the life of the lease, if shorter), as
follows:
Land improvements 25 years
Buildings, building and leasehold improvements 15-45 years
Machinery and equipment 15 years
Furniture, fixtures and other 3-10 years
INTANGIBLE ASSETS - In connection with the issuance of both bank
debt and public debt as well as in connection with acquisitions, the
Company recorded certain intangible assets. The following schedule
summarizes the amortization periods and amortization expense recorded
in connection with the intangible assets (in thousands):
F-8
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
USEFUL
Amortization of: LIFE 1998 1997 1996
---- ------ ------ ------
<S> <C> <C> <C> <C>
Deferred Financing Costs <Fa> 5-6 years $ 614 $2,913 $3,588
Debt Issue Costs 5 years 940 - -
Goodwill 40 years 6,914 3,778 2,915
Non-Compete Agreements 3-5 years 652 489 1,153
Acquisition Costs and Other 5-21 years 456 516 279
------ ------ ------
Total $9,576 $7,696 $7,935
====== ====== ======
<FN>
<Fa> Amount included in interest expense in the consolidated statements
of operations.
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS - The carrying amount of goodwill
is reviewed if facts and circumstances suggest that it may be
impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted
cash flows of the entity acquired over the remaining amortization
period, the carrying amount of the goodwill is reduced by the
estimated shortfall of cash flows. In addition, long-lived assets
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability is based on future discounted
net cash flows from the use of the asset. Goodwill associated with
assets acquired in a purchase business combination is included in
impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be
recoverable.
STOCK SPLITS - In June 1997, the Company effected a 3:2 stock
split of its common stock, and in May 1998, the Company declared a
2:1 stock split of its common stock effective June 10, 1998. All
common stock, paid-in capital, share and earnings per share
information has been retroactively restated to reflect these
splits.
INCOME TAXES - The Company provides for deferred taxes on
temporary differences arising from assets and liabilities whose
bases are different for financial reporting and state, federal and
foreign income tax purposes. The Company does not provide U.S.
income taxes on the unremitted earnings of its foreign subsidiary
($25,615,000 at December 31, 1998) because the Company intends to
indefinitely reinvest such unremitted earnings. Upon distribution
of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable
to the foreign country.
OTHER COMPREHENSIVE INCOME - Effective January 1, 1998, the
Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130") which
establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of
SFAS 130 had no impact on the Company's net income or
shareholders' equity. SFAS 130 requires the Company's pension
liability adjustment, currency translation adjustments, and
unrealized gains and losses on its investments, which prior to
adoption were reported separately in shareholders' equity, to be
included in accumulated other comprehensive income. Prior year
amounts have been reclassified to conform to the requirements of
SFAS 130.
NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (the "Statement"). The
Statement, which will be effective for the year 2000, requires
derivative instruments to be recorded in the balance sheet at
their fair value with changes in fair value being recognized in
earnings unless specific hedging accounting criteria are met.
Although the Company believes it has a minimal current level of
hedging and derivative activity, it has not determined the impact
of this statement on its operations and financial position.
EARNINGS PER SHARE - Earnings per share is computed in accordance
with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). Basic earnings per share
excludes dilution and is computed by dividing earnings available
to common shareholders by the weighted average number of
F-9
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could
share in the earnings.
The unallocated shares issued under the Employee Stock Ownership
Plan are excluded from both the basic and diluted earnings per
share calculations. The effect of the convertible subordinated
notes, which could potentially dilute earnings per share, was not
included in the computation for the year ended December 31, 1998
because the result would have been antidilutive.
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
EARNINGS PER SHARE - BASIC
Income available to common shareholders $25,841 46,499 $0.55
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,650
Other - 436
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $25,841 48,585 $0.53
======= ====== =====
FOR THE YEAR ENDED DECEMBER 31, 1997
EARNINGS PER SHARE - BASIC
Income available to common shareholders $34,976 40,575 $0.86
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 1,508
Convertible Subordinated Notes 476 834
Other - 110
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $35,452 43,027 $0.82
======= ====== =====
FOR THE YEAR ENDED DECEMBER 31, 1996
EARNINGS PER SHARE - BASIC
Income available to common shareholders $21,158 39,663 $0.53
=====
EFFECT OF DILUTIVE SECURITIES
Stock options - 507
Other - 279
------- ------
EARNINGS PER SHARE - DILUTED
Income available to common shareholders
including assumed conversions $21,158 40,449 $0.52
======= ====== =====
</TABLE>
FOREIGN CURRENCY TRANSLATION - The financial statements include
the results of Canadian operations which are translated from
Canadian dollars, their functional currency, into U.S. dollars.
The balance sheet is translated at the year end rate of exchange.
Results of operations are translated at average rates prevailing
during the year. The effects of translation are included as a
component of other comprehensive income (loss). Foreign currency
transaction gains and losses are recorded in income when realized.
F-10
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to
the 1996 and 1997 financial statements to conform to the 1998
presentation.
2. MERGERS WITH COMMERCIAL PRINTING COMPANIES
Effective May 30, 1998, the Company completed its mergers with
seven commercial printing companies through the exchange of common
stock, which had a market value of $21.965 per share, as shown in
the table below:
<TABLE>
<CAPTION>
SHARES OF MAIL-WELL
OPERATING COMPANY NAME COMMON STOCK EXCHANGED
<S> <C>
Color Art, Inc. ("Color Art") 2,351,951
Accu-color, Inc. ("Accu-color") 622,391
Industrial Printing Company ("Industrial Printing") 570,161
IPC Graphics, Inc. ("IPC Graphics") 325,973
United Lithograph, Inc. ("United Lithograph") 519,568
French Bray, Inc. ("French Bray") 538,040
Clarke Printing, Co. ("Clarke Printing") 437,984
</TABLE>
The consolidated financial statements give retroactive effect to
the mergers, which have been accounted for using the pooling of
interests method and, as a result, the financial position, results
of operations and cash flows are presented as if the combining
companies had been consolidated for all periods presented. The
consolidated statements of changes in shareholders' equity reflect
the accounts of the Company as if the additional common stock had
been issued during all periods presented.
Color Art is a commercial printer with offices located in St.
Louis and Osage Beach, Missouri, and also the operator of a short-
run printing and graphics company through its subsidiary Graphic
Links, LLC. Accu-color, located in St. Louis, Missouri, is
primarily a supplier of color separation and other graphic arts
services to the printing and advertising industries.
Industrial Printing is located in Toledo, Ohio and is engaged in
the printing and selling of advertising pieces and labels, and
general commercial printing. IPC Graphics prints and sells
advertising pieces, mailers and business forms from its facilities
in Toledo, Ohio.
United Lithograph provides commercial printing services to
individuals and businesses located in the New England region from
its offices in Somerville, Massachusetts. French Bray, located in
Glen Burnie, Maryland, provides commercial, high quality, multi-
color printing in the Mid-Atlantic region. Clarke Printing
designs, manufactures and sells printed materials throughout Texas
and Mexico.
The companies listed above are hereafter collectively referred to
as the Commercial Printing Group.
Each of the mergers was negotiated and consummated as separate
transactions and the separate mergers were not contingent upon
each other. Except for French Bray and Clarke Printing, all of
the above entities had elected Subchapter S corporation treatment
for U.S. federal income tax purposes and, accordingly, did not pay
U.S. federal income taxes. Subsequent to May 30, 1998, these
companies were included in Mail-Well's consolidated U.S. federal
income tax return. In connection with the mergers, the Company
also issued common stock to acquire the net assets (including the
assumption of the debt associated with such assets) of certain
related real estate ventures owned by shareholders of the
commercial printing companies. The shares of the Company's common
stock exchanged for real estate assets are included with the
shares exchanged for
F-11
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the respective operating company in the table above. The results
of operations and financial conditions of the real estate assets
are reflected in the restated consolidated financial statements
with significant intercompany transactions and balances eliminated.
The mergers with the real estate entities have been accounted for
as taxable business combinations and the recognizable tax benefits
attributable to the increase in tax basis were allocated to
additional paid-in-capital.
Each of the above transactions has been accounted for individually
as a pooling of interests and, accordingly, the consolidated
financial statements for the periods subsequent to February 24,
1994 (inception) have been restated to include the accounts of the
Commercial Printing Group. Prior to the mergers, Industrial
Printing's and IPC Graphics' fiscal year ended on September 30,
United Lithograph's fiscal year ended on June 30 and French Bray's
fiscal year ended on July 31. Accordingly, the accompanying
financial statements include those financial statements of
entities with different fiscal years restated on a calendar year
basis. Additionally, the accompanying consolidated financial
statements reflect certain minor adjustments to conform the
accounting policies of the Commercial Printing Group to the
Company's.
Net sales, income before extraordinary items and net income of the
separate companies for the periods preceding the mergers were as
follows:
<TABLE>
<CAPTION>
UNAUDITED
INCOME (LOSS) UNAUDITED PRO FORMA
BEFORE NET PRO FORMA DILUTED
NET EXTRAORDINARY INCOME NET INCOME EARNINGS
(THOUSANDS, EXCEPT PER SHARE AMOUNTS) SALES ITEMS (LOSS) (LOSS) <F1> PER SHARE
----- ----- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 1998 (UNAUDITED) <F2>
Mail-Well, Inc. as previously reported $ 274,705 $ 9,510 $ 9,510 $ 9,510
Pooled entities 44,029 23 23 (752)
---------- ------- ------- -------
Combined $ 318,734 $ 9,533 $ 9,533 $ 8,758 $0.18
========== ======= ======= ======= =====
YEAR ENDED DECEMBER 31, 1997
Mail-Well, Inc. as previously reported $ 897,560 $28,276 $22,176 $22,176
Color Art 76,099 3,218 3,218 1,930
Accu-color 14,409 1,550 1,550 930
Industrial Printing 19,499 769 769 461
IPC Graphics 10,429 405 405 243
United Lithograph 21,232 502 502 301
French Bray 23,353 (178) (178) (178)
Clarke Printing 11,356 434 434 434
---------- ------- ------- -------
Pooled entities 176,377 6,700 6,700 4,121
---------- ------- ------- -------
Combined $1,073,937 $34,976 $28,876 $26,297 $0.62
========== ======= ======= ======= =====
YEAR ENDED DECEMBER 31, 1996
Mail-Well, Inc. as previously reported $ 778,524 $16,927 $16,927 $16,927
Color Art 66,023 1,970 1,970 1,182
Accu-color 15,572 629 629 377
Industrial Printing 24,642 540 540 324
IPC Graphics <F3> 2,262 30 30 18
United Lithograph 20,012 420 420 252
French Bray 28,046 454 454 454
Clarke Printing 9,413 188 188 188
---------- ------- ------- -------
Pooled entities 165,970 4,231 4,231 2,795
---------- ------- ------- -------
Combined $ 944,494 $21,158 $21,158 $19,722 $0.49
========== ======= ======= ======= =====
F-12
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<FN>
<F1> Unaudited pro forma net income reflects adjustments to net
income to record an estimated provision for income taxes for
each period presented assuming Color Art, Accu-color,
Industrial Printing, IPC Graphics and United Lithograph were
tax paying entities.
<F2> Income (loss) includes aggregate merger expenses of the
Commercial Printing Group totaling $2.2 million in the first
quarter of 1998.
<F3> IPC Graphics was spun-off from Industrial Printing on
October 1, 1996. The results of IPC Graphics prior to
October 1, 1996 are included in the results of Industrial
Printing, and the spin-off transaction has been eliminated
in the Company's consolidated financial statements.
</TABLE>
In connection with the mergers, transaction costs incurred by the
Commercial Printing Group of approximately $3.3 million were
expensed during 1998. These costs consist primarily of investment
banking, legal and accounting fees.
3. ACQUISITIONS
The presentation below summarizes the Company's 1998 acquisitions:
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
MONTH OPERATING SALES
NAME OF BUSINESS ACQUIRED LOCATION ACQUIRED SEGMENT (MILLIONS)
- ------------------------- -------- -------- ------- ----------
<S> <C> <C> <C> <C>
Poser Business Forms, Inc. Fairhope, Alabama January Distributors $ 90
Rono Graphic Communications Portland, Oregon March Commercial 12
Lawson Mardon Label Division Toronto, Ontario March Labels 81
Denver Forms Company Denver, Colorado March Distributors 12
National Graphics Company Denver, Colorado March Envelopes 8
EPX Denver Denver, Colorado March Distributors 4
Blue Line Envelope Montreal, Quebec April Envelopes 6
South Press, Inc. Dallas, Texas April Commercial 12
Century Index Corporation Anaheim, California May Envelopes 8
Label Division, IP Paper Bowling Green, Kentucky May Labels 30
Anderson Lithograph Los Angeles, California May Commercial 135
Illinois Envelope, Inc. Kalamazoo, Michigan June Envelopes 7
Gould Packaging, Inc. Vancouver, Washington June Envelopes 14
Graphics Illustrated, Inc. West Palm Beach, Florida August Commercial 11
McLaren, Morris and Todd Ltd. Mississauga, Ontario August Commercial 34
John D. Lucas Printing Co. Baltimore, Maryland August Commercial 27
Armstrong-White, Inc. Bloomfield Hills, Michigan August Commercial 2
Richtman Printing Englewood, Colorado September Commercial 6
Production Press, Inc. Jacksonville, Illinois September Commercial 9
Apico Corporation Girard, Kansas October Distributors 10
Perfection Forms Girard, Kansas October Distributors 10
Trafton Printing, Inc. Amarillo, Texas October Commercial 9
Imperial Litho and Dryography Phoenix, Arizona November Commercial 26
----
$563
====
</TABLE>
The presentation below summarizes the purchase price, including
all adjustments made through December 31, 1998. These
acquisitions have been accounted for as purchases and,
accordingly, the net purchase price of each acquisition was
allocated to the various assets and liabilities according to their
estimated fair values as of the date of the respective purchase.
The results of operations of each of the acquisitions have been
included in the accompanying consolidated statements of operations
from the date of the acquisition.
F-13
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CASH
AND TOTAL
TYPE OF MONTH STOCK DEBT PURCHASE GOODWILL
(IN MILLIONS) PURCHASE ACQUIRED PAID ASSUMED PRICE RECORDED
-------- -------- ---- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
1996 Acquisitions
Quality Park Products Assets April $ 27.6 $0.7 $ 28.3 $ 3.4
Pac National Group Assets November 20.2 0.0 20.2 6.4
Shepard Poorman (SP) Stock December 18.9 0.8 19.7 7.9
1997 Acquisitions
Six acquisitions, as a group Assets (3) June, July, 86.4 0.6 87.0 38.1
Stock (3) September,
October and
December
1998 Acquisitions
23 acquisitions, as a group Assets (10) Various 360.4 9.1 369.5 170.2
Stock (13)
</TABLE>
The fair value of stock issued for acquisitions was $8,780,000 and
$6,018,000 for the years ended December 31, 1998 and 1997,
respectively.
The following table presents the unaudited pro forma results of
operations as if the 1998, 1997 and 1996 acquisitions had occurred
on January 1, 1997, 1996 and 1995, respectively. The summary pro
forma results are based on assumptions and are not necessarily
indicative of the actual results which would have occurred had
these acquisitions occurred on January 1 of the year preceding the
acquisition date, or of the future results of operations of the
Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $1,729.4 $1,726.7 $1,193.6
Income before extraordinary item 32.5 47.2 17.9
Extraordinary item (4.1) (6.1) -
Net income $ 28.4 $ 41.1 $ 17.9
Earnings per basic share:
Income before extraordinary item $ 0.69 $ 1.16 $ 0.45
Extraordinary item (0.08) (0.15) -
Net income $ 0.61 $ 1.01 $ 0.45
Earnings per diluted share:
Income before extraordinary item $ 0.66 $ 1.11 $ 0.44
Extraordinary item (0.08) (0.14) -
Net income $ 0.58 $ 0.97 $ 0.44
</TABLE>
In connection with the acquisition of Murray Envelope Corporation,
in July 1997, a subsidiary of the Company issued 220,472 shares of
non-voting common stock. These shares are redeemable by the
holder during the period from January 1, 1999 to February 1, 2000
for $3,500,000. Alternatively, the holder may convert these
shares into an equal number of shares of the Company's common
stock. This interest in the non-voting common stock of the
subsidiary has been recorded as a minority interest in the
consolidated balance sheet.
Certain purchase agreements require the payment of additional
consideration in the form of cash payments if specific operating
performance criteria are met. Any subsequent payment will be
allocated to goodwill. In addition, purchase price allocation for
certain acquisitions have not been finalized. Therefore, the
amount of goodwill could be adjusted within one year of the
purchase.
F-14
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997
---- ----
<S> <C> <C>
INVENTORIES:
Raw materials $ 45,720 $ 34,656
Work in process 22,089 12,428
Finished goods 49,256 42,132
--------- --------
117,065 89,216
Reserve for obsolescence, loss and other (2,934) (2,948)
--------- --------
Total $ 114,131 $86,268
========= ========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements $ 23,818 $ 14,667
Buildings, building and leasehold improvements 115,264 73,567
Machinery and equipment 336,509 229,214
Furniture, fixtures and other 33,108 26,453
Construction in progress 37,982 10,435
--------- --------
546,681 354,336
Less accumulated depreciation (108,949) (91,539)
--------- --------
Total $ 437,732 $262,797
========= ========
RESERVES:
Allowance for doubtful accounts receivable $ (6,727) $ (3,795)
Accumulated amortization:
Deferred financing costs (1,413) (2,000)
Goodwill (15,902) (9,030)
Other intangibles included in other assets (5,169) (4,386)
</TABLE>
5. LONG-TERM DEBT AND CAPITAL LEASES
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
INTEREST RATE AT DECEMBER 31,
DECEMBER 31, 1998 1998 1997
----------------- ---- ----
<S> <C> <C> <C>
Bank Borrowings:
Unsecured loan, due June 9, 2003 6.88% $ 25,461 $ -
Unsecured revolving loan facility, due
March 31, 2003 5.875% 93,000 -
Demand note - 55,393
Senior Subordinated Notes, due 2004 10.5% - 85,000
Senior Subordinated Notes, due 2008 8.75% 300,000 -
Convertible Subordinated Notes, due 2002 5.0% 152,050 152,050
Other 20,952 48,447
-------- --------
591,463 340,890
Less current maturities (8,036) (10,533)
-------- --------
Long term debt and capital leases $583,427 $330,357
======== ========
</TABLE>
In November 1998, Mail-Well I Corporation issued $300,000,000 of
8.75% Senior Subordinated Notes (the "Senior Notes"), the net
proceeds of which were used to legally extinguish the $85,000,000
of senior subordinated notes due 2004 and repay a portion of the
unsecured line of credit. The Senior Notes constitute unsecured
obligations of the Company. The Company can redeem the Senior
Notes, in whole or in part, on or after December 15, 2003, at
redemption prices which range from 100% to 104.375%, plus accrued
and unpaid
F-15
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
interest. In addition, before December 15, 2001, the Company can
redeem up to 35% of the Senior Notes at 108.75% of the principal
amount thereof, plus accrued and unpaid interest, with the net
cash proceeds from certain common stock offerings. Each holder of
the Senior Notes has the right to require the Company to
repurchase the Notes at a purchase price equal to 101% of the
principal amount, plus accrued and unpaid interest thereon, upon
the occurrence of certain events constituting a change of control
of the Company.
On March 18, 1998, the Company entered into a revolving loan
facility totaling $300 million with Bank of America, the lead
agent for its syndicate of banks. The new bank facility consists
of a five-year unsecured revolving loan facility. The same bank
agreed to lend the Company and one of its Canadian subsidiaries up
to an additional $20.0 million at LIBOR plus 0.75% per annum under
a similar revolving credit facility. There were $93,000,000 and
no amounts outstanding under these facilities as of December 31,
1998, respectively.
In November 1997, the Company issued $152,050,000 of Convertible
Subordinated Notes (the "Notes"). The Notes constitute unsecured
subordinated obligations of the Company. The Notes are
convertible at the option of the holder into shares of the
Company's common stock, par value $0.01 per share, at a conversion
price of $19.00 per share at anytime prior to November 1, 2002.
In addition, each holder of the Notes has the right to require the
Company to repurchase the Notes at a purchase price equal to 101%
of the principal amount, plus accrued and unpaid interest thereon,
upon the occurrence of certain events constituting a change of
control of the Company.
Other long-term debt is comprised of capital lease obligations and
term debt with banks of the Commercial Printing Group. Interest
rates on other term debt with banks range from 6.0% to 9.0% at
December 31, 1998.
In 1998, the Company wrote off deferred financing costs of
$4,132,000 (net of $2,587,000 of income tax benefits) capitalized
in connection with the bank debt which was repaid in November
1998. In 1997, the Company wrote off deferred financing costs of
$6,100,000 (net of $3,814,000 of income tax benefits) capitalized
in connection with the bank debt which was repaid in November
1997. The write-offs are shown as extraordinary items in the
statements of operations.
The long-term debt agreements contain certain restrictive
covenants that, among other things and with certain exceptions,
limit the ability of the Company to incur additional indebtedness
or issue capital stock, prepay subordinated debt, transfer assets
outside of the Company, pay dividends or repurchase shares of
common stock. In addition to these restrictions, the Company is
required to satisfy certain financial covenants.
The aggregate annual maturities for all long-term debt during the
fiscal years subsequent to December 31, 1998 are (in thousands):
1999 $ 8,036
2000 13,566
2001 7,366
2002 160,031
2003 98,096
2004 and thereafter 304,368
--------
$591,463
========
Cash paid for interest on long-term debt was $33,996,000,
$22,818,000 and $28,886,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
F-16
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
In November 1996, the Company entered into a five-year agreement
whereby it can sell, on a revolving basis, an undivided percentage
ownership interest in a designated pool of accounts receivable up
to a maximum of $100.0 million. At December 31, 1998 and 1997,
$52.6 million and $72.0 million, respectively, had been sold
(without recourse) under this agreement and the sale was reflected
as a reduction of accounts receivable in the Company's
consolidated balance sheets. The Company has retained a
securitized interest in the accounts receivable of $41.7 million
and $22.3 million at December 31, 1998 and 1997, respectively.
The receivables were sold at a discount of 0.60% above the
prevailing commercial paper rate plus certain other fees. The
discount expense of $4.4 million, $4.9 million and $0.7 million on
the receivables sold has been recorded in the Company's statements
of operations for the years ended December 31, 1998, 1997 and
1996, respectively.
In November 1996, the Company refinanced certain equipment under a
sale/leaseback arrangement. The equipment was sold for $30.0
million. The transaction was accounted for as a sale whereby the
equipment was removed from the Company's financial statements.
There was no significant gain or loss on the sale of the
equipment. In 1997, the Company reacquired the equipment from the
original lessor and sold and leased back such equipment from a new
buyer-lessor. The purchase price from the old buyer-lessor and
selling price to the new buyer-lessor approximated its then fair
market value ($27.6 million). The leasebacks are classified as
operating leases. At the end of the five year lease term, the
Company may either (i) purchase the equipment for $16.0 million,
(ii) sell the equipment on behalf of the lessor for a selling
price of no less than $13.2 million or (iii) return the equipment
to the lessor. If the Company elects to return the equipment to
the lessor at the end of the lease term, the Company has
guaranteed a residual value of $13.2 million for the benefit of
the lessor.
The Company leases various office, warehouse and manufacturing
facilities under operating leases. Minimum annual lease
commitments at December 31, 1998 were as follows (in thousands):
1999 $ 22,548
2000 19,304
2001 16,961
2002 14,589
2003 13,993
2004 and thereafter 12,950
--------
Total $100,345
========
Lease expense for the years ended December 31, 1998, 1997 and 1996
was $25,831,000, $17,301,000 and $6,890,000, respectively.
The Company is involved in various lawsuits incidental to its
businesses. In management's opinion, an adverse determination
against the Company relating to these suits would not be material
to the consolidated financial statements. In the case of
administrative proceedings related to environmental matters
involving governmental authorities, management does not believe
that any imposition of monetary sanctions would be material to the
Company's results of operations and financial position.
F-17
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following is a comparison of the fair value and carrying value
at December 31, 1998 and 1997 of the Company's financial
instruments (in thousands):
<TABLE>
<CAPTION>
1998 1997
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 1,375 $ 1,375 $ 40,911 $ 40,911
Receivables (trade) 135,923 135,923 64,958 64,958
Investment in accounts receivable
securitization 41,669 41,669 22,319 22,319
Financial liabilities
Unsecured loan 24,465 25,461 - -
Demand note - - 55,393 55,393
Unsecured revolving loan facility 89,114 93,000 - -
Senior subordinated notes 304,500 300,000 91,163 85,000
Convertible subordinated notes 128,482 152,050 185,501 152,050
Other long-term debt 20,952 20,952 48,447 48,447
</TABLE>
CASH AND CASH EQUIVALENTS AND RECEIVABLES - The carrying value of
cash and cash equivalents and receivables approximates fair value
due to the short term maturities of these investments.
INVESTMENT IN ACCOUNTS RECEIVABLE SECURITIZATION - The fair
value of the investment in accounts receivable securitization is
based on discounting expected cash flows at rates currently
available to the Company for instruments with similar risks and
maturities.
LONG-TERM DEBT - The fair value of the Company's long term debt to
banks is based on quoted interest rates for borrowings of similar
quality and terms. The fair value of the senior subordinated
notes and the convertible subordinated notes is based upon quoted
market prices. The fair value of other long-term debt was
estimated using the incremental borrowing rate for each company
for debt of the same remaining maturities.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that
potentially subject the Company to significant concentrations of
credit risk consists primarily of accounts receivable.
Concentrations of credit risk with respect to accounts receivable
are limited due to the large number of entities comprising the
Company's customer base and their dispersion across many different
industries and geographic areas. As of December 31, 1998 and
1997, the Company had no significant concentrations of credit
risk.
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN
SECURITIES OFFERING - On November 13, 1997, the Company's shelf
registration statement ("shelf") on Form S-3 was declared
effective by the Securities and Exchange Commission. The shelf
permits the Company to issue up to $300.0 million in debt
securities, common stock, preferred stock or warrants over the
two-year period following the effective date.
On February 11, 1998, the Company completed the sale of 6,000,000
shares of its common stock at a price of $19.625 per share. Of these
shares, the Company sold 4,864,600 and 1,135,400 were sold by a group
of shareholders. Proceeds from the sale of common stock by the
Company of $90.7 million, net of underwriting discounts and
commissions, were used for general corporate purposes. The
February 1998 stock offering and the Convertible Subordinated
Notes were issued under the shelf registration statement and, at
December 31, 1998, there was availability to issue another $52
million of securities under the shelf registration statement.
PREFERRED STOCK - The Company has authorized 25,000 shares of
$0.01 par value preferred stock. No shares have been issued at
December 31, 1998 or 1997.
F-18
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STOCK OPTION PLANS - The following summarizes the various stock
option plans at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OPTIONS ELIGIBLE TO YEARS TO
AUTHORIZED OUTSTANDING BE ISSUED FULL VESTING
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
1994 Stock Option Plan <Fa> 1,918,350 1,143,757 71,272 4 or 5
1996 Directors Stock Option Plan <Fb> 420,000 60,000 318,000 Immediately
1997 Non-Qualified Stock Option Plan <Fa> 1,950,000 1,106,130 764,670 5 years
Allied Acquisition Non-Qualified Stock
Option Plan <Fc> 124,800 119,902 - 4 years
1998 Incentive Stock Option Plan <Fa> 1,000,000 189,970 810,030 5 years
<FN>
<Fa> Plan is for directors and key employees
<Fb> Plan is for directors only
<Fc> Plan is for key employees of The Allied Printers
</TABLE>
All grants expire ten years from the grant date or until 90 days
after termination of a directorship. All grants are administered
by the Compensation Committee of the Board of Directors.
On the grant date, all options had an exercise price equal to or
greater than the fair market value of the Company's common stock.
The following is a summary of the Company's stock option activity:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
OPTIONS PRICE LIFE PRICE
------- ----- ---- -----
<S> <C> <C> <C> <C>
Outstanding, December 31, 1995 832,958 $1.32 - $1.43 8.8 years $ 1.33
1996
Granted 481,500 $3.01 - $3.74 $ 3.67
Exercised (30,258) $1.32 $ 1.32
Canceled or forfeited (7,674) $1.32 $ 1.32
---------
Outstanding, December 31, 1996 1,276,526 $1.32 - $3.74 9.2 years $ 2.21
1997
Granted 1,784,202 $6.17 - $13.69 $ 7.29
Exercised (144,986) $1.32 - $3.74 $ 1.42
Canceled or forfeited (88,272) $1.32 - $3.74 $ 1.49
---------
Outstanding, December 31, 1997 2,827,470 $1.32 - $13.69 8.9 years $ 5.48
1998
Granted 661,194 $9.31 - $21.86 $12.80
Exercised (493,249) $1.32 - $13.69 $ 3.70
Canceled or forfeited (375,656) $1.32 - $19.03 $ 7.27
---------
Outstanding, December 31, 1998 2,619,759 $1.32 - $21.86 8.2 years $ 7.37
=========
Vested and exercisable at December 31, 1996 219,974 $1.32 - $3.74 $ 1.65
=========
Vested and exercisable at December 31, 1997 424,896 $1.32 - $ 9.50 $ 3.05
=========
Vested and exercisable at December 31, 1998 569,943 $1.32 - $21.86 $ 5.56
=========
</TABLE>
F-19
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE OPTIONS VESTED AVERAGE
RANGE OF DECEMBER 31, REMAINING EXERCISE AT DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE PRICE 1998 PRICE
- --------------- ---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$ 1.32 - $ 3.74 610,065 7.0 years $ 2.56 298,452 $ 2.41
$ 6.17 - $ 7.00 1,242,092 8.2 years $ 6.64 190,440 $ 6.65
$ 9.11 - $12.00 614,700 9.3 years $11.74 28,950 $ 9.58
$13.54 - $13.69 128,902 8.6 years $13.68 28,101 $13.68
$19.03 - $21.86 24,000 9.3 years $21.86 24,000 $21.86
--------- -------
$ 1.32 - $21.86 2,619,759 8.2 years $ 7.37 569,943 $ 5.56
========= =======
</TABLE>
The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations in accounting for
its employee stock option plans. The exercise price of the stock
options is the fair value of the common stock as of the date of
grant. Accordingly, no compensation cost has been recognized.
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") was issued in October
1995 and, if fully adopted by the Company, would change the method
for recognition of cost. Under SFAS 123, compensation expense is
based upon the fair value of each option at the date of grant
using an option-pricing model that takes into account as of the
grant date the exercise price and expected life of the option, the
current price of the underlying stock and its expected volatility,
expected dividends on the stock and the risk-free interest rate
for the expected term of the option. Had compensation expense
been determined based on the guidance in SFAS 123, the Company's
net income and earnings per share would have been reduced to the
pro forma amounts indicated below. The weighted average fair
values of options granted in 1998, 1997 and 1996 were $6.73, $3.83
and $1.72, respectively.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions used for grants:
<TABLE>
<CAPTION>
DIVIDEND EXPECTED RISK FREE EXPECTED
YIELD VOLATILITY INTEREST RATE LIFE
----- ---------- ------------- ----
<S> <C> <C> <C> <C>
March 1, 1995 Options 0% 33% 7.2% 5 and 6 years
May 8, 1996 Options 0% 38% 6.2% 4 years
October 1, 1996 Options 0% 44% 6.7% 5 and 6 years
1997 Options 0% 54% 5.4% 5 years
1998 Options 0% 68% 4.8% 5 years
</TABLE>
F-20
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the pro forma effect of applying SFAS 123:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- --------------------
(IN THOUSANDS, EXCEPT AS PRO AS PRO AS PRO
PER SHARE AMOUNTS) REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item $25,841 $24,073 $34,976 $33,852 $21,158 $20,956
Extraordinary item (4,132) (4,132) (6,100) (6,100) - -
Net income $21,709 $19,941 $28,876 $27,752 $21,158 $20,956
Income per basic share
before extraordinary item $ 0.55 $ 0.52 $ 0.86 $ 0.83 $ 0.53 $ 0.53
Net income per basic share $ 0.47 $ 0.43 $ 0.71 $ 0.68 $ 0.53 $ 0.53
Income per diluted share
before extraordinary item $ 0.53 $ 0.50 $ 0.82 $ 0.80 $ 0.52 $ 0.52
Net income per diluted share $ 0.45 $ 0.41 $ 0.68 $ 0.66 $ 0.52 $ 0.52
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure may
not be indicative of future amounts. Additional awards in future
years are anticipated.
OTHER COMPREHENSIVE INCOME - The income tax effects allocated to
and the cumulative balance of each component of other
comprehensive income (loss) are as follows (in thousands):
<TABLE>
<CAPTION>
TAX
BEGINNING BEFORE-TAX (BENEFIT) NET-OF-TAX ENDING
BALANCE AMOUNT EXPENSE AMOUNT BALANCE
------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Pension liability adjustment $ (73) $ (120) $ (40) $ (80) $ (153)
Currency translation adjustments (1,032) (7,648) - (7,648) (8,680)
Unrealized loss on investments (115) (199) (76) (123) (238)
------- ------- ----- ------- -------
$(1,220) $(7,967) $(116) $(7,851) $(9,071)
======= ======= ===== ======= =======
DECEMBER 31, 1997
Pension liability adjustment $ (110) $ 61 $ 24 $ 37 $ (73)
Currency translation adjustments (115) (917) - (917) (1,032)
Unrealized loss on investments (49) (108) (42) (66) (115)
------- ------- ----- ------- -------
$ (274) $ (964) $ (18) $ (946) $(1,220)
======= ======= ===== ======= =======
DECEMBER 31, 1996
Pension liability adjustment $ (211) $ 166 $ 65 $ 101 $ (110)
Currency translation adjustments (20) (95) - (95) (115)
Unrealized loss on investments - (80) (31) (49) (49)
------- ------- ----- ------- -------
$ (231) $ (9) $ 34 $ (43) $ (274)
======= ======= ===== ======= =======
</TABLE>
F-21
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
Taxes are based on income before income taxes and extraordinary
item for the years ended December 31, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic $31,886 $42,677 $26,448
Foreign 17,903 15,082 8,337
------- ------- -------
$49,789 $57,759 $34,785
======= ======= =======
</TABLE>
The provision for income taxes consists of the following for the
years ended December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $5,550 $9,539 $2,029
Foreign 5,246 3,335 2,138
State 948 1,397 132
------- ------- -------
11,744 14,271 4,299
Deferred:
Federal 9,492 5,298 6,968
Foreign 1,792 2,651 1,475
State 920 563 885
------- ------- -------
12,204 8,512 9,328
------- ------- -------
Total provision for income taxes $23,948 $22,783 $13,627
======= ======= =======
</TABLE>
Components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforwards $ 4,525 $ 5,541
Net operating loss carryforwards 3,533 1,032
Compensation related accruals 6,352 3,588
Intangibles 3,735 3,386
Miscellaneous accruals and reserves 2,195 1,853
Accounts receivable and inventories 3,137 2,198
Land basis differences and other 691 675
State tax credits 916 95
Valuation allowance (267) (288)
------- -------
Total deferred tax assets 24,817 18,080
------- -------
Deferred tax liabilities:
Property, plant and equipment 54,756 40,466
Deferred financing costs - 41
Intangibles 5,035 3,825
Prepaids and inventories 1,197 489
------- -------
Total deferred tax liabilities 60,988 44,821
------- -------
Deferred tax liability, net $36,171 $26,741
======= =======
</TABLE>
F-22
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The difference between the statutory federal income tax rate and
the Company's effective income tax rate is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income tax, net of federal benefit 3.5 3.4 3.3
Goodwill amortization 3.5 1.5 1.8
Employee stock ownership plan 9.3 1.2 1.3
Effect of pooled entities electing nontaxable
status prior to the mergers (2.4) (2.8) (1.5)
Other (.8) 1.1 0.3
---- ---- ----
Effective income tax rate 48.1% 39.4% 39.2%
==== ==== ====
</TABLE>
At December 31, 1998, the following net federal operating loss and
tax credit carryforwards are available. The Company is limited in
the amounts of net operating loss carryforwards which may be used
in any one year.
<TABLE>
<CAPTION>
Operating Expiration Tax
(in thousands) Losses Dates Credits
------ ----- -------
<S> <C> <C> <C>
Consolidated Company $ - $2,538
Acquired from Poser 7,976 2002 - 2012 -
Acquired from GAC 678 2005 - 2009 1,203
Acquired from SP - 590
Acquired from Other 770 2005 - 2008 194
------ ------
Total $9,424 $4,525
====== ======
</TABLE>
Cash paid for income taxes was $23,762,000, $15,090,000 and
$7,194,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
10. BENEFIT PLANS
PENSION PLANS - The Company sponsors three noncontributory defined
benefit pension plans under collective bargaining agreements with
unions representing certain employees in the U.S. The Company also
has obligations in the U.S. under a noncontributory defined benefit
plan, which was curtailed in 1994. The Company sponsors four
defined benefit pension plans covering certain salaried and hourly
employees in Canada who have bargained for such benefits. During
1997, the Company terminated one Canada defined benefit plan. The
1996 amounts reflect the termination of the plan.
The provisions of Statement of Financial Accounting Standards No.
87, "Employers' Accounting for Pensions," require the recognition
of an additional minimum liability for each defined benefit plan
for which the accumulated benefit obligation exceeds plan assets.
This amount has been recorded as a long-term liability with an
offsetting intangible asset. Because the asset recognized may not
exceed the amount of unrecognized prior service cost and transition
obligation on an individual plan basis, the balance, net of tax
benefits, is reported as part of accumulated other comprehensive
income (loss).
F-23
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes the funded status of the plans and
the related amounts that are recognized in the consolidated balance
sheets (in thousands).
<TABLE>
<CAPTION>
December 31,
1998 1997
---- ----
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $26,803 $26,390
Service cost 1,477 1,300
Interest cost 1,812 1,847
Amendments - 177
Actuarial gains and loss 837 369
Foreign currency exchange rate changes (1,294) (954)
Benefits paid (2,393) (2,326)
Curtailment (54) -
------- -------
Benefit obligation at end of year 27,188 26,803
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 34,119 34,034
Foreign currency exchange rate changes (1,822) (1,334)
Actual return on plan assets 1,591 2,649
Employer contributions 1,194 1,096
Benefits paid (2,393) (2,326)
------- -------
Fair value of plan assets at end of year 32,689 34,119
------- -------
Funded status 5,501 7,316
Unrecognized actuarial loss (gain) 1,527 (155)
Unrecognized prior service cost 272 306
Unrecognized transition asset (5,663) (7,137)
------- -------
Net amount recognized $ 1,637 $ 330
======= =======
Amounts recognized in the consolidated
balance sheet:
Prepaid benefit cost $ 2,404 $ 1,504
Accrued benefit liability (1,283) (1,490)
Intangible asset 267 187
Deferred tax asset 96 56
Accumulated other comprehensive (income) loss 153 73
------- -------
Net amount recognized $ 1,637 $ 330
======= =======
</TABLE>
Net pension expense for the plans included the following
components (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost $ 1,477 $ 1,300 $ 1,113
Interest cost on projected benefit obligation 1,812 1,847 1,179
Expected return on plan assets (2,814) (3,278) (1,571)
Net amortization and deferral (377) 31 266
------- ------- -------
Net periodic pension cost (income) $ 98 $ (100) $ 987
======= ======= =======
</TABLE>
F-24
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The significant assumptions used as of December 31 in computing
the net pension expense and funded status information shown above
are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.75 - 7.5% 7.25 - 7.5% 7 - 8.75%
Expected long-term rate of return on assets 8.75 - 9.5% 8.7 - 9% 8.5%
Rate of compensation increase 2 - 4% 2 - 4% 4 - 5%
</TABLE>
The aggregate accumulated benefit obligation and aggregate fair
value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were $5,355,000 and
$4,089,000, respectively, as of December 31, 1998. The aggregate
accumulated benefit obligation and aggregate fair value of plans
assets for pension plans with accumulated benefit obligations in
excess of plan assets were $4,057,000 and $3,035,000 ,
respectively, as of December 31, 1997.
Certain other U.S. employees covered by union agreements are
included in multi-employer pension plans to which the Company
makes contributions in accordance with the contractual union
agreements. Such contributions are made on a monthly basis in
accordance with the requirements of the plans and the actuarial
computations and assumptions of the administrators of the plans.
Contributions to such multi-employer plans were $1,070,000,
$1,877,000 and $989,000 for 1998, 1997 and 1996, respectively.
Benefits and net asset data for these multi-employer pension plans
for union employees are not available.
401(k) PLANS - The Company has several employee savings plans
which are designed to qualify under Section 401(k) of the Internal
Revenue Code. All U.S. salaried and non-union hourly employees
who meet the eligibility requirements are covered under one of
these plans. In addition, U.S. employees covered by union
agreements where these benefits have been collectively bargained
are also covered by one of these plans. Each of the plans allows
eligible employees to make salary reduction contributions. The
provisions of certain plans include mandatory or discretionary
contributions by the Company. Amounts charged to expense in
connection with Company contributions were $4,119,000, $3,159,000
and $2,765,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
INCENTIVE COMPENSATION - The Company has established Incentive
Compensation Plans covering full time employees and executive
officers of certain subsidiaries. The amount of incentive
compensation is based on the consolidated results of the Company
and on the results and performance measures of various
subsidiaries. Compensation expense under these plans was
$5,553,000, $927,000 and $1,268,000 for the years ended
December 31, 1998, 1997 and 1996, respectively. Prior to the
mergers, certain businesses of the Commercial Printing Group
maintained profit sharing plans. Aggregate compensation expense
under these plans was $1,009,000 and $1,064,000 for the years
ended December 31, 1997 and 1996, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN - See Note 11.
11. RESTRUCTURING AND OTHER UNUSUAL CHARGE
RESTRUCTURING CHARGES
In November 1998, the Company committed to implement a
restructuring program affecting the Envelopes and Commercial
Printing segments and recorded a pre-tax provision of $15,961,000,
of which $11,699,000 represents non-cash charges for asset write-
offs and impairments, primarily machinery and equipment. Impairment
losses were calculated based on the excess of the carrying amount
of the assets over the assets' fair values. The fair value of an asset
is generally determined based on recent comparable sales and independent
quotes from the used equipment market. The remaining $4,262,000 is for
severance, other termination benefits and property exit costs, including
noncancelable operating leases. These charges are a result of the
regionalization of the Company's U.S. Envelopes operations and
reorganization of the Company's Commercial Printing operations,
primarily in the Northwest. The Company also incurred $761,000 of
restructuring costs relating to the relocation of personnel,
equipment and inventory which under generally accepted accounting
principles cannot be accrued up front as part of the Company's
restructuring initiative. These costs are also included in
"Restructuring and other unusual charge"
F-25
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
in the consolidated statements of operations. Severance costs for
the 616 personnel included in the restructuring provision resulted
from regionalizing special manufacturing operations (490
personnel) and administrative functions (126 personnel) in various
locations of the Company's U.S. operations. Approximately 178
personnel had been terminated by the end of 1998 and the remaining
terminations are expected to be completed by mid 1999.
The following table summarizes the costs associated with the
restructuring program (in thousands):
<TABLE>
<CAPTION>
Asset Severance & Property
Write-Downs Related Costs Exit Costs Total
----------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Envelopes
Initial reserve $ 8,912 $2,825 $ 500 $12,237
Utilized in 1998 8,912 433 26 9,371
------- ------ ------ -------
Balance 12/31/98 $ - $2,392 $ 474 $ 2,866
======= ====== ====== =======
Commercial Printing
Initial reserve $ 2,787 $ 82 $ 855 $ 3,724
Utilized in 1998 2,787 82 55 2,924
------- ------ ------ -------
Balance 12/31/98 $ - $ - $ 800 $ 800
======= ====== ====== =======
Total
Initial reserve $11,699 $2,907 $1,355 $15,961
Utilized in 1998 11,699 515 81 12,295
------- ------ ------ -------
Balance 12/31/98 $ - $2,392 $1,274 $ 3,666
======= ====== ====== =======
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
In 1994, the Company established an ESOP for certain U.S.
employees. The ESOP borrowed monies from the Company to purchase
3,896,544 shares of Company common stock. These shares are held
in trust and are committed to be issued to employees' accounts in
the ESOP. Compensation expense under a leveraged ESOP is based on
the annual average market value of shares allocated to
participants; however, the tax deduction is based on the original
cost of the shares. This results in rising compensation expense as
the market value of the shares increases. In addition, a
significant portion of the compensation expense is not deductible
for tax purposes; thereby raising the Company's effective tax
rate. As a result, in October 1998, the ESOP debt was
extinguished and the Company committed to release all shares of
stock held by the ESOP to plan participants effectively
terminating the leveraged ESOP. This resulted in the commitment to
issue 1.4 million previously unallocated shares at a non-cash,
pre-tax cost of $12.2 million. The Company plans to replace this
leveraged ESOP with a non-leveraged ESOP.
The loan obligation of the ESOP was considered an unearned
employee benefit expense and, as such, was recorded as a reduction
of the Company's shareholders' equity. The Company's
contributions to the ESOP were used to repay the loan principal
and interest. Both the loan obligation and the unearned benefit
expense were reduced by the amount of loan principal repayments
made by the ESOP. Amounts charged to expense were $14,326,000
(including the $12.2 million one-time charge discussed above),
$2,614,000 and $1,973,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
At December 31, 1998 and 1997 the ESOP held the following shares
of common stock:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Shares allocated to participant accounts 2,238,758 2,019,312
Shares committed to be allocated to participant
accounts in connection with current year contribution 1,657,786 219,446
Unallocated shares held for future years contributions - 1,657,786
--------- ---------
Total 3,896,544 3,896,544
========= =========
</TABLE>
F-26
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair market value of the unallocated shares of common stock
held for future contributions was $31,394,000 at December 31,
1997.
12. SEGMENT INFORMATION
In 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131").
SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements. Operating segments are components of an
enterprise about which separate financial information is available
that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be
reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to
segments. Additionally, segment information for all periods has
been restated to reflect the mergers of the Commercial Printing
Group as discussed in Note 2.
The Company's operating segments prepare separate financial
information that is evaluated regularly by the Chief Operating
Officer in assessing performance and deciding how to allocate
resources. Corporate expenses include the costs of maintaining a
corporate office. The Company does not allocate corporate
overhead, interest (income) expense, amortization expense, gains
and losses on disposal of assets or income taxes by segment in
assessing performance. Operating segments of the Company are
defined primarily by product line and consist of Envelopes,
Commercial Printing, Printing for Distributors and Labels. The
latter two segments were added via acquisitions in the first
quarter of 1998. The Envelopes segment prints and manufactures
envelopes designed to customer specifications. The Commercial
Printing segment specializes in printing advertising literature,
high-end catalogs, annual reports, calendars and computer
instruction books and provides a broad range of printing and
graphic arts services primarily to the advertising industry. The
Printing for Distributors segment prints a diverse line of custom
products addressing the business documents needs of small and
medium-sized end users. The Labels segment is a leading supplier
of labels to the North American food and beverage markets. Early
in 1999, the Company combined the High Impact Color Printing
segment with the Commercial Printing Group under one organization,
now called the Commercial Printing segment. Segment information
for all periods has been restated to reflect this combination.
Intersegment sales from 1996 through 1998 were insignificant.
Segment information as of and for the years ended December 31,
1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES:
Envelopes $ 795,881 $ 709,531 $638,153
Commercial Printing <Fa> 522,801 353,977 306,341
Printing for Distributors <Fa> 113,590 10,429 -
Labels 72,414 - -
---------- ---------- --------
Total $1,504,686 $1,073,937 $944,494
========== ========== ========
OPERATING INCOME (LOSS):
Envelopes $ 88,241 $ 82,212 $ 68,440
Commercial Printing <Fa> 34,519 20,273 15,341
Printing for Distributors <Fa> 8,943 532 -
Labels 4,280 - -
Corporate <Fc> (49,103) (17,189) (13,649)
---------- ---------- --------
Total $ 86,880 $ 85,828 $ 70,132
========== ========== ========
</TABLE>
F-27
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Envelopes $ 674,773 $ 544,632 $398,993
Commercial Printing <Fa> 421,017 221,781 208,056
Printing for Distributors <Fa> 106,698 5,437 -
Labels 96,029 - -
Corporate <Fb> (170,561) (100,439) (55,063)
---------- --------- --------
Total $1,127,956 $ 671,411 $551,986
========== ========= ========
DEPRECIATION AND AMORTIZATION:
Envelopes $ 13,500 $ 11,249 $ 10,594
Commercial Printing <Fa> 12,231 10,254 11,183
Printing for Distributors <Fa> 1,830 365 -
Labels 3,117 - -
Corporate 8,962 4,505 4,172
---------- --------- --------
Total $ 39,640 $ 26,373 $ 25,949
========== ========= ========
CAPITAL EXPENDITURES:
Envelopes $ 44,450 $ 22,263 $ 13,142
Commercial Printing <Fa> 33,883 12,397 8,897
Printing for Distributors <Fa> 3,932 2,178 -
Labels 5,070 - -
---------- --------- --------
Total $ 87,335 $ 36,838 $ 22,039
========== ========= ========
<FN>
<Fa> As a result of the 1998 acquisition of Poser,
the 1997 results of IPC Graphics were
reclassified from Commercial Printing to the
Printing for Distributors segment.
<Fb> Corporate identifiable assets include inter-
company balances and adjustments for the
accounts receivable securitization and
certain significant operating leases. This
is done to reflect the return on assets
employed within each segment on a consistent
basis.
<Fc> The restructuring charges discussed in Note
11 and the merger costs related to segments, but
they were not considered by the chief operating
decision maker in deciding how to allocate
resources and thus, have been included in the
Corporate operating loss.
</TABLE>
Geographic information as of and for the years ended December 31,
1998, 1997 and 1996 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES:
U.S. $1,350,197 $ 958,644 $857,566
Canada 154,489 115,293 86,928
---------- ---------- --------
Total $1,504,686 $1,073,937 $944,494
========== ========== ========
IDENTIFIABLE ASSETS:
U.S. $ 909,550 $ 576,209 $453,209
Canada 218,406 95,202 98,777
---------- ---------- --------
Total $1,127,956 $ 671,411 $551,986
========== ========== ========
</TABLE>
F-28
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUMMARY QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS) (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
12/31/98 9/30/98 6/30/98 3/31/98
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $431,750 $404,143 $350,059 $318,734
Gross profit 94,217 85,622 70,427 69,047
(Loss) income before
extraordinary item (7,714) 12,723 11,299 9,533
Extraordinary item (4,132) - - -
Net (loss) income $(11,846) $ 12,723 $ 11,299 $ 9,533
Earnings (loss) per share - basic:
(Loss) income per share before
extraordinary item $ (0.16) $ 0.27 $ 0.24 $ 0.22
Extraordinary item per share (0.09) - - -
Net (loss) income per share $ (0.25) $ 0.27 $ 0.24 $ 0.22
Earnings (loss) per share - diluted:
(Loss) income per share before
extraordinary item $ (0.16) $ 0.25 $ 0.22 $ 0.20
Extraordinary item per share (0.09) - - -
Net (loss) income per share $ (0.25) $ 0.25 $ 0.22 $ 0.20
<CAPTION>
QUARTER ENDED
12/31/97 9/30/97 6/30/97 3/31/97
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $291,229 $278,794 $250,474 $253,440
Gross profit 66,363 60,778 56,990 55,594
Income before extraordinary item 10,429 8,820 8,875 6,852
Extraordinary item (6,100) - - -
Net income $ 4,329 $ 8,820 $ 8,875 $ 6,852
Earnings (loss) per share - basic:
Income per share before
extraordinary item $ 0.26 $ 0.22 $ 0.22 $ 0.17
Extraordinary item per share (0.15) - - -
Net income per share $ 0.11 $ 0.22 $ 0.22 $ 0.17
Earnings (loss) per share - diluted:
Income per share before
extraordinary item $ 0.23 $ 0.21 $ 0.21 $ 0.17
Extraordinary item per share (0.13) - - -
Net income per share $ 0.10 $ 0.21 $ 0.21 $ 0.17
</TABLE>
The results for the three months ended March 31, 1998 have been
restated from those previously reported on Form 10-Q to reflect the
mergers discussed in Note 2.
See Notes 5 and 11 for discussion of material items which impacted the
results of the fourth quarter of 1998.
F-29
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In December 1998, MWI ("Issuer") issued 8 3/4% Senior Subordinated
Notes ("Senior Notes") due in 2008 (see Note 5). The Senior Notes
are guaranteed by all of the U.S. subsidiaries (the "Guarantor
Subsidiaries") of MWI, all of which are wholly owned, and by Mail-
Well, Inc. ("Parent Guarantor"). The guarantees are joint and
several, full, complete and unconditional. There are no
restrictions on the ability of the Guarantor Subsidiaries to
transfer funds to MWI in the form of cash dividends, loans or
advances, other than ordinary legal restrictions under corporate
law, fraudulent transfer and bankruptcy laws.
The following condensed consolidating financial information
illustrates the composition of the Parent Guarantor, Issuer,
Guarantor Subsidiaries and non-guarantor subsidiaries. Management
has determined that separate complete financial statements would
not provide additional material information that would be useful
in assessing the financial composition of the Guarantor
Subsidiaries.
Investments in subsidiaries are accounted for under the equity
method, wherein the investor company's share of earnings and
income taxes applicable to the assumed distribution of such
earnings are included in net income. In addition, investments
increase in the amount of permanent contributions to subsidiaries
and decrease in the amount of distributions from subsidiaries.
The elimination entries eliminate the equity method investment in
subsidiaries and the equity in earnings of subsidiaries,
intercompany payables and receivables and other transactions
between subsidiaries.
F-30
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $425,156 $925,041 $155,142 $ (653) $1,504,686
COST OF SALES - 337,468 737,318 111,240 (653) 1,185,373
------- -------- -------- -------- -------- ----------
GROSS PROFIT - 87,688 187,723 43,902 - 319,313
OTHER OPERATING COSTS
Selling, administrative and other 1,127 60,415 118,309 20,342 - 200,193
Restructuring and other unusual charge - 28,846 76 - - 28,922
Merger costs - - 3,318 - - 3,318
------- -------- -------- -------- -------- ----------
Total Other Operating Costs 1,127 89,261 121,703 20,342 - 232,433
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS) (1,127) (1,573) 66,020 23,560 - 86,880
OTHER (INCOME) EXPENSE
Interest expense 7,833 27,734 5,845 5,568 (8,853) 38,127
Other (income) expense (8,853) (435) (519) (82) 8,853 (1,036)
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND
EXTRAORDINARY ITEM (107) (28,872) 60,694 18,074 - 49,789
PROVISION FOR
INCOME TAXES - (13,887) 30,795 7,040 - 23,948
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES AND
EXTRAORDINARY ITEM (107) (14,985) 29,899 11,034 - 25,841
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 21,816 40,933 11,034 - (73,783) -
------- -------- -------- -------- -------- ----------
INCOME BEFORE
EXTRAORDINARY ITEM 21,709 25,948 40,933 11,034 (73,783) (25,841)
EXTRAORDINARY ITEM - (4,132) - - - (4,132)
------- -------- -------- -------- -------- ----------
NET INCOME $21,709 $ 21,816 $ 40,933 $ 11,034 $(73,783) $ 21,709
======= ======== ======== ======== ======== ==========
</TABLE>
F-31
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $369,394 $589,250 $115,293 $ - $1,073,937
COST OF SALES - 290,671 463,817 79,724 - 834,212
------- -------- -------- -------- -------- ----------
GROSS PROFIT - 78,723 125,433 35,569 - 239,725
OTHER OPERATING COSTS 269 56,965 79,403 17,260 - 153,897
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS) (269) 21,758 46,030 18,309 - 85,828
OTHER (INCOME) EXPENSE
Interest expense 634 16,332 9,672 3,519 - 30,157
Other (income) expense (4) (761) (1,031) (292) - (2,088)
------- -------- -------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND
EXTRAORDINARY ITEM (899) 6,187 37,389 15,082 - 57,759
PROVISION FOR
INCOME TAXES - 2,438 14,358 5,987 - 22,783
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY
IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES AND
EXTRAORDINARY ITEM (899) 3,749 23,031 9,095 - 34,976
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 29,775 28,791 8,202 - (66,768) -
------- -------- -------- -------- -------- ----------
INCOME BEFORE
EXTRAORDINARY ITEM 28,876 32,540 31,233 9,095 (66,768) 34,976
EXTRAORDINARY ITEM - (2,765) (2,442) (893) - (6,100)
------- -------- -------- -------- -------- ----------
NET INCOME $28,876 $ 29,775 $ 28,791 $ 8,202 $(66,768) $ 28,876
======= ======== ======== ======== ======== ==========
</TABLE>
F-32
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ - $349,038 $508,528 $86,928 $ - $944,494
COST OF SALES - 277,056 402,589 61,020 - 740,665
------- -------- -------- ------- -------- --------
GROSS PROFIT - 71,982 105,939 25,908 - 203,829
OTHER OPERATING COSTS 128 51,306 69,275 12,988 - 133,697
------- -------- -------- ------- -------- --------
OPERATING INCOME (LOSS) (128) 20,676 36,664 12,920 - 70,132
OTHER (INCOME) EXPENSE
Interest expense - 27,328 3,289 4,252 - 34,869
Other (income) expense (1) 140 8 331 - 478
------- -------- -------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES (127) (6,792) 33,367 8,337 - 34,785
PROVISION FOR
INCOME TAXES 1 (2,662) 12,675 3,613 - 13,627
------- -------- -------- ------- -------- --------
INCOME (LOSS) BEFORE
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES (128) (4,130) 20,692 4,724 - 21,158
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES 21,286 25,416 4,724 - (51,426) -
------- -------- -------- ------- -------- --------
NET INCOME $21,158 $ 21,286 $ 25,416 $ 4,724 $(51,426) $ 21,158
======= ======== ======== ======= ======== ========
</TABLE>
F-33
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ 6,952 $ (7,311) $ 1,734 $ - $ 1,375
Receivables, net - 14,308 95,847 25,768 - 135,923
Investment in accounts receivable
Securitization - 5,412 36,257 - 41,669
Accounts receivable - other - 47,889 18,308 1,112 (43,908) 23,401
Inventories, net - 39,267 60,286 14,578 - 114,131
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 116 8,515 7,935 2,785 - 19,351
-------- -------- -------- -------- ----------- ----------
Total current assets 147,552 122,343 211,322 45,977 (191,344) 335,850
INVESTMENT IN SUBSIDIARIES 301,447 609,661 76,104 - (987,212) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 121,733 249,002 66,997 - 437,732
GOODWILL, NET - 59,900 210,067 52,182 - 322,149
OTHER ASSETS, NET 3,902 13,111 15,155 57 - 32,225
-------- -------- -------- -------- ----------- ----------
TOTAL $452,901 $926,748 $761,650 $165,213 $(1,178,556) $1,127,956
======== ======== ======== ======== =========== ==========
CURRENT LIABILITIES
Accounts payable $ - $ 18,171 $ 56,441 $ 12,411 $ - $ 87,023
Accrued compensation and vacation - 12,320 23,926 5,155 - 41,401
Other current liabilities 1,476 26,759 27,668 35,197 (43,908) 47,192
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-term debt
and capital leases - 5 2,796 5,235 - 8,036
-------- -------- -------- -------- ----------- ----------
Total current liabilities 1,476 204,691 110,831 57,998 (191,344) 183,652
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 393,004 15,415 22,958 - 583,427
DEFERRED INCOME TAXES - 19,890 20,078 7,566 - 47,534
OTHER LONG-TERM
LIABILITIES - 4,216 5,665 587 - 10,468
-------- -------- -------- -------- ----------- ----------
Total liabilities 153,526 680,800 92,990 89,109 (191,344) 825,081
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 299,375 301,447 609,661 76,104 (987,212) 299,375
-------- -------- -------- -------- ----------- ----------
TOTAL $452,901 $926,748 $761,650 $165,213 $(1,178,556) $1,127,956
======== ======== ======== ======== =========== ==========
</TABLE>
F-34
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 256 $ 41,483 $ (920) $ 92 $ - $ 40,911
Receivables, net - 6,393 42,296 16,269 - 64,958
Investment in accounts receivable
securitization - 3,097 19,222 - - 22,319
Accounts receivable - other - 6,080 3,375 852 - 10,307
Inventories, net - 41,472 34,066 10,730 - 86,268
Note receivable from Issuer 147,436 - - - (147,436) -
Other current assets 129 5,418 2,921 1,667 - 10,135
-------- -------- -------- ------- --------- --------
Total current assets 147,821 103,943 100,960 29,610 (147,436) 234,898
INVESTMENT IN SUBSIDIARY 174,226 259,599 20,680 - (461,466) -
PROPERTY, PLANT AND
EQUIPMENT, NET - 110,290 124,170 28,337 - 262,797
GOODWILL, NET - 45,192 72,685 36,050 - 153,927
OTHER ASSETS, NET 4,927 4,865 9,997 - - 19,789
-------- -------- -------- ------- --------- --------
TOTAL $326,974 $523,889 $328,492 $93,997 $(608,902) $671,411
======== ======== ======== ======= ========= ========
CURRENT LIABILITIES
Accounts payable $ - $ 20,320 $ 29,170 $ 4,151 $ - $ 53,641
Accrued compensation and vacation - 13,675 15,428 3,626 - 32,729
Other current liabilities 3,104 62,565 (37,868) 4,752 - 32,553
Note payable to Parent - 147,436 - - (147,436) -
Current portion of long-term debt
and capital leases - 79 9,725 729 - 10,533
-------- -------- -------- ------- --------- --------
Total current liabilities 3,104 244,075 16,455 13,258 (147,436) 129,456
LONG-TERM DEBT AND
CAPITAL LEASES 152,050 85,008 37,879 55,420 - 330,357
OTHER LONG-TERM
LIABILITIES - 17,080 14,559 4,639 - 36,278
-------- -------- -------- ------- --------- --------
Total liabilities 155,154 353,124 61,932 73,317 - 496,091
MINORITY INTEREST - 3,500 - - - 3,500
SHAREHOLDERS' EQUITY 171,820 174,226 259,599 20,680 (461,466) 171,820
-------- -------- -------- ------- --------- --------
TOTAL $326,974 $523,889 $328,492 $93,997 $(608,902) $671,411
======== ======== ======== ======= ========= ========
</TABLE>
F-35
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1998
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $ 1,631 $ 76,422 $ 45,781 $ (30,756) $ - $ 93,078
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (9,390) (308,293) (33,920) - (351,603)
Capital expenditures - (25,327) (48,035) (13,973) - (87,335)
Investment in subsidiaries (92,336) (310,000) (34,000) - 436,336 -
Other investing activities (1,887) 10,760 233 555 - 9,661
------- --------- --------- --------- --------- ---------
Net cash used in investing
activities (94,223) (333,957) (390,095) (47,338) 436,336 (429,277)
-------- --------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - (2,315) (17,035) - - (19,350)
Net proceeds from common
stock issuance 92,336 - - - - 92,336
Proceeds from long term debt - 592,556 1,067 205,488 - 799,111
Repayments of long-term debt-
and capital lease obligations - (358,139) (44,621) (153,976) - (556,736)
Investment by parent - - 402,336 34,000 (436,336) -
Other financing activities - (9,098) (3,824) - - (12,922)
-------- --------- --------- --------- --------- ---------
Net cash provided by financing
activities 92,336 223,004 337,923 85,512 (436,336) 302,439
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - (5,776) - (5,776)
-------- --------- --------- --------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (256) (34,531) (6,391) 1,642 - (39,536)
BALANCE AT BEGINNING
OF YEAR 256 41,483 (920) 92 - 40,911
-------- --------- --------- --------- --------- ---------
BALANCE AT END OF YEAR $ - $ 6,952 $ (7,311) $ 1,734 $ - $ 1,375
======== ========= ========= ========= ========= =========
</TABLE>
F-36
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1997
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $ (242) $ 51,016 $ 33,041 $ 10,594 $ - $ 94,409
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (20,979) (61,878) (17) - (82,874)
Capital expenditures - (9,496) (25,148) (2,194) - (36,838)
Loan to Issuer (147,436) - - - 147,436 -
Investment in subsidiaries - (62,000) - - 62,000 -
Other investing activities 252 (185) 1,346 404 - 1,817
--------- --------- -------- -------- --------- ---------
Net cash used in investing
activities (147,184) (92,660) (85,680) (1,807) 209,436 (117,895)
--------- --------- -------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - (3,715) (9,099) - - (12,814)
Net proceeds from common
stock issuance 201 - 1,001 - - 1,202
Proceeds from long term debt 147,436 67,197 12,419 60,000 - 287,052
Repayments of long-term debt-
and capital lease obligations - (137,401) (11,990) (69,734) - (219,125)
Loan from Parent Guarantor - 147,436 - - (147,436) -
Investment by parent - - 62,000 - (62,000) -
Other financing activities - - (5,254) - - (5,254)
--------- --------- -------- -------- --------- ---------
Net cash provided by (used in)
financing activities 147,637 73,517 49,077 (9,734) (209,436) 51,061
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - 1,039 - 1,039
--------- --------- -------- -------- --------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 211 31,873 (3,562) 92 - 28,614
BALANCE AT BEGINNING
OF YEAR 45 9,610 2,642 - - 12,297
--------- --------- -------- -------- --------- ---------
BALANCE AT END OF YEAR $ 256 $ 41,483 $ (920) $ 92 $ - $ 40,911
========= ========= ======== ======== ========= =========
</TABLE>
F-37
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1996
(in thousands)
<CAPTION>
Combined Combined
Parent Guarantor Nonguarantor
Guarantor Issuer Subsidiaries Subsidiaries Elim. Consolidated
--------- ------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $(14) $ 124,494 $(17,322) $(11,840) $ - $ 95,318
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired - (27,710) (16,058) (20,548) - (64,316)
Capital expenditures - (7,896) (12,432) (1,711) - (22,039)
Investment in subsidiaries - (16,000) (21,000) - 37,000 -
Other investing activities - 33,421 1,265 668 - 35,354
---- --------- -------- -------- -------- ---------
Net cash used in
investing activities - (18,185) (48,225) (21,591) 37,000 (51,001)
---- --------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts receivable
securitization, net - 1,238 60,257 - - 61,495
Net proceeds from common
stock issuance 40 - 254 - - 294
Proceeds from long term debt - 254,486 4,477 65,000 - 323,963
Repayments of long-term debt
and capital lease obligations - (350,623) (13,296) (52,287) - (416,206)
Investment by parent - - 16,000 21,000 (37,000) -
Other financing activities - (1,800) (1,862) - - (3,662)
---- --------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities 40 (96,699) 65,830 33,713 (37,000) (34,116)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - - (282) - (282)
---- --------- -------- -------- -------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 26 9,610 283 - - 9,919
BALANCE AT BEGINNING
OF YEAR 19 - 2,359 - - 2,378
---- --------- -------- -------- -------- ---------
BALANCE AT END OF YEAR $ 45 $ 9,610 $ 2,642 $ - $ - $ 12,297
==== ========= ======== ======== ======== =========
</TABLE>
F-38
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ - $ 256
Other current assets 116 129
Note receivable from Mail-Well I Corporation 147,436 147,436
-------- --------
Total current assets 147,552 147,821
INVESTMENT IN SUBSIDIARY 301,447 174,226
INTANGIBLE ASSETS (net of accumulated amortization
of $1,109 and $150) 3,902 4,772
OTHER ASSETS - 155
-------- --------
TOTAL $452,901 $326,974
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to subsidiary $ 231 $ 2,470
Accrued interest 1,245 634
-------- --------
Total current liabilities 1,476 3,104
CONVERTIBLE SUBORDINATED NOTES 152,050 152,050
-------- --------
Total liabilities 153,526 155,154
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 299,375 171,820
-------- --------
TOTAL $452,901 $326,974
======== ========
See notes to condensed financial statements.
</TABLE>
F-39
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OTHER OPERATING COSTS
Administrative $ 168 $ 172 $ 109
Amortization 959 97 19
------- ------- -------
Total other operating costs 1,127 269 128
------- ------- -------
OPERATING LOSS (1,127) (269) (128)
OTHER (INCOME) EXPENSE
Interest expense-debt 7,833 634 -
Interest income from subsidiary (8,846) - -
Other income (7) (4) (1)
------- ------- -------
LOSS BEFORE INCOME TAXES (107) (899) (127)
------- ------- -------
PROVISION FOR INCOME TAXES
Current - - -
Deferred - - 1
------- ------- -------
LOSS BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS OF SUBSIDIARY (107) (899) (128)
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 21,816 29,775 21,286
------- ------- -------
NET INCOME $21,709 $28,876 $21,158
======= ======= =======
See notes to condensed financial statements.
</TABLE>
F-40
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,709 $ 28,876 $ 21,158
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Equity in undistributed earnings of subsidiary (21,816) (29,775) (21,286)
Amortization 959 97 19
Deferred tax provision - - 1
Changes in operating assets and liabilities, net of effects
of acquired businesses:
Other working capital 624 586 223
Other assets 155 (26) (129)
-------- --------- --------
Net cash provided by (used in) operating activities 1,631 (242) (14)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary (92,336) - -
Other activity with subsidiary, net (1,887) 252 -
Issuance of note receivable from subsidiary - (147,436) -
-------- --------- --------
Net cash used in investing activities (94,223) (147,184) -
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock issuance 92,336 201 40
Proceeds from issuance of convertible subordinated notes - 147,436 -
-------- --------- --------
Net cash provided by financing activities 92,336 147,637 40
-------- --------- --------
NET CHANGE IN CASH (256) 211 26
BALANCE AT BEGINNING OF YEAR 256 45 19
-------- --------- --------
BALANCE AT END OF YEAR $ - $ 256 $ 45
======== ========= ========
Stock issued for acquisitions $ 8,780 $ 1,000 $ -
See notes to condensed financial statements.
</TABLE>
F-41
<PAGE>
<PAGE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL STATEMENTS) SCHEDULE I
CONDENSED SUPPLEMENTAL FINANCIAL INFORMATION OF THE REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The financial statements of Mail-
Well, Inc. (the "Company") reflect the investment in Mail-Well I
Corporation ("M-W Corp."), a wholly-owned subsidiary, using the
equity method.
INCOME TAXES - The provision for income taxes is based on income
recognized for financial statement purposes. Deferred income
taxes are recognized for the effects of temporary differences
between such income and that recognized for income tax purposes.
The Company files a consolidated U.S. income tax return with M-W
Corp.
RECLASSIFICATIONS - Certain reclassifications have been made to the
1996 and 1997 financial statements to conform to the 1998 presentation.
2. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements and
related Notes of Mail-Well, Inc. and Subsidiaries included
elsewhere herein for additional information.
3. MERGERS
Effective May 30, 1998, the Company completed its mergers with
several commercial printing businesses. Reference is made to Note
2 to the consolidated Financial Statements. Pursuant to the
merger agreements, each of the Commercial Printing Group
businesses was merged with a subsidiary of the Company in exchange
for shares of the Company's common stock. Each of the mergers has
been accounted for under the pooling of interests method and,
accordingly, these parent-only financial statements have been
restated to include the investment in the merged businesses.
4. NOTES RECEIVABLE
During 1997, the Company loaned M-W Corp. $147,436,000 which is
payable on demand and earns interest at 6% payable annually. The note
is unsecured and is subordinate in right of payment to any and all
other existing and future indebtedness of the Company.
5. DEBT AND GUARANTEES
Information on the debt of the Company is disclosed in Note 5 of
the Notes to Consolidated Financial Statements of Mail-Well, Inc.
and Subsidiaries included elsewhere herein. The Company has
guaranteed all debt of M-W Corp. ($439.4 million outstanding at
December 31, 1998, including current maturities) and certain other
obligations arising in the ordinary course of business. The
aggregate amounts of M-W Corp.'s debt maturities for the five
years following 1998 are: 1999 - $8,036,000; 2000 - $13,566,000;
2001 - $7,366,000; 2002 - $7,981,000; 2003 - $98,096,000; and
$304,368,000 thereafter.
6. DIVIDENDS RECEIVED
No dividends have been received from M-W Corp. since the Company's
inception. M-W Corp.'s ability to declare dividends to the
Company is restricted by the terms of its bank credit agreements
and the indenture relating to M-W Corp.'s Senior Subordinated
Notes.
* * * * *
F-42
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS <F1>
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 3,795 $ 3,734 $ 2,671
Charged to costs and expenses 3,425 1,454 2,590
Charged to other accounts <F2> 3,065 <F3> 909 <F4> 1,236 <F5>
Deductions <F6> (3,558) (2,302) (2,763)
------- ------- -------
Balance at end of year $ 6,727 $ 3,795 $ 3,734
======= ======= =======
<FN>
<F1> Schedule has been restated to reflect the mergers of the
Commercial Printing Group companies (see Note 2 to the
consolidated financial statements included elsewhere herein)
accounted for under the pooling of interests method.
<F2> Recoveries of accounts previously written off.
<F3> Includes the beginning balances of ($2,910) of the allowance for
doubtful accounts for the companies acquired in 1998.
<F4> Includes the beginning balances ($643) of the allowance for
doubtful accounts for the companies acquired in 1997.
<F5> Includes the beginning balances ($801) of the allowance for
doubtful accounts for the companies acquired in 1996.
<F6> Accounts written off.
</TABLE>
F-43
<PAGE>
<PAGE>
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE COMPANY THAT IS DIFFERENT FROM, OR IN ADDITION
TO, THAT CONTAINED IN THIS PROSPECTUS. THEREFORE, IF ANYONE DOES GIVE
YOU INFORMATION OF THIS SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN
A JURISDICTION WHERE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER
TO BUY, ANY OF THE SECURITIES OFFERED BY THIS PROSPECTUS IS UNLAWFUL, OR
IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE KINDS OF
ACTIVITIES, THE OFFER PRESENTED IN THIS PROSPECTUS DOES NOT EXTEND TO
YOU. THIS PROSPECTUS SPEAKS ONLY AS OF THE DATE OF THIS PROSPECTUS
UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
MAIL-WELL I CORPORATION
8 3/4% Series B Senior Subordinated Notes
due 2008 offered in exchange for outstanding
8 3/4% Senior Subordinated Notes due 2008
The exchange offer will expire at 5:00 p.m., New York City time, on
____________, 1999, unless we extend it; provided we may not extend the
exchange offer beyond ____________, 1999.
___________________
P R O S P E C T U S
___________________
March __, 1999
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL")
empowers a Delaware corporation to indemnify any person who was or is,
or is threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of such corporation), by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, if such person acted in good faith and in a
manner such 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.
Section 145 of the DGCL also provides that a Delaware corporation
may indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director, officer,
employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with
the defense or settlement of such action or suit if the 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 except that no
indemnification is permitted without judicial approval if the person is
adjudged to be liable to the corporation. Where an person is successful
on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify such person against the expenses
which such person actually and reasonably incurred.
The Company's Certificate of Incorporation provides that the
Company shall indemnify its officers and directors, and may indemnify
its employees and agents, to the fullest extent permitted by the DGCL.
Section 102(b)(7) of the DGCL permits a corporation's certificate
of incorporation to include a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability
of a director for: (i) any breach of the director's duty of loyalty to
the corporation or its stockholders; (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law; (iii) transactions under Section 174 of the DGCL (unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) any
transaction from which the director derived an improper personal
benefit.
The Company's Certificate of Incorporation provides that a
director shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to
the extent such exemption is not permitted under the DGCL.
II-1
<PAGE>
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
Exhibit
Number Description of Exhibit
- ------ ----------------------
3.1<F*> Certificate of Incorporation of Mail-Well Corporation.
3.2<F*> Certificate of Amendment of Certificate of Incorporation of
Mail-Well Corporation.
3.3<F*> Certificate of Correction Filed to Correct Certain Error in
the Certificate of Amendment of Mail-Well 1 Corporation
Filed in the Office of the Secretary of State of Delaware on
September 11, 1995.
3.4<F*> Certificate of Change of Registered Agent and Registered
Office.
3.5<F*> Bylaws of the Company.
4.1 Form of Indenture between the Parent Company and The Bank of
New York, as Trustee, dated November 1997, relating to the
Parent Company's $152,050,000 aggregate principal amount of
5% Convertible Subordinated Notes due 2002--incorporated by
reference from Exhibit 4.2 to the Parent Company's Amendment
No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-
36337).
4.2 Form of Supplemental Indenture between the Parent Company
and The Bank of New York, as Trustee, dated November 1997,
relating to the Parent Company's $152,050,000 aggregate
principal amount of 5% Convertible Subordinated Notes due
2002 and Form of Convertible Note--incorporated by reference
from Exhibit 4.5 to the Parent Company's Amendment No. 2 to
Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between the Company
and State Street Bank and Trust Company, as Trustee,
relating to the Company's $300,000,000 aggregate principal
amount of 8 3/4% Senior Subordinated Notes due 2008--
incorporated by reference from Exhibit 4.4 to the Parent
Company's Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference
from Exhibit 4.5 to the Parent Company's Annual Report on
Form 10-K for the year ended December 31, 1998, File No.
1-12551.
5<F*> Opinion of Rothgerber Johnson & Lyons LLP re: legality of
the Company's $300,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2008.
8<F*> Opinion of Rothgerber Johnson & Lyons LLP re: tax matters.
II-2
<PAGE>
<PAGE>
10.1 Form of Indemnity Agreement between the Parent Company and
each of its officers and directors--incorporated by
reference from Exhibit 10.17 of the Parent Company's
Registration Statement on Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between the Company and each of
its officers and directors--incorporated by reference from
Exhibit 10.18 of the Parent Company's Registration Statement
on Form S-1 dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as
of February 23, 1994 and related Employee Stock Ownership
Plan Trust Agreement--incorporated by reference from Exhibit
10.19 of the Parent Company's Registration Statement on Form
S-1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--
incorporated by reference from Exhibit 10.20 of the Parent
Company's Registration Statement on Form S-1 dated March 25,
1994.
10.5 Parent Company 1994 Stock Option Plan, as amended on May 7,
1997--incorporated by reference from Exhibit 10.56 of the
Parent Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.6 Form of the Parent Company Incentive Stock Option Agreement
--incorporated by reference from Exhibit 10.22 of the Parent
Company's Registration Statement on Form S-1 dated March 25,
1994.
10.7 Form of the Parent Company Nonqualified Stock Option
Agreement--incorporated by from Exhibit 10.23 of the Parent
Company's Registration Statement on Form S-1 dated March 25,
1994.
10.8 Purchase and Contribution Agreement dated as of November 15,
1996, between the Company, Wisco Envelope Corp., Pavey
Envelope and Tag Corp., Mail-Well West, Inc., Graphic Arts
Center, Inc., Wisco III, L.L.C., Supremex, Inc., Innova
Envelope, Inc., as Sellers, and Mail-Well Trade Receivables
Corp., as Purchaser--incorporated by reference from Exhibit
10.39 of the Parent Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
10.9 Mail-Well Receivables Master Trust Pooling and Servicing
Agreement dated as of November 15, 1996 by and between Mail-
Well Trade Receivables Corporation, Seller, Mail-Well I
Corporation, Servicer, and Norwest Bank Colorado, National
Association, Trustee--incorporated by reference from Exhibit
10.40 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.10 Series 1996-1 Supplement dated as of November 15, 1996, to
Pooling and Servicing Agreement, dated as of November 15,
1996, by and between Mail-Well Trade Receivables
Corporation, Seller, the Company, Servicer, and Norwest Bank
Colorado, National Association, as Trustee on behalf of the
Series 1996-1 Certificateholders--incorporated by reference
from Exhibit 10.41 of the Parent Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
II-3
<PAGE>
<PAGE>
10.11 Series 1996-1 Certificate Purchase Agreement dated as of
November 15, 1996 among Mail-Well Trade Receivables
Corporation, as Seller, Corporate Receivables Corporation,
as Purchaser, Norwest Bank Colorado, National Association,
as Trustee, and the Company, as Servicer--incorporated by
reference from Exhibit 10.42 of the Parent Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.12 Intercreditor Agreement dated as of November 15, 1996, by
and among Citicorp North America, Inc., as Securitization
Company Agent, Banque Paribas, New York Branch, as Liquidity
Agent, Banque Paribas, as Credit Lenders' Agent, Norwest
Bank Colorado, National Association, as Trustee, Mail-Well
Trade Receivables Corporation, as Servicer, originator and
Mail-Well Credit Borrower, Supremex, Inc., as the Supremex
Credit Borrower and the other parties hereto--incorporated
by reference from Exhibit 10.43 of the Parent Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
10.13 Series 1996-1 Asset Purchase Agreement among Corporate
Receivables Corporation, the Liquidity Providers Parties
hereto, Citicorp North America, Inc., as Securitization
Company Agent, Banque Paribas, New York Branch, as Liquidity
Agent, and Norwest Bank Colorado, National Association, as
trustee, dated as of November 15, 1996--incorporated by
reference from Exhibit 10.44 of the Parent Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.14 Parent Company 1997 Non-Qualified Stock Option Plan--
incorporated by reference from exhibit 10.54 of the Parent
Company's Form 10-Q for the quarter ended March 31, 1997.
10.15 1997 Non-Qualified Stock Option Agreement--incorporated by
reference from exhibit 10.54 of the Parent Company's Form
10-Q for the quarter ended March 31, 1997.
10.16 Mail-Well, Inc. 1998 Incentive Stock Option Plan--
incorporated by reference from the Parent Company's
definitive proxy statement on Schedule 14A for the regular
annual meeting of shareholders held April 29, 1998.
10.17 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive
Stock Option Agreement--incorporated by reference from the
Parent Company's definitive proxy statement on Schedule 14A
for the regular annual meeting of shareholders held
April 29, 1998.
10.18 Credit Agreement dated as of March 16, 1998, among the
Parent Company, certain Guarantors, Bank of America National
Trust and Savings Association, as Agent and other financial
institutions party thereto--incorporated by reference from
Exhibit 10.60 of the Parent Company's Form 10-Q for the
quarter ended March 31, 1998.
10.19 Credit Agreement dated as of March 16, 1998, among Supremex
Inc., certain Guarantors, Bank of America National Trust and
Savings Association, as Agent and other financial
institutions party thereto--incorporated by reference from
Exhibit 10.61 to the Parent Company's Form 10-Q for the
quarter ended March 31, 1998.
10.20 Participation Agreement dated as of December 15, 1997, among
the Company, Keybank National Association, as Trustee and
other financial institutions party thereto--
II-4
<PAGE>
<PAGE>
incorporated by reference from Exhibit 10.62 to the Parent
Company's Form 10-Q for the quarter ended March 31, 1998.
10.21 Equipment Lease dated as of December 15, 1997 among the
Company, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by
reference from Exhibit 10.63 to the Parent Company's Form
10-Q for the quarter ended March 31, 1998.
10.22 Guaranty Agreement dated as of December 15, 1997, among the
Parent Company, Graphic Arts Center, Inc., Griffin Envelope
Inc., Murray Envelope Corporation, Shepard Poorman
Communications Corporation, Wisco Envelope Corp., Wisco II,
LLC, Wisco III, LLC, the Company, Keybank National
Association, as Trustee and other financial institutions
party thereto--incorporated by reference from Exhibit 10.64
to the Parent Company's Form 10-Q for the quarter ended
March 31, 1998.
10.23 Stock Purchase Agreement dated as of December 15, 1997,
among the Company, Poser Business Forms, Inc. and other
Selling Shareholders party thereto--incorporated by
reference from the Parent Company's report on Form 8-K dated
January 6, 1998.
10.24 Asset Purchase Agreement dated as of January 31, 1998, among
Lawson Mardon Packaging USA, Inc (USA)--incorporated by
reference from the Parent Company's report on Form 8-K dated
March 10, 1998.
10.25 Asset Purchase Agreement dated as of January 31, 1998, among
3014597 Nova Scotia Company and Lawson Mardon Packaging Inc.
(Canada)--incorporated by reference from the Parent
Company's report on Form 8-K dated March 10, 1998.
10.26 Purchase Agreement dated December 11, 1998, between the
Company and Donaldson, Lufkin & Jenrette Securities
Corporation, Prudential Securities, Incorporated, Bear,
Stearns & Co., Inc. and Hanifen, Imhoff Inc., as Initial
Purchasers, relating to the Company's $300,000,000 aggregate
principal amount of 8 % Senior Subordinated Notes due 2008--
incorporated by reference from Exhibit 10.27 to the Parent
Company's Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 1-12551.
10.27 Registration Rights Agreement dated December 16, 1998, by
and among the Company, and Donaldson, Lufkin & Jenrette
Securities Corporation, Prudential Securities, Incorporated,
Bear, Stearns & Co., Inc. and Hanifen, Imhoff Inc., as
Initial Purchasers, relating to the Company's $300,000,000
aggregate principal amount of 8 % Senior Subordinated Notes
due 2008--incorporated by reference from Exhibit 10.28 to
the Parent Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-12551.
12<F*> Calculation of ratio of earnings to fixed charges.
21<F*> Subsidiaries of the Registrant.
23.1<F*> Consent of Deloitte & Touche LLP.
II-5
<PAGE>
<PAGE>
23.2<F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
23.3<F*> Consent of Rothgerber Johnson & Lyons LLP (reference is made
to Exhibit 5 hereof).
24<F*> Powers of Attorney (reference is made to the signature page
hereof).
25<F*> Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of State Street Bank and Trust
Company, as trustee under the indenture, relating to the old
notes and the new notes (separately bound).
27.1<F*> Financial Data Schedule-For year ended December 31, 1998.
27.2<F*> Financial Data Schedule-For year ended December 31, 1997.
27.3<F*> Financial Data Schedule-For year ended December 31, 1996.
99.1<F*> Form of Letter of Transmittal.
99.2<F*> Form of Notice of Guaranteed Delivery.
[FN]
- --------
<F*> Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule I Condensed Balance Sheets as of December 31, 1998 and
1997 and Condensed Statements of Operations and Cash
Flows for the Years Ended December 31, 1998, 1997,
and 1996. Included in Part I of this Registration
Statement at pages F-39 to F-42.
Schedule II Valuation and Qualifying Accounts for the Years Ended
December 31, 1998, 1997 and 1996. Included in Part I
of this Registration Statement at page F-43.
ITEM 22. UNDERTAKINGS
(a) ITEM 512 UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement.
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered)
and any deviation from the low or high and of the
estimated maximum offering range may be reflected
in the form of
II-6
<PAGE>
<PAGE>
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent
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.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(g)(1) The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(g)(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be refiled as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes 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.
(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,
II-7
<PAGE>
<PAGE>
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of
responding to the request.
(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 became effective.
II-8
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrants have duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Englewood, State of Colorado, on March 12, 1999.
Mail-Well I Corporation
Mail-Well, Inc.
By: /s/ Gerald F. Mahoney
------------------------------------------
Gerald F. Mahoney, Chief Executive Officer
Graphics Arts Center, Inc.
Mail-Well Canada Holdings, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Label Holdings, Inc.
Mail-Well Label USA, Inc.
Mail-Well West, Inc.
Murray Envelope Holdings, Inc.
Murray Envelope Corporation
N-M Envelope, Inc.
National Graphics Company
Poser Business Forms, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
By: /s/ Paul V. Reilly
------------------------------------------
Paul V. Reilly, Chief Executive Officer
II-9
<PAGE>
<PAGE>
Pursuant to the requirements of the Securities 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Mark Zoeller, and each of them, as attorneys-in-
fact, each with the power of substitution, for him or her in any and all
capacities, to sign any amendments to this registration statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gerald F. Mahoney Chairman of the Board, March 12, 1999
- --------------------- Chief Executive Officer and Director
Gerald F. Mahoney of Mail-Well I Corporation and
Mail-Well, Inc., and Chairman and
Director of Graphic Arts Center, Inc.
/s/ Paul V. Reilly President, Chief Operating Officer and March 12, 1999
- ------------------ Director of Mail-Well I Corporation
Paul V. Reilly and Mail-Well, Inc., and Chief
Executive Officer and Director of all
other Registrants
/s/ Michael Zawalski Senior Vice President, Chief March 12, 1999
- -------------------- Financial Officer and Director of
Michael Zawalski all Registrants except Mail-Well, Inc.
/s/ Frank P. Diassi Director of Mail-Well, Inc. March 12, 1999
- -------------------
Frank P. Diassi
/s/ Frank J. Hevrdejs Director of Mail-Well, Inc. March 12, 1999
- ---------------------
Frank J. Hevrdejs
/s/ Jerome W. Pickholz Director of Mail-Well, Inc. March 12, 1999
- ----------------------
Jerome W. Pickholz
/s/ William R. Thomas Director of Mail-Well, Inc. March 12, 1999
- ---------------------
William R. Thomas
/s/ Roger Wertheimer Director of all Registrants except March 12, 1999
- -------------------- Mail-Well, Inc. and Graphic Arts
Roger Wertheimer Center, Inc.
</TABLE>
II-10
<PAGE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description of Exhibit Page Number
- ------- ---------------------- -----------
<C> <S> <C>
3.1<F*> Certificate of Incorporation of Mail-Well Corporation.
3.2<F*> Certificate of Amendment of Certificate of Incorporation of
Mail-Well Corporation.
3.3<F*> Certificate of Correction Filed to Correct Certain Error in the
Certificate of Amendment of Mail-Well 1 Corporation Filed in the
Office of the Secretary of State of Delaware on September 11, 1995.
3.4<F*> Certificate of Change of Registered Agent and Registered Office.
3.5<F*> Bylaws of the Company.
4.1 Form of Indenture between the Parent Company and The Bank of
New York, as Trustee, dated November 1997, relating to the Parent
Company's $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002--incorporated by reference
from Exhibit 4.2 to the Parent Company's Amendment No. 2 to
Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.2 Form of Supplemental Indenture between the Parent Company and
The Bank of New York, as Trustee, dated November 1997, relating to
the Parent Company's $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002 and Form of Convertible
Note--incorporated by reference from Exhibit 4.5 to the Parent
Company's Amendment No. 2 to Form S-3 dated November 10, 1997
(Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between the Company and
State Street Bank and Trust Company, as Trustee, relating to the
Company's $300,000,000 aggregate principal amount of 8 % Senior
Subordinated Notes due 2008--incorporated by reference from
Exhibit 4.4 to the Parent Company's Annual Report on Form 10-K for
the year ended December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference from
Exhibit 4.5 to the Parent Company's Annual Report on Form 10-K for
the year ended December 31, 1998, File No. 1-12551.
5<F*> Opinion of Rothgerber Johnson & Lyons LLP re: legality of the
Company's $300,000,000 aggregate principal amount of 8 3/4%
Senior Subordinated Notes due 2008.
8<F*> Opinion of Rothgerber Johnson & Lyons LLP re: tax matters.
<PAGE>
<PAGE>
10.1 Form of Indemnity Agreement between the Parent Company and each
of its officers and directors--incorporated by reference from
Exhibit 10.17 of the Parent Company's Registration Statement on
Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between the Company and each of its
officers and directors--incorporated by reference from Exhibit 10.18
of the Parent Company's Registration Statement on Form S-1 dated
March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of
February 23, 1994 and related Employee Stock Ownership Plan Trust
Agreement--incorporated by reference from Exhibit 10.19 of the Parent
Company's Registration Statement on Form S-1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by
reference from Exhibit 10.20 of the Parent Company's Registration
Statement on Form S-1 dated March 25, 1994.
10.5 Parent Company 1994 Stock Option Plan, as amended on May 7, 1997--
incorporated by reference from Exhibit 10.56 of the Parent Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10.6 Form of the Parent Company Incentive Stock Option Agreement--
incorporated by reference from Exhibit 10.22 of the Parent Company's
Registration Statement on Form S-1 dated March 25, 1994.
10.7 Form of the Parent Company Nonqualified Stock Option Agreement--
incorporated by from Exhibit 10.23 of the Parent Company's
Registration Statement on Form S-1 dated March 25, 1994.
10.8 Purchase and Contribution Agreement dated as of November 15, 1996,
between the Company, Wisco Envelope Corp., Pavey Envelope and
Tag Corp., Mail-Well West, Inc., Graphic Arts Center, Inc., Wisco III,
L.L.C., Supremex, Inc., Innova Envelope, Inc., as Sellers, and Mail-Well
Trade Receivables Corp., as Purchaser--incorporated by reference from
Exhibit 10.39 of the Parent Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
10.9 Mail-Well Receivables Master Trust Pooling and Servicing Agreement
dated as of November 15, 1996 by and between Mail-Well Trade
Receivables Corporation, Seller, Mail-Well I Corporation, Servicer,
and Norwest Bank Colorado, National Association, Trustee--
incorporated by reference from Exhibit 10.40 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
10.10 Series 1996-1 Supplement dated as of November 15, 1996, to Pooling
and Servicing Agreement, dated as of November 15, 1996, by and
between Mail-Well Trade Receivables Corporation, Seller, the
Company, Servicer, and Norwest Bank Colorado, National
Association, as Trustee on behalf of the Series 1996-1
Certificateholders--incorporated by reference from Exhibit 10.41 of the
Parent Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
<PAGE>
<PAGE>
10.11 Series 1996-1 Certificate Purchase Agreement dated as of November 15,
1996 among Mail-Well Trade Receivables Corporation, as Seller,
Corporate Receivables Corporation, as Purchaser, Norwest Bank
Colorado, National Association, as Trustee, and the Company, as
Servicer--incorporated by reference from Exhibit 10.42 of the Parent
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.12 Intercreditor Agreement dated as of November 15, 1996, by and
among Citicorp North America, Inc., as Securitization Company
Agent, Banque Paribas, New York Branch, as Liquidity Agent,
Banque Paribas, as Credit Lenders' Agent, Norwest Bank Colorado,
National Association, as Trustee, Mail-Well Trade Receivables
Corporation, as Servicer, originator and Mail-Well Credit Borrower,
Supremex, Inc., as the Supremex Credit Borrower and the other
parties hereto--incorporated by reference from Exhibit 10.43 of the
Parent Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.13 Series 1996-1 Asset Purchase Agreement among Corporate
Receivables Corporation, the Liquidity Providers Parties hereto,
Citicorp North America, Inc., as Securitization Company Agent,
Banque Paribas, New York Branch, as Liquidity Agent, and Norwest
Bank Colorado, National Association, as trustee, dated as of
November 15, 1996--incorporated by reference from Exhibit 10.44
of the Parent Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
10.14 Parent Company 1997 Non-Qualified Stock Option Plan--incorporated
by reference from exhibit 10.54 of the Parent Company's Form 10-Q
for the quarter ended March 31, 1997.
10.15 1997 Non-Qualified Stock Option Agreement--incorporated by
reference from exhibit 10.54 of the Parent Company's Form 10-Q for
the quarter ended March 31, 1997.
10.16 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by
reference from the Parent Company's definitive proxy statement on
Schedule 14A for the regular annual meeting of shareholders held
April 29, 1998.
10.17 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock
Option Agreement--incorporated by reference from the Parent
Company's definitive proxy statement on Schedule 14A for the regular
annual meeting of shareholders held April 29, 1998.
<PAGE>
<PAGE>
10.18 Credit Agreement dated as of March 16, 1998, among the Parent
Company, certain Guarantors, Bank of America National Trust and
Savings Association, as Agent and other financial institutions party
thereto--incorporated by reference from Exhibit 10.60 of the Parent
Company's Form 10-Q for the quarter ended March 31, 1998.
10.19 Credit Agreement dated as of March 16, 1998, among Supremex Inc.,
certain Guarantors, Bank of America National Trust and Savings
Association, as Agent and other financial institutions party thereto--
incorporated by reference from Exhibit 10.61 to the Parent Company's
Form 10-Q for the quarter ended March 31, 1998.
10.20 Participation Agreement dated as of December 15, 1997, among the
Company, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference from
Exhibit 10.62 to the Parent Company's Form 10-Q for the quarter
ended March 31, 1998.
10.21 Equipment Lease dated as of December 15, 1997 among the
Company, Keybank National Association, as Trustee and other
financial institutions party thereto--incorporated by reference from
Exhibit 10.63 to the Parent Company's Form 10-Q for the quarter
ended March 31, 1998.
10.22 Guaranty Agreement dated as of December 15, 1997, among the Parent
Company, Graphic Arts Center, Inc., Griffin Envelope Inc., Murray
Envelope Corporation, Shepard Poorman Communications Corporation,
Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, the Company,
Keybank National Association, as Trustee and other financial
institutions party thereto--incorporated by reference from Exhibit
10.64 to the Parent Company's Form 10-Q for the quarter ended
March 31, 1998.
10.23 Stock Purchase Agreement dated as of December 15, 1997, among the
Company, Poser Business Forms, Inc. and other Selling Shareholders
party thereto--incorporated by reference from the Parent Company's
report on Form 8-K dated January 6, 1998.
10.24 Asset Purchase Agreement dated as of January 31, 1998, among
Lawson Mardon Packaging USA, Inc (USA)--incorporated by
reference from the Parent Company's report on Form 8-K dated
March 10, 1998.
10.25 Asset Purchase Agreement dated as of January 31, 1998, among
3014597 Nova Scotia Company and Lawson Mardon Packaging Inc.
(Canada)--incorporated by reference from the Parent Company's report
on Form 8-K dated March 10, 1998.
<PAGE>
<PAGE>
10.26 Purchase Agreement dated December 11, 1998, between the Company
and Donaldson, Lufkin & Jenrette Securities Corporation, Prudential
Securities, Incorporated, Bear, Stearns & Co., Inc. and Hanifen,
Imhoff Inc., as Initial Purchasers, relating to the Company's
$300,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2008--incorporated by reference from
Exhibit 10.27 to the Parent Company's Annual Report on Form 10-K
for the year ended December 31, 1998, File No. 1-12551.
10.27 Registration Rights Agreement dated December 16, 1998, by and
among the Company, and Donaldson, Lufkin & Jenrette Securities
Corporation, Prudential Securities, Incorporated, Bear, Stearns &
Co., Inc. and Hanifen, Imhoff Inc., as Initial Purchasers, relating to the
Company's $300,000,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2008--incorporated by reference from Exhibit
10.28 to the Parent Company's Annual Report on Form 10-K for the
year ended December 31, 1998, File No. 1-12551.
12<F*> Calculation of ratio of earnings to fixed charges.
21<F*> Subsidiaries of the Registrant.
23.1<F*> Consent of Deloitte & Touche LLP.
23.2<F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
23.3<F*> Consent of Rothgerber Johnson & Lyons LLP (reference is made to
Exhibit 5 hereof).
24<F*> Powers of Attorney (reference is made to the signature page hereof).
25<F*> Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939 of State Street Bank and Trust Company, as trustee under the
indenture, relating to the old notes and the new notes (separately bound).
27<F*> Financial Data Schedule.
99.1<F*> Form of Letter of Transmittal.
99.2<F*> Form of Notice of Guaranteed Delivery.
<FN>
- ----------------------
<F*> Filed herewith.
</TABLE>
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MAIL-WELL CORPORATION
ARTICLE I
The name of the corporation is Mail-Well Corporation.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, Dover, County of Kent,
Delaware 19901. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted
by the corporation is to engage in any lawful business, act or activity
for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation shall
have authority to issue is one thousand (1,000) shares of common stock,
par value $.01 per share.
The exclusive voting power of the corporation shall be vested in
the common stock of the corporation. Each share of common stock shall
entitle the holder thereof to one vote at all meetings of the
stockholders of the corporation.
ARTICLE V
The corporation shall indemnify its directors and officers, and
may indemnify its employees and agents, to the fullest extent permitted
by the General Corporation Law of the State of Delaware if any such
person is made a party to an action or a proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer or employee of
the corporation or any predecessor of the corporation or served any
other enterprise as a director, officer or employee at the request of
the corporation or any predecessor of the corporation.
<PAGE>
<PAGE>
ARTICLE VI
A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the General
Corporation Law of the State of Delaware as the same exists or may
hereafter be amended. Any repeal or modification of the foregoing
sentence shall not adversely affect any right or protection of a
director of the corporation existing hereunder with respect to any act
or omission occurring prior to such repeal or modification.
ARTICLE VII
The number of directors which shall constitute the whole board of
directors shall be fixed from time to time by the bylaws of the
corporation.
ARTICLE VIII
The name and mailing address of the person who is to serve as the
initial director of the corporation until the first annual meeting of
stockholders of the corporation, or until his successors are elected and
qualified, are set forth below:
Name Address
---- -------
William C. Oehmig Eight Greenway Plaza, Suite 702
Houston, Texas 77046
ARTICLE IX
The name and mailing address of the incorporator are as follows:
Name Address
---- -------
Michael L. Friedman 711 Louisiana St, Suite 2900
South Tower Pennzoil Place
Houston, Texas 77002
ARTICLE X
In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to adopt, alter
or repeal the bylaws of the corporation.
- 2 -
<PAGE>
<PAGE>
ARTICLE XI
Elections of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
Meetings of stockholders may be held at such place, either within
or without the State of Delaware, as may be designated by or in the
manner provided in the bylaws. The books of the corporation may be kept
(subject to any provision contained in the statutes of the State of
Delaware) outside the State of Delaware at such place or places as may
be designated from time to time by the board of directors or in the
bylaws of the corporation.
ARTICLE XII
The corporation may amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of Delaware and may add
additional provisions authorized by such laws as are then in force. All
rights conferred upon the directors or stockholders of the corporation
herein or in any amendment hereof are granted subject to this
reservation.
I, the undersigned, being the incorporator hereinabove named, for
the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Delaware, do make this Certificate, hereby declaring
and certifying that this is my act and deed and that the facts herein
stated are true, and accordingly have hereunto set my hand this 30th day
of November, 1993.
/s/ Michael L. Friedman
-------------------------------
Michael L. Friedman
- 3 -
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MAIL-WELL CORPORATION
Mail-Well Corporation, a corporation duly organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
("Company"), does hereby certify:
FIRST: That the sole stockholder of the Company, pursuant to a written
consent signed and effective as of August 23, 1995, adopted the following
resolutions, proposing and declaring advisable and in the best interests of
the Company the amendment to the Certificate of Incorporation of the Company
set forth in such resolutions:
RESOLVED, that the Certificate of Incorporation of the
Company, as amended (the "Certificate of Incorporation"), be
amended by deleting Article 1 in its entirety and substituting the
following therefor:
The name of the corporation is Mail-Well 1 Corporation.
SECOND: That the aforesaid amendment was duly adopted by the sole
stockholder of the Company in accordance with the applicable provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Mail-Well Corporation has caused this Certificate of
Amendment to be signed by Paul V. Reilly as Vice President-Finance and Chief
Financial Officer this 23rd day of August, 1995.
MAIL-WELL CORPORATION
By: /s/ Paul V. Reilly
------------------------------------
Paul V. Reilly
Vice President-Finance and
Chief Financial Officer
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF CORRECTION FILED TO CORRECT
CERTAIN ERROR IN THE CERTIFICATE OF AMENDMENT
OF MAIL-WELL 1 CORPORATION
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON SEPTEMBER 11, 1995.
Mail-Well I Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Mail-Well 1 Corporation.
2. That a Certificate of amendment was filed by the Secretary of
State of Delaware on September 11, 1995 and that said Certificate
requires correction as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is as
follows: the name was incorrectly stated in the document as Mail-
Well 1 Corporation, the specific error being that the name
contains the number "1" as opposed to the Roman Numeral "I".
4. Article First of the Certificate is corrected to read as follows:
That the sole stockholder of the Company, pursuant to a written
consent signed and effective as of August 23, 1995, adopted the
following resolutions, proposing and declaring advisable and in
the best interests of the company the amendment to the Certificate
of Incorporation of the Company set forth in such resolutions:
RESOLVED, that the Certificate of Incorporation of the
Company, as amended (the "Certificate of Incorporation"), be
amended by deleting Article I in its entirety and
substituting the following therefor:
The name of the corporation is Mail-Well I Corporation.
IN WITNESS WHEREOF, said Mail-Well 1 Corporation has caused this
Certificate to be signed by Roger Wertheimer, its V.P.-General Counsel,
and attested by Jana L. Brown, its V.P.-Controller, this 28th day of
August, 1996.
MAIL-WELL 1 CORPORATION
By: /s/ Roger Wertheimer
-------------------------
Roger Wertheimer
ATTEST:
By: /s/ Jana L. Brown
-------------------------
Jana L. Brown
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
* * * * *
Mail-Well I Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
The present registered agent of the corporation is The Prentice
Hall Corporation System, Inc. and the present registered office of the
corporation is in the county of New Castle.
The Board of Directors of Mail-Well I Corporation adopted the
following resolution on the 1st day of November 1996.
Resolved, that the registered office of Mail-Well I Corporation in
the state of Delaware be and it hereby is changed to Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle, and the authorization of the present registered agent of this
corporation be and the same is hereby withdrawn, and THE CORPORATION
TRUST COMPANY, shall be and is hereby constituted and appointed the
registered agent of this corporation at the address of its registered
office.
IN WITNESS WHEREOF, Mail-Well I Corporation has caused this
statement to be signed by Robert J. Terry, its President, and attested
by Roger Wertheimer, its Secretary, this 1st day of November 1996.
By: /s/ Robert J. Terry
----------------------------------
Robert J. Terry
President and COO
ATTEST:
By: /s/ Roger Wertheimer
----------------------------------
Roger Wertheimer
V.P.-General Counsel and Secretary
<PAGE>
EXHIBIT 3.5
BYLAWS
OF
MAIL-WELL I CORPORATION
AS AMENDED AUGUST 2, 1995
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
OFFICES
Section 1.1. Registered Office and Agent 3
Section 1.2. Offices 3
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Annual Meetings 3
Section 2.2. Special Meetings 3
Section 2.3. Notice of Meetings 4
Section 2.4. Quorum 4
Section 2.5. Adjournments 4
Section 2.6. Voting; Proxies 4
Section 2.7. Action by Consent of Stockholders 5
Section 2.8. List of Stockholders Entitled to Vote 5
Section 2.9. Fixing Record Date 5
Section 2.10. Business to be Brought Before the Annual Meeting 5
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Number; Qualifications 6
Section 3.2. Vacancies 7
Section 3.3. Powers 7
Section 3.4. Resignations 7
Section 3.5. Regular Meetings 7
Section 3.6. Special Meetings 7
Section 3.7. Notice of Meetings 7
Section 3.8. Quorum; Vote Required for Action 8
Section 3.9. Action by Consent of Directors 8
Section 3.10. Telephonic Meetings Permitted 8
Section 3.11. Compensation 8
<PAGE>
<PAGE>
Section 3.12. Removal 8
Section 3.13. Committees 9
Section 3.14. Nomination of Directors 9
ARTICLE IV
NOTICES
Section 4.1. Notices 10
Section 4.2. Waiver of Notice 11
ARTICLE V
OFFICERS
Section 5.1. Election; Qualifications; Term of Office;
Resignation; Removal; Vacancies 11
Section 5.2. Powers and Duties 11
ARTICLE VI
STOCK
Section 6.1. Certificates 12
Section 6.2. Certificates Issued for Partly Paid Shares 12
Section 6.3. Facsimile Signatures 12
Section 6.4. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates 12
Section 6.5. Transfer of Stock 13
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends 13
Section 7.2. Fiscal Year 13
Section 7.3. Seal 13
Section 7.4. Amendments 13
ARTICLE VIII
INDEMNIFICATION
* * * * *
- 2 -
<PAGE>
<PAGE>
BYLAWS
OF
MAIL-WELL I CORPORATION
* * * * *
ARTICLE I
OFFICES
Section 1.1. Registered Office and Agent. The initial
----------- ---------------------------
registered office shall be 32 Loockerman Square, Suite L-100, Dover, County
of Kent, Delaware 19901, and the name of the initial registered agent of
the corporation at such address shall be The Prentice-Hall Corporation
System, Inc.
Section 1.2. Offices. The corporation may also have
----------- -------
offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business
of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Annual Meetings. Annual meetings of
----------- ---------------
stockholders shall be held at such date, time and place, either within or
without the State of Delaware, as may be designated from time to time by
the Board of Directors and stated in the notice of the meeting, for the
purpose of electing a Board of Directors, and transacting such other
business as may properly be brought before the meeting.
Section 2.2. Special Meetings. Special meetings of the
----------- ----------------
stockholders, for any purpose or purposes, unless otherwise provided by
statute or by the Certificate of Incorporation, may be called at any time
by the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the
request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed
- 3 -
<PAGE>
<PAGE>
meeting. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 2.3. Notice of Meetings. Whenever stockholders are
----------- ------------------
required or permitted to take action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
Section 2.4. Quorum. Except as otherwise provided by law
----------- ------
or by the Certificate of Incorporation or these Bylaws, the presence in
person or by proxy of the holders of a majority of the outstanding shares
of stock of the corporation entitled to vote thereat shall constitute a
quorum at each meeting of the stockholders and all questions shall be
decided by a majority of the shares so represented in person or by proxy at
the meeting and entitled to vote thereat. The stockholders present at any
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 2.5. Adjournments. Notwithstanding any other
----------- ------------
provisions of the Certificate of Incorporation or these Bylaws, the holders
of a majority of the shares of stock of the corporation entitled to vote at
any meeting, present in person or represented by proxy, whether or not a
quorum is present, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At any such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting originally called;
provided, however, that if the adjournment is for more than thirty days, or
if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
Section 2.6. Voting; Proxies. Unless otherwise provided
----------- ---------------
in the Certificate of Incorporation, each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period. Each proxy shall be
revocable unless expressly provided therein to be irrevocable or unless
otherwise made irrevocable by law. The notice of every meeting of the
stockholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of such person or persons as the Board of Directors may
select.
- 4 -
<PAGE>
<PAGE>
Section 2.7. Action by Consent of Stockholders. Unless
----------- ---------------------------------
otherwise provided in the Certificate of Incorporation, any action required
to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
Section 2.8. List of Stockholders Entitled to Vote. The
----------- -------------------------------------
officer who has charge of the stock ledger of the corporation shall prepare
and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.9. Fixing Record Date. In order that the
----------- ------------------
corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. The Board of
Directors shall not close the books of the corporation against transfer of
shares during the whole or any part of such period. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 2.10. Business to be Brought Before the Annual
------------ -----------------------------------------
Meeting. To be properly brought before the annual meeting of
- -------
stockholders, business must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder of the corporation who is a stockholder
of record at the time of giving of notice provided for in this Section 2.10
of Article II, who shall be entitled to vote at such meeting and who
complies with the notice procedures set forth
- 5 -
<PAGE>
<PAGE>
in this Section 2.10 of Article II. In addition to any other applicable
requirements, for business to be brought before an annual meeting by a
stockholder of the corporation, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation (i) not later than
February 1, 1996 in the case of the annual meeting of stockholders of the
corporation to be held on May 1, 1996, or (ii) not less than 90 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders of the corporation in the case of each subsequent annual
meeting of stockholders. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at
the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the
acquisition date, the class and the number of shares of voting stock of the
corporation which are owned beneficially by the stockholder, (iv) any
material interest of the stockholder in such business, and (v) a
representation that the stockholder intends to appear in person or by proxy
at the meeting to bring the proposed business before the meeting.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with
the procedures set forth in this Section 2.10.
The chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of
this Section 2.10 of Article II, and if the chairman should so determine,
the chairman shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 2.10
of Article II, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder with respect to the matters set forth in
this Section 2.10.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Number; Qualifications. The number of
----------- ----------------------
directors shall be as fixed in such a manner as may be determined by the
vote of not less than a majority of the directors then in office, but shall
not be less than one. The directors shall be elected at the annual meeting
of the
- 6 -
<PAGE>
<PAGE>
stockholders, except as provided in Section 3.2, and each director elected
shall hold office until his successor is elected and qualified or until his
earlier death, resignation or removal. A director need not be a
stockholder of the corporation. A majority of the directors may elect from
its members a chairman. The chairman, if any, shall hold this office until
his successor shall have been elected and qualified.
Section 3.2. Vacancies. Any vacancy in the Board of
----------- ---------
Directors, including vacancies resulting from any increase in the
authorized number of directors may be filled by a majority of the remaining
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next
annual meeting of stockholders and their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
Section 3.3. Powers. The business affairs and property of
----------- ------
the corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or
done by the stockholders.
Section 3.4. Resignations. Any director may resign at any
----------- ------------
time by written notice to the corporation. Any such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.5. Regular Meetings. Regular meetings of the
----------- ----------------
Board of Directors shall be held at such place or places within or without
the State of Delaware, at such hour and on such day as may be fixed by
resolution of the Board of Directors, without further notice of such
meetings.
Section 3.6. Special Meetings. Special meetings of the
----------- ----------------
Board of Directors may be held whenever called by (i) the Chairman of the
Board; (ii) the President; (iii) the President or Secretary on the written
request of a majority of the Board of Directors; or (iv) resolution adopted
by the Board of Directors. Special meetings may be held within or without
the State of Delaware as may be stated in the notice of the meeting.
Section 3.7. Notice of Meetings. Written notice of the
----------- ------------------
time, place and general nature of the business to be transacted at all
special meetings of the Board of Directors must be given to each director
at least one day prior to the day of the meeting; provided, however, that
notice of any meeting need not be given to any director if waived by him in
writing, or if he shall be present at such meeting, except when the
director attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds
that the meeting is not lawfully called or convened.
- 7 -
<PAGE>
<PAGE>
Section 3.8. Quorum; Vote Required for Action. At all
----------- --------------------------------
meetings of the Board of Directors, a majority of directors then in office
shall constitute a quorum for the transaction of business and, except as
otherwise provided by law or these Bylaws, the act of a majority of the
directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors; but a lesser number may adjourn the meeting
from day to day, without notice other than announcement at the meeting,
until a quorum shall be present. Directors may participate in any meeting
of the directors, and members of any committee of directors may participate
in any meeting of such committee, by means of conference telephone or
similar communications equipment by means of which all persons
participating in such meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
Section 3.9. Action by Consent of Directors. Any action
----------- ------------------------------
required or permitted to be taken at any meeting of the Board of Directors
or of any committee of the Board of Directors may be taken without a
meeting, if all members of the board or the committee of the board, as the
case may be, consent thereto in writing, which may be in counterparts, and
the writing or writings are filed with the minutes of proceedings of the
Board of Directors or the committee thereof. Such writing(s) shall be
manually executed if practicable, but if circumstances so require, effect
shall be given to written consent transmitted by telegraph, telex, telecopy
or similar means of visual data transmission.
Section 3.10. Telephonic Meetings Permitted. Members of
------------ -----------------------------
the Board of Directors, or any committee designated by the board, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Bylaw shall constitute presence in person at such
meeting.
Section 3.11. Compensation. Directors shall be entitled to
------------ ------------
such compensation for their services as may be approved by the Board of
Directors, including, if so approved by resolution of the Board of
Directors, a fixed sum and expenses of attendance at each regular or
special meeting or any committee thereof. No such payment shall preclude
any director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 3.12. Removal. Any director or the entire Board of
------------ -------
Directors may be removed, with or without cause, by the holders of a
majority of shares entitled to vote at an election of directors. The
notice calling such meeting shall state the intention to act upon such
matter, and, if the notice so provides, the vacancy or vacancies caused by
such removal may be filled at such meeting by a vote of the majority of the
shares entitled to vote at an election of directors.
- 8 -
<PAGE>
<PAGE>
Section 3.13. Committees. The Board of Directors may, by
------------ ----------
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of
the corporation. The Board may designate one or more directors as
alternate members of any committee. The alternate members of any committee
may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in a resolution of
the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation
to be affixed to all papers which may require it; but no such committee
shall have such power or authority in reference to amending the Certificate
of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the Bylaws of the corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have
such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required. Members of special or standing committees shall be entitled to
receive such compensation for serving on such committees as the Board of
Directors shall determine.
Section 3.14. Nomination of Directors. Only persons who
------------ -----------------------
are nominated in accordance with the following procedures shall be eligible
for election as directors. Nominations of persons for election to the
Board of Directors of the corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors or (b) by
any stockholder of the corporation who is a stockholder of record at the
time of giving of notice provided for in this Section 3.14 of Article III,
who shall be entitled to vote for the election of directors at the meeting
and who complies with the notice procedures set forth in this Section 3.14
of Article III. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation (i) with respect to an
election to be held at the annual meeting of the stockholders of the
corporation, (a) not later than February 1, 1996 in the case of the annual
meeting of stockholders of the corporation to be held on May 1, 1996, or
(b) 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders of the corporation, and (ii) with respect to
an election to be held at a special meeting of stockholders of the
corporation for the election of directors, not later than the closing of
business on the 10th day following the day on which such notice of the date
of the meeting was mailed or public disclosure of the date of the meeting
was made, whichever first occurs. Such stockholder's notice to the
Secretary shall set forth (a) as to
- 9 -
<PAGE>
<PAGE>
each person whom the stockholder proposes to nominate for election or re-
election as a director, all information relating to the person that is
required to be disclosed in solicitations for proxies for election of
directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including the written consent
of such person to be named in the proxy statement as a nominee and to serve
as a director if elected); and (b) as to the stockholder giving the notice
(i) the name and address, as they appear on the corporation's books, of
such stockholder, and (ii) the class and number of shares of capital stock
of the corporation which are beneficially owned by the stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
In the event that a person is validly designated as nominee to
the Board and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee.
No person shall be eligible to serve as a director of the
corporation unless nominated in accordance with the procedures set forth in
this Section 3.14 of Article III. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the procedures
prescribed by the Bylaws, and if the chairman should so determine, the
chairman shall so declare to the meeting and the defective nomination shall
be disregarded.
Notwithstanding the foregoing provisions of this Section 3.14
of Article III, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder with respect to the matters set forth in
this Section 3.14 of Article III.
ARTICLE IV
NOTICES
Section 4.1. Notices. Whenever any notice is required to
----------- -------
be given under the provisions of these Bylaws or of the Certificate of
Incorporation to any director or stockholder, such notice must be in
writing and may be given in person, in writing or by mail, telegram,
telecopy or other similar means of visual communication, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage or other transmittal charges
- 10 -
<PAGE>
<PAGE>
thereon prepaid. Such notice shall be deemed to be given (i) if by mail,
at the time when the same shall be deposited in the United States mail and
(ii) otherwise, when such notice is transmitted.
Section 4.2. Waiver of Notice. Whenever any notice is
----------- ----------------
required to be given under the provisions of the Bylaws or of the Certif-
icate of Incorporation to any director or stockholder, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 5.1. Election; Qualifications; Term of Office;
----------- ------------------------------------------
Resignation; Removal; Vacancies. The officers of the corporation shall be
- -------------------------------
elected or appointed by the Board of Directors and may include, at the
discretion of the Board, a Chairman of the Board, a President, a Secretary,
a Treasurer and such Executive, Senior or other Vice Presidents and other
officers as may be determined by the Board of Directors. Any number of
offices may be held by the same person. The officers of the corporation
shall hold office until their successors are chosen and qualified, except
that any officer may resign at any time by written notice to the
corporation and the Board of Directors may remove any officer at any time
at its discretion with or without cause. Any vacancies occurring in any
office of the corporation by death, resignation, removal or otherwise may
be filled for the unexpired portion of the term by the Board of Directors
at any regular or special meeting.
Section 5.2. Powers and Duties. The officers of the
----------- -----------------
corporation shall have such powers and duties as generally pertain to their
offices, except as modified herein or by the Board of Directors, as well as
such powers and duties as shall be determined from time to time by the
Board of Directors. The Chairman of the Board, if one is elected, and
otherwise the President, shall preside at all meetings of the Board. The
President shall preside at all meetings of the Stockholders.
- 11 -
<PAGE>
<PAGE>
ARTICLE VI
STOCK
Section 6.1. Certificates. Every holder of stock in the
----------- ------------
corporation shall be entitled to have a certificate, signed by, or in the
name of the corporation by, (i) the Chairman or Vice-Chairman of the Board
of Directors, or the President or a Vice President and (ii) the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of
the corporation, certifying the number of shares owned by him in the
corporation. If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the
qualification, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in section 202
of the General Corporation Law of the State of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 6.2. Certificates Issued for Partly Paid Shares.
----------- ------------------------------------------
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 6.3. Facsimile Signatures. Any of or all the
----------- --------------------
signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 6.4. Lost, Stolen or Destroyed Stock Certificates;
----------- ----------------------------------------------
Issuance of New Certificates. The Board of Directors may direct a new
- ----------------------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen or destroyed upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board
of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the
- 12 -
<PAGE>
<PAGE>
corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 6.5. Transfer of Stock. Upon surrender to the
----------- -----------------
corporation or the transfer agent of the corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, and subject to applicable federal and
state securities laws and contractual obligations, it shall be the duty of
the corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends. Dividends upon the capital stock
----------- ---------
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation. Before payment of any
dividend, there may be set aside out of any funds of the corporation avail-
able for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for such other purpose as the directors
shall think conducive to the interest of the corporation, and the directors
may modify or abolish any such reserve in the manner in which it was
created.
Section 7.2. Fiscal Year. The fiscal year of the
----------- -----------
corporation shall be fixed by resolution of the Board of Directors.
Section 7.3. Seal. The seal of the corporation shall be
----------- ----
in such form as the Board of Directors shall prescribe.
Section 7.4. Amendments. These Bylaws may be altered,
----------- ----------
amended or repealed or new Bylaws may be adopted by the stockholders or by
the Board of Directors, when such power is conferred upon the board of
directors by the Certificate of Incorporation (i) at any regular meeting of
the stockholders or of the Board of Directors (ii) or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws shall be contained
in the notice of such special meeting. If the power to adopt, amend or
repeal Bylaws is conferred upon the Board of Directors by the Certificate
of Incorporation it shall not divest or limit the power of the stockholders
to adopt, amend or repeal Bylaws.
- 13 -
<PAGE>
<PAGE>
ARTICLE VIII
INDEMNIFICATION
The corporation shall be authorized to indemnify any person entitled
to indemnity under the General Corporation Law of the State of Delaware as
the same exists or may hereafter be amended ("DGCL") to the fullest extent
permitted by the DGCL; provided, however, that the corporation shall not be
permitted to indemnify any person in connection with any proceeding
initiated by such person, unless such proceeding is authorized by a
majority of the directors of the corporation.
- 14 -
<PAGE>
EXHIBIT 5
OPINION RE: LEGALITY
March 12, 1999
Mail-Well, Inc.
23 Inverness Way, Suite 160
Englewood, Colorado 80112
Ladies and Gentlemen:
You have requested our opinion in connection with the
Registration Statement on Form S-4 (the "Registration Statement") which
is expected to be filed by Mail-Well I Corporation (the "Company") on or
about March 15, 1999, with respect to the exchange offer and issuance of
$300,000,000 aggregate principal amount of 8 3/4% Series B Senior
Subordinated Notes due 2008 (the "Notes"), to be issued under that
certain indenture (the "Indenture") among the Company, the Guarantors
listed on Schedule A to the Indenture, and State Street Bank and Trust
Company, a Massachusetts trust company, as described in the Registration
Statement.
We have reviewed such documents and have made such investigation
of applicable law as we have deemed necessary under the circumstances.
Based on that review and investigation, it is our opinion that, upon
their issuance in accordance with the Indenture, the Notes will have
been duly authorized and legally issued, will be fully paid and
nonassessable, and will be binding obligations of the Company.
We consent to the use by the Company, in the Registration
Statement, of our name and the statements with respect to our firm under
the heading of "Legal Matters" in the Registration Statement.
Sincerely yours,
/s/ ROTHGERBER JOHNSON & LYONS LLP
<PAGE>
EXHIBIT 8
____________, 1999
Roger Wertheimer, Esq.
Mail-Well, Inc.
23 Inverness Way, Suite 160
Englewood, CO 80112
Re: Federal Tax Aspects of the Exchange of 8-3/4%
Senior Subordinated Notes of Mail-Well I
Corporation due 2008 for 8-3/4% Series B Senior
Subordinated Notes of Mail-Well I Corporation
due 2008
Dear Mr. Wertheimer:
You have requested our opinion concerning certain federal income
tax aspects of the exchange of 8-3/4% Senior Subordinated Notes of Mail-
Well I Corporation due 2008 ("Old Notes") for 8-3/4% Series B Senior
Subordinated Notes of Mail-Well I Corporation due 2008 ("New Notes").
We have reviewed the Securities and Exchange Commission Form S-4
Registration Statement and Prospectus prepared and filed with respect to
the exchange of the Old Notes for the New Notes. We have also reviewed
such other information, materials and matters of law as we believe
appropriate.
In addition, we have relied upon certain representations of the
management of Mail-Well I Corporation (the "Company"). Although we have
made no independent investigation of these representations, we have no
reason to believe they are untrue.
FACTS
The Company originally issued and sold the $300,000,000 aggregate
principal amount of Senior Subordinated Notes due 2008 on December 16,
1998, in an offering exempt from registration under the Securities Act
of 1934 (the "Securities Act") pursuant to Section 4(2), Rule 144A and
Regulation S of the Securities Act. Given the Company's issuance of
the Old Notes under these provisions of the United States securities
law, the holders of the Old Notes may not transfer the Old
<PAGE>
<PAGE>
Roger Wertheimer, Esq.
Mail-Well, Inc.
________________, 1999
Page 2
Notes in the United States unless the Old Notes were registered under
the Securities Act or unless the transfer is pursuant to an exemption
from the registration requirements of the Securities Act and applicable
state securities laws.
As a condition to the original issuance of the Old Notes, the
Company entered into a Registration Rights Agreement dated as of
December 16, 1998, with the initial purchasers of the Old Notes. In the
Registration Rights Agreement, the Company agreed to file with the
Securities and Exchange Commission a registration statement under the
Securities Act no later than March 16, 1999, with respect to the
$300,000,000 aggregate principal amount of 8-3/4% Series B Senior
Subordinated Notes due 2008 offered by a Prospectus; also the Company
agreed to use its best efforts to have the registration statement
declared effective within 90 days after March 16, 1999.
Pursuant to an offer made by the Company, holders of the Old Notes
may exchange their Old Notes for registered New Notes. Under the terms
of such offer, for each Old Note surrendered pursuant to the exchange
offer, the holder of the Old Note will receive a New Note having a
principal amount equal to that of the surrendered Old Note. Interest on
each New Note will accrue from the last interest payment date on which
interest was paid on the Old Note surrendered in exchange for the New
Note or, if no interest has been paid on such Old Note, from the date
the Old Note was issued.
TAX OPINIONS
1. For federal income tax purposes, the exchange of the Old Notes
for registered New Notes is not a significant modification of the Old
Notes under Section 1.1001-3 of the United States Treasury Regulations.
2. For federal income tax purposes, the exchanges of Old Notes
for New Notes will not constitute a taxable exchange of the Old Notes
for purposes of Section 1001 of the Internal Revenue Code of 1986, as
amended.
*******
We express no opinion as to the tax treatment of any conditions
existing at the time of, or effects resulting from, the transaction that
are not specifically referred to above.
This opinion is based upon existing statutes, regulations,
proposed regulations, Internal Revenue Service rulings and revenue
procedures, judicial and administrative decisions, and other matters of
record. An opinion of counsel, unlike a tax ruling, has no official
status of any kind. No guarantee can be given that the I.R.S. will not
challenge or prevail on any issue. In addition, the law
<PAGE>
<PAGE>
Roger Wertheimer, Esq.
Mail-Well, Inc.
________________, 1999
Page 3
upon which this opinion is based is subject to change, and no assurance
can be given that any such change will not be applied retroactively. No
application has been made to the Internal Revenue Service for a tax
ruling.
Very truly yours,
ROTHGERBER JOHNSON & LYONS LLP
JRW/clw
<PAGE>
<TABLE>
EXHIBIT 12
MAIL-WELL, INC.
Calculation of Ratio of Earnings to Fixed Charges
<CAPTION>
PERIOD FROM
FEB. 24, 1994
(INCEPTION) YEARS ENDED DECEMBER 31,
THROUGH ----------------------------------------------------
DEC. 31, 1994 1995 1996 1997 1998
------------- ---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income before taxes and extraordinary item $12,553 $23,499 $34,785 $57,759 $49,789
Fixed charges:
Interest expense (including amortization of
deferred financing costs) 16,456 33,154 34,869 30,157 38,127
Interest component of rental expense 908 1,694 2,297 5,767 8,610
------- ------- ------- ------- -------
Total Fixed Charges 17,364 34,848 37,166 35,924 46,737
------- ------- ------- ------- -------
Total Earnings and Fixed Charges $29,917 $58,347 $71,951 $93,683 $96,526
======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges
1.7 1.7 1.9 2.6 2.1
======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Classic Envelope Plus, Ltd.
Graphics Arts Center de Mexico
Graphics Arts Center, Inc.
Mail-Well Canada Holdings, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Enveloppe, S.A.
Mail-Well Europe Holdings, LLC
Mail-Well France Holdings
Mail-Well Label Company
Mail-Well Label Holdings, Inc.
Mail-Well Label USA, Inc.
Mail-Well Mexico Holdings, Inc.
Mail-Well Trade Receivables Corporation
Mail-Well West, Inc.
McLaren Morris & Company
Murray Envelope Corporation
Murray Envelope Holdings, Inc.
National Graphics Company
N-M Envelope, Inc.
Poser Business Forms, Inc.
Supremex, Inc.
Wisco II, L.L.C.
Wisco III, L.L.C.
Wisco Envelope Corp.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Mail-Well I
Corporation on Form S-4 of our report dated January 28, 1999, included
in the Annual Report on Form 10-K of Mail-Well, Inc., for the year ended
December 31, 1998, and to the use of our report dated January 28, 1999,
appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
March 12, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Mail-Well I
Corporation on Form S-4 of our report dated March 6, 1998 (except for
Notes 7 and 13, which are dated May 15, 1998 and May 22, 1998,
respectively, relating to the financial statements of Color Art, Inc.
and Subsidiaries (not presented separately herein)), included in the
Annual Report on Form 10-K of Mail-Well, Inc., for the year ended
December 31, 1998, and to the use of our report dated March 6, 1998
(except for Notes 7 and 13, which are dated May 15, 1998 and May 22,
1998, respectively, relating to the financial statements of Color Art,
Inc. and Subsidiaries (not presented separately herein)), appearing in
the Prospectus, which is part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
March 12, 1999
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President
and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
Mail-Well I Corporation
Affiliate Guarantors Listed on Schedule Attached hereto
(Exact name of obligor as specified in its charter)
Delaware 84-1250533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Inverness Way East, Suite 160
Englewood, CO 80112
(303) 790-8023
(Address of principal executive offices) (Zip Code)
8 3/4% Series B Senior Subordinated Notes Due 2008
(Title of indenture securities)
<PAGE>
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY
AUTHORITY TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The
Commonwealth of Massachusetts, 100 Cambridge Street,
Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance
Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
Trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
The obligor is not an affiliate of the trustee or of
its parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS
NOW IN EFFECT.
A copy of the Articles of Association of the trustee,
as now in effect, is on file with the Securities and
Exchange Commission as Exhibit 1 to Amendment No. 1 to
the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and
is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF
ASSOCIATION.
A copy of a Statement from the Commissioner of Banks
of Massachusetts that no certificate of authority for
the trustee to commence business was necessary or
issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of
Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED
IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities
and Exchange Commission as Exhibit 3 to Amendment No.
1 to the Statement of Eligibility and Qualification of
Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and
is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR
INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in
effect, is on file with the Securities and Exchange
Commission as Exhibit 4 to the Statement of
Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated
herein by reference thereto.
1
<PAGE>
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES
REQUIRED BY SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b)
of the Act is annexed hereto as Exhibit 6 and made a
part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS
SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which
relates to matters peculiarly within the knowledge of the obligor or any
underwriter for the obligor, the trustee has relied upon information
furnished to it by the obligor and the underwriters, and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
The answer furnished to Item 2. of this statement will be
amended, if necessary, to reflect any facts which differ from those
stated and which would have been required to be stated if known at the
date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, State Street Bank and Trust Company, a
corporation organized and existing under the laws of The Commonwealth of
Massachusetts, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in the City of Boston and The Commonwealth of Massachusetts, on the
March 8, 1999
STATE STREET BANK AND TRUST COMPANY
By: /s/ Chi C. Ma
----------------------------------
Name: Chi C. Ma
Title: Assistant Vice President
2
<PAGE>
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed
issuance by Mail-Well I Corporation of its 8 3/4% Series B Senior
Subordinated Notes Due 2008, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may
be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Chi C. Ma
---------------------------------
Name: Chi C. Ma
Title: Assistant Vice President
Dated: March 12, 1999
3
<PAGE>
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business September 30, 1998, published in accordance with a call made by
------------------
the Federal Reserve Bank of this District pursuant to the provisions of
the Federal Reserve Act and in accordance with a call made by the
Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and
coin 2,008,956
Interest-bearing balances 12,286,877
Securities 9,654,241
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary 10,922,779
Loans and lease financing receivables:
Loans and leases, net of unearned income 7,457,235
Allowance for loan and lease losses 82,851
Allocated transfer risk reserve 0
Loans and leases, net of unearned income and
allowances 7,374,384
Assets held in trading accounts 1,898,804
Premises and fixed assets 513,372
Other real estate owned 100
Investments in unconsolidated subsidiaries 484
Customers' liability to this bank on acceptances
outstanding 48,563
Intangible assets 220,613
Other assets 1,333,210
-----------
Total assets 46,262,383
==============
LIABILITIES
Deposits:
In domestic offices 9,557,938
Noninterest-bearing 7,158,356
Interest-bearing 2,399,582
In foreign offices and Edge subsidiary 18,451,054
Noninterest-bearing 429,797
Interest-bearing 18,021,257
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices
of the bank and of its Edge subsidiary 12,023,438
Demand notes issued to the U.S. Treasury 451,424
Trading liabilities 1,582,933
Other borrowed money 323,782
Subordinated notes and debentures 0
Bank's liability on acceptances executed and
outstanding 48,563
Other liabilities 1,226,129
Total liabilities 43,665,261
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock 29,931
Surplus 462,782
Undivided profits and capital reserves/Net
unrealized holding gains (losses) 2,080,148
Net unrealized holding gains (losses) on
available-for-sale securities 27,376
Cumulative foreign currency translation adjustments (3,115)
Total equity capital 2,597,122
-----------
Total liabilities and equity capital 46,262,383
-----------
</TABLE>
4
<PAGE>
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best
of our knowledge and belief has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve
System and is true and correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,375
<SECURITIES> 41,669
<RECEIVABLES> 142,650
<ALLOWANCES> (6,727)
<INVENTORY> 114,131
<CURRENT-ASSETS> 335,850
<PP&E> 546,681
<DEPRECIATION> (108,949)
<TOTAL-ASSETS> 1,127,956
<CURRENT-LIABILITIES> 183,652
<BONDS> 583,427
<COMMON> 488
0
0
<OTHER-SE> 298,887
<TOTAL-LIABILITY-AND-EQUITY> 1,127,956
<SALES> 1,504,686
<TOTAL-REVENUES> 1,504,686
<CGS> 1,185,373
<TOTAL-COSTS> 1,417,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,425
<INTEREST-EXPENSE> 38,127
<INCOME-PRETAX> 49,789
<INCOME-TAX> 23,948
<INCOME-CONTINUING> 25,841
<DISCONTINUED> 0
<EXTRAORDINARY> (4,132)
<CHANGES> 0
<NET-INCOME> 21,709
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 40,911
<SECURITIES> 22,319
<RECEIVABLES> 68,753
<ALLOWANCES> (3,795)
<INVENTORY> 86,268
<CURRENT-ASSETS> 234,898
<PP&E> 354,336
<DEPRECIATION> (91,539)
<TOTAL-ASSETS> 671,411
<CURRENT-LIABILITIES> 129,456
<BONDS> 330,357
<COMMON> 430
0
0
<OTHER-SE> 171,390
<TOTAL-LIABILITY-AND-EQUITY> 671,411
<SALES> 1,073,937
<TOTAL-REVENUES> 1,073,937
<CGS> 834,212
<TOTAL-COSTS> 988,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,454
<INTEREST-EXPENSE> 30,157
<INCOME-PRETAX> 57,759
<INCOME-TAX> 22,783
<INCOME-CONTINUING> 34,976
<DISCONTINUED> 0
<EXTRAORDINARY> (6,100)
<CHANGES> 0
<NET-INCOME> 28,876
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,297
<SECURITIES> 9,505
<RECEIVABLES> 63,538
<ALLOWANCES> (3,734)
<INVENTORY> 76,552
<CURRENT-ASSETS> 177,604
<PP&E> 292,192
<DEPRECIATION> (72,938)
<TOTAL-ASSETS> 551,986
<CURRENT-LIABILITIES> 142,379
<BONDS> 237,840
<COMMON> 436
0
0
<OTHER-SE> 142,975
<TOTAL-LIABILITY-AND-EQUITY> 551,986
<SALES> 944,494
<TOTAL-REVENUES> 944,494
<CGS> 740,665
<TOTAL-COSTS> 874,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,590
<INTEREST-EXPENSE> 34,869
<INCOME-PRETAX> 34,785
<INCOME-TAX> 13,627
<INCOME-CONTINUING> 21,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,158
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
<PAGE>
EXHIBIT 99.1
- ----------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON
____________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M., EASTERN TIME, ON THE EXPIRATION
DATE.
- ----------------------------------------------------------------------
LETTER OF TRANSMITTAL
To: State Street Bank and Trust Company
FACSIMILE TRANSMISSION: (617) 664-5290
CONFIRM BY TELEPHONE TO: (617) 664-5314
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
State Street Bank and Trust Company
Attn: Susan Lavey, Corporate Actions
Two International Place, Fourth Floor
Boston, Massachusetts 02110
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
Re: Mail-Well I Corporation
To exchange outstanding 8 3/4% Senior Subordinated Notes due 2008
for new 8 3/4% Series B Senior Subordinated Notes due 2008
Exchange Agent: State Street Bank & Trust Company
The undersigned acknowledges receipt of the Prospectus dated
_________, 1999 (the "Prospectus") of Mail-Well I Corporation, a
Delaware corporation (the "Issuer"), and this Letter of Transmittal
(which may be amended from time to time) for 8 3/4% Senior Subordinated
Notes due 2008 (this "Letter"), which together constitute the Issuer's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its
8 3/4% Series B Senior Subordinated Notes due 2008 (the "Exchange
Notes") for each $1,000 in principal amount of its outstanding 8 3/4%
Senior Subordinated Notes due 2008 (the "Old Notes") that were issued
and sold in a transaction exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act").
The undersigned has completed, executed and delivered this Letter
to indicate the action he or she desires to take with respect to the
Exchange Offer.
<PAGE>
<PAGE>
All holders of Old Notes who wish to tender their Old Notes must,
prior to the Expiration Date: (1) complete, sign, date and deliver this
Letter, or a facsimile thereof, to the Exchange Agent, in person or to
the address set forth above; and (2) tender his or her Old Notes or, if
a tender of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company
("DTC"), confirm such book-entry transfer (a "Book-Entry Confirmation"),
in each case in accordance with the procedures for tendering described
in the Instructions to this Letter. Holders of Old Notes whose
certificates are not immediately available, or who are unable to deliver
their certificates or Book-Entry Confirmation, together with all other
documents required by this Letter to be delivered to the Exchange Agent
on or prior to the Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus. (See Instruction 1).
Upon the terms and subject to the conditions of the Exchange
Offer, the acceptance for exchange of Old Notes validly tendered and not
withdrawn will take place on the Expiration Date, and the issuance of
the Exchange Notes will be made as soon as reasonably practicable after
the Expiration Date. For the purposes of the Exchange Offer, the Issuer
shall be deemed to have accepted for exchange validly tendered Old Notes
when, as and if the Issuer has given written notice thereof to the
Exchange Agent.
The Instructions included with this Letter must be followed in
their entirety. Questions and requests for assistance or additional
copies of the Prospectus or this Letter may be directed to the Exchange
Agent, at the address listed above, or Mark L. Zoeller, Corporate
Counsel, Mail-Well I Corporation, 23 Inverness Way East, Suite 160,
Englewood, Colorado 80112, at (303) 790-8023.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall
have the respective meanings ascribed to them in the Prospectus. List
in Box 1 below the Old Notes of which you are the holder. If the space
provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Old Notes on a separate signed schedule and affix
that schedule to this Letter.
<PAGE>
<PAGE>
<TABLE>
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<CAPTION>
- ------------------------------------------------------------------------------------------------
Principal Principal
Name(s) and Address(es) of Registered Certificate Amount Amount of Old
Holder(s) (Please fill in if blank) Number(s) <F1> of Old Notes Notes Tendered <F2>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Totals:
- ------------------------------------------------------------------------------------------------
<FN>
<F1> Need not be completed if Old Notes are being tendered by book-
entry transfer.
<F2> Unless otherwise indicated, the entire principal amount of Old
Notes represented by a certificate or Book-Entry Confirmation
delivered to the Exchange Agent will be deemed to have been
tendered.
</TABLE>
<PAGE>
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned tenders to the Issuer the principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered with this Letter, the undersigned
exchanges, assigns and transfers to, or upon the order of, the Issuer,
all right, title and interest in and to the Old Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his
or her agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Issuer) with respect to the tendered
Old Notes, with full power of substitution, to: (a) deliver
certificates for such Old Notes; (b) deliver Old Notes and all
accompanying evidence of transfer and authenticity to or upon the order
of the Issuer upon receipt by the Exchange Agent, as the undersigned's
agent, of the Exchange Notes to which the undersigned is entitled upon
the acceptance by the Issuer of the Old Notes tendered under the
Exchange Offer; and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of the Old Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has
full power and authority to tender, exchange, assign and transfer the
Old Notes tendered hereby and that the Issuer will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional
documents deemed by the Issuer to be necessary or desirable to complete
the assignment and transfer of the Old Notes tendered.
The undersigned agrees that acceptance of any tendered Old Notes
by the Issuer and the issuance of Exchange Notes (together with the
guarantees of the Guarantors with respect thereto) in exchange therefor
shall constitute performance in full by the Issuer and the Guarantors of
their obligations under the Registration Rights Agreement and that, upon
the issuance of the Exchange Notes, the Issuer and the Guarantors will
have no further obligations or liabilities thereunder (except in certain
limited circumstances). By tendering Old Notes, the undersigned
certifies each of the following:
(1) that it is not an "affiliate" (as defined in Rule 405 of the
Securities Act) of the Issuer (an "Affiliate");
(2) that it is acquiring the Exchange Notes in the ordinary course
of its business;
(3) that 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 (within the meaning of the
Securities Act) of the Exchange Notes; and
(4) if the undersigned is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making activities or other
trading activities (and not directly from the Issuer or an
Affiliate), and that it will deliver a prospectus meeting the
requirements of the Securities Act in
<PAGE>
<PAGE>
connection with any resale of the Exchange Notes. By signing this
Letter and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
All authority conferred or agreed to be conferred by this Letter
shall survive the death or incapacity of the undersigned, and every
obligation of the undersigned under this Letter shall be binding upon
the undersigned's heirs, personal representatives, successors and
assigns. Tenders may be withdrawn only in accordance with the
procedures set forth in the Instructions contained in this Letter.
Unless otherwise indicated under "Special Delivery Instructions"
below, the Exchange Agent will deliver Exchange Notes (and, if
applicable, a certificate for any Old Notes not tendered but represented
by a certificate also encompassing Old Notes which are tendered) to the
undersigned at the address set forth in Box 1.
The Exchange Offer is subject to the more detailed terms set forth
in the Prospectus and, in case of any conflict between the terms of the
terms of the Prospectus and this Letter, the Prospectus shall prevail.
==========================================================================
[ ] Check here if tendered Old Notes are being delivered by book-entry
transfer made to the account maintained by the Exchange Agent with DTC
and complete the following:
Name of Tendering Institution:____________________________________________
Account Number:___________________________________________________________
Transaction Code Number:__________________________________________________
==========================================================================
[ ] Check here if tendered Old Notes are being delivered pursuant to a
Notice of Guaranteed Delivery previously sent to the Exchange Agent and
complete the following:
Name(s) of Registered Owner(s):___________________________________________
Date of Execution of Notice of Guaranteed Delivery:_______________________
Window Ticket Number (if available):______________________________________
Name of Institution which Guaranteed Delivery:____________________________
==========================================================================
<PAGE>
<PAGE>
BOX 2
PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Notes as their
name(s) appear(s) on certificate(s) for Old Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, such person must set forth his or her full
title below. (See Instruction 3)
X____________________________________________________
X____________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Date: __________________ , 1999
Name(s)________________________________________________________________
(Please Print)
Capacity:______________________________________________________________
Address:_______________________________________________________________
(Include Zip Code)
Area Code and Telephone No.:___________________________________________
PLEASE COMPLETE A SUBSTITUE FORM W-9 (INCLUDED HEREIN)
<PAGE>
<PAGE>
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
____________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
____________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code)
of Firm)
____________________________________________________________________________
(Authorized Signature)
____________________________________________________________________________
(Title)
____________________________________________________________________________
(Printed Name)
Date: _______________________, 1999
<PAGE>
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
NAME OF PAYOR: State Street Bank and Trust Company, Exchange Agent
____________________________________________________________________________
Please provide your taxpayer Part 1
identification number
at the right and certify Social Security Number
by signing and dating below or Employer Identification Number
______________________________________________
____________________________________________________________________________
Substitute Part 2 [ ]
Form W-9
Department of the Treasury, Check the box if you are NOT subject to back-
Internal Revenue Service up withholding under the provisions of
Section 2406(a)(1)(C) of the Internal Revenue
Code because (1) you have not been notified
that you are subject to back-up withholding
as a result of failure to report all interest
or dividends or (2) the Internal Revenue
Service has notified you that you are no
longer subject to back-up withholding.
____________________________________________________________________________
Payor's Request for Taxpayer Part 3 [ ]
Identification Number (TIN)
Check box if awaiting TIN
____________________________________________________________________________
CERTIFICATION: UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED IN THIS FORM IS TRUE, CORRECT AND
COMPLETE
Signature:____________________________________
Date:_________________________________________
Name:_________________________________________
(Please Print)
____________________________________________________________________________
<PAGE>
<PAGE>
____________________________________________________________________________
BOX 4
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 2, 3 and 4)
____________________________________________________________________________
To be completed ONLY if certificates for Old Notes in a principal amount
not exchanged, or Exchange Notes, are to be issued in the name of
someone other than the person(s) whose signature(s) appear in Box 2, or
if Old Notes delivered by book-entry transfer which are not accepted for
exchange are to be returned by credit to an account maintained at DTC
other than the account indicated above.
Issue and deliver (check appropriate boxes):
[ ] Old Notes not tendered
[ ] Exchange Notes
to (Please Print):
Name:_____________________________________________
Address:__________________________________________
__________________________________________
__________________________________________
__________________________________________
Please complete the Substitute Form W-9 at Box 3.
Tax I.D. or Social Security Number:_______________
__________________________________________________
For book-entry transfer:
Name of Tendering Institution:____________________
__________________________________________________
Account Number:___________________________________
Transaction Code Number:__________________________
____________________________________________________________________________
____________________________________________________________________________
BOX 5
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 2, 3 and 4)
____________________________________________________________________________
To be completed ONLY if certificates for Old Notes in a principal amount
not exchanged, or Exchange Notes, are to be sent to someone other than
the person(s) whose signature(s) appear in Box 2 or to an address other
than that shown in Box 1.
Deliver (check appropriate boxes):
[ ] Old Notes not tendered
[ ] Exchange Notes
to (Please Print):
Name:_____________________________________________
Address:__________________________________________
__________________________________________
__________________________________________
__________________________________________
Please complete the Substitute Form W-9 at Box 3.
Tax I.D. or Social Security Number:_______________
__________________________________________________
____________________________________________________________________________
<PAGE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter and Certificates. Certificates for Old
----------------------------------------
Notes or a Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed copy of this Letter and any other
documents required by this Letter, must be received by the Exchange
Agent at its addresss set forth in this Letter on or before the
Expiration Date. Except as otherwise provided below, the delivery will
be deemed made when actually received by the Exchange Agent.
Holders whose Old Notes are not immediately available or who
cannot deliver their Old Notes or a Book-Entry Confirmation, as the case
may be, and all other required documents to the Exchange Agent on or
before the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to
such procedures: (1) the tender must be made through a firm which is a
member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or a commercial bank
or trustee having an office or correspondent in the United States (each
an "Eligible Institution"); (2) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution this
Letter (or a facsimile) and a Notice of Guaranteed Delivery, completed
and signed, setting forth the name and address of the holder of the Old
Notes and the amount of Old Notes, stating that the tender is being made
thereby and guaranteeing that within five Nasdaq National Market trading
days after the date of execution of the Notice of Guaranteed Delivery
the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, and any other documents
required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent; and (3) the certificates for all physically
tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation and all other documents required by this Letter, must be
received by the Exchange Agent within five Nasdaq National Market
trading days after the date of signing the Notice of Guaranteed
Delivery, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures."
A tender will be deemed to have been received as of the date when
the tendering holder's properly completed and duly signed Letter
accompanied by the Old Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange
for Old Notes tendered pursuant to a Notice of Guaranteed Delivery will
be made only against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Old Notes (or a timely Book-Entry
Confirmation).
The method of delivery of Old Notes and all other documents is at
the election and risk of the holder. If sent by mail, it is recommended
that registered mail, return receipt requested, be used, proper
insurance be obtained, and the mailing be made sufficiently in advance
of the Expiration Date to permit delivery to the Exchange Agent on or
before the Expiration Date.
All questions as to the validity, form, eligibility (including
time of receipt), acceptance and withdrawal of tendered Old Notes will
be determined by the Issuer, whose determination will be final and
binding. The Issuer reserves the absolute right to reject any or all
tenders that are not in proper form or the acceptance of which, in the
opinion of the Issuer's counsel, would be
<PAGE>
<PAGE>
unlawful. The Issuer also reserves the right to waive any irregularities
or conditions of tender as to particular Old Notes. All tendering
holders, by execution of this Letter, waive any right to receive notice
of acceptance of their Old Notes. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including this Letter and
these instructions) will be final and binding.
Neither the Issuer, the Exchange Agent nor any other person shall
be obligated to give notice of defects or irregularities in any tender,
nor shall any of them incur any liability for failure to give any such
notice.
2. Partial Tenders; Withdrawals. If less than the entire principal
----------------------------
amount of any Old Note evidenced by a submitted certificate or by a
Book-Entry Confirmation is tendered, the tendering holder must fill in
the principal amount tendered in the fourth column of Box 1 above. All
of the Old Notes represented by a certificate or by a Book-Entry
Confirmation delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. A certificate for Old Notes which
are not tendered will be sent to the holder, unless otherwise provided
in Box 5, as soon as practicable after the Expiration Date, in the event
that less than the entire principal amount of Old Notes represented by a
submitted certificate is tendered. In the case of Old Notes tendered by
Book-Entry Confirmation, any non-exchanged Old Notes will be credited to
the account maintained by the holder with DTC as indicated in this
Letter.
Any tender pursuant to the Exchange Offer may be withdrawn prior
to the Expiration Date. To be effective with respect to the tender of
Old Notes, a notice of withdrawal must be received by the Exchange Agent
before the Expiration Date. Any notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, identify
the Old Notes to be withdrawn (including the amount of the Old Notes),
and specify the name in which the Old Notes are registered, if different
from that of the withdrawing holder. If certificates for Old Notes have
been delivered or otherwise identified to the Exchange Agent, then,
prior to the release of the certificates the withdrawing holder must
also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed
by an Eligible Institution unless the holder is an Eligible Institution.
If Old Notes have been tendered pursuant to Book-Entry Confirmation, any
notice of withdrawal must specify the name and number of the account at
DTC to be credited with the withdrawn Old Notes and otherwise comply
with the procedures of DTC. The Exchange Agent will return the properly
withdrawn Old Notes promptly following receipt of notice of withdrawal.
All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
3. Signatures on this Letter; Assignments; Guarantee of Signatures.
---------------------------------------------------------------
If this Letter is signed by the holder(s) of Old Notes tendered hereby,
the signature must correspond with the name(s) as written on the face of
the certificate(s) for such Old Notes, without alteration, enlargement
or any change whatsoever.
Any beneficial owner whose Old Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender Old Notes should contact such holder promptly and
instruct such holder to tender Old Notes on such beneficial owner's
behalf. If such beneficial owner wishes to tender such Old Notes
himself or herself, such
<PAGE>
<PAGE>
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such beneficial
owner's name or follow the procedures described in the next paragraph.
The transfer of record ownership may take considerable time.
If Old Notes tendered hereby are registered in the name of a
person other than the signer of this Letter, the Old Notes surrendered
for exchange must be endorsed by the registered holder, or be
accompanied by a written instrument or instruments of transfer or
exchange (such as a bond power), in satisfactory form as determined by
the Issuer in its sole discretion, duly executed by the registered
holder, in each case with the signature thereon guaranteed by an
Eligible Institution.
If any of the Old Notes tendered hereby are owned by two or more
joint owners, all owners must sign this Letter. If any tendered Old
Notes are held in different names on several certificates, it will be
necessary to complete, sign and submit as many separate copies of this
Letter as there are names in which certificates are held.
If this Letter or any certificate or assignment is 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 proper evidence satisfactory to the Issuer of their authority to so
act must be submitted, unless waived by the Issuer.
4. Special Issuance and Delivery Instructions. If any Exchange Notes
------------------------------------------
to be issued in exchange for Old Notes tendered hereby are to be issued
(and any untendered Old Notes are to be reissued) in a name or to an
account different from those of the registered holder, the tax
identification number of the recipient must be indicated, Box 4 must be
completed and the tendered Old Notes must be endorsed or accompanied by
written instruments of transfer (such as bond powers) in form
satisfactory to the Issuer and duly executed by the registered holder
and the signature on the endorsement or instrument of transfer must be
guaranteed by an Eligible Institution that is a member of a recognized
signature guarantee medallion program within the meaning of Rule l7Ad-15
under the Exchange Act.
If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder
appearing on the note register for the Old Notes, Box 5 must be
completed and the signature on this Letter must be guaranteed by an
Eligible Institution.
5. Tax Identification Number. Federal income tax law requires that a
-------------------------
holder whose tendered Old Notes are accepted for exchange must provide
the Exchange Agent (as payor) with his or her correct taxpayer
identification number ("TIN"). In the case of a holder who is an
individual, the TIN is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, the holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, delivery to the holder of the Exchange Notes may be subject to
back-up withholding. (If withholding results in overpayment of taxes, a
refund may be obtained.) Exempt holders (including, among others,
corporations and certain foreign individuals) are not subject to these
back-up withholding and reporting requirements.
<PAGE>
<PAGE>
Under federal income tax laws, payments that may be made by the
Issuer on account of Exchange Notes issued pursuant to the Exchange
Offer may be subject to back-up withholding at a rate of 31%. Unless an
exemption applies, the Exchange Agent will be required to withhold, and
will withhold, 31% of the gross proceeds otherwise payable to a holder
pursuant to the Exchange Offer if the holder does not provide his or her
taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. In
order to prevent back-up withholding, each tendering holder must provide
his or her correct TIN by completing the "Substitute Form W-9" at Box 3,
certifying that the TIN provided is correct (or that the holder is
awaiting a TIN) and that: (1) the holder has not been notified by the
Internal Revenue Service that he or she is subject to back-up
withholding as a result of failure to report all interest or dividends,
or (2) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding.
Each tendering holder should complete and sign Box 2 and the
Substitute Form W-9 included at Box 3, so as to provide the information
and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
6. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
--------------
applicable to the transfer of Old Notes to it or its order pursuant to
the Exchange Offer. If, however, the Exchange Notes or certificates for
Old Notes not exchanged are to be delivered to, or are to be issued in
the name of, any person other than the record holder, or if tendered
certificates are recorded in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed by any
reason other than the transfer of Old Notes to the Issuer or its order
pursuant to the Exchange Offer, then the amount of such transfer taxes
(whether imposed on the record holder or any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of
taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering
holder.
Except as provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the certificates listed in this
Letter.
7. Waiver of Conditions. The Issuer reserves the absolute right to
--------------------
amend or waive any of the specified conditions in the Exchange Offer in
the case of any Old Notes tendered.
8. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder
-------------------------------------------------
whose certificates for Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated
above, for further instructions.
9. Requests for Assistance or Additional Copies. Questions relating
--------------------------------------------
to the procedure for tendering, as well as requests for additional
copies of the Prospectus or this Letter, may be directed to the Exchange
Agent.
IMPORTANT: THIS LETTER, TOGETHER WITH CERTIFICATES REPRESENTING
TENDERED OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER
REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR BEFORE THE EXPIRATION DATE.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OF 8 3/4% SENIOR SUBORDINATED NOTES DUE 2008
As set forth in the Prospectus dated __________, 1999 (the
"Prospectus") of Mail-Well I Corporation (the "Issuer") and its
subsidiaries under "The Exchange Offer--Guaranteed Delivery Procedures"
and in the Letter of Transmittal for 8 3/4% Senior Subordinated Notes
due 2008 (the "Letter of Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer (as defined
below) of the Issuer if: (1) certificates for the above-referenced
Notes (the "Old Notes") are not immediately available, (2) time will not
permit all required documents to reach the Exchange Agent (as defined
below) on or prior to the Expiration Date (as defined in the Prospectus)
or (3) the procedures for book-entry transfer cannot be completed on or
prior to the Expiration Date (as defined below). Such form may be
delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Exchange Agent.
To: State Street Bank and Trust Company
FACSIMILE TRANSMISSION: (617) 664-5290
CONFIRM BY TELEPHONE TO: (617) 664-5314
BY MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
State Street Bank and Trust Company
Attn: Susan Lavey, Corporate Actions
Two International Place, Fourth Floor
Boston, Massachusetts 02110
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which are
hereby acknowledged, the principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedures described in the
Prospectus and the Letter of Transmittal.
The Exchange Offer will expire at 5:00 p.m., New York City time,
on _______________, 1999, unless extended by the Issuer (the "Expiration
Date").
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of
the undersigned and every obligation of the undersigned under this
Notice of Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns,
trustees in bankruptcy and other legal representatives of the
undersigned.
SIGNATURES
X______________________________________________________
X______________________________________________________
Signature(s) of Owner(s) or Authorized Signatory
Date: __________________ , 1999
Name(s)____________________________________________________________________
(Please Print)
Capacity:__________________________________________________________________
Address:___________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.:_______________________________________________
Taxpayer Identification or Social Security No.:____________________________
Principal amount of Old Notes Exchanged: $________________________________
Certificate Nos. of Old Notes (if available):______________________________
IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO.:
Account No.:_______________________________________________________________
<PAGE>
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule l7Ad-l5 under the Securities Exchange
Act of 1934, as amended, hereby guarantees: (a) that the above-named
person(s) own(s) the above-described securities tendered hereby within
the meaning of Rule 10b-4 under the Securities Exchange Act of 1934; (b)
that such tender of the above-described securities complies with Rule
l0b-4; (c) that tender by delivery of such certificates or pursuant to
the procedure for book-entry transfer, in either case with delivery of a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, is being made by the above-
named person(s); and (d) within five Nasdaq National Market trading days
after the date of execution of this Notice of Guaranteed Delivery the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, and any other documents required
by the Letter of Transmittal will be deposited with the Exchange Agent.
Name of Firm:______________________________________________________________
Number and Street or P.O. Box:_____________________________________________
___________________________________________________________________________
(include zip code)
Tel. No.:__________________________________________________________________
Fax No.:___________________________________________________________________
Authorized Signature:______________________________________________________
Title:_____________________________________________________________________
Date:______________________________________________________________________
DO NOT SEND CERTIFICATES REPRESENTING NOTES
WITH THIS NOTICE. NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL.
