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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ x ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 1-12551
MAIL-WELL, INC.
(Exact name of Registrant as specified in its charter.)
COLORADO 84-1250533
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
23 INVERNESS WAY EAST, ENGLEWOOD, CO 80112
(Address of principal executive offices) (Zip Code)
303-790-8023
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $0.01 par value per share The New York Stock Exchange
Convertible Subordinated Notes due 2002 The New York Stock Exchange
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 19, 1999 was $536,786,482.
As of February 19, 1999, the Registrant had 48,870,907 shares of Common
Stock, $0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this form (Items 11 and 12)
is incorporated by reference from the registrant's Proxy Statement to
be filed pursuant to Regulation 14A with respect to the registrant's
Annual Meeting of Stockholders to be held on or about May 5, 1999.
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TABLE OF CONTENTS
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PART I
Item 1. Business 1
The Company 1
Growth Strategy 1
The Printing Industry 2
Acquisitions 2
Products 3
Services 6
Marketing and Distribution 7
Printing and Manufacturing 8
Materials and Supply Arrangements 11
Patents, Trademarks and Brand Names 11
Competition 11
Seasonality 12
Employees 12
Environmental 13
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Dividend Policy 15
Issuance of Stock 15
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation. 18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk. 24
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 52
PART III
Item 10. Directors and Executive Officers of Registrant 53
Item 11. Executive Compensation 55
Item 12. Security Ownership of Certain Beneficial Owners
and Management 55
Item 13. Certain Relationships and Related Transactions 55
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 56
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PART I
ITEM 1. BUSINESS
THE COMPANY
Mail-Well, Inc. is 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 42
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 certain competitive advantages in the
printing industry, including the ability to (i) utilize our network of
strategically located plants and sales offices to attract customers that
require production from multiple locations, (ii) realize cost savings as a
result of volume related purchases of paper, ink and other raw materials,
(iii) reduce overhead expense through the consolidation of certain
administrative functions for insurance, employee benefits and financial
management, (iv) increase profitability through the optimization of
equipment utilization among facilities, (v) offer customers greater
flexibility in meeting their needs due to more available capacity and
equipment capabilities and (vi) 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 report 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-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
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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 certain 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 certain "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
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 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:
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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
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 Corp. and Perfection Forms Girard, Kansas October Distributor 20
Trafton Printing, Inc. Amarillo, Texas October Commercial 9
Imperial Litho & Dryography Phoenix, Arizona November Commercial 26
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Total $739
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<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 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.
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Please refer to Notes 2 and 3 of our consolidated financial
statements included elsewhere in this report 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: (i) customized
conventional and specialty envelopes and packaging products sold
directly to end users or to independent distributors who sell to end
users ("Consumer Direct") and (ii) envelope and other products sold to
wholesalers, paper merchants, printers, brokers, office product
establishments and superstores ("Wholesale").
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
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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.
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 envelopes
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, the Company 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 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.
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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 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 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 certain 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 certain 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
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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 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
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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.
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 Company's 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: (i)
high-speed web machines, capable of folding and printing directly from
paper rolls and (ii) 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 orders
typically including customized value added features. The
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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 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
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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 the Company 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 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.
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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
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
The Company markets products under a number of trademarks and
brand names. The Company also holds or has rights to use various
patents relating to its 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 (i) 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
11
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presentation effect, (ii) 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 (iii) 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 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 the operations of the Company as a whole.
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ENVIRONMENTAL
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 certain
facilities, wastewater treatment and discharge. We have implemented
environmental programs designed to ensure that the Company operates 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 the
Company is 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, the Company will be subject to regulations being developed by
the federal Environmental Protection Agency ("EPA") 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 ("CERCLA"), 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 waste management and minimization
programs implemented by the Company and our current use of permitted
hazardous waste disposal facilities, management does 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
("GP") acquisition ("GP 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 the Company to
liability under CERCLA for historical off-site disposal practices.
Additionally, GP also agreed to indemnify and hold the Company
harmless from damages that relate to the use, condition, ownership or
operation of any purchased assets or the conduct of GP Envelope 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 (i) a $35.0 million limitation and (ii) a six-year term
limit. This indemnity also is subject to contribution arrangements
with the Company, 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 contribution arrangements. Conversely, we have agreed
to indemnify GP for (i) environmental liabilities incurred subsequent
to the closing date, (ii) 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 the Company paying 10% of the indemnifiable damages in the
first two years increasing annually to 50% in the sixth year, and (iii)
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.
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In the asset purchase agreement related to the American Envelope
Company ("American") acquisition ("American Acquisition"), American
agreed to indemnify and hold harmless the Company from certain
liabilities and obligations. In addition to an indemnification for
certain retained liabilities, the indemnification provides that (i)
American'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 (ii) to the extent that a claim consists of costs
and expenses related to any Costs of Remediation as to which American
is obligated to indemnify the Company, the parties shall contribute and
share in the items on a sliding scale, such that American 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 Acquisition,
with American's share decreasing by 10% each year thereafter until the
sixth anniversary of such closing date, when American'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 Company.
In connection with the American Acquisition, American and the
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.
ITEM 2. PROPERTIES
At December 31, 1998, the Company 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.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the New York Stock
Exchange ("NYSE") under the symbol "MWL." The following table sets
forth, for the periods indicated, the range of the high and low sales
prices for the Company's Common Stock as reported by the NYSE.
1997 HIGH LOW
---- ---- ---
First Quarter $ 7.25 $ 5.25
Second Quarter 14.50 6.58
Third Quarter 17.25 12.69
Fourth Quarter 20.50 13.69
1998
----
First Quarter $20.75 $17.63
Second Quarter 24.94 18.75
Third Quarter 22.75 8.44
Fourth Quarter 14.06 5.75
The Common Stock was split 3-for-2 in June 1997 and 2-for-1 in
June 1998. All prices reflect such splits. As of February 19, 1999,
there were approximately 501 stockholders of record and, based upon
security position listings, the Company believes that it has in excess
of 7,500 beneficial owners.
DIVIDEND POLICY
The Company has not paid a dividend on Common Stock since its
incorporation. The Company does not anticipate paying any dividends on
Common Stock in the foreseeable future because it intends to retain
earnings to finance the expansion of its business, to repay indebtedness
and for general corporate purposes. Any payment of future dividends
will be at the discretion of the Board of Directors and will depend
upon, among other things, the Company's earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions
with respect to the payment of dividends and other relevant factors.
The Company's bank credit agreements and senior subordinated notes
indenture limit the amount of dividends the Company could pay before
causing a default.
ISSUANCE OF STOCK
On April 20, 1998, the Company issued 121,764 shares of Common
Stock in connection with the acquisition of South Press, Inc. ("South
Press"), as a portion of the consideration paid to the selling
shareholders. These shares were issued to the former shareholders of
South Press (two individuals, each of whom was an "accredited investor"
as defined under Rule 501 of Regulation D) in an exempt transaction
under the Securities Act of 1933, pursuant to Section 4(2) thereof and
Regulation D thereunder.
On May 5, 1998, the Company acquired Century Index Corporation
("Century") in exchange for 184,896 shares of Common Stock. These
shares were issued to the former shareholders of Century (two
individuals, each of whom was an accredited investor) in an exempt
transaction under the Securities Act of 1933, pursuant to Section 4(2)
thereof and Regulation D thereunder.
Effective May 30, 1998, the Company acquired the following
businesses, through a merger of each respective company with and into a
newly formed wholly owned subsidiary, Mail-Well Commercial Printing,
Inc. The number of shares issued with respect to each acquisition,
subject to certain contingencies regarding delivered working capital and
indemnities, is listed after each company:
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Acquired Company Shares Issued
---------------- -------------
Color Art, Inc. 2,351,951
Accu-color, Inc. 622,391
Clarke Printing, Co. 437,984
United Lithograph, Inc. 519,568
Industrial Printing Co.,
and IPC Graphics, Inc. 896,134
French Bray, Inc. 538,040
These shares were issued to the former shareholders of the
acquired businesses (who numbered, in the aggregate and aside from
accredited investors, less than 35) in an exempt transaction under the
Securities Act of 1933, pursuant to Section 4(2) thereof and Regulation
D thereunder.
On June 1, 1998, the Company acquired Illinois Envelope, Inc., in
exchange for 48,182 shares of Common Stock. These shares were issued to
the former shareholders of Illinois Envelope (two individuals, each of
whom was an accredited investor) in an exempt transaction under the
Securities Act of 1933, pursuant to Section 4(2) thereof and Regulation
D thereunder.
On August 27, 1998, the Company issued 70,564 shares of Common
Stock in connection with the acquisition of Armstrong-White, Inc.
("Armstrong"), as a portion of the consideration paid to the selling
shareholders. These shares were issued to the former shareholders of
Armstrong (two individuals, each of whom was an accredited investor) in
an exempt transaction under the Securities Act of 1933, pursuant to
Section 4(2) thereof and Regulation D thereunder.
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ITEM 6. SELECTED FINANCIAL DATA
The summary of historical financial data presented below is
derived from the historical audited financial statements of the Company
and its predecessors, the envelope business of Georgia-Pacific ("GP
Envelope") and Pavey Envelope and Tag Corp. ("Pavey"), 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 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 herein.
<TABLE>
<CAPTION>
PREDECESSOR
COMPANIES
PERIOD ---------
FROM PERIOD
FEB. 24, FROM JAN. 1,
1994 1994
YEAR ENDED DECEMBER 31, THROUGH THROUGH
-------------------------------------------------- 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
<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:
<S> <C>
Income before extraordinary item $47.6
Net income 43.5
Income per diluted share before extraordinary item 0.94
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The following should be read in conjunction with the consolidated
historical financial statements and related notes of Mail-Well, Inc. and
its subsidiaries (the "Company") included elsewhere in this report. 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. The
Company'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 report 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
the Company's business.
<TABLE>
OVERVIEW, HISTORICAL FINANCIAL DATA BY SEGMENT (IN THOUSANDS)
<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>
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.
<PAGE>
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.
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<PAGE>
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 the Company, including acquisitions from their
purchase dates.
<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 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, the Company 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 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, the
Company 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 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
19
<PAGE>
<PAGE>
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 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 certain significant accounts and the
20
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<PAGE>
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 includes amortization expense related to
intangibles, administrative expenses and loss (gain) on disposal of
assets. Certain major production equipment is accounted for as an
operating lease on a consolidated basis while treated as a purchase on a
segment level. The Company also classifies the excess of the operating
lease expense over depreciation (the Operating Lease Expense) as a
corporate expense in analyzing segment operations.
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 the
Company 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. The Company 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 the
Company's restructuring initiative. In October 1998 the 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, the Company 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
21
<PAGE>
<PAGE>
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 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 the Company expects its
effective tax rate to be approximately 41.0%.
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, Mail-Well I Corporation
issued $300.0 million of 8 3/4% Senior Subordinated Notes ("Senior 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 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 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 Credit Agreement and a term
loan with the same bank.
22
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<PAGE>
SECURITIES OFFERINGS -- 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.
The convertible subordinated notes were issued under the shelf
registration statement and, in February 1998 the 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 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 -- The Company 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 certain systems upgrades as discussed below under "Year
2000."
INFLATION -- The effects of inflation have not been material to
the Company. 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 the Company to date. With the strengthening U.S.
Dollar, the Company'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 the Company and are not expected to have a material effect
on the Company's liquidity and capital resources.
RECENT DEVELOPMENTS
The following developments have occurred since December 31, 1998.
ACQUISITIONS -- On February 2, 1999, the Company acquired
Colorhouse, Inc., a pre-press company located in Minneapolis, Minnesota,
with approximate annual sales of $20.7 million. On February 4, 1999, the
Company 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.
YEAR 2000
The Company 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 ("Year 2000 compliant"). The Company 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. The Company 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, the Company 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. The Company is in the process of evaluating information
supplied to date
23
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<PAGE>
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 the Company, 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 the Company'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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to certain 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 the Company's financial position. The Company'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 the
Company's fixed rate long-term debt is affected by changes in long-term
interest rates.
If LIBOR were to increase 1% from the rate at December 31, 1998
and the Company borrowed the maximum amount available under its variable
rate debt ($320 million), the Company'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, the Company 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 the
Company's financial structure.
If the interest rates were to decrease 1%, the fair value of the
Company'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 the Company'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 the Company's
financial position.
24
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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 at Item 14. 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
25
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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)
26
<PAGE>
<PAGE>
<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>
27
<PAGE>
<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>
28
<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>
29
<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>
30
<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):
31
<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
32
<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.
33
<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
34
<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
========== ======= ======= ======= =====
35
<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.
36
<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.
37
<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
38
<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.
The Senior Notes are guaranteed by the U.S. subsidiaries (the
"Guarantor Subsidiaries") of MWI, all of which are wholly owned.
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.
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.
39
<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.
40
<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.
41
<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>
42
<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>
43
<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>
44
<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>
45
<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).
46
<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>
47
<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"
48
<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>
49
<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>
50
<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>
51
<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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
52
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Under the terms of the 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 & 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 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 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 Company since January 1998. Prior to that, Mr. Reilly was
Senior Vice President--Finance and Chief Financial Officer of the
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 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 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
53
<PAGE>
<PAGE>
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 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
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 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 positions 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
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 Company.
Frank P. Diassi has been a director of the 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 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 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 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 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.
54
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The sections captioned "Director Compensation", "Compensation
Committee Interlocks and Insider Participation", "Executive Compensation",
"Summary Compensation Table", "Option Grants in 1998", "Aggregated Option
Exercises in 1998 and Year End Option Values", "Compensation Committee
Report on Executive Compensation" and "Stock Price Performance Graph"
appearing in the Company's Proxy Statement filed pursuant to Regulation 14A
in connection with the 1999 Annual Meeting of Stockholders are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section captioned "Security Ownership of Certain Beneficial
Owners and Management" appearing in the Company's Proxy Statement filed
pursuant to Regulation 14A in connection with the 1999 Annual Meeting of
Stockholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
55
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
Included in Part II, Item 8 of this Report.
(a)(2) FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this Report:
Page
Schedule I Condensed Balance Sheets as of December 31, 1998 and 1997
and Condensed Statements of Operations for the Years
Ended December 31, 1998, 1997, and 1996 59
Schedule II Valuation and Qualifying Accounts for the Years Ended
December 31, 1998, 1997, and 1996 63
(a)(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3(i) Articles of Incorporation of the Company - incorporated by
reference from Exhibit 3(i) of the Company's Form 10-Q
for the quarter ended June 30, 1997.
3(ii) Bylaws of the Company - incorporated by reference from Exhibit
3.4 of the Company's Registration Statement on Form S-1
dated September 21, 1995.
4.1 Form of Certificate representing the Common Stock, par value
$0.01 per share, of the Company - incorporated by
reference from Exhibit 4.1 of the Company's Amendment
No. 1 to Form S-3 dated October 29, 1997 (Reg. No. 333-
35561).
4.2 Form of Indenture between the Company and The Bank of New York,
as Trustee, dated November 1997, relating to the
Company's $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002--incorporated by
reference from Exhibit 4.2 to the Company's Amendment
No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-
36337).
4.3 Form of Supplemental Indenture between the Company and The Bank
of New York, as Trustee, dated November 1997, relating
to the 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 Company's Amendment No. 2 to Form S-3
dated November 10, 1997 (Reg. No. 333-36337).
4.4 <F*> Indenture dated as of December 16, 1998 between Mail-Well I
Corporation ("MWI") and State Street Bank and Trust
Company, as Trustee, relating to MWI's $300,000,000
aggregate principal amount of 8-3/4% Senior Subordinated
Notes due 2008.
4.5 <F*> Form of Senior Subordinated Note.
10.1 Form of Indemnity Agreement between the Company and each of its
officers and directors - incorporated by reference from
Exhibit 10.17 of the Company's Registration Statement on
Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation and
each of its officers and directors - incorporated by
reference from Exhibit 10.18 of the 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 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 Company's
Registration Statement on Form S-1 dated March 25, 1994.
56
<PAGE>
<PAGE>
10.5 Company 1994 Stock Option Plan, as amended on May 7, 1997 -
incorporated by reference from Exhibit 10.56 of the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
10.6 Form of the Company Incentive Stock Option Agreement -
incorporated by reference from Exhibit 10.22 of the
Company's Registration Statement on Form S-1 dated March
25, 1994.
10.7 Form of the Company Nonqualified Stock Option Agreement -
incorporated by from Exhibit 10.23 of the 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 Mail-Well I Corporation, 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
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, Mail-Well I Corporation, 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 Company's Annual Report on Form 10-
K for the year ended December 31, 1996.
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 Mail-Well I
Corporation, as Servicer-incorporated by reference from
Exhibit 10.42 of the 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 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
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.14 Company 1997 Non-Qualified Stock Option Plan - incorporated by
reference from exhibit 10.54 of the 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 Company's Form 10-Q
for the quarter ended March 31, 1997
10.16 Company's Allied Acquisition Non-Qualified Stock Option Plan.
10.17 Mail-Well, Inc. 1998 Incentive Stock Option Plan.
10.18 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive
Stock Option Agreement.
10.19 Credit Agreement dated as of March 16, 1998 among Mail-Well I
Corporation, certain Guarantors, Bank of America
National Trust and Savings Association, as Agent and
other financial institutions party thereto.
10.20 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.
57
<PAGE>
<PAGE>
10.21 Participation Agreement dated as of December 15, 1997 among
Mail-Well I Corporation, Keybank National Association,
as Trustee and other financial institutions party
thereto.
10.22 Equipment Lease dated as of December 15, 1997 among Mail-Well I
Corporation, Keybank National Association, as Trustee
and other financial institutions party thereto.
10.23 Guaranty Agreement dated as of December 15, 1997 among Mail-
Well, Inc., Graphic Arts Center, Inc., Griffin Envelope
Inc., Murray Envelope Corporation, Shepard Poorman
Communications Corporation, Wisco Envelope Corp., Wisco
II, LLC, Wisco III, LLC, Mail-Well I Corporation,
Keybank National Association, as Trustee and other
financial institutions party thereto.
10.24 Stock Purchase Agreement dated as of December 15, 1997 among
Mail-Well I Corporation and Poser Business Forms, Inc.
and other Selling Shareholders party thereto,
incorporated by reference from the Company's report on
Form 8-K dated January 6, 1998.
10.25 Asset Purchase Agreement dated as of January 31, 1998 among
Lawson Mardon Packaging USA, Inc (USA), incorporated by
reference from the Company's report on Form 8-K dated
March 10, 1998.
10.26 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
Company's report on Form 8-K dated March 10, 1998.
10.27<F*> Purchase Agreement dated December 11, 1998, between MWI and
Donaldson, Lufkin & Jenrette Securities Corporation,
Prudential Securities, Incorporated, Bear, Stearns &
Co., Inc. and Hanifen, Imhoff Inc., as Initial
Purchasers, relating to MWI's $300,000,000 aggregate
principal amount of 8-3/4% Senior subordinated Notes due
2008.
10.28<F*> Registration Rights Agreement dated December 16, 1998 by and
among MWI and Donaldson, Lufkin & Jenrette Securities
Corporation, Prudential Securities, Incorporated, Bear,
Stearns & Co., Inc. and Hanifen, Imhoff Inc., as Initial
Purchasers, relating to MWI's $300,000,000 aggregate
principal amount of 8-3/4% Senior subordinated Notes due
2008.
21 <F*> Subsidiaries of the Registrant.
23.1 <F*> Consent of Deloitte & Touche LLP.
23.2 <F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
24 <F*> Powers of Attorney (reference is made to the signature page
hereof).
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.
<FN>
_____________
<F*> Filed herewith.
</TABLE>
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed on December 1, 1998, regarding
an extraordinary charge taken by the Company in the fourth
quarter due to the restructuring of the Company's envelope and
commercial printing operations and the termination of the
Company's leveraged ESOP.
A report on Form 8-K was filed on December 14, 1998 regarding
the Company's issuance and sale of the Mail-Well I Corporation
8 3/4% Senior Subordinated Notes due 2008.
58
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY SUPPLEMENTAL 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
Receivable from subsidiary 1,256 -
Note receivable from Mail-Well I Corporation 147,436 147,436
-------- --------
Total current assets 148,808 147,821
INVESTMENT IN SUBSIDIARY 299,960 172,167
INTANGIBLE ASSETS (net of accumulated amortization
of $1,109 and $150) 3,902 4,772
OTHER ASSETS - 155
-------- --------
TOTAL $452,670 $324,915
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to subsidiary $ - $ 542
Accrued interest 1,245 634
-------- --------
Total current liabilities 1,245 1,176
CONVERTIBLE SUBORDINATED NOTES 152,050 152,050
-------- --------
Total liabilities 153,295 153,226
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 299,375 171,689
-------- --------
TOTAL $452,670 $324,915
======== ========
See notes to condensed financial statements.
</TABLE>
59
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY SUPPLEMENTAL 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>
60
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. (PARENT-ONLY FINANCIAL SUPPLEMENTAL 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 624 676 223
Other assets 155 (26) (129)
--------- --------- --------
Net cash provided by (used in) operating activities 1,631 (152) (14)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary (101,304) - -
Other activity with subsidiary, net (1,887) 252 -
Issuance of note receivable from subsidiary - (147,436) -
--------- --------- --------
Net cash used in investing activities (103,191) (147,184) -
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock issuance 101,304 201 40
Proceeds from issuance of convertible subordinated notes - 147,346 -
--------- --------- --------
Net cash provided by financing activities 101,304 147,547 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>
61
<PAGE>
<PAGE>
MAIL-WELL, INC. (PARENT-ONLY SUPPLEMENTAL 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.
* * * * *
62
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES SCHEDULE II
SUPPLEMENTAL 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>
63
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, State of Colorado, on February 26,
1999.
MAIL-WELL, INC.
By: /s/ Gerald F. Mahoney
---------------------------------
Gerald F. Mahoney, Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report 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 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 report 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/ February 26, 1999
- ----------------------- Chief Executive Officer/Director
Gerald F. Mahoney
/s/ Paul V. Reilly President, Chief Operating Officer February 26, 1999
- ----------------------- and Director
Paul V. Reilly
/s/ Michael Zawalski Senior Vice President, February 26, 1999
- ----------------------- Chief Financial Officer
Michael Zawalski
/s/ Frank P. Diassi Director February 26, 1999
- -----------------------
Frank P. Diassi
/s/ Frank J. Hevrdejs Director February 26, 1999
- -----------------------
Frank J. Hevrdejs
/s/ Jerome W. Pickholz Director February 26, 1999
- -----------------------
Jerome W. Pickholz
/s/ William R. Thomas Director February 26, 1999
- -----------------------
William R. Thomas
</TABLE>
64
<PAGE>
Execution Copy
Mail-Well I Corporation
8 3/4% Senior Subordinated Notes Due 2008
-------------------------
INDENTURE
-------------------------
Dated as of December 16, 1998
-------------------------
State Street Bank and Trust Company
-------------------------
Trustee
<PAGE>
<PAGE>
<TABLE>
CROSS-REFERENCE TABLE<F*>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.05
(b) 13.03
(c) 13.03
313 (a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 13.02
(d) 7.6
314 (a) 4.03; 4.19; 13.02
(b) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) N.A.
315 (a) 7.01
(b) 7.05, 13.02
(c) 7.01
(d) 7.01; 6.05
(e) 6.11
316 (a) (last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 2.12
317 (a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318 (a) 13.01
(b) N.A.
(c) 13.01
<FN>
_____________________
N.A. means not applicable.
<F*>This Cross-Reference Table is not part of the Indenture.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE 1
Section 1.01. Definitions 1
Section 1.02. Other Definitions 17
Section 1.03. Incorporation by Reference of Trust Indenture Act 17
Section 1.04. Rules of Construction 18
ARTICLE 2 THE NOTES 18
Section 2.01. Form and Dating 18
Section 2.02. Execution and Authentication 19
Section 2.03. Registrar and Paying Agent 20
Section 2.04. Paying Agent to Hold Money in Trust 20
Section 2.05. Holder Lists 20
Section 2.06. Transfer and Exchange 21
Section 2.07. Replacement Notes 34
Section 2.08. Outstanding Notes 34
Section 2.09. Treasury Notes 35
Section 2.10. Temporary Notes 35
Section 2.11. Cancellation 35
Section 2.12. Defaulted Interest 35
Section 2.13. CUSIP Numbers 36
ARTICLE 3 REDEMPTION AND PREPAYMENT 36
Section 3.01. Notices to Trustee 36
Section 3.02. Selection of Notes to be Redeemed 36
Section 3.03. Notice of Redemption 36
Section 3.04. Effect of Notice of Redemption 37
Section 3.05. Deposit of Redemption Price 37
Section 3.06. Notes Redeemed in Part 38
Section 3.07. Optional Redemption 38
Section 3.08. Mandatory Redemption 39
Section 3.09. Offer to Purchase by Application of Net Proceeds 39
ARTICLE 4 COVENANTS 40
Section 4.01. Payment of Notes 40
Section 4.02. Maintenance of Office or Agency 41
Section 4.03. Compliance Certificate 41
Section 4.04. Taxes 42
Section 4.05. Stay, Extension and Usury Laws 42
Section 4.06. Change of Control 42
Section 4.07. Asset Sales 43
Section 4.08. Restricted Payments 44
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Section 4.09. Incurrence of Indebtedness 46
Section 4.10. Anti-Layering 48
Section 4.11. Liens 48
Section 4.12. Dividend and Other Payment Restrictions Affecting
Subsidiaries 49
Section 4.13. Transactions with Affiliates 49
Section 4.14. Additional Subsidiary Guarantees 50
Section 4.15. Limitations on Issuances of Guarantees of Indebtedness 50
Section 4.16. Business Activities 50
Section 4.17. Advances to Subsidiaries 50
Section 4.18. Payments for Consent 50
Section 4.19. Reports 51
ARTICLE 5 SUCCESSORS 52
Section 5.01. Merger, Consolidation, or Sale of Assets 52
Section 5.02. Successor Corporation Substituted 53
ARTICLE 6 DEFAULTS AND REMEDIES 53
Section 6.01. Events of Default 53
Section 6.02. Acceleration 55
Section 6.03. Other Remedies 55
Section 6.04. Waiver of Past Defaults 56
Section 6.05. Control by Majority 56
Section 6.06. Limitation on Suits 56
Section 6.07. Rights of Holders of Notes to Receive Payment 57
Section 6.08. Collection Suit by Trustee 57
Section 6.09. Trustee May File Proofs of Claim 57
Section 6.10. Priorities 58
Section 6.11. Undertaking for Costs 58
ARTICLE 7 TRUSTEE 58
Section 7.01. Duties of Trustee 58
Section 7.02. Rights of Trustee 59
Section 7.03. Individual Rights of Trustee 60
Section 7.04. Trustee's Disclaimer 60
Section 7.05. Notice of Defaults 60
Section 7.06. Reports by Trustee to Holders of the Notes 61
Section 7.07. Compensation and Indemnity 61
Section 7.08. Replacement of Trustee 62
Section 7.09. Successor Trustee by Merger, Etc 63
Section 7.10. Eligibility; Disqualification 63
Section 7.11. Preferential Collection of Claims Against Company 63
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ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE 63
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance 63
Section 8.02. Legal Defeasance and Discharge 63
Section 8.03. Covenant Defeasance 64
Section 8.04. Conditions to Legal or Covenant Defeasance 64
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions 65
Section 8.06. Repayment to Company 66
Section 8.07. Reinstatement 66
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER 67
Section 9.01. Without Consent of Holders of Notes 67
Section 9.02. With Consent of Holders of Notes 67
Section 9.03. Compliance with Trust Indenture Act 69
Section 9.04. Revocation and Effect of Consents 69
Section 9.05. Notation on or Exchange of Notes 69
Section 9.06. Trustee to Sign Amendments, Etc 69
ARTICLE 10 SUBORDINATION 70
Section 10.01. Agreement to Subordinate 70
Section 10.02. [Intentionally Omitted] 70
Section 10.03. Liquidation; Dissolution; Bankruptcy 70
Section 10.04. Default on Designated Senior Debt 70
Section 10.05. Acceleration of Notes 71
Section 10.06. When Distribution Must be Paid Over 71
Section 10.07. Notice by Company 72
Section 10.08. Subrogation 72
Section 10.09. Relative Rights 72
Section 10.10. Subordination May Not be Impaired by Company 72
Section 10.11. Distribution or Notice to Representative 73
Section 10.12. Rights of Trustee and Paying Agent 73
Section 10.13. Authorization to Effect Subordination 73
Section 10.14. Amendments 73
ARTICLE 11 GUARANTEES 74
Section 11.01. Note Guarantees 74
Section 11.02. Limitation of Guarantor's Liability 75
Section 11.03. Execution and Delivery of Note Guarantees 75
Section 11.04. Guarantors May Consolidate, Etc., on Certain Terms 75
Section 11.05. Releases Following Sale of Assets 76
Section 11.06. Trustee to Include Paying Agent 77
Section 11.07. Subordination of Note Guarantees 77
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ARTICLE 12 SATISFACTION AND DISCHARGE 77
Section 12.01. Satisfaction and Discharge 77
Section 12.02. Application of Trust 78
ARTICLE 13 MISCELLANEOUS 79
Section 13.01. Trust Indenture Act Controls 79
Section 13.02. Notices 79
Section 13.03. Communication by Holders of Notes with Other Holders
of Notes 80
Section 13.04. Certificate and Opinion as to Conditions Precedent 80
Section 13.05. Statements Required in Certificate or Opinion 80
Section 13.06. Rules by Trustee and Agents 81
Section 13.07. No Personal Liability of Directors, Officers, Employees
and Stockholders 81
Section 13.08. Governing Law 81
Section 13.09. No Adverse Interpretation of Other Agreements 81
Section 13.10. Successors 81
Section 13.11. Severability 81
Section 13.12. Counterpart Originals 82
Section 13.13. Table of Contents, Headings, Etc 82
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF SUBSIDIARY GUARANTEE
Exhibit E FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit F FORM OF INTERCOMPANY NOTE
</TABLE>
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INDENTURE dated as of December 16, 1998 among Mail-Well I
Corporation, a Delaware corporation (the "Company"), the Guarantors (as
defined herein) listed on Schedule A hereto, and State Street Bank and
Trust Company, a Massachusetts trust company, as trustee (the
"Trustee").
The Company, the Guarantors, and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the
Holders of the 8 3/4% Series A Senior Subordinated Notes due 2008 (the
"Series A Notes") and the 8 3/4% Series B Senior Subordinated Notes due
2008 (the "Exchange Notes" and, together with the Series A Notes, the
"Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means the Global Note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with and registered in the name of the Depositary
or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
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 (ii) Indebtedness secured by a
Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. 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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules
and procedures of the Depositary, Euroclear and Cedel Bank that apply to
such transfer or exchange.
"Asset Sale" means, (i) 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 Section 4.06 and/or the provisions
of Article 5 hereof and not by the provisions of Section 4.07; and (ii)
the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale by the Company or any of its Restricted
Subsidiaries of Equity Interests in any of its Subsidiaries.
Notwithstanding
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the preceding, the following items shall not be deemed to be Asset
Sales: (i) 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; (ii) a transfer of
assets between or among the Company and its Wholly Owned Restricted
Subsidiaries; (iii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary; and (iv) a Restricted Payment that is permitted
under Section 4.08 hereof.
"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
13d-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)(iii) 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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company,
or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means, (i) in the case of a corporation,
corporate stock; (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock; (iii) in the case
of a partnership or limited liability company, partnership or membership
interests (whether general or limited); and (iv) any other interest or
participation that confers on a Person the right to receive a share of
the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the
full faith and credit of the United States government or any agency or
instrumentality thereof having maturities of not more than one year from
the date of acquisition, (iii) demand or time deposits, certificates of
deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case with any
lender party to the Existing Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and
a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the
types
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described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within one year after the date of acquisition,
and (vi) investments in money market or other mutual funds at least 95%
of whose assets comprise securities described in clauses (ii) through
(v) above.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following:
(i) 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)(iii) of the Exchange Act) other than a Principal
or a Related Party of a Principal; (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company; (iii) the consummation
of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined
above), other than the 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; (iv) 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 (v) 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.
"Company" means Mail-Well I Corporation, a Delaware corporation,
and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(i) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale, to the extent such losses were
deducted in computing such Consolidated Net Income; plus (ii) provision
for taxes based on income or profits of such Person and its Subsidiaries
for such period, to the extent that such provision for taxes was
deducted in computing such Consolidated Net Income; plus (iii)
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 (iv) 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 (v) non-cash items increasing such Consolidated Net Income for
such period, other than items
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that were accrued in the ordinary course of business, in each case, on a
consolidated basis and determined in accordance with GAAP.
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: (i) the Net
Income (but not loss) of any Person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the specified Person or a Wholly Owned Subsidiary
thereof; (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income
is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders;
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded; (iv) the 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 (v) 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: (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such
date; plus (ii) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of preferred stock 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: (i) was a member of such Board of Directors on the Issue Date; or
(ii) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of the Board of Directors of the Parent Company at the time of
such nomination or election.
"Convertible Notes" means the 5% Convertible Subordinated Notes
due 2002 of Mail-Well, Inc. outstanding as of the date of this
Indenture.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as
to which the Trustee may give notice to the Company.
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"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.
"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06 hereof,
in the form of Exhibit A-1 hereto except that such Note shall not bear
the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all
successors thereto appointed as depositary hereunder and having become
such pursuant to the applicable provision of this Indenture.
"Designated Senior Debt" means, (i) all Senior Debt under the
Credit Facilities; and (ii) any Senior Debt permitted under this
Indenture the principal amount of which is $50 million or more and that
has been designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon
the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the
option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature; provided,
however, that a class of Capital Stock shall not be Disqualified Stock
hereunder solely as the result of any maturity or redemption that is
conditioned upon, and subject to, compliance with Section 4.08 hereof.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"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.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means those notes, having terms substantially
identical to the Notes, offered to the Holders of the Notes under the
Exchange Offer Registration Statement.
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"Exchange Offer" means the offer made to the Holders of the Notes
to exchange their Notes for the Exchange Notes.
"Exchange Offer Registration Statement" means that certain
registration statement filed by the Company with the Commission to
register the Exchange Offer.
"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: (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
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 (ii) the consolidated interest
expense of such Person and its Restricted Subsidiaries that was
capitalized during such period; plus (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one
of its Restricted Subsidiaries or secured by a Lien on assets of such
Person or one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus (iv) 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: (i) 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 (iii) of the proviso set forth in the definition of
Consolidated Net Income; (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date,
shall be excluded; and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with 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.
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"Foreign Subsidiary" means any non-U.S. domiciled Subsidiary.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements,
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect
from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form
of Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b),
2.06(d) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued
under this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment
of which guarantee or obligations the full faith and credit of the
United States is pledged.
"Guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of
business, direct or indirect, in any manner including, without
limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantors" means each of: (i) the Parent Company, (ii) each
other entity listed on Schedule A hereto; and (iii) any other Subsidiary
of the Company or the Parent Company that executes a Note Guarantee in
accordance with the provisions of this Indenture and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under: (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements; and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or the value of foreign
currencies purchased or received by such Person in the ordinary course
of business.
"Holder" means the Person in whose name a Note 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:
(i) borrowed money; (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement agreements in
respect thereof); (iii) banker's acceptances; (iv) representing Capital
Lease Obligations; (v) 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 (vi) 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: (i) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as defined in Rule 501(a)(i), (ii), (iii) or
(vii) under the Securities Act.
"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 Exhibit F to this 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 Section 4.03(c).
"Issue Date" shall mean December 16, 1998.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of Boston, Massachusetts or at a place
of payment are authorized by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by
such Holders in connection with the Exchange Offer.
"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.
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"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"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: (i) any gain (but not loss),
together with any related provision for taxes on such gain (but not
loss), realized in connection with: (a) any Asset Sale; 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 (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related provision
for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received 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 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: (i) 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; (ii)
no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder
of any other Indebtedness (other than the Notes) 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 (iii) 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.
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Note Guarantee" means, individually and collectively, the
guarantees given by the Guarantors pursuant to Article 11 hereof,
including a notation in the Notes substantially in the form attached
hereto as Exhibit D.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
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"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of such
Person, or any Guarantor, as applicable.
"Officers' Certificate" means a certificate signed on behalf of
the Company by two Officers of the Company, one of whom must be the
principal executive officer, the principal financial officer or the
principal accounting officer of the Company, that meets the requirements
of Section 13.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of
Section 12.05 hereof. The counsel may be an employee of or counsel to
the Company (or any Guarantor, if applicable), any Subsidiary of the
Company or the Trustee.
"Parent Company" means, Mail-Well, Inc., a Colorado corporation.
"Participant" means, with respect to DTC, Euroclear or Cedel Bank,
a Person who has an account with DTC, Euroclear or Cedel Bank,
respectively (and, with respect to DTC, shall include Euroclear and
Cedel Bank).
"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 Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Debt (and
any debt securities issued in exchange for Senior Debt) to substantially
the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of this Indenture.
"Permitted Investments" means, (i) any Investment in the Company
or in a Restricted Subsidiary of the Company; (ii) any Investment in
Cash Equivalents; (iii) 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;
(iv) 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 Section 4.02 hereof; (v) Investments existing as of the
Issue Date; (vi) any acquisition of assets solely in exchange for the
issuance of Equity Interests of the Company; (vii) accounts receivable,
endorsements for collection, deposits or similar Investments arising in
the ordinary course of business; (viii) any Investment by the Company or
a Restricted Subsidiary in assets of a Permitted Business or assets to
be used in a Permitted Business; (ix) 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; (x) 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 (xi) 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
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taken together with all other Investments made pursuant to this clause
(xi) since the Issue Date and existing at the time such Investment was
made, did not exceed $25 million.
"Permitted Liens" means, (i) Liens securing Senior Debt; (ii)
Liens in favor of the Company or its Restricted Subsidiaries; (iii)
Liens when the 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 Notes, in which case the Lien securing
such Obligation must be subordinate and junior to the Lien securing the
Notes with the same or lesser relative priority as such Obligation shall
have been with respect to the Notes; (iv) 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; (v) 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; (vi) 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; (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by Section 4.04(b)(iv) hereof, covering only the
assets acquired with such Indebtedness; (viii) Liens existing on the
date of this Indenture; (ix) Liens on assets of Restricted Subsidiaries
to secure Senior Debt of such Restricted Subsidiaries that are permitted
by this Indenture to be incurred; (x) 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; (xi) 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 natural incurred in the ordinary course of business; (xii)
easements, rights-of-way, restrictions, defects or irregularities in
title and other similar charges or incumbrances not interfering in any
material respect with the business of the Company or any of its
Subsidiaries; (xiii) purchase money liens (including extensions and
renewals thereof); (xiv) 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 (xv) judgment and attachment Liens not giving rise to
an Event of Default; (xvi) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or warranty
requirements; (xvii) liens arising out of consignment or similar
arrangements for the sale of goods; (xviii) any interest or title of a
lessor in property subject to any Capital Lease Obligation or operating
lease; (xix) 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, (xx)
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; (xxi) Liens securing Hedging Obligations that are otherwise
permitted under this Indenture; (xxii) leases or subleases granted to
others that do not materially interfere with the ordinary course of
business of the Company and its Subsidiaries; (xxiii) Liens arising from
filing Uniform Commercial Code financing statements regarding leases;
(xxiv) 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; (xxv) Liens in favor of collecting or payor banks
having a right of setoff, revocation,
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refund or chargeback with respect to money or instruments of the Company
or any Subsidiary on deposit with or in possession of such bank; (xxvi)
Liens to secure Non-Recourse Debt; and (xxvii) Liens not otherwise
permitted by clauses (i) through (xxvi) 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, (i) 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 (ii) payment to
the Parent Company to enable the Parent Company to make any 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 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 Affiliated Group and (b) any Tax Payments shall
either be 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 or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its
Restricted Subsidiaries (other that intercompany Indebtedness); provided
that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued interest on
the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount reasonable expenses incurred in connection
therewith including premiums paid, if any, to the Holder thereof); (ii)
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by 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).
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"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.
"Private Placement Legend" means the legend set forth in Section
2.07(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"RSTD Global Note" means the Global Note in the form of Exhibit A-
1 hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with and registered in the name of the Depositary or its
nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes transferred or exchanged to the Company or
any of its Subsidiaries, pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144 under the Securities
Act.
"Registration Rights Agreement" means that certain agreement among
the Company and Donaldson, Lufkin & Jenrette Securities Corporation,
Prudential Securities Incorporated, Bear, Stearns & Co. Inc. and
Hanifen, Imhoff Inc. requiring the Company to file the Exchange Offer
Registration Statement and the Shelf Registration Statement.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation
S Temporary Global Note upon expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note
in the form of Exhibit A-2 hereto bearing the Private Placement Legend
and deposited with or on behalf of and registered in the name of the
Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on
Rule 903 of Regulation S.
"Related Party" with respect to any Principal means, (i) any
controlling stockholder, 80% or more owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such
Principal; or (ii) 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 (i).
"Representative" means this Indenture trustee or other trustee,
agent or representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee
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customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined
in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referenced Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, (i) all Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto; (ii) any
other Indebtedness permitted to be incurred by the Company under the
terms of this Indenture unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the Notes; and (iii) all
Obligations with respect to the items listed in the preceding clauses
(i) and (ii). Notwithstanding anything to the contrary in the preceding,
Senior Debt will not include: (i) any liability for federal, state,
local or other taxes owed or owing by the Company; (ii) any Indebtedness
of the Company to any of its Subsidiaries or other Affiliates; (iii)
any trade payables; or (iv) any Indebtedness that is incurred in
violation of this 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 this Indenture.
"Shelf Registration Statement" means that certain shelf
registration statement filed by the Company with the Commission to
register resales of the Notes or the Exchange Notes.
"Significant Subsidiary" means any Subsidiary that is, or would
be, a "significant subsidiary" as defined 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.
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"Special Purpose Finance Vehicle" means any corporation,
partnership, joint venture, association, joint-stock company, or trust,
the common stock or similar securities of which are owned by the Company
or the Parent Company, formed for the sole purpose of facilitating or
engaging in financing transactions or a series of financing
transactions, including the issuance of trust preferred stock or similar
securities. Any Special Purpose Finance Vehicle formed by the Company
shall have restrictions to that effect in its organizational documents
and other restrictions that are typical for a special purpose entity,
including bankruptcy remoteness and a requirement that there be one or
more independent directors, general partners or trustees (as
applicable).
"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.
"Subsidiary" means, with respect to any Person: (i) any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and (ii)
any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax Payment" means any payment of foreign, federal, state or
local tax liabilities.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA, except as provided in Section 9.03 hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Global Note" means a permanent global Note in the
form of Exhibit A-1 attached hereto that bears the Global Note Legend
and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Notes
that do not bear the Private Placement Legend.
"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: (i) has no Indebtedness other than Non-
Recourse Debt; (ii) 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 or
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; (iii) is a Person with respect to
which neither the Company
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nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (iv) has
not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and (v) has at least one director on its board of
directors that is not a director or executive officer of 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 is permitted by Section 4.08 hereof. 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 this 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 Section 4.09 hereof, the Company shall be in default of
such covenant. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is
permitted under Section 4.09 hereof, calculated on a pro forma basis as
if such designation had occurred at beginning of the four-quarter
reference period; and (ii) no Default or Event of Default would be in
existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing: (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by (ii) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned 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.
"Wholly Owned Subsidiary" of any Person means a 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 or by one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of
such Person.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in
Section
<S> <C>
"Affiliate Transaction" 4.13
"Asset Sale Offer" 3.09
"Calculation Date" 1.01
"Change of Control Offer" 4.06
"Company Affiliated Group" 1.01
"Covenant Defeasance" 8.03
"DTC" 2.03
"Event of Default" 6.01
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Blockage Notice" 10.04
"Payment Default" 6.01
"Permitted Debt" 4.09
"Purchase Date" 3.09
"Registrar" 2.03
"Restricted Payment" 4.08
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this
Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Note Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company or any Guarantor and any
successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule
under the TIA have the meanings so assigned to them.
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and in the plural
include the singular;
(v) provisions apply to successive events and transactions; and
(vi) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The notation on each
Note relating to the Note Guarantees shall be substantially in the form
set forth on Exhibit D, which is a part of this Indenture. The Notes
may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Notes (including the
Note Guarantees) shall constitute, and are hereby expressly made, a part
of this Indenture and the Company, the Guarantors, and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby. However, to the extent
any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be
controlling.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 attached hereto (including the Global Note Legend and the
"Schedule of Exchanges in the Global Note" attached thereto). Notes
issued in definitive form shall be substantially in the form of Exhibit
A-1 attached hereto (but without the Global Note Legend and without the
"Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time
to time endorsed thereon and that the aggregate principal amount of
outstanding Notes represented thereby may from time to time be reduced
or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian,
at the direction of the Trustee, in accordance with instructions given
by the Holder thereof as required by Section 2.06 hereof.
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Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note
(accompanied by a notation of the Note Guarantees duly endorsed by the
Guarantors), which shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Trustee, at its Boston, Massachusetts
office, as custodian for the Depositary, and registered in the name of
the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel Bank, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by
the Trustee of (i) a written certificate from the Depositary, together
with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners
thereof who acquired an interest therein during the Restricted Period
pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A
Global Note or a RSTD Global Note bearing a Private Placement Legend,
all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an
Officers' Certificate from the Company. Following the termination of
the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes pursuant to the Applicable
Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S
Temporary Global Note. The aggregate principal amount of the Regulation
S Temporary Global Note and the Regulation S Permanent Global Notes may
from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case
may be, in connection with transfers of interest as hereinafter
provided.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the
"General Terms and Conditions of Cedel Bank" and "Customer Handbook" of
Cedel Bank shall be applicable to transfers of beneficial interests in
the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes that are held by the Agent Members through Euroclear or
Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the
Notes and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by
two Officers, authenticate Notes, with the Note Guarantees endorsed
thereon, for original issue up to the aggregate principal amount stated
in paragraph 4 of the Notes. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this
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Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to
deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company and the Guarantors shall maintain an office or agency
where Notes may be presented for registration of transfer or for
exchange ("Registrar") and an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company
may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of
any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of the Guarantors may act
as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global
Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for
the payment of principal, premium or Liquidated Damages, if any, or
interest on the Notes, and will notify the Trustee of any default by the
Company or the Guarantors in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all
money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Guarantor) shall have no further liability for the money. If the
Company or a Guarantor acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying
Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section
312(a). If the Trustee is not the Registrar, the Company and/or the
Guarantors shall furnish to the Trustee at least seven Business Days
before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders
of Notes and the Company and the Guarantors shall otherwise comply with
TIA Section 312(a).
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Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of
the Depositary, by a nominee of the Depositary to the Depositary or to
another nominee of the Depositary, or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for
Definitive Notes if (i) the Company delivers to the Trustee notice from
the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under
the Exchange Act and, in either case, a successor Depositary is not
appointed by the Company within 90 days after the date of such notice
from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes
prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Registrar of any certificates required pursuant to Rule 903 under
the Securities Act. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Notes (accompanied by a notation
of the Note Guarantees duly endorsed by the Guarantors) shall be issued
in such names as the Depositary shall instruct the Trustee. Global
Notes also may be exchanged or replaced, in whole or in part, as
provided in Sections 2.07 and 2.11 hereof. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to Section 2.07 or 2.11 hereof, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global
Note may not be exchanged for another Note other than as provided in
this Section 2.06(a), however, beneficial interests in a Global Note may
be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the Private
Placement Legend; provided, however, that prior to the expiration
of the Restricted Period transfers of beneficial interests in the
Regulation S Temporary Global Note may not be made to a U.S.
Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Beneficial interests in any Unrestricted
Global Note may be transferred only to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required
to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests (other than a transfer of a
beneficial interest in a Global Note to a Person who takes
delivery thereof in the form of a beneficial interest in the same
Global Note), the transferor of such beneficial interest must
deliver to the Registrar either (A) (i) a written order from a
Participant or an Indirect Participant given to the
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Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest
in another Global Note in an amount equal to the beneficial interest
to be transferred or exchanged and (ii) instructions given in
accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such
increase or (B) (i) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with
the Applicable Procedures directing the Depositary to cause to be
issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (ii) instructions
given by the Depositary to the Registrar containing information
regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (i)
above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities
Act. Upon an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the equirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests
in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture, the Notes and otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note
may be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in another Restricted Global Note if
the transfer complies with the requirements of clause (ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (i) thereof;
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Temporary
Global Note or the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (ii) thereof;
and
(C) if the transferee will take delivery in the form
of a beneficial interest in the RSTD Global Note, then the
transferor must deliver (x) a certificate in the form of
Exhibit B hereto, including the certifications and
certificates and Opinion of Counsel required by item (iii)
thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the
Unrestricted Global Note. A beneficial interest in any Restricted
Global Note may be exchanged by any holder thereof for a
beneficial interest in an Unrestricted Global Note or transferred
to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
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(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of the beneficial interest
to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, is not (i) a broker-
dealer, (ii) a Person participating in the distribution of
the Exchange Notes or (iii) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (i)(a) thereof;
(ii) if the holder of such beneficial interest
in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take
delivery thereof in the form of a beneficial interest
in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including
the certifications in item (iv) thereof; and
(iii) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Registrar to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement
Legend are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes (accompanied by a
notation of the Note Guarantees duly endorsed by the Guarantors) in an
aggregate principal amount equal to the principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in
the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note or to transfer such beneficial interest to a
Person who
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takes delivery thereof in the form of a Definitive
Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (ii)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (i) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (ii) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements
of the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(iii)(A) thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (iii) thereof, if
applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (iii)(B) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(iii)(C) thereof, the Trustee shall cause the aggregate
principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a
Definitive Note (accompanied by a notation of the Note
Guarantees duly endorsed by the Guarantors) in the
appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest
shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject
to all restrictions on transfer contained therein.
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(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof,
a beneficial interest in the Regulation S Temporary Global Note
may not be (A) exchanged for a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule
903(c)(iii)(B) under the Securities Act or (B) transferred to a
Person who takes delivery thereof in the form of a Definitive Note
prior to the conditions set forth in clause (A) above or unless
the transfer is pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Notwithstanding 2.06(c)(i) hereof, a holder of a
beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of such beneficial interest,
in the case of an exchange, or the transferee, in the case
of a transfer, is not (i) a broker-dealer, (ii) a Person
participating in the distribution of the Exchange Notes or
(iii) a Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(i) if the holder of such beneficial interest
in a Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does
not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit C hereto,
including the certifications in item (i)(b) thereof;
(ii) if the holder of such beneficial interest
in a Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take
delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (iv)
thereof; and
(iii) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement
Legend are not required in order to maintain
compliance with the Securities Act.
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(iv) If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to
transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive
Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(ii) hereof, the Trustee shall
cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive
Note (accompanied by a notation of the Note Guarantees
duly endorsed by the Guarantors) in the appropriate
principal amount. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this
Section 2.06(c)(iv) shall be registered in such name
or names and in such authorized denomination or
denominations as the holder of such beneficial
interest shall instruct the Registrar through
instructions from the Depositary and the Participant
or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names
such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iv) shall not bear the Private
Placement Legend. A beneficial interest in an
Unrestricted Global Note cannot be exchanged for a
Definitive Note bearing the Private Placement Legend
or transferred to a Person who takes delivery thereof
in the form of a Definitive Note bearing the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) If any Holder of a Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in
a Restricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications
in item (ii)(b) thereof;
(B) if such Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (i) thereof;
(C) if such Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (ii) thereof;
(D) if such Definitive Note is being transferred
pursuant to an exemption from the registration requirements
of the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(iii)(A) thereof;
(E) if such Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (iii) thereof, if
applicable;
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(F) if such Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (iii)(B) thereof; or
(G) if such Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(iii)(C) thereof, the Trustee shall cancel the Definitive
Note, increase or cause to be increased the aggregate
principal amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note, and in all other cases,
the RSTD Global Note.
(ii) A Holder of a Restricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, is not (i) a
broker-dealer, (ii) a Person participating in the
distribution of the Exchange Notes or (iii) a Person who is
an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(i) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (i)(c)
thereof;
(ii) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (iv)
thereof; and
(iii) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company to the effect
that such exchange or transfer is in compliance with
the Securities Act, that the restrictions on transfer
contained herein and in the Private Placement Legend
are not required in order to maintain compliance with
the Securities Act, and such Definitive Notes
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are being exchanged or transferred in compliance with
any applicable blue sky securities laws of any State
of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes
and increase or cause to be increased the aggregate principal amount of
the Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request
for such an exchange or transfer, the Trustee shall cancel the
applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee
shall authenticate one or more Unrestricted Global Notes (accompanied by
a notation of the Note Guarantees duly endorsed by the Guarantors) in an
aggregate principal amount equal to the principal amount of beneficial
interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to
such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Registrar the Definitive Notes duly endorsed
or accompanied by a written instruction of transfer in form satisfactory
to the Registrar duly executed by such Holder or by his attorney, duly
authorized in writing. In addition, the requesting Holder shall provide
any additional certifications, documents and information, as applicable,
pursuant to the provisions of this Section 2.06(e).
(i) Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof if the
Registrar receives the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (i) thereof;
(B) if the transfer will be made pursuant to Rule
903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (ii) thereof; and
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required
by item (iii) thereof, if applicable.
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(ii) Any Restricted Definitive Note may be exchanged by the
Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant
to the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an exchange,
or the transferee, in the case of a transfer, is not (i) a
broker-dealer, (ii) a Person participating in the
distribution of the Exchange Notes or (iii) a Person who is
an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(i) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including
the certifications in item (i)(a) thereof;
(ii) if the Holder of such Restricted
Definitive Notes proposes to transfer such Notes to a
Person who shall take delivery thereof in the form of
an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit B hereto, including
the certifications in item (iv) thereof; and
(iii) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Company to the effect
that such exchange or transfer is in compliance with
the Securities Act, that the restrictions on transfer
contained herein and in the Private Placement Legend
are not required in order to maintain compliance with
the Securities Act, and such Restricted Definitive
Note is being exchanged or transferred in compliance
with any applicable blue sky securities laws of any
State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer
such Notes to a Person who takes delivery thereof in the form of
an Unrestricted Definitive Note. Upon receipt of a request for
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder
thereof. Unrestricted Definitive Notes cannot be exchanged for or
transferred to Persons who take delivery thereof in the form of a
Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer
in accordance with the Registration Rights Agreement, the Company shall
issue and, upon receipt of an authentication order in accordance with
Section 2.02, the Trustee shall authenticate (i) one or more
Unrestricted Global Notes (accompanied by a notation of the Note
Guarantees duly endorsed by the Guarantors) in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes
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tendered for acceptance by persons that are not (x) broker-dealers, (y)
Persons participating in the distribution of the Exchange Notes or (z)
Persons who are affiliates (as defined in Rule 144) of the Company and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes
(accompanied by a notation of the Note Guarantees duly endorsed by the
Guarantors) in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the
Exchange Offer. Concurrent with the issuance of such Notes, the Trustee
shall cause the aggregate principal amount of the applicable Restricted
Global Notes to be reduced accordingly, and the Company shall execute
and the Trustee shall authenticate and deliver to the Persons designated
by the Holders of Definitive Notes so accepted Definitive Notes in the
appropriate principal amount.
(g) Legends. The following legends shall appear on the face of
all Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (i) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), OR (B) IT IS NOT A U.S. PERSON, IS NOT
ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (ii) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING
INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE
SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES
ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB
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IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND,
IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AND (iii) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
NOTE OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE
902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS."
(B) Notwithstanding the foregoing, any Global Note
or Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or
(f) to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a
legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS
DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON
UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS
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GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION
PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY
GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such
Global Note shall be returned to or retained and canceled by the Trustee
in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Note is exchanged
for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such
Global Note, by the Trustee or by the Depositary at the direction of the
Trustee, to reflect such reduction; and if the beneficial interest is
being exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement
shall be made on such Global Note, by the Trustee or by the Depositary
at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Global Notes and Definitive Notes (in each case, accompanied by a
notation of the Note Guarantees duly endorsed by the Guarantors)
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a
Definitive Note for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable
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in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer
pursuant to Sections 2.10, 3.06, 4.02, 4.06 and 9.05 hereof).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole
or in part, except the unredeemed portion of any Note being
redeemed in part.
(iv) All Global Notes and Definitive Notes (in each case,
accompanied by a notation of the Note Guarantees duly endorsed by
the Guarantors) issued upon any registration of transfer or
exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company and the Guarantors, evidencing the same
debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Notes during a period
beginning at the opening of business 15 days before the day of
mailing of notice of redemption and ending at the close of
business on the day of such mailing, (B) to register the transfer
of or to exchange any Note so selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed
in part or (C) to register the transfer of or to exchange a Note
between a record date and the next succeeding Interest Payment
Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes and for all
other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes (in each case, accompanied by a notation of the
Note Guarantees duly endorsed by the Guarantors) in accordance
with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a transfer or exchange may be submitted by
facsimile.
(ix) Each Holder of a Note agrees to indemnify the
Company and the Trustee against any liability that may result from
the transfer, exchange or assignment of such Holder's Note in
violation of any provision of this Indenture and/or applicable
United States federal or state securities law.
(x) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in any
Note (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Note)
other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do
so if and when expressly required by the terms of, this Indenture,
and to examine the same to determine substantial compliance as to
form with the express requirements hereof.
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(j) Each beneficial owner of an interest in a Note agrees to
indemnify the Company and the Trustee against any liability that may
result from the transfer, exchange or assignment by such beneficial
owner of such interest in violation of any provision of this Indenture
and/or applicable United States federal or state securities law.
(k) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among beneficial owners of interest in any Global Note) other than to
require delivery of such certificate and other documentation or evidence
as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to
determine substantial compliance as to form with the express
requirements hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of
the Company, shall authenticate a replacement Note (accompanied by a
notation of the Note Guarantees duly endorsed by the Guarantors) if the
Trustee's requirements are met. An indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Guarantors, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company
and the Guarantors and shall be entitled to all of the benefits of this
Indenture equally and proportionately with all other Notes duly issued
hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated
by the Trustee except for those canceled by it, those delivered to it
for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and
those described in this Section as not outstanding. Except as set forth
in Section 2.09 hereof, a Note does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after
that date such Notes shall be deemed to be no longer outstanding and
shall cease to accrue interest.
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Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company, by any Guarantor or by any Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any Guarantor, shall be considered as
though not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction,
waiver or consent, only Notes that a Responsible Officer of the Trustee
actually knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes (accompanied
by a notation of the Note Guarantees duly endorsed by the Guarantors)
upon a written order of the Company signed by two Officers of the
Company. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to
the Trustee. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Notes (accompanied by a
notation of the Note Guarantees duly endorsed by the Guarantors) in
exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Notes
surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall return such canceled Notes to the Company.
The Company may not issue new Notes to replace Notes that it has paid or
that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If either the Company or any Guarantor defaults in a payment of
interest on the Notes, it or they (to the extent of their obligations
under the Note Guarantees) shall pay the defaulted interest in any
lawful manner plus, to the extent lawful, interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent
special record date, in each case at the rate provided in the Notes and
in Section 4.01 hereof. The Company shall notify the Trustee in writing
of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the
special record date, the Company (or, upon the written request of the
Company, the Trustee in the name and at the expense of the Company)
shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such
interest to be paid.
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Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as
contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Notes, and any
such redemption shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 35 days but not more than 60 days before a redemption
date, an Officers' Certificate setting forth (i) the clause of this
Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the principal amount of Notes to be redeemed and
(iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the
Trustee will select Notes for redemption on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more
than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption may not be
conditional.
If any Note is to be redeemed in part only, the notice of
redemption that relates to that Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion of the original Note will be issued in
the name of the Holder thereof upon cancellation of the original Note.
Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall
mail or cause to be mailed, by first class mail, a notice of redemption
to each Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed (including cusip
numbers) and shall state:
(a) the redemption date;
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(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed;
and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however,
that the Company shall have delivered to the Trustee, at least 45 days
prior to the redemption date, an Officers' Certificate requesting that
the Trustee give such notice and setting forth the information to be
stated in such notice as provided in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of
redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Notes to be
redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Trustee or the Paying
Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to
accrue on the Notes or the portions of Notes called for redemption. If
a Note is redeemed on or after an interest record date but on or prior
to the related interest payment date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note
called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful
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on any interest not paid on such unpaid principal, in each case at the
rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note
(accompanied by a notation of the Note Guarantees duly endorsed by the
Guarantors) equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes will pursuant to
this Section 3.07 prior to December 15, 2003. Thereafter, the Company
may redeem all or a part of these 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:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 104.375%
2004 102.917%
2005 101.458%
2006 and thereafter 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07 at any time prior to December 15, 2001, the Company may on any one
or more occasions redeem up to 35% of the aggregate principal amount of
Notes originally issued under this 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: (i) at least $195 million in
aggregate principal amount of Notes remains outstanding immediately
after the occurrence of such redemption (excluding Notes held by the
Parent Company, the Company and their Subsidiaries); and (ii) the
redemption must occur within 45 days of the date of the closing of such
Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
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Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.06 and 4.07 hereof, the
Company shall not be required to make mandatory redemption payments with
respect to the Notes.
Section 3.09. Offer to Purchase by Application of Net Proceeds.
In the event that, pursuant to Section 4.07 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that
a longer period is required by applicable law (the "Offer Period").
Promptly after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.07 hereof (the "Offer
Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are
made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered
at the close of business on such record date, and no additional interest
shall be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.07 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased
and may not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the
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Company, or a Paying Agent at the Address specified in the notice at
least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes
to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes (accompanied by a notation of the Note Guarantees
duly endorsed by the Guarantors) equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by book-
entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered,
all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may
be, shall promptly mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly
issue a new Note (in each case, accompanied by a notation of the Note
Guarantees duly endorsed by the Guarantors), and the Trustee, upon
written request from the Company shall authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted
shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the
manner provided in the Notes. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other
than the Company or any Guarantor thereof, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Company shall
pay all Liquidated Damages, if any, in the same manner on the dates and
in the amounts set forth in the Registration Rights Agreement.
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The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest
rate on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard
to any applicable grace period) at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Trustee
or an affiliate of the Trustee, Registrar or co-registrar) where Notes
may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company or the Guarantors in
respect of the Notes and this Indenture may be served. The Company
shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an
office or agency in the Borough of Manhattan, the City of New York for
such purposes. The Company shall give prompt written notice to the
Trustee of any such designation or rescission and of any change in
location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.03.
Section 4.03. Compliance Certificate.
(a) The Company and the Guarantors shall deliver to the Trustee,
within 90 days after the end of the fiscal year, an Officers'
Certificate stating that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal year has been made under
the supervision of the signing Officers with a view to determining
whether the Company or such Guarantor, as the case may be, has kept,
observed, performed and fulfilled its obligations under this Indenture
and the Guarantees, respectively, and further stating, as to each such
Officer signing such certificate, that to the best of his or her
knowledge the Company or such Guarantor, as the case may be, has kept,
observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of
any of the terms, provisions and conditions of this Indenture (or, if a
Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and
what action the Company or such Guarantor, as the case may be, is taking
or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest, if any, on
the Notes is prohibited or if such event has occurred, a description of
the event and what action the Company or such Guarantor, as the case may
be, is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.19(a) shall
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be accompanied by a written statement of the Company's independent
public accountants (who shall be a firm of establish ed national
reputation) that in making the examination necessary for certification
of such financial statements, nothing has come to their attention that
would lead them to believe that the Company has violated any provisions
of Article 4 or Article 5 hereof or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) Each of the Company and the Guarantors shall, so long as any
of the Notes are outstanding, deliver to the Trustee, forthwith upon any
Officer of the Company or any Guarantor becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or
Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.04. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
Section 4.05. Stay, Extension and Usury Laws.
Each of the Company and the Guarantors covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or
at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and each of the Company and the
Guarantors (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer
and permit the execution of every such power as though no such law has
been enacted.
Section 4.06. Change of Control.
(a) If a Change of Control occurs, each Holder of Notes shall
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 Notes
pursuant to the offer described below (the "Change of Control Offer").
In the Change of Control Offer, the Company shall offer a "Change of
Control Payment" in cash equal to 101% of the aggregate principal amount
of 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 shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the Change of Control Payment Date
specified in such notice, pursuant to the procedures required by this
Indenture and described in such notice. The Company shall 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
Notes as a result of a Change of Control.
(b) Subject to Section 4.06(d), on the Change of Control Payment
Date, the Company shall, to the extent lawful;
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(i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions
thereof so tendered; and
(iii) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being
purchased by the Company.
(c) The Paying Agent shall promptly mail to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the
Trustee shall promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered, if any; provided that
each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof.
(d) Prior to complying with any of the provisions of this
Section 4.06, but in any event within, 90 days following a Change of
Control, the Company shall either repay all outstanding Senior Debt or
obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of Notes required by
this covenant. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(e) The provisions described in this Section 4.06 require the
Company to make a Change of Control Offer following a Change of Control
shall be applicable regardless of whether or not any other provisions of
this Indenture are applicable.
(f) The Company shall 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 this Indenture applicable to a Change
of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.07. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(a) 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;
(b) 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
(c) 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:
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(i) 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 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
(ii) 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:
(a) by reinvesting in the business of the Company or such
Restricted Subsidiary;
(b) by repaying outstanding Senior Debt; or
(c) by offering to purchase the Notes at 100% of principal
amount, plus accrued and unpaid interest, if any.
Section 4.08. Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment
or distribution on account of 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);
(ii) 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);
(iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu with or subordinated to the Notes
or the Note Guarantees (other than the Notes or the Note
Guarantees), except a payment of interest or principal at the
Stated Maturity thereof; or
(iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"),
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unless, at the time of and after giving effect to such Restricted
Payment:
(i) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof;
(ii) the Company, at the time of such Restricted Payment
and after giving pro forma effect thereto as 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 Section 4.09(a); and
(iii) 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 this Indenture
(excluding Restricted Payments permitted by clauses (ii), (iii),
(iv), (vi), (viii) and (ix) 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 from the sale of Equity Interests or any
Indebtedness that is convertible into Capital Stock and has
been so converted, plus
(C) the aggregate cash received by the Company as
capital contributions after the Issue Date, plus
(D) $15 million.
(b) For so long as no Default has occurred and is continuing or
would be caused thereby, the preceding provisions of this Section 4.08
shall not prohibit:
(i) the payment of any dividend within 60 days after the
date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of this Indenture;
(ii) the repurchase, redemption, defeasance, retirement or
other acquisition of the Company's $85 million aggregate principal
amount of 10 1/2% Senior Subordinated Notes due 2004;
(iii) the repurchase, redemption, defeasance, retirement or
other acquisition of any pari passu 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;
(iv) the redemption, repurchase, defeasance, retirement or
other acquisition of pari passu or subordinated Indebtedness of
the Company or any Guarantor with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
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(v) 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;
(vi) 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 this 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;
(vii) 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;
(viii) 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
(ix) Permitted Payments to the Parent Company.
(c) 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
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 Section 4.08 were
computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.09. Incurrence of Indebtedness.
(a) The Company shall not, and shall 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.
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(b) Notwithstanding the prohibitions of paragraph (a) of this
Section 4.09, the Company may incur of any of the following items of
Indebtedness (collectively, "Permitted Debt"):
(i) 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;
(ii) the incurrence by the Company and its Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company and the Subsidiary
Guarantors of Indebtedness represented by the Notes and the Note
Guarantees;
(iv) 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;
(v) 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 this Indenture to be incurred
under the first paragraph of this covenant or clause (ii) or (iii)
of this paragraph;
(vi) 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 Notes, in the case of
the Company, or the Note Guarantee of such Subsidiary
Guarantor, in the case of a Subsidiary Guarantor; and
(B) (i) 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 (ii) 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 (vi);
(vii) 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 this Indenture to be outstanding;
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(viii) 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;
(ix) 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 (ix), not to exceed $50 million;
(x) 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 (x);
(xi) 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
(xi)); and
(xii) 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
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.
(c) For purposes of determining compliance with this Section, in
the event that an item of proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in
paragraphs (b)(i) through (b)(xii) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company shall be
permitted to classify such item of Indebtedness on the date of its
incurrence in any manner that complies with this Section 4.09.
Section 4.10. Anti-Layering.
The Company shall 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 Notes. No Guarantor shall
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.
Section 4.11. Liens.
The Company shall not, and shall 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.
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Section 4.12. Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall 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.
Section 4.13. Transactions with Affiliates.
The Company shall not, and shall 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:
(a) 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
(b) the Company delivers to the Trustee:
(i) 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
(ii) 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, shall not be subject to the provisions of
the prior paragraph:
(a) 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;
(b) 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;
(c) transactions between or among the Company and/or its
Restricted Subsidiaries;
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(d) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company; and
(e) Restricted Payments that are permitted by Section 4.08.
Section 4.14. Additional Subsidiary Guarantees.
If after the Issue Date 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.
Section 4.15. Limitations on Issuances of Guarantees of Indebtedness.
The Company shall not permit any of its Restricted Subsidiaries
that is not a Guarantor of the 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 Notes by such
Restricted Subsidiary to the same extent as such Guarantee of such other
Indebtedness, which Guarantee shall be senior to or pari passu 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 Notes may be subordinated to the Guarantee of
such Senior Debt to the same extent as the Notes are subordinated to
such Senior Debt.
Notwithstanding the preceding paragraph, any Note Guarantee of the
Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged under the circumstances
described in Section 11.05.
Section 4.16. Business Activities.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses.
Section 4.17. Advances to Subsidiaries.
After the Issue Date any advance made by the Company to a
Restricted Subsidiary that is not a Guarantor shall be evidenced by an
Intercompany Note in favor of the Company.
Section 4.18. Payments for Consent.
The Company shall not, and shall 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 Notes for or as an
inducement to any consent waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such
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considerations is offered to be paid and is paid to all Holders of the
Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or
agreement.
Section 4.19. Reports.
(a) Whether or not required by the Commission, so long as any
Notes are outstanding, the Company shall furnish to the Holders of
Notes, within the time periods specified in the Commission's rules and
regulations:
(i) 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 is certified
independent accountants; and
(ii) 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.
(b) 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.
(c) In addition, whether or not required by the Commission, the
Company shall file a copy of all of the information and reports referred
to in clauses (a) and (b) above with the Commission for public
availability within the time periods specified in the Commission's rules
and regulations (unless the Commission shall not accept such a filing)
and make such information available to securities analysts and
prospective investors upon request.
(d) In addition, the Company shall file with the Trustee such
other information, documents and other reports which the Company is
required to file with the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act.
(e) For so long as any Notes remain outstanding (unless the
Company is subject to the reporting requirements of the Exchange Act),
the Company and the Guarantors shall furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
(f) The foregoing reporting obligations set forth in this Section
4.19 may be satisfied by reports prepared and filed by the Parent Company
on a consolidated basis under the requirements of the Exchange Act.
(g) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein,
including the
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Company's compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers' Certificates).
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company may not, directly or indirectly: (i) consolidate or
merge with or into another Person (whether or not the Company is the
surviving corporation); or (ii) 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:
(a) either: (i) the Company is the surviving corporation; or
(ii) 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;
(b) 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
Notes and this Indenture pursuant to agreements reasonably satisfactory
to the Trustee;
(c) immediately after such transaction no Default or Event of
Default exists; and
(d) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company):
(i) shall 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
(ii) shall, 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 Section 4.09(a).
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 Section 5.01 shall 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.
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Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially
all of the assets of the Company in accordance with Section 5.01 hereof,
the successor corporation formed by such consolidation or into or with
which the Company is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation,
merger, sale, lease, conveyance or other disposition, the provisions of
this Indenture referring to the "Company" or the "Guarantor," as the
case may be, shall refer instead to the successor corporation and not to
the Company or the Guarantor, as the case may be), and may exercise
every right and power of the Company or applicable Guarantor, as the
case may be, under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided,
however, that the predecessor Company and the predecessor Subsidiaries
that are Guarantors shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of
all of the Company's assets that meets the requirements of Section 5.01
hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following is an Event of Default:
(a) default for 30 days in the payment when due of interest on,
or Liquidated Damages with respect to, the Notes, whether or not
prohibited by the subordination provisions of this Indenture;
(b) default in payment when due of the principal of or premium,
if any, on the Notes, whether or not prohibited by the subordination
provisions of this Indenture;
(c) failure by the Company or any of its Restricted Subsidiaries
to comply with the provisions described under Sections 3.09, 4.06, 4.07,
4.08, 4.09 and 5.01 hereof;
(d) failure by the Company or any of its Restricted Subsidiaries
to comply with any of the other agreements in this 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 Notes then outstanding;
(e) 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 this Indenture,
if that default:
(i) 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
(ii) 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;
(f) 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;
(g) except as permitted by this 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
(h) the Company or any of the Company's Restricted Subsidiaries
that are Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become
due; or
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of the
Company's Restricted Subsidiaries that are Significant
Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a custodian of the Company or any of the
Company's Restricted Subsidiaries that are Significant
Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary or for all
or substantially all of the property of the Company or any of the
Company's Restricted Subsidiaries that are Significant
Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of the
Company's Restricted Subsidiaries that are Significant
Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
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Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified
in clause (h) of Section 6.01 hereof with respect to the Company, any
Restricted Subsidiary that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon
any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (h) of Section 6.01 hereof occurs with respect to
the Company, any Guarantor constituting a Significant Subsidiary or any
group of Guarantors that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately
without further action or notice. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict
with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due
solely because of the acceleration) have been cured or waived.
If an Event of Default occurs 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 Notes pursuant
to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable,
to the extent permitted by law, anything in this Indenture or in the
Notes to the contrary notwithstanding. 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 Notes prior to such
date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of
the years beginning on December 15, of the years set forth below, as set
forth below (expressed as percentages of principal amount):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1998 111.665%
1999 110.207%
2000 108.749%
2001 107.291%
2002 105.833%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal,
premium, if any, and interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising
any right or remedy accruing upon an Event of Default shall not impair
the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted
by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount
of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or
Event of Default in the payment of the principal of, premium and
Liquidated Damages, if any, or interest on, the Notes (including in
connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then
outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of other
Holders of Notes or that may involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of
a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority
over another Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any,
and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as
shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and the Holders of the Notes allowed in any judicial
proceedings relative to the Company or any of the Guarantors (or any
other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money
or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section
7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and
other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment
or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in
any such proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal, premium and
Liquidated Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses against any
party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This
Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than
10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its
exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of
any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture
(but need not confirm or investigate the accuracy of mathematical
calculations or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall
be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on such Officers' Certificate or Opinion of
Counsel. The Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
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(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or
any Guarantor.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in compliance with
such request or direction.
(g) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event which
is in fact such a default is received by a Responsible Officer at the
Corporate Trust Office of the Trustee, and such notice references the
Notes and this Indenture.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any
Guarantors or any Affiliate of the Company with the same rights it would
have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue as trustee or
resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, the
Notes or the Note Guarantees, it shall not be accountable for the
Company's use of the proceeds from the Notes or any money paid to the
Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall
not be responsible for any statement or recital herein or any statement
in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if
it is actually known to the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in
payment of principal of, premium, if any, or interest on any Note, the
Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the
notice is in the interests of the Holders of the Notes.
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Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section
313(a) (but if no event described in TIA Section 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the
Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee from time
to time such compensation as shall be agreed upon in writing between the
Company and the Trustee for its acceptance of this Indenture and
services hereunder. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company
and the Guarantors shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by
it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of
the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify each of the Trustee
or any successor Trustee against any and all losses, damages, claims,
liabilities or expenses (including taxes (other than taxes based on the
income of the Trustee)) incurred by it arising out of or in connection
with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture
against the Company and the Guarantors (including this Section 7.07) and
defending itself against any claim (whether asserted by the Company, any
Guarantor, or any Holder or any other person) or liability in connection
with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence or bad faith. The Trustee shall
notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company and the Guarantors of their obligations hereunder.
The Company and the Guarantors shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel
and the Company and the Guarantors shall pay the reasonable fees and
expenses of such counsel. The Company and the Guarantors need not pay
for any settlement made without their consent, which consent shall not
be unreasonably withheld.
The obligations of the Company and the Guarantors under this
Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
To secure the Company's and the Guarantors' payment obligations in
this Section, the Trustee shall have a Lien prior to the Notes on all
money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien
shall survive the satisfaction and discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(h) or (i) hereof occurs, the
expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute expenses
of administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor
Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged
from the trust hereby created by so notifying the Company. The Holders
of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, any Guarantor or the Holders of Notes of at least 10% in
principal amount of the then outstanding Notes may petition, at the
expense of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply
with Section 7.10, such Holder of a Note may petition any court of
competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties
of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders of the Notes. The retiring Trustee
shall promptly transfer all property held by it as Trustee to the
successor Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.07 hereof.
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Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's and the Guarantors' obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be
the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United
States of America or of any state thereof that is authorized under such
laws to exercise corporate trustee power, that is subject to supervision
or examination by federal or state authorities and that has a combined
capital and surplus of at least $250 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is
subject to TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in
this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company and the Guarantors
shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be deemed to have been discharged from their
respective obligations with respect to all outstanding Notes and Note
Guarantees, as applicable, on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
Legal Defeasance means that the Company and the Guarantors shall be
deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the
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following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to
receive solely from the trust fund described in Section 8.04 hereof, and
as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages on
such Notes when such payments are due, (b) the Company's and the
Guarantors' obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's and the
Guarantors' obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and the Guarantors
shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be released from its obligations under the
covenants contained in Sections 4.06, 4.07, 4.08, 4.09, 4.10, 4.11,
4.12, 4.13, 4.14, 4.15, 4.16 and 4.17 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "Outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "Outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed
outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the
Company may omit to comply with and shall have no liability in respect
of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder
of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(g) hereof shall not constitute Events of
Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as shall be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and Liquidated Damages, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes
are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that
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(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, 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 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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion
of the proceeds of which shall be used to defease the Notes pursuant to
this Article 8 concurrently with such incurrence) or insofar as Sections
6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending
on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument (other than this 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;
(f) the Company shall 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;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the
Company or the Guarantors or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or the
Guarantors; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee, collectively for purposes of
this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become
due thereon in
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respect of principal, premium, if any, Liquidated Damages and interest,
but such money need not be segregated from other funds except to the
extent required by law.
The Company and the Guarantors shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the
cash or non-callable Government Securities deposited pursuant to Section
8.04 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities
held by it as provided in Section 8.04 hereof which, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee (which may
be the opinion delivered under Section 8.04(a) hereof), are in excess of
the amount thereof that would then be required to be deposited to effect
an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of,
premium, if any, Liquidated Damages or interest on any Note and
remaining unclaimed for two years after such principal, and premium, if
any, Liquidated Damages or interest has become due and payable shall,
subject to applicable escheat law, be paid to the Company on its request
or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Company or Guarantors for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times
------------------
and The Wall Street Journal (national edition), notice that such money
-----------------------
remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining shall be
repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with
Section 8.02 or 8.03 hereof, as the case may be, by reason of any order
or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the
Company's and the Guarantors' obligations under this Indenture, the
Notes and the Note Guarantees, as applicable, shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or
8.03 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03 hereof,
as the case may be; provided, however, that, if the Company or the
Guarantors make any payment of principal of, premium, if any, Liquidated
Damages or interest on any Note following the reinstatement of its
obligations, the Company and the Guarantors shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and
the Guarantors and the Trustee may amend or supplement this Indenture,
the Note Guarantees, or the Notes without the consent of any Holder of a
Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes or to alter the provisions of Article 2
hereof (including the related definitions) in a manner that does not
materially adversely affect any Holder;
(c) to provide for the assumption of the Company's or a
Guarantors obligations to the Holders of the Notes in the case of a
merger or consolidation or sale of all or substantially all of the
Company's assets pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights
or benefits to the Holders of the Notes or that does not adversely
affect the legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and each of the Guarantors,
authorizing the execution of any such amended or supplemental Indenture,
and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and each of the
Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture
(including Sections 3.09, 4.06 and 4.07 hereof), the Note Guarantees,
and the Notes with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, the Notes), and, subject to Sections
6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of,
premium, if any, or interest on the Notes, except a payment default
resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, the Note Guarantees or the Notes
may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
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Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and each of the Guarantors authorizing
the execution of any such amended or supplemental Indenture, and upon
the filing with the Trustee of evidence satisfactory to the Trustee of
the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the
Trustee shall join with the Company and each of the Guarantors in the
execution of such amended or supplemental Indenture unless such amended
or supplemental Indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee
may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes
affected thereby a notice briefly describing the amendment, supplement
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of
any such amended or supplemental Indenture or waiver. Subject to
Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture
or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the
redemption of the Notes, except as provided above with respect to
Sections 3.09, 4.06 and 4.07 hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes and
a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by the covenants contained in Sections 3.09,
4.06 or 4.07 hereof;
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(h) release any Guarantor from any of its obligations under its
Note Guarantee or this Indenture, or amend the provisions of this
Indenture relating to the release of Guarantors; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of Article 10 of this
Indenture (which relate to subordination) shall require the consent of
the Holders of at least 66 2/3% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture, the Note
Guarantees, or the Notes shall be set forth in a amended or supplemental
Indenture that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the
Holder of a Note and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note, even
if notation of the consent is not made on any Note. However, any such
Holder of a Note or subsequent Holder of a Note may revoke the consent
as to its Note if the Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective.
An amendment, supplement or waiver becomes effective in accordance with
its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company
in exchange for all Notes may issue and the Trustee shall authenticate
new Notes (accompanied by a notation of the Note Guarantees duly
endorsed by the Guarantors) that reflect the amendment, supplement or
waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement
does not adversely affect the rights, duties, liabilities or immunities
of the Trustee. The Company and the Guarantors may not sign an
amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01) shall
be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture.
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ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company and the Guarantors agree, and each Holder by accepting
a Note agrees, that the Indebtedness evidenced by the Notes is
subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment in full of all Senior
Debt (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
Section 10.02. [Intentionally Omitted]
Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company or any Guarantor
in a liquidation or dissolution of the Company or such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or such Guarantor or its property, in
an assignment for the benefit of creditors or any marshaling of the
Company's or such Guarantor's assets and liabilities:
(a) holders of Senior Debt shall be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders of the Notes
shall be entitled to receive any payment with respect to the Notes
(except that Holders may receive (i) Permitted Junior Securities and
(ii) payments and other distributions made from any defeasance trust
created pursuant to Section 8.01 hereof); and
(b) until all Obligations with respect to Senior Debt (as
provided in subsection (i) above) are paid in full, any distribution to
which Holders would be entitled but for this Article 10 shall be made to
holders of Senior Debt (except that Holders of Notes may receive and
retain (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section
8.01 hereof), as their interests may appear.
Section 10.04. Default on Designated Senior Debt.
The Company and the Guarantors may not make any payment or
distribution to the Trustee or any Holder in respect of Obligations with
respect to the Notes and may not acquire from the Trustee or any Holder
any Notes for cash or property (other than (i) Permitted Junior
Securities and (ii) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof) until all
principal and other Obligations with respect to the Senior Debt have
been paid in full if:
(a) a default in the payment of any principal, premium, if any,
or interest on Designated Senior Debt occurs and is continuing beyond
any applicable grace period in the agreement, indenture or other
document governing such Designated Senior Debt; or
(b) any other default on Designated Senior Debt occurs and is
continuing that then permits, or with the giving of notice or passage of
time or both (unless cured or waived) shall permit holders of the
Designated Senior Debt as to which such default relates to accelerate
its maturity and the Trustee receives
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a notice of the default (a "Payment Blockage Notice") from a Person who
may give it pursuant to Section 10.12 hereof. If the Trustee receives
any such Payment Blockage Notice, no subsequent Payment Blockage Notice
shall be effective for purposes of this Section unless and until at
least 365 days shall 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 may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(a) the date upon which the default is cured or waived, or
(b) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or
acquisition at the time of such payment or acquisition.
Section 10.05. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment
of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.04 hereof, such payment shall be held by the
Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of
Senior Debt as their interests may appear or their Representative under
this Indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in
full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read
into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt, and
shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or the Company or any other Person
money or assets to which any holders of Senior Debt shall be entitled by
virtue of this Article 10, except if such payment is made as a result of
the willful misconduct or gross negligence of the Trustee.
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Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but
failure to give such notice shall not affect the subordination of the
Notes to the Senior Debt as provided in this Article 10.
Section 10.08. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid
in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Debt to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to the Holders
of Notes have been applied to the payment of Senior Debt. A
distribution made under this Article 10 to holders of Senior Debt that
otherwise would have been made to Holders of Notes is not, as between
the Company and Holders, a payment by the Company on the Notes.
Section 10.09. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes
and holders of Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders of Notes and creditors
of the Company other than their rights in relation to holders of Senior
Debt; or
(c) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Debt to receive distributions
and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal
of or interest on a Note on the due date, the failure is still a Default
or Event of Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act
or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
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Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders
of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to
the Trustee or to the Holders of Notes for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of
the Senior Debt and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making
of any payment or distribution by the Trustee, and the Trustee and the
Paying Agent may continue to make payments on the Notes, unless a
Responsible Officer of the Trustee shall have received at its Corporate
Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any
Obligations with respect to the Notes to violate this Article 10. Only
the Company or a Representative may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under
or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such
action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 10, and appoints the Trustee
to act as such Holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in
the form required in any proceeding referred to in Section 6.09 hereof
at least 30 days before the expiration of the time to file such claim,
the Representative of the Designated Senior Debt are hereby authorized
to file an appropriate claim for and on behalf of the Holders of the
Notes.
Section 10.14. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
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ARTICLE 11
GUARANTEES
Section 11.01. Note Guarantees.
Subject to the provisions of this Article 11, each of the
Guarantors hereby, jointly and severally, unconditionally guarantee to
each Holder of a Note authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of
the Company hereunder or thereunder, that: (a) the principal of, premium
and Liquidated Damages, if any, and interest on the Notes shall be
promptly paid in full when due, whether at the maturity or interest
payment or mandatory redemption date, by acceleration, redemption or
otherwise, and interest on the overdue principal of, premium and
Liquidated Damages, if any, and interest on the Notes, if any, if
lawful, and all other obligations of the Company to the Holders or the
Trustee under this Indenture and the Notes shall be promptly paid in
full or performed, all in accordance with the terms of this Indenture
and the Notes; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same shall
be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same
immediately. The Guarantors hereby agree that their obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence
of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions of this Indenture and the
Notes, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenant that
the Guarantees shall not be discharged except by complete performance of
the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company or Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the
Company or Guarantors, any amount paid by either to the Trustee or such
Holder, these Guarantees, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that they
shall not be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed hereby until payment in
full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on
the one hand, and the Holders and the Trustee, on the other hand, (x)
the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes of these Guarantees,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(y) in the event of any declaration of acceleration of such obligations
as provided in Article 6 hereof, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors
for the purpose of these Guarantees. The Guarantors shall have the right
to seek contribution from any non-paying Guarantor so long as the
exercise of such right does not impair the rights of the Holders under
these Guarantees.
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Section 11.02. Limitation of Guarantor's Liability.
Each Guarantor and, by its acceptance hereof, each Holder hereof,
hereby confirm that it is their intention that the Note Guarantee by
such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar federal or state law
to the extent applicable to the Note Guarantees. To effectuate the
foregoing intention, each such person hereby irrevocably agrees that the
obligation of such Guarantor under its Note Guarantee under this Article
11 shall be limited to the maximum amount as shall, after giving effect
to such maximum amount and all other (contingent or otherwise)
liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any rights to contribution of such Guarantor
pursuant to any agreement providing for an equitable contribution among
such Guarantor and other Affiliates of the Company of payments made by
guarantees by such parties, result in the obligations of such Guarantor
in respect of such maximum amount not constituting a fraudulent
conveyance. Each Holder, by accepting the benefits hereof, confirms its
intention that, in the event of bankruptcy, reorganization or other
similar proceeding of the Company or any Guarantor in which concurrent
claims are made upon such Guarantor hereunder, to the extent such claims
shall not be fully satisfied, each such claimant with a valid claim
against the Company shall be entitled to a ratable share of all payments
by such Guarantor in respect of such concurrent claims.
Section 11.03. Execution and Delivery of Note Guarantees.
To evidence the Note Guarantees set forth in Section 11.01 hereof,
each Guarantor hereby agrees that a notation of the Note Guarantees
substantially in the form of Exhibit D shall be endorsed by an officer
of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such
Guarantor by its President or one of its Vice Presidents and attested to
by an Officer.
Each Guarantor hereby agrees that the Note Guarantees set forth in
Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of the Note Guarantees.
If an officer or Officer whose signature is on this Indenture or
on the Note Guarantees no longer holds that office at the time the
Trustee authenticates the Note on which the Note Guarantees are
endorsed, the Note Guarantees shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantees
set forth in this Indenture on behalf of the Guarantors.
Section 11.04. Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as set forth in Articles 4 and 5 hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or shall
prevent any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety, to the Company.
(b) Except as set forth in Articles 4 and 5 hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company (whether or not affiliated with the
Guarantor), or successive
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consolidations or mergers in which a Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to a corporation other than the Company
(whether or not affiliated with the Guarantor) authorized to acquire and
operate the same; provided, however, that such transaction meets all of
the following requirements: (i) each Guarantor hereby covenants and
agrees that, upon any such consolidation, merger, sale or conveyance,
the Note Guarantee endorsed on the Notes, and the due and punctual
performance and observance of all of the covenants and conditions of
this Indenture to be performed by such Guarantor, shall be expressly
assumed (in the event that the Guarantor is not the surviving
corporation in the merger), by supplemental indenture satisfactory in
form to the Trustee, executed and delivered to the Trustee, by the
corporation formed by such consolidation, or into which the Guarantor
shall have been merged, or by the corporation which shall have acquired
such property, (ii) immediately after giving effect to such transaction,
no Default or Event of Default exists; and (iii) the Company would be
permitted by virtue of the Company's pro forma Fixed Charge Coverage
Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage ratio test set for in Section 4.09(a) hereof. In case of any
such consolidation, merger, sale or conveyance and upon the assumption
by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Note Guarantees endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to
be performed by the Guarantor, such successor corporation shall succeed
to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Guaranties to be
endorsed upon all of the Notes issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the Trustee.
All the Guaranties so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Guaranties theretofore and
thereafter issued in accordance with the terms of this Indenture as
though all of such Guaranties had been issued at the date of the
execution hereof.
Section 11.05. Releases Following Sale of Assets.
Concurrently with any sale of assets (including, if applicable,
all of the capital stock of any Guarantor), any Liens in favor of the
Trustee in the assets sold thereby shall be released; provided that in
the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section
4.07 hereof. The Note Guarantee or the obligations under Section 11.04
hereof of a Guarantor that is a subsidiary will be released (i) in
connection with any sale or other disposition of all or substantially
all of the assets of such Guarantor (including by way of merger or
consolidation), if the Company applies the Net Proceeds of that sale or
other disposition in accordance with Section 4.07 hereof, or (ii) in
connection with the sale of all of the capital stock of a Guarantor that
is a subsidiary, if the Company applies the Net Proceeds of that sale in
accordance with Section 4.07 hereof. Upon delivery by the Company to the
Trustee of an Officers' Certificate to the effect that such sale or
other disposition was made by the Company in accordance with the
provisions of this Indenture, including without limitation Section 4.07
hereof, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Guarantor from its obligations
under its Note Guarantees. Any Guarantor not released from its
obligations under its Note Guarantee shall remain liable for the full
amount of principal of and interest on the Notes and for the other
obligations of any Guarantor under this Indenture as provided in this
Article 11.
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Section 11.06. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the
term "Trustee" as used in this Article 11 shall in such case (unless the
context shall otherwise require) be construed as extending to and
including such Paying Agent within its meaning as fully and for all
intents and purposes as if such Paying Agent were named in this Article
11 in place of the Trustee.
Section 11.07. Subordination of Note Guarantees.
The obligations of each Guarantor under its Note Guarantee
pursuant to this Article 11 shall be junior and subordinated to the
prior payment in full of all Senior Debt of such Guarantor and the
amounts for which the Guarantors shall be liable under the guarantees
issued from time to time with respect to Senior Debt on the same basis
as the Notes are junior and subordinated to Senior Debt. For the
purposes of the foregoing sentence, the Trustee and the Holders shall
have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments
in respect of the Notes pursuant to this Indenture, including Article 11
hereof.
ARTICLE 12
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge.
This Indenture shall upon the request of the Company cease to be
of further effect (except as to surviving rights of registration of
transfer or exchange of Notes herein expressly provided for, the
Company's obligations under Section 7.07 hereof, and the Trustee's and
the Paying Agent's obligations under Section 12.02 hereof) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(a) either
(i) all Notes therefore authenticated and delivered
(other than (A) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 2.07 and (B) Notes for whose payment money has been
deposited in trust with the Trustee or any Paying Agent and
thereafter paid to the Company or discharged from such
trust) have been delivered to the Trustee for cancellation;
or
(ii) all such Notes not theretofore delivered to the
Trustee for cancellation
(A) have become due and payable; or
(B) shall become due and payable at their Stated
Maturity within one year, or
(C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in
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the name, and at the expense, of the Company, and the
Company, in the case of clause (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for such purpose money or
Government Securities in an amount sufficient (as certified
by an independent public accountant designated by the
Company) to pay and discharge the entire indebtedness of
such Notes not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and
interest, if any, to the date of such deposit (in the case
of Notes which have become due and payable) or the Stated
Maturity or redemption date, as the case may be;
(b) the Company has paid or caused to be paid all other sums
then due and payable hereunder by the Company;
(c) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit and
after giving effect to such deposit; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the Company's obligations in Sections 2.03, 2.04, 2.06, 2.07, 2.11,
7.07, 7.08, 12.02, 12.03 and 12.04, and the Trustee's and Paying Agent's
obligations in Section 12.02 shall survive until the Notes are no longer
outstanding. Thereafter, only the Company's obligations in Section 7.07
shall survive.
In order to have money available on a payment date to pay
principal (and premium, if any, on) or interest on the Notes, the
Government Securities shall be payable as to principal (and premium, if
any) or interest at least one Business Day before such payment date in
such amounts as shall provide the necessary money. Government
Securities shall not be callable at the issuer's option.
Section 12.02. Application of Trust.
All money deposited with the Trustee pursuant to Section 12.01
shall be held in trust and, at the written direction of the Company, be
invested prior to maturity in U.S. Government Obligations, and applied
by the Trustee in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
as the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for the payment of which
money has been deposited with the Trustee; but such money need not be
segregated from other funds except to the extent required by law.
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ARTICLE 13
MISCELLANEOUS
Section 13.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall
control.
Section 13.02. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company or any Guarantor:
Mail-Well I Corporation
c/o Mail-Well, Inc.
23 Inverness Way East, Suite 160
Englewood, Colorado 80112
Telecopier No.: (303) 397-7400
Attention: General Counsel
With a copy to:
Rothgerber Johnson & Lyons LLP
1200 17th Street, Suite 3000
Denver, Colorado 80202-5839
Telecopier No.: (303) 623-9222
Attention: Herbert H. Davis III
If to the Trustee:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Telecopier No.: (617) 664-5376
Attention: Corporate Trust Division: Mail-Well I Corporation
The Company, any Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices
or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if
telecopied; and the next Business Day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day
delivery.
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Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address
shown on the register kept by the Registrar. Any notice or communication
shall also be so mailed to any Person described in TIA Section 313(c),
to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 13.03. Communication by Holders of Notes with Other Holders
of Notes.
The Trustee is subject to TIA Section 312(b), and Holders may
communicate pursuant thereto with other Holders with respect to their
rights under this Indenture or the Notes. The Company, the Guarantors,
the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company or such
Guarantors shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
Section 13.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply
with the provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him
or her to express an informed opinion as to whether or not such covenant
or condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
Section 13.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
Section 13.07. No Personal Liability of Directors, Officers, Employees
and Stockholders.
No past, present or future 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 any
Guarantor under the Notes, this Indenture or the Note Guarantees or for
any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration
for issuance of the Notes.
Section 13.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
Section 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture or the Note Guarantees.
Section 13.10. Successors.
All agreements of the Company and the Guarantors in this
Indenture, the Notes and the Note Guarantees shall bind its successors.
All agreements of the Trustee in this Indenture shall bind their
respective successors.
Section 13.11. Severability.
In case any provision in this Indenture, the Notes or the Note
Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
81
<PAGE>
<PAGE>
Section 13.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the
same agreement.
Section 13.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part of this
Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.
[Signatures on following page]
82
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Indenture as of
the date first written above.
MAIL-WELL I CORPORATION
By: /s/ Paul V. Reilly
------------------------------------------
Name: Paul V. Reilly
Title: President
EACH ENTITY LISTED ON SCHEDULE A
HERETO
By: /s/ Roger Wertheimer
------------------------------------------
Name: Roger Wertheimer
Title: Vice President, General Counsel and
Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Chi C. Ma
------------------------------------------
Name: Chi C. Ma
Title: Assistant Vice President
83
<PAGE>
<PAGE>
SCHEDULE A
----------
SCHEDULE OF GUARANTORS
Anderson Lithograph Company
Armstrong-White, Inc.
Barkley, Inc.
Denver Forms Company
Digital X-Press, Inc.
Gould Packaging, Inc.
Graphics Arts Center, Inc.
Graphics Illustrated, Inc.
Griffin Envelope, Inc.
Imperial Litho and Dryography, Inc.
John D. Lucas Printing Co.
Mail-Well Commercial Printing, Inc.
Mail-Well Canada Holdings, Inc.
Mail-Well, Inc. (the Parent Company)
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.
Production Press, Inc.
Richtman's Printing of Colorado, LLC
Trafton Printing, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
<PAGE>
(Face of Note)
CUSIP/CINS 56032E AA 1
8-3/4% Series A Senior Subordinated Notes due 2008
No. 0001 $200,000,000.00
--------------
MAIL-WELL I CORPORATION
promises to pay to Cede & Co.
or registered assigns,
the principal sum of TWO HUNDRED MILLION DOLLARS AND NO CENTS
------------------------------------------
Dollars on December 15, 2008.
Interest Payment Dates: June 15, and December 15
Record Dates: June 1 and December 1
Dated:
MAIL-WELL I CORPORATION
By: /s/ Paul V. Rielly
----------------------
Name: Paul V. Reilly
Title: President
By: /s/ Michael Zawalski
----------------------
Name: Michael Zawalski
Title: Senior Vice
President and
Chief Financial
Officer
This is one of the
Notes referred to in the
within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: /s/ Please Provide
-------------------------------
Authorized Signatory
<PAGE>
<PAGE>
(Back of Note)
8-3/4% Series A Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE,
(II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF
THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER (i) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
(A "QIB"), (B) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR
THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI"), (ii) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS
OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES
IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AND (iii) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE TRUSTEE. EACH IAI THAT IS NOT
<PAGE>
<PAGE>
A QIB WILL BE REQUIRED TO EFFECT ANY TRANSFER OF NOTES OR INTERESTS
THEREIN (OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT)
THROUGH ONE OF THE INITIAL PURCHASERS. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Mail-Well I Corporation, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of
this Note at 8-3/4% per annum from the date hereof until maturity and
shall pay the Liquidated Damages payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. The Company will pay
interest and Liquidated Damages semi-annually on June 15 and December 15
of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on
the Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of issuance;
provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be
June 15, 1999. The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate
that is 1% per annum in excess of the rate then in effect; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated
Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons
who are registered Holders of Notes at the close of business on the June
1 or December 1, next preceding the Interest Payment Date, even if such
Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with
respect to defaulted interest. The Notes will be payable as to
principal, premium and Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately
available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
<PAGE>
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank
and Trust Company, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of the
Guarantors may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of December 16, 1998 ("Indenture") among the Company, the
Guarantors and the Trustee. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms.
To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company
limited to $300 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5,
the Company shall not have the option to redeem the Notes prior to
December 15, 2003. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest
and Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on July 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . 104.375%
2004 . . . . . . . . . . . . . . . . . . 102.917%
2005 . . . . . . . . . . . . . . . . . . 101.458%
2006 and thereafter. . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to December 15, 2001, the Company may
(but shall not have the obligation to) redeem, on one or more occasions,
up to an aggregate of 35% of the aggregate principal amount of Notes
issued at a redemption price equal to 108.75% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings; provided that at least $195 million
of the aggregate principal amount of Notes issued remain outstanding
immediately after the occurrence of such redemption; and provided
further, that such redemption shall occur within 45 days of the date of
the closing of such Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the
Notes.
<PAGE>
<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder of 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 each Holder's Notes
(the "Change of Control Offer") at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change
of Control Payment"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or any of its Restricted Subsidiaries
consummate an Asset Sale, the Company shall promptly commence an offer
to all Holders of Notes (as "Asset Sale Offer") pursuant to Section 3.09
of the Indenture to purchase the maximum principal amount of Notes that
may be purchased out of the Net Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase in accordance with the procedures set forth in the Indenture.
If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Holders of Notes that
are the subject of an offer to purchase will receive an Asset Sale Offer
from the Company prior to any related purchase date and may elect to
have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address.
Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date interest
ceases to accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes
may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder
to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Note or
portion of a Note selected for redemption, except for the unredeemed
portion of any Note being redeemed in part. Also, it need not exchange
or register the transfer of any Notes for a period of 15 days before the
mailing of a notice of redemption or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and any existing default or
compliance with any
<PAGE>
<PAGE>
provision of the Indenture, the Guarantees, or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the
then outstanding Notes. Without the consent of any Holder of a Note,
the Indenture, the Guarantees, or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or a Guarantor's
obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest on or Liquidated
Damages, if any, with respect to the Notes; (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by Article 10 of the Indenture); (iii) failure by the Company
or any of its Restricted Subsidiaries to comply with Sections 3.09,
4.06, 4.07, 4.08, 4.09 and 5.01 of the Indenture; (iv) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice
to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes then outstanding to comply with certain
other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed by 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, which 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 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 $10.0 million or
more; (vi) the failure by the Company or any of its Restricted
Subsidiaries to pay final judgments by courts of competent jurisdiction
aggregating in excess of $10.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) except as permitted
by the Indenture, any Guarantee of a Guarantor 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 Guarantee; and (viii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Guarantors. If
any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, with respect to the Company, any
Guarantor constituting a Significant Subsidiary or any group of
Guarantors that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without
further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of
<PAGE>
<PAGE>
the Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
If an Event of Default occurs by reason of 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 Notes pursuant to
Section 3.07 of the Indenture, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable,
to the extent permitted by law, anything in the Indenture or herein to
the contrary notwithstanding. 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 Notes prior to such date,
then, upon acceleration of the Notes, an additional premium shall also
become and be immediately due and payable in an amount, for each of the
years beginning on December 15, of the years set forth below, as set
forth below (expressed as percentages of principal amount):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998 . . . . . . . . . . . . . . . . . . 111.665%
1999 . . . . . . . . . . . . . . . . . . 110.207%
2000 . . . . . . . . . . . . . . . . . . 108.749%
2001 . . . . . . . . . . . . . . . . . . 107.291%
2002 . . . . . . . . . . . . . . . . . . 105.833%
</TABLE>
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the
Notes. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of
Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were not the
Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder of the Company or the Guarantors, as such,
shall not have any liability for any obligations of the Company or the
Guarantors under the Notes, the Indenture or the Guarantees, or for any
claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
the issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
<PAGE>
<PAGE>
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants
with right of survivorship and not as tenants in common), CUST
(= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Notes under the Indenture, Holders of Restricted Global Notes
and Restricted Definitive Notes shall have all the rights set forth in
the Registration Rights Agreement dated as of December 16, 1998, among
the Company, the Guarantors and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders.
No representation is made as to the accuracy of such numbers either as
printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Mail-Well I Corporation
c/o Mail-Well, Inc.
23 Inverness Way East, Suite 160
Englewood, Colorado 80112
Attention: Secretary
<PAGE>
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-----------------------------------------------------
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- ----------------------------------------------------------------------------
Date:
-----------------
Your Signature:
---------------------------
(Sign exactly as your name
appears on the face of this
Note)
Signature Guarantee:
----------------------
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.09 or 4.06 of the Indenture, check the box below:
/ /Section 3.09 / /Section 4.06
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 4.10 or Section 4.15 of the Indenture,
state the amount you elect to have purchased:
$
-----------------------
Date: Your Signature:
----------------------------- --------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No.:
------------------
Signature Guarantee:
---------------------
<PAGE>
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of
a part of another Global Note or Definitive Note for an interest in this
Global Note, have been made:
<TABLE>
<CAPTION>
Principal amount
Amount of decrease in Amount of increase in [at maturity] of Signature of
Principal amount Principal Amount this Global Note authorized signatory
[at maturity] of [at maturity] of following such of Trustee or Note
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
<PAGE>
GUARANTEE
Each of the corporations listed on Schedule I hereto (hereinafter
referred to as the "Guarantors", which term includes any successor or
additional Guarantor under the Indenture (the "Indenture") referred to
in the Note upon which this notation is endorsed), (i) has
unconditionally guaranteed (a) the due and punctual payment of the
principal of and interest on the Notes, whether at maturity or interest
payment date, by acceleration, call for redemption or otherwise, (b) the
due and punctual payment of interest on the overdue principal of and (if
lawful) interest on the Notes, (c) the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee, all
in accordance with the terms set forth in the Indenture, and (d) in case
of any extension of time of payment or renewal of any Notes or any of
such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise and (ii) has
agreed to pay any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any
rights under this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantors shall have any personal liability
under this Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee,
all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this
Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
The obligations of the Guarantors to the Holders of Notes and to
the Trustee pursuant to the Guarantees and the Indenture are expressly
subordinated to the extent set forth in Article 10 of the Indenture and
reference is hereby made to such Indenture for the precise terms of such
subordination.
EACH ENTITY LISTED ON SCHEDULE I HERETO
By: /s/ Michael Zawalski
---------------------------------------
Name: Michael Zawalski
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE>
SCHEDULE I
Mail-Well, Inc.
Anderson Lithograph Company
Armstrong-White, Inc.
Barkley, Inc.
Denver Forms Company
Digital X-Press, Inc.
Gould Packaging, Inc.
Graphics Arts Center, Inc.
Graphics Illustrated, Inc.
Griffin Envelope, Inc.
Imperial Litho and Dryography, Inc.
John D. Lucas Printing Co.
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.
Production Press, Inc.
Richtman's Printing of Colorado, LLC
Trafton Printing, Inc.
Wisco II, L.L.C.
Wisco Envelope Corp.
<PAGE>
EXECUTION COPY
MAIL-WELL I CORPORATION
$300,000,000
8-3/4% Series A Senior Subordinated Notes due 2008
Purchase Agreement
December 11, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
HANIFEN, IMHOFF INC.
<PAGE>
<PAGE>
$300,000,000
8-3/4% Series A Senior Subordinated Notes due 2008
of
Mail-Well I Corporation
PURCHASE AGREEMENT
December 11, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PRUDENTIAL SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
HANIFEN, IMHOFF INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Mail-Well I Corporation, a Delaware corporation (the "COMPANY"),
-------
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation, Prudential Securities Incorporated, Bear, Stearns & Co.
Inc. and Hanifen, Imhoff Inc. (each, an "INITIAL PURCHASER" and,
-----------------
collectively, the "INITIAL PURCHASERS") an aggregate of $300,000,000
------------------
in principal amount of its 8-3/4% Series A Senior Subordinated Notes due
2008 (the "SERIES A NOTES"), subject to the terms and conditions set
--------------
forth herein. The Series A Notes are to be issued pursuant to the
provisions of an indenture (the "INDENTURE"), to be dated as of the
---------
Closing Date (as defined below), among the Company, the Guarantors (as
defined below) and State Street Bank and Trust Company, as trustee (the
"TRUSTEE"). The Series A Notes and the Series B Notes (as defined
-------
below) issuable in exchange therefor are collectively referred to herein
as the "NOTES." The Notes will be guaranteed (the "GUARANTEES") by
----- ----------
each of the entities listed on Schedule A hereto (each, a "GUARANTOR"
---------
and, collectively, the "GUARANTORS"). Capitalized terms used but not
----------
defined herein shall have the meanings given to such terms in the
Indenture.
-1-
<PAGE>
<PAGE>
1. OFFERING MEMORANDUM. The Series A Notes will be offered
-------------------
and sold to the Initial Purchasers pursuant to one or more exemptions
from the registration requirements under the Securities Act of 1933, as
amended (the "ACT"). The Company and the Guarantors have prepared a
---
preliminary offering memorandum, dated December 1, 1998 (the
"PRELIMINARY OFFERING MEMORANDUM") and a final offering memorandum,
-------------------------------
dated December 11, 1998 (the "OFFERING MEMORANDUM"), relating to the
-------------------
Series A Notes and the Guarantees. As used herein, the terms
"Preliminary Offering Memorandum" and "Offering Memorandum" shall
include the financial statements and schedules, if any, incorporated by
reference therein (the "Incorporated Information").
Upon original issuance thereof, and until such time as the same is
no longer required pursuant to the Indenture, the Series A Notes (and
all securities issued in exchange therefor, in substitution thereof or
upon conversion thereof) shall bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (i) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)(A "QIB"), OR
(ii) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE ACT;
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (i) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (ii) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (iii) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE ACT, (iv) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
ACT, (v) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR
(vi) 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; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
-2-
<PAGE>
<PAGE>
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
-------------------------------
representations, warranties and covenants contained in this Agreement,
and subject to the terms and conditions contained herein, the Company
agrees to issue and sell to the Initial Purchasers, and the Initial
Purchasers agree to purchase from the Company, the principal amounts of
Series A Notes set forth opposite the name of such Initial Purchaser on
Schedule B hereto at a purchase price equal to 97.33% of the principal
amount thereof (the "PURCHASE PRICE").
--------------
3. TERMS OF OFFERING. The Initial Purchasers have advised
-----------------
the Company that the Initial Purchasers will make offers (the "EXEMPT
-------
RESALES") of the Series A Notes purchased hereunder on the terms set
- -------
forth in the Offering Memorandum, as amended or supplemented, solely to
(i) persons whom the Initial Purchasers reasonably believe to be
"qualified institutional buyers" as defined in Rule 144A under the Act
("QIBS"), and (ii) persons permitted to purchase the Series A Notes in
----
offshore transactions in reliance upon Regulation S under the Act (each,
a "REGULATION S PURCHASER") (such persons specified in clauses (i) and
----------------------
(ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The
-------------------
Initial Purchasers will offer the Series A Notes to Eligible Purchasers
initially at a price equal to 100% of the principal amount thereof.
Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights
agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the
-----------------------------
Closing Date, in substantially the form of Exhibit A hereto, for so long
as such Series A Notes constitute "TRANSFER RESTRICTED SECURITIES" (as
------------------------------
defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Company and the Guarantors will agree
to file with the Securities and Exchange Commission (the "COMMISSION")
----------
under the circumstances set forth therein, (i) a registration statement
under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating
-------------------------------------
to the Company's 8-3/4% Series B Senior Subordinated Notes due 2008
(the "SERIES B NOTES"), to be offered in exchange for the Series A
--------------
Notes (such offer to exchange being referred to as the "EXCHANGE
---------
OFFER") and the Guarantees thereof or (ii) a shelf registration
- -----
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION
-------------------
STATEMENT" and, together with the Exchange Offer Registration
- ---------
Statement, the "REGISTRATION STATEMENTS") relating to the resale by
-----------------------
certain holders of the Series A Notes and to use its best efforts to
cause such Registration Statements to be declared and remain effective
and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the
Indenture, the Notes, the Guarantees and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the
"OPERATIVE DOCUMENTS."
-------------------
-3-
<PAGE>
<PAGE>
4. DELIVERY AND PAYMENT.
--------------------
(a) Delivery of, and payment of the Purchase Price for,
the Series A Notes shall be made at the offices of Rothgerber Johnson &
Lyons LLP, 1200 17th Street, Suite 3000, Denver, Colorado 80202, or such
other location as may be mutually acceptable. Such delivery and payment
shall be made at 9:00 a.m. New York City time, on December 16, 1998 or
at such other time on the same date or such other date as shall be
agreed upon by the Initial Purchasers and the Company in writing. The
time and date of such delivery and the payment for the Series A Notes
are herein called the "CLOSING DATE."
------------
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), having an aggregate principal amount
---
corresponding to the aggregate principal amount of the Series A Notes
(collectively, the "GLOBAL NOTE"), shall be delivered by the Company
-----------
to the Initial Purchasers (or as the Initial Purchasers direct) in each
case with any transfer taxes thereon duly paid by the Company against
payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Company. The Global Note
shall be made available to the Initial Purchasers for inspection not
later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. Each of the
---------------------------------------------
Company and the Guarantors hereby agrees with the Initial Purchasers as
follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing,
(i) of the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any
Series A Notes for offering or sale in any jurisdiction designated by
the Initial Purchasers pursuant to Section 5(e) hereof, or the
initiation of any proceeding by any state securities commission or any
other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c)
below that makes any statement of a material fact made in the
Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements
therein not misleading. The Company and the Guarantors shall use their
best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any
Series A Notes under any state securities or Blue Sky laws, the Company
and the Guarantors shall use their best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may
reasonably request for the time period specified in Section 5(c).
Subject to the Initial Purchasers' compliance with their representations
and warranties and agreements set forth in Section 7 hereof,
-4-
<PAGE>
<PAGE>
the Company consents to the use of the Preliminary Offering Memorandum
and the Offering Memorandum, and any amendments and supplements thereto
required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for
the Initial Purchasers an Offering Memorandum is required by law to be
delivered in connection with Exempt Resales by the Initial Purchasers
and in connection with market-making activities of the Initial
Purchasers for so long as any Series A Notes are outstanding, (i) not to
make any amendment or supplement to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which
the Initial Purchasers shall reasonably object after being so advised
and (ii) to prepare promptly upon the Initial Purchasers' reasonable
request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or
such market-making activities.
(d) If, during the period referred to in Section 5(c)
above, any event shall occur or condition shall exist as a result of
which, in the opinion of counsel to the Initial Purchasers, it becomes
necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not misleading,
or if, in the opinion of counsel to the Initial Purchasers, it is necessary
to amend or supplement the Offering Memorandum to comply with any applicable
law, forthwith to prepare an appropriate amendment or supplement to such
Offering Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof
as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to
Exempt Resales as contemplated hereby, to cooperate with the Initial
Purchasers and counsel to the Initial Purchasers in connection with the
registration or qualification of the Series A Notes for offer and sale
to the Initial Purchasers and pursuant to Exempt Resales under the
securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to
file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification;
provided, however, that neither the Company nor any Guarantor shall be
required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any
action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt
Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and
make generally available as soon as practicable after the end of each
fiscal year to the record holders of the Notes a financial report of the
Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a
consolidated statement of operations, a consolidated statement of cash
flows and a
-5-
<PAGE>
<PAGE>
consolidated statement of shareholders' equity as of the end of and for
such fiscal year, together with comparable information as of the end of
and for the preceding year, certified by the Company's independent
public accountants and (ii) to mail and make generally available as soon
as practicable after the end of each quarterly period (except for the
last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such
period, and for the period from the beginning of such year to the close
of such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Notes are outstanding, to furnish to
the Initial Purchasers as soon as available copies of all reports or
other communications furnished by the Company or any of the Guarantors
to its security holders or furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Company or any of the Guarantors is listed and such other publicly
available information concerning the Company and/or its subsidiaries as
the Initial Purchasers may reasonably request.
(h) So long as any of the Series A Notes remain
outstanding and during any period in which the Company and the
Guarantors are not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
------------
available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such
holder, the information ("RULE 144A INFORMATION") required by
---------------------
Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of the
obligations of the Company and the Guarantors under this Agreement,
including: (i) the fees, disbursements and expenses of counsel to the
Company and the Guarantors and accountants of the Company and the
Guarantors in connection with the sale and delivery of the Series A
Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the
foregoing (including financial statements), including the mailing and
delivering of copies thereof to the Initial Purchasers and persons
designated by them in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Series A Notes
to the Initial Purchasers and pursuant to Exempt Resales, including any
transfer or other taxes payable thereon, (iii) all costs of printing or
producing this Agreement, the other Operative Documents and any other
agreements or documents in connection with the offering, purchase, sale
or delivery of the Series A Notes, (iv) all expenses in connection with
the registration or qualification of the Series A Notes and the
Guarantees for offer and sale under the securities or Blue Sky laws of
the several states and all costs of printing or producing any
preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the
Initial Purchasers in connection with such registration or qualification
and memoranda relating thereto), (v) the cost of printing certificates
representing the Series A Notes and the Guarantees, (vi) all expenses
and listing fees in connection with the application for quotation of the
Series A Notes in the National
-6-
<PAGE>
<PAGE>
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
----
System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee
------
and the Trustee's counsel in connection with the Indenture, the Notes
and the Guarantees, (viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (ix) any fees charged by
rating agencies for the rating of the Notes, (x) all costs and expenses
of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement, and (xi) and all other costs and
expenses incident to the performance of the obligations of the Company
and the Guarantors hereunder for which provision is not otherwise made
in this Section.
(j) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A
Notes on PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry"
transfer of the Notes, and to comply with all of its agreements set
forth in the representation letters of the Company and the Guarantors to
DTC relating to the approval of the Notes by DTC for "book-entry"
transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise transfer or dispose of any debt securities
of the Company or any Guarantor or any warrants, rights or options to
purchase or otherwise acquire debt securities of the Company or any
Guarantor substantially similar to the Notes and the Guarantees (other
than (i) the Notes and the Guarantees and (ii) commercial paper issued
in the ordinary course of business), without the prior written consent
of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Series A Notes to the
Initial Purchasers or pursuant to Exempt Resales in a manner that would
require the registration of any such sale of the Series A Notes under
the Act.
(n) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of
any Notes and the related Guarantees.
(o) To cause the Exchange Offer to be made in the
appropriate form to permit Series B Notes and guarantees thereof by the
Guarantors registered pursuant to the Act to be offered in exchange for
the Series A Notes and the Guarantees and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
it prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Series A Notes and the Guarantees.
-7-
<PAGE>
<PAGE>
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
----------------------------------------------------------
AND THE GUARANTORS. As of the date hereof, each of the Company and the
- -------------------
Guarantors represents and warrants to, and agrees with, each of the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements
in or omissions from the Preliminary Offering Memorandum or the Offering
Memorandum (or any supplement or amendment thereto) based upon
information relating to any Initial Purchaser furnished to the Company
in writing by or on behalf of an Initial Purchaser expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(b) Each of the Company and its subsidiaries has been duly
incorporated or formed, is validly existing as a corporation, limited
liability company or limited partnership in good standing under the laws
of its jurisdiction of incorporation or formation and has the corporate,
limited liability company or limited partnership power and authority to
carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified
would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
-----------------------
(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule C hereto are the only
subsidiaries, direct or indirect, of the Company. All of the
outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "LIEN"), except with respect to Murray Envelope
----
Holdings, Inc. which has a series of non-voting common stock
outstanding, 10% of which are owned by non-affiliates of the Company.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
-8-
<PAGE>
<PAGE>
(f) The Indenture has been duly authorized by the Company
and each of the Guarantors and, on the Closing Date, will have been
validly executed and delivered by the Company and each of the
Guarantors. When the Indenture has been duly executed and delivered by
the Company and each of the Guarantors, the Indenture will be a valid
and binding agreement of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA"
---
or "TRUST INDENTURE ACT"), and the rules and regulations of the
-------------------
Commission applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on
the Closing Date, will have been validly executed and delivered by the
Company. When the Series A Notes have been issued, executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Series A Notes will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date,
the Series A Notes will conform as to legal matters to the description
thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been
duly authorized by the Company. When the Series B Notes are issued,
executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Series B Notes will be entitled to the
benefits of the Indenture and will be the valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(i) The Guarantee to be endorsed on the Series A Notes by
each Guarantor has been duly authorized by such Guarantor and, on the
Closing Date, will have been duly executed and delivered by each such
Guarantor. When the Series A Notes have been issued, executed and
authenticated in accordance with the Indenture and delivered to and paid
for by the Initial Purchasers in accordance with the terms of this
Agreement, the Guarantee of each Guarantor endorsed thereon will be
entitled to the benefits of the Indenture and will be the valid and
binding obligation of such Guarantor, enforceable against such Guarantor
in accordance with its terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the
Guarantees to be endorsed on the Series A Notes will conform as to legal
matters to the description thereof contained in the Offering Memorandum.
-9-
<PAGE>
<PAGE>
(j) The Guarantee to be endorsed on the Series B Notes by
each Guarantor has been duly authorized by such Guarantor and, when
issued, will have been duly executed and delivered by each such
Guarantor. When the Series B Notes have been issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Guarantee of each Guarantor endorsed thereon will be
entitled to the benefits of the Indenture and will be the valid and
binding obligation of such Guarantor, enforceable against such Guarantor
in accordance with its terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. When the Series B Notes are
issued, authenticated and delivered, the Guarantees to be endorsed on
the Series B Notes will conform as to legal matters to the description
thereof in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly
authorized by the Company and each of the Guarantors and, on the Closing
Date, will have been duly executed and delivered by the Company and each
of the Guarantors. When the Registration Rights Agreement has been duly
executed and delivered, the Registration Rights Agreement will be a
valid and binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each Guarantor in accordance with
its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Registration Rights Agreement
will conform as to legal matters to the description thereof in the
Offering Memorandum.
(l) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(m) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company and its subsidiaries, in each case except as described in
the Offering Memorandum.
(n) The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; and neither the Company nor any of
its subsidiaries (i) has received notice from any insurer or agent of
such insurer that substantial capital improvements or other material
expenditures will have to be made in order to continue such insurance or
(ii) has any reason to believe that it will not be able to renew its
existing insurance
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coverage as and when such coverage expires or to obtain similar coverage
from similar insurers at a cost that would not have a Material Adverse
Effect.
(o) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Company or
any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which would be required by the Act to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 filed with
the Commission.
(p) There is no (i) significant unfair labor practice
complaint, grievance or arbitration proceeding pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries before the National Labor Relations Board or any state or
local labor relations board, (ii) strike, labor dispute, slowdown or
stoppage pending or, to the best of the Company's knowledge, threatened
against the Company or any of its subsidiaries or (iii) union
representation question existing with respect to the employees of the
Company or any of its subsidiaries, except in the case of clauses (i),
(ii) and (iii) for such actions which, singly or in the aggregate,
would not have a Material Adverse Effect. To the best knowledge of the
Company, no collective bargaining organizing activities are taking place
with respect to the Company or any of its subsidiaries.
(q) The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) All material tax returns required to be filed by the
Company and each of its subsidiaries in any jurisdiction have been
filed, other than those filings being contested in good faith, and all
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company or any of its
subsidiaries have been paid, other than those being contested in good
faith and for which adequate reserves have been provided.
(s) All indebtedness of the Company and the Guarantors
that will be repaid with the proceeds of the issuance and sale of the
Series A Notes was incurred, and the indebtedness represented by the
Series A Notes is being incurred, for proper purposes and in good faith
and each of the Company and the Guarantors was, at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Series A Notes, and will be on the Closing
Date (after giving effect to the application of the proceeds from the
issuance of the Series A Notes) solvent, and had at the time of the
incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Series A Notes and will have on the Closing
Date (after giving effect to the application of the proceeds from the
issuance of the Series A Notes) sufficient capital for carrying on their
respective business and were, at the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and
sale of the Series A Notes, and will be on the Closing Date (after
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giving effect to the application of the proceeds from the issuance of
the Series A Notes) able to pay their respective debts as they mature.
(t) To the Company's knowledge, no action has been taken
and no law, statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency or body which prevents the
execution, delivery and performance of any of the Operative Documents,
the issuance of the Series A Notes or the Guarantees, or suspends the
sale of the Series A Notes or the Guarantees in any jurisdiction
referred to in Section 5(e); and no injunction, restraining order or
other order or relief of any nature by a federal or state court or other
tribunal of competent jurisdiction has been issued with respect to the
Company or any of its subsidiaries which would prevent or suspend the
issuance or sale of the Series A Notes or the Guarantees in any
jurisdiction referred to in Section 5(e).
(u) To the best of the Company's knowledge, the execution,
delivery and performance of this Agreement and the other Operative
Documents by the Company and each of the Guarantors, compliance by the
Company and each of the Guarantors with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and
thereby will not (i) require any consent, approval, authorization or
other order of, or qualification with, any court or governmental body or
agency (except such as may be required under the securities or Blue Sky
laws of the various states), (ii) conflict with or constitute a breach
of any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, any of its
subsidiaries or their respective property, (iv) result in the imposition
or creation of (or the obligation to create or impose) a Lien under, any
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or their
respective property is bound, or (v) result in the termination,
suspension or revocation of any Authorization (as defined below) of the
Company or any of its subsidiaries or result in any other impairment of
the rights of the holder of any such Authorization.
(v) There are no legal or governmental proceedings pending
or, to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject, which might
result, singly or in the aggregate, in a Material Adverse Effect.
(w) Neither the Company nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation relating
to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement
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Income Security Act of 1974,
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as amended ("ERISA"), or any provisions of the Foreign Corrupt
-----
Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not
have a Material Adverse Effect.
(x) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any related
constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a Material
Adverse Effect.
(y) Each of the Company and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "AUTHORIZATION") of, and has made all
-------------
filings with and notices to, all governmental or regulatory authorities
and self-regulatory organizations and all courts and other tribunals,
including without limitation, under any applicable Environmental Laws,
as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have
any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the
Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities
and governing bodies having jurisdiction with respect thereto; and no
event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or
lapse of time or both, would result in any other impairment of the
rights of the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or
the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(z) The accountants, Deloitte & Touche LLP, with respect
to the Company and the Guarantors (excluding Color Art, Inc.) that have
certified the financial statements and supporting schedules with respect
to the Company and the Guarantors (excluding Color Art, Inc.) included
in the Preliminary Offering Memorandum and the Offering Memorandum are
independent public accountants with respect to the Company and the
Guarantors (excluding Color Art, Inc.), as required by the Act and the
Exchange Act. The accountants, Rubin, Brown, Gornstein & Co. LLP, with
respect to Color Art, Inc., that have certified the financial statements
of Color Art, Inc. referred to in the Preliminary Offering Memorandum
and Offering Memorandum are independent public accountants with respect
to Color Art, Inc. as required by the Act on the Exchange Act. The
historical financial statements, together with related schedules
and notes, set forth in the Preliminary Offering Memorandum and the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the
Act, except for the absence of historical financial statements of recently
acquired subsidiaries as required under Rule 3-05 of Regulation S-X and
the omission, of which you are aware, of the financial statements, or
summary footnote disclosure related to, certain Guarantors as required
by Rule 3-10 of Regulation S-X.
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(aa) The historical financial statements, together with
related schedules and notes forming part of the Offering Memorandum (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated in the
Offering Memorandum at the respective dates or for the respective
periods to which they apply; such statements and related schedules and
notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum
(and any amendment or supplement thereto) are, in all material respects,
accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(bb) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been
prepared on a basis consistent with the historical financial statements
of the Company and its subsidiaries and give effect to assumptions used
in the preparation thereof on a reasonable basis and in good faith and
present fairly the historical and proposed transactions contemplated by
the Preliminary Offering Memorandum and the Offering Memorandum. The
other pro forma financial and statistical information and data included
in the Offering Memorandum are, in all material respects, accurately
presented and prepared on a basis consistent with the pro forma
financial statements.
(cc) The Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be,
an "investment company," as such term is defined in the Investment
Company Act of 1940, as amended.
(dd) Except for the Registration Rights Agreement and the
Company's obligation to cause its parent, Mail-Well, Inc., to register
70,564 shares of Mail-Well, Inc. common stock issued pursuant to the
Stock Purchase Agreement dated August 27, 1998, between the Company,
Armstrong-White, Inc. and the shareholders thereof, there are no
contracts, agreements or understandings between the Company or any
Guarantor and any person granting such person the right to require the
Company or such Guarantor to file a registration statement under the Act
with respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities with
the Notes and Guarantees registered pursuant to any Registration
Statement.
(ee) Neither the Company nor any of its subsidiaries nor
any agent thereof acting on the behalf of them has taken, and none of
them will take, any action that might cause this Agreement or the
issuance or sale of the Series A Notes to violate Regulation G (12
C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(ff) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act (i) has imposed (or has informed the Company or any
Guarantor that it is considering imposing) any condition (financial or
otherwise) on the Company's or any Guarantor's retaining any rating
assigned to the Company or any Guarantor, any
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securities of the Company or any Guarantor or (ii) has indicated to the
Company or any Guarantor that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that
does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company,
any Guarantor or any securities of the Company or any Guarantor.
(gg) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not occurred
any material adverse change or any development involving a prospective
material adverse change in the condition, financial or otherwise, or the
earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material
adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any
of its subsidiaries has incurred any material liability or obligation,
direct or contingent.
(hh) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the
Act.
(ii) When the Series A Notes and the Guarantees are issued
and delivered pursuant to this Agreement, neither the Series A Notes nor
the Guarantees will be of the same class (within the meaning of Rule
144A under the Act) as any security of the Company or the Guarantors
that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States
automated inter-dealer quotation system.
(jj) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Company, the
Guarantors or any of their respective representatives (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) in connection with the offer and sale of the Series A
Notes contemplated hereby, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Series A
Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(kk) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(ll) None of the Company, the Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company and the Guarantors
make no representation) has engaged or will engage in any directed
selling efforts within the meaning of Regulation S under the Act
("REGULATION S") with respect to the Series A Notes or the Guarantees.
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(mm) The Company, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Series A Notes outside the United States and, in
connection therewith, the Offering Memorandum will contain the
disclosure required by Rule 902(h).
(nn) The Series A Notes sold in reliance on Registration S
will be represented upon issuance by a temporary global security that
may not be exchanged for definitive securities until the expiration of
the 40-day restricted period referred to in Rule 903(c)(3) of the Act
and only upon certification of beneficial ownership of such Series A
Notes by non-U.S. persons or U.S. persons who purchased such Series A
Notes in transactions that were exempt from the registration
requirements of the Act.
(oo) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.
(pp) The sale of the Series A Notes pursuant to Regulation
S is not part of a plan or scheme to evade the registration provisions
of the Act.
(qq) No registration under the Act of the Series A Notes or
the Guarantees is required for the sale of the Series A Notes and the
Guarantees to the Initial Purchasers as contemplated hereby or for the
Exempt Resales assuming the accuracy of the Initial Purchasers'
representations and warranties and agreements set forth in Section 7
hereof.
(rr) Each certificate signed by any officer of the Company
or any Guarantor and delivered to the Initial Purchasers or counsel for
the Initial Purchasers shall be deemed to be a representation and
warranty by the Company or such Guarantor to the Initial Purchasers as
to the matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and the Guarantors
and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and hereby consents to such
reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each
--------------------------------------------------
of the Initial Purchasers, severally and not jointly, represents and
warrants to, and agrees with, the Company and the Guarantors:
(a) Such Initial Purchaser is a QIB with such knowledge
and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Series A
Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series
A Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes
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in a transaction that would violate the Act or the securities laws of
any state of the United States or any other applicable jurisdiction and
(B) will be reoffering and reselling the Series A Notes only to (x) QIBs
in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A and (y) in offshore transactions in reliance
upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D
under the Act) has been or will be used by such Initial Purchaser or any
of its representatives in connection with the offer and sale of the
Series A Notes pursuant hereto, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the
Series A Notes only from, and will offer to sell the Series A Notes only
to, Eligible Purchasers. Each Initial Purchaser further agrees that it
will offer to sell the Series A Notes only to, and will solicit offers
to buy the Series A Notes only from (A) Eligible Purchasers that the
Initial Purchaser reasonably believes are QIBs and (B) Regulation S
Purchasers, in each case, that agree that (x) the Series A Notes
purchased by them may be resold, pledged or otherwise transferred within
the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act,
as in effect on the date of the transfer of such Series A Notes, only
(I) to the Company or any of its subsidiaries, (II) to a person whom the
seller reasonably believes is a QIB purchasing for its own account or
for the account of a QIB in a transaction meeting the requirements of
Rule 144A under the Act, (III) in an offshore transaction (as defined in
Rule 902 under the Act) meeting the requirements of Rule 904 of the Act,
(IV) in a transaction meeting the requirements of Rule 144 under the
Act, (V) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable
to the Company) or (VI) 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 and
(y) they will deliver to each person to whom such Series A Notes or an
interest therein is transferred a notice substantially to the effect of
the foregoing.
(e) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in
any directed selling efforts within the meaning of Regulation S with
respect to the Series A Notes or the Guarantees.
(f) The Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will
be offered and sold only in offshore transactions.
(g) Such Initial Purchasers agree that they have not
offered or sold and will not offer or sell the Series A Notes in the
United States or to, or for the benefit or account of, a U.S. Person
(other than a distributor), in each case, as defined in Rule 902 under
the Act (i) as part of their distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering of the
Series A Notes pursuant hereto and the Closing Date, other than in
accordance with
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Regulation S of the Act or another exemption from the registration
requirements of the Act. Such Initial Purchasers agree that, during
such 40-day restricted period, they will not cause any advertisement
with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted
in any public place and will not issue any circular relating to the
Series A Notes, except such advertisements as are permitted by and
include the statements required by Regulation S.
(h) Such Initial Purchasers agree that, at or prior to
confirmation of a sale of Series A Notes by them to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration during the 40-day restricted period referred to in Rule
903(c)(2) under the Act, they will send to such distributor, dealer or
person receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:
"The Series A Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered and sold within the United States or
to, or for the account or benefit of, U.S. persons (i) as part of
your distribution at any time or (ii) otherwise until 40 days after
the later of the commencement of the Offering and the Closing Date,
except in either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to Accredited Institutions in
transactions that are exempt from the registration requirements of
the Securities Act), and in connection with any subsequent sale by
you of the Series A Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer or
person receiving a selling concession, fee or other remuneration, you
must deliver a notice to substantially the foregoing effect. Terms
used above have the meanings assigned to them in Regulation S."
(i) Such Initial Purchasers agree that the Series A Notes
offered and sold in reliance on Regulation S will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the 40-day restricted period referred
to in Rule 903(c)(3) of the Act and only upon certification of
beneficial ownership of such Series A Notes by non-U.S. persons or U.S.
persons who purchased such Series A Notes in transactions that were
exempt from the registration requirements of the Act.
(j) The sale of the Series A Notes offered and sold by
such Initial Purchaser pursuant hereto in reliance on Regulation S is
not part of a plan or scheme to evade the registration provisions of the
Act.
Each of the Initial Purchasers acknowledges that the Company
and the Guarantors and, for purposes of the opinions to be delivered to
each Initial Purchaser pursuant to Section 9 hereof, counsel to the
Company and the Guarantors and counsel to the Initial Purchasers will
rely upon the accuracy and truth of the foregoing representations and
each of the Initial Purchasers hereby consents to such reliance.
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8. INDEMNIFICATION.
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(a) The Company and each Guarantor agree, jointly and
severally, to indemnify and hold harmless each of the Initial
Purchasers, their directors, officers and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could
give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material
fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule
144A Information provided by the Company or any Guarantor to any holder
or prospective purchaser of Series A Notes pursuant to Section 5(h) or
caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any of the Initial Purchasers furnished in writing to the
Company by any of the Initial Purchasers; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who
failed to deliver a Final Offering Memorandum, as then amended or
supplemented, (so long as the Final Offering Memorandum and any
amendment or supplement thereto was provided by the Company to the
several Initial Purchasers in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages, liabilities or judgements
caused by any untrue statement or alleged untrue statement of a material
act contained in any Preliminary Offering Memorandum, or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged
material misstatement or omission was cured in the Final Offering
Memorandum, as so amended or supplemented.
(b) Each of the Initial Purchasers agrees, severally and
not jointly, to indemnify and hold harmless the Company and the
Guarantors, and their respective directors and officers and each person,
if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Company or the Guarantors, to the
same extent as the foregoing indemnity from the Company and the
Guarantors to each of the Initial Purchasers but only with reference to
information relating to such Initial Purchasers furnished in writing to
the Company by such Initial Purchasers expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section
8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall
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promptly notify the person against whom such indemnity may be sought
(the "INDEMNIFYING PARTY") in writing and the indemnifying party shall
------------------
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case
of any action in respect of which indemnity may be sought pursuant to
both Sections 8(a) and 8(b), the
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Initial Purchasers shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel
and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the
Initial Purchasers). Any indemnified party shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of the indemnified party unless (i) the employment of such
counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any
such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of
such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
indemnified parties and all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the
parties indemnified pursuant to Section 8(a), and by the Company, in the
case of parties indemnified pursuant to Section 8(b). The indemnifying
party shall indemnify and hold harmless the indemnified party from and
against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written
consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the indemnifying party)
and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of
which the indemnified party is or could have been a party and indemnity
or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of
such action and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and the Initial Purchasers on the other
hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(d)(i) above but also
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the relative fault of the Company and the Guarantors, on the one hand,
and the Initial Purchasers, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other
hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Series A Notes (after underwriting
discounts and commissions, but before deducting expenses) received by
the Company, and the total discounts and commissions received by the
Initial Purchasers bear to the total price to investors of the Series A
Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand,
or the Initial Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Guarantors, and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant
to this Section 8(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses incurred by
such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses,
claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchasers shall not be
required to contribute any amount in excess of the amount by which the
total discounts and commissions received by such Initial Purchasers
exceeds the amount of any damages which the Initial Purchasers have
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
---------------------------------------------
obligations of the Initial Purchasers to purchase the Series A Notes
under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All the representations and warranties of the Company
and the Guarantors contained in this Agreement shall be true and correct
on the Closing Date with the same force and effect as if made on and as
of the Closing Date.
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(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review (or of any potential or
intended review) for a possible change that does not indicate the
direction of the possible change in, any rating of the Company or any
Guarantor or any securities of the Company or any Guarantor (including,
without limitation, the placing of any of the foregoing ratings on
credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change,
nor shall any notice have been given of any potential or intended
change, in the outlook for any rating of the Company or any Guarantor or
any securities of the Company or any Guarantor by any such rating
organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating
to the Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have
occurred any change or any development involving a prospective change in
the condition, financial or otherwise, or the earnings, business,
management or operations of the Company and its subsidiaries, taken as a
whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term
debt of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries shall have incurred any liability or
obligation, direct or contingent, the effect of which, in any such case
described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in the Initial
Purchasers' judgment, is material and adverse and, in the Initial
Purchasers' judgment, makes it impracticable to market the Series A
Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) The Initial Purchasers shall have received on the
Closing Date a certificate dated the Closing Date, signed by the
President and the Chief Financial Officer of the Company and each of the
Guarantors, confirming the matters set forth in Sections 6(hh), 9(a) and
9(b) and stating that each of the Company and the Guarantors has
complied with all the agreements and satisfied all of the conditions
herein contained and required to be complied with or satisfied on or
prior to the Closing Date.
(e) The Initial Purchasers shall have received on the
Closing Date an opinion (satisfactory to you and counsel for the Initial
Purchasers), dated the Closing Date, of Rothgerber Johnson & Lyons LLP,
counsel for the Company and the Guarantors, to the effect that:
(i) each of the Company and its subsidiaries has
been duly incorporated or formed, is validly existing as a corporation,
limited liability company or limited partnership in good standing under
the laws of its jurisdiction of incorporation or formation and has the
corporate, limited liability company or limited partnership power and
authority to carry on its business as described in the Offering
Memorandum and to own, lease and operate its properties;
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<PAGE>
(ii) each of the Company and its subsidiaries is duly
qualified and is in good standing as a foreign corporation or entity
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully
paid, non-assessable and not subject to any preemptive or similar
rights;
(iv) all of the outstanding shares of capital stock
of each of the Company's subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable, and are owned by
the Company, free and clear of any Lien; except with respect to Murray
Envelope Holdings, Inc. which has a series of non-voting common stock
outstanding, 10% of which are owned by non-affiliates of the Company;
(v) the Series A Notes have been duly authorized
and, when executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms except as (x)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(vi) the Guarantees have been duly authorized and
validly executed and delivered by the Guarantors and, when the Series A
Notes are executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, the Guarantees endorsed
thereon will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Guarantors, enforceable in
accordance with their terms except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(vii) the Indenture has been duly authorized, executed
and delivered by the Company and each Guarantor and is a valid and
binding agreement of the Company and each Guarantor, enforceable against
the Company and each Guarantor in accordance with its terms except as
(x) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(viii) this Agreement has been duly authorized,
executed and delivered by the Company and the Guarantors;
(ix) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and the Guarantors and
is a valid and binding agreement of the
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<PAGE>
Company and each Guarantor, enforceable against the Company and each
Guarantor in accordance with its terms, except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights of acceleration and
the availability of equitable remedies may be limited by equitable
principles of general applicability;
(x) the Series B Senior Notes have been duly
authorized by the Company and the Guarantees to be endorsed on the
Series B Notes have been duly authorized by the Guarantors;
(xi) when the Series B Senior Notes are executed and
authenticated in accordance with the provisions of the Indenture and
delivered in exchange for Series A Notes in accordance with the
Indenture and the Exchange Offer, they will be entitled to the benefits
of the Indenture and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(xii) when the Series B Notes are executed and
authenticated in accordance with the provisions of the Indenture and
delivered in exchange for Series A Notes in accordance with the
Indenture and the Exchange Offer, the Guarantees endorsed thereon will
be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Guarantors, enforceable in accordance with
their terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(xiii) the statements under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business," "Description of the Company's
Capital Stock," "Description of Notes," "Description of Certain
Indebtedness," "Notice to Investors" and "Plan of Distribution" in the
Offering Memorandum, insofar as such statements constitute a summary of
the legal matters, documents or proceedings referred to therein, fairly
present in all material respects such legal matters, documents and
proceedings;
(xiv) neither the Company nor any of its subsidiaries
is in violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor any
of its subsidiaries is in default in the performance of any obligation,
agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective property is
bound;
(xv) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and each of
the Guarantors, the compliance by the Company and each of the Guarantors
with all provisions hereof and thereof and the consummation
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<PAGE>
of the transactions contemplated hereby and thereby will not (i) require
any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be
required under the securities or Blue Sky laws of the various states),
(ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company
or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company
and its subsidiaries, taken as a whole, to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their
respective property, or (iv) result in the imposition or creation of (or
the obligation to create or impose) a Lien under, any agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective
property is bound.
(xvi) the Company is not and, after giving effect to
the offering and sale of the Series A Notes and the application of the
net proceeds thereof as described in the Offering Memorandum, will not
be, an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended;
(xvii) the Indenture complies as to form in all
material respects with the requirements of the TIA and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder, and it is not necessary in connection with the
offer, sale and delivery of the Series A Notes to the Initial Purchasers
in the manner contemplated by this Agreement or in connection with the
Exempt Resales to qualify the Indenture under the TIA.
(xviii) no registration under the Act of the
Series A Notes is required for the sale of the Series A Notes to the
Initial Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming that (i) each Initial Purchaser is a QIB or a
Regulation S Purchaser, (ii) the accuracy of, and compliance with, the
Initial Purchasers' representations and agreements contained in Section
7 of this Agreement, and (iii) the accuracy of the representations of
the Company and the Guarantors set forth in Sections 6(ll), (oo) and
(pp) of this Agreement.
(xix) such counsel has no reason to believe that, as
of the date of the Offering Memorandum or as of the Closing Date, the
Offering Memorandum, as amended or supplemented, if applicable (except
for the financial statements and other financial data included therein,
as to which such counsel need not express any belief) contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The opinion of Rothgerber Johnson & Lyons LLP described in Section
9(e) above shall be rendered to you at the request of the Company and
the Guarantors and shall so state therein. In giving such opinion with
respect to the matters covered by Section 9(c)(xix), Rothgerber Johnson
& Lyons LLP may state that their opinion and belief are based upon their
participation in the preparation of the Offering Memorandum and any
amendments or supplements thereto and review
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<PAGE>
and discussion of the contents thereof, but are without independent
check or verification except as specified.
(f) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, of the general counsel
of the Company, to the effect that:
(i) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is or could be a party or to which any of their
respective property is or could be subject, which might result, singly
or in the aggregate, in a Material Adverse Effect;
(ii) neither the Company nor any of its subsidiaries
has violated any Environmental Law or any provisions of ERISA, any
provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a Material Adverse Effect;
(iii) each of the Company and its subsidiaries has
such Authorizations of, and has made all filings with and notices to,
all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct
its business, except where the failure to have any such Authorization or
to make any such filing or notice would not, singly or in the aggregate,
have a Material Adverse Effect. Each such Authorization is valid and in
full force and effect and each of the Company and its subsidiaries is in
compliance with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including
the receipt of any notice from any authority or governing body) which
allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any
other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to
the Company or any of its subsidiaries; except where such failure to be
valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect;
(iv) other than the Registration Rights Agreement and
the Company's obligation to cause its parent, Mail-Well, Inc., to
register 70,564 shares of Mail-Well, Inc. common stock issued pursuant
to the Stock Purchase Agreement dated August 27, 1998, there are no
contracts, agreements or understandings between the Company or any
Guarantor and any person granting such person the right to require the
Company or such Guarantor to file a registration statement under the Act
with respect to any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such securities with
the Notes and the Guarantees registered pursuant to any Registration
Statement.
(g) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, of Andrews & Kurth LLP,
counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
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(h) The Initial Purchasers shall have received, at the
time this Agreement is executed and at the Closing Date, letters dated
the date hereof or the Closing Date, as the case may be, in form and
substance satisfactory to the Initial Purchasers from Deloitte & Touche
LLP independent public accountants, containing the information and
statements of the type ordinarily included in accountants' "comfort
letters" to the Initial Purchasers with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(i) The Series A Notes shall have been approved by the
NASD for trading and duly listed in PORTAL.
(j) The Initial Purchasers shall have received a
counterpart, conformed as executed, of the Indenture which shall have
been entered into by the Company, the Guarantors and the Trustee.
(k) The Company and the Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have
received an original copy thereof, duly executed by the Company and the
Guarantors.
(l) Neither the Company nor the Guarantors shall have
failed at or prior to the Closing Date to perform or comply with any of
the agreements herein contained and required to be performed or complied
with by the Company or the Guarantors, as the case may be, at or prior
to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This
------------------------------------------
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by written notice to the Company
if any of the following has occurred: (i) any outbreak or escalation of
hostilities or other national or international calamity or crisis or
change in economic conditions or in the financial markets of the United
States or elsewhere that, in the Initial Purchasers' judgment, is
material and adverse and, in the Initial Purchasers' judgment, makes it
impracticable to market the Series A Notes on the terms and in the
manner contemplated in the Offering Memorandum, (ii) the suspension or
material limitation of trading in securities or other instruments on the
New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board
of Trade or the Nasdaq National Market or limitation on prices for
securities or other instruments on any such exchange or the Nasdaq
National Market, (iii) the suspension of trading of any securities of
the Company or any Guarantor on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by
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<PAGE>
either federal or New York State authorities or (vi) the taking of any
action by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of
-------------
this Agreement shall be addressed as follows: (i) if to the Company or
any Guarantor, to Mail-Well I Corporation, c/o Mail-Well, Inc.,
23 Inverness Way East, Englewood, Colorado 80112, telephone (303) 790-
8023, Attn: Chief Financial Officer, and (ii) if to the Initial
Purchasers, Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department,
or in any case to such other address as the person to be notified may
have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the
Guarantors and the Initial Purchasers set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and
will survive delivery of and payment for the Series A Notes, regardless
of (i) any investigation, or statement as to the results thereof, made
by or on behalf of any Initial Purchasers, the officers or directors of
the Initial Purchasers, any person controlling any Initial Purchaser,
the Company, any Guarantor, the officers or directors of the Company or
any Guarantor, or any person controlling the Company or any Guarantor,
(ii) acceptance of the Series A Notes and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and
each Guarantor, jointly and severally, agree to reimburse the Initial
Purchasers for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all
expenses which it has agreed to pay pursuant to Section 5(i) hereof.
The Company and each Guarantor also agree, jointly and severally, to
reimburse the several Initial Purchasers and their officers, directors
and each person, if any, who controls such Initial Purchasers within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act for
any and all fees and expenses (including without limitation the fees and
expenses of counsel) incurred by them in connection with enforcing their
rights under this Agreement (including without limitation its rights
under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Guarantors, the Initial Purchasers, the Initial Purchasers' directors
and officers, any controlling persons referred to herein, the directors
of the Company and the Guarantors and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a
purchaser of any of the
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Series A Notes from any of the several Initial Purchasers merely because
of such purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
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<PAGE>
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the several Initial
Purchasers.
Very truly yours,
MAIL-WELL I CORPORATION
By: /s/ Roger Wertheimer
-------------------------------
Name: Roger Wertheimer
Title: Vice President, General
Counsel and Secretary
EACH ENTITY LISTED ON SCHEDULE A
HERETO
By: /s/ Roger Wertheimer
-------------------------------
Name: Roger Wertheimer
Title: Vice President, General
Counsel and Secretary
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS & CO. INC.
HANIFEN, IMHOFF INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael L. Crow
---------------------------------------
Name: Michael L. Crow
Title: Senior Vice President
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<PAGE>
<TABLE>
SCHEDULE A
GUARANTORS
<CAPTION>
Name of Guarantor State of Incorporation
- ----------------- ----------------------
<S> <C>
Mail-Well, Inc. Colorado
Anderson Lithograph Company California
Armstrong-White, Inc. Michigan
Barkley, Inc. California
Denver Forms Company Colorado
Digital X-Press, Inc. Florida
Gould Packaging, Inc. Washington
Graphics Arts Center, Inc. Delaware
Graphics Illustrated, Inc. Florida
Griffin Envelope, Inc. Washington
Imperial Litho and Dryography, Inc. Arizona
John D. Lucas Printing Co. Maryland
Mail-Well Commercial Printing, Inc. Delaware
Mail-Well Canada Holdings, Inc. Delaware
Mail-Well Label Holdings, Inc. Colorado
Mail-Well Label USA, Inc. Colorado
Mail-Well West, Inc. Delaware
Murray Envelope Holdings, Inc. Colorado
Class I Non-voting stock 10%
owned by Non-affiliates
Murray Envelope Corporation Mississippi
N-M Envelope, Inc. Mississippi
National Graphics Company Colorado
Poser Business Forms, Inc. Delaware
Production Press, Inc. Illinois
Richtman's Printing of Colorado, LLC Colorado
Trafton Printing, Inc. Texas
Wisco II, L.L.C. Delaware
Wisco Envelope Corp. Tennessee
</TABLE>
-1-
<PAGE>
PAGE>
<TABLE>
SCHEDULE B
<CAPTION>
INITIAL PURCHASER PRINCIPAL AMOUNT OF NOTES
----------------- -------------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation $165,000,000
Prudential Securities Incorporated $ 90,000,000
Bear, Stearns & Co. Inc. $ 30,000,000
Hanifen, Imhoff Inc. $ 15,000,000
------------
Total $300,000,000
============
</TABLE>
-2-
<PAGE>
<PAGE>
<TABLE>
SCHEDULE C
SUBSIDIARIES
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
Anderson Lithograph Company California
Armstrong-White, Inc. Michigan
Barkley, Inc. California
Denver Forms Company Colorado
Digital X-Press, Inc. Florida
Gould Packaging, Inc. Washington
Graphics Arts Center, Inc. Delaware
Graphics Illustrated, Inc. Florida
Griffin Envelope, Inc. Washington
Imperial Litho and Dryography, Inc. Arizona
John D. Lucas Printing Co. Maryland
Mail-Well Commercial Printing, Inc. Delaware
Mail-Well Canada Holdings, Inc. Delaware
Mail-Well Label Holdings, Inc. Colorado
Mail-Well Label USA, Inc. Colorado
Mail-Well West, Inc. Delaware
Murray Envelope Holdings, Inc. Colorado
Class I Non-voting stock 10%
owned by Non-affiliates
Murray Envelope Corporation Mississippi
N-M Envelope, Inc. Mississippi
National Graphics Company Colorado
Poser Business Forms, Inc. Delaware
Production Press, Inc. Illinois
Richtman's Printing of Colorado, LLC Colorado
Trafton Printing, Inc. Texas
Wisco II, L.L.C. Delaware
Wisco Envelope Corp. Tennessee
Classic Envelope Plus, Ltd. British Columbia
Innova Envelope Inc. Ontario
Madsen Morris and Todd, Limited Ontario
Mail-Well Label Company Canada
Nova Scotia Company Nova Scotia
PNG, Inc. Ontario
Supremex, Inc. Canada
Mail-Well Europe Holdings LLC Colorado
Mail-Well France Holdings France
Mail-Well Envelope S.A. France
Mail-Well Mexico Holdings Inc. Colorado
</TABLE>
-3-
<PAGE>
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
-1-
<PAGE>
==============================================================
Execution Copy
REGISTRATION RIGHTS AGREEMENT
Dated as of December 16, 1998
by and among
Mail-Well I Corporation
The Guarantors listed on Schedule A
and
Donaldson, Lufkin & Jenrette Securities Corporation
Prudential Securities Incorporated
Bear, Stearns & Co. Inc.
Hanifen, Imhoff Inc.
==============================================================
<PAGE>
<PAGE>
This Registration Rights Agreement (this "Agreement") is
---------
made and entered into as of December 16, 1998, by and among Mail-Well I
Corporation, a Delaware corporation (the "Company"), each of the
-------
entities listed on Schedule A, attached hereto (each a "Guarantor"
---------
and, collectively, the "Guarantors"), and Donaldson, Lufkin & Jenrette
----------
Securities Corporation, Prudential Securities Inc., Bear, Stearns & Co.
Inc., Hanifen, Imhoff Inc. (each an "Initial Purchaser" and,
-----------------
collectively, the "Initial Purchasers"), each of whom has agreed to
------------------
purchase the Company's 8-3/4% Series A Senior Subordinated Notes due
2008 (the "Series A Notes") pursuant to the Purchase Agreement (as
--------------
defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated December 11,1998 (the "Purchase Agreement"), by and among the
------------------
Company, the Guarantors and the Initial Purchasers. In order to induce
the Initial Purchasers to purchase the Series A Notes, the Company has
agreed to provide the registration rights set forth in this Agreement.
The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 9 of the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
---
Advice: As defined in Section 6(d) hereof.
------
Business Day: Any day except a Saturday, Sunday or other
------------
day in the City of New York, or in the city of the corporate trust
office of the Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the
-------------
Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B
--------------------------------------------
Notes that are acquired by a Broker-Dealer in the Exchange Offer in
exchange for Series A Notes that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading
activities (other than Series A Notes acquired directly from the Company
or any of its affiliates).
Certificated Securities: As defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed
----------
"Consummated" for purposes of this Agreement upon the occurrence of (a)
the filing and effectiveness under the Act of the Exchange Offer
Registration Statement relating to the Series B Notes to be issued in
the Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section
3(b) hereof and (c) the
1
<PAGE>
<PAGE>
delivery by the Company to the Registrar under the Indenture of Series B
Notes in the same aggregate principal amount as the aggregate principal
amount of Series A Notes tendered by Holders thereof pursuant to the
Exchange Offer.
Damages Payment Date: With respect to the Series A
--------------------
Notes, each Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as
------------
amended.
Exchange Offer: The registration by the Company under
--------------
the Act of the Series B Notes pursuant to the Exchange Offer
Registration Statement pursuant to which the Company shall offer the
Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted
Securities for Series B Notes in an aggregate principal amount equal to
the aggregate principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration
-------------------------------------
Statement relating to the Exchange Offer, including the related
Prospectus.
Exempt Resales: The transactions in which the Initial
--------------
Purchasers propose to sell the Series A Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the
Act, and to certain "accredited investors," as such term is defined in
Rule 501(a)(1), (2), (3), (5) and (7) of Regulation D under the Act.
Global Noteholder: As defined in the Indenture.
-----------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated the Closing Date, among
---------
the Company, the Guarantors and the Trustee, pursuant to which the Notes
are to be issued, as such Indenture is amended or supplemented from time
to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and
---------------------
the Notes.
Majority Holders: As defined in Section 6(c) hereof.
----------------
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Series A Notes and the Series B Notes.
-----
Person: An individual, partnership, corporation, trust,
------
unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration
----------
Statement at the time such Registration Statement is declared effective,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all
material incorporated by reference into such Prospectus.
2
<PAGE>
<PAGE>
Record Holder: With respect to any Damages Payment Date,
-------------
each Person who is a Holder of Notes on the record date with respect to
the Interest Payment Date on which such Damages Payment Date shall
occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of
----------------------
the Company and the Guarantors relating to (a) an offering of Series B
Notes pursuant to an Exchange Offer or (b) the registration for resale
of Transfer Restricted Securities pursuant to the Shelf Registration
Statement, in each case, (i) which is filed pursuant to the provisions
of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
------------------------
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 8-3/4% Series B Senior
--------------
Subordinated Notes due 2008 to be issued pursuant to the Indenture (i)
in the Exchange Offer or (ii) upon the request of any Holder of Notes
covered by a Shelf Registration Statement, in exchange for such Series A
Notes.
Shelf Registration Period: As defined in Section 4(a)
-------------------------
hereof.
Shelf Registration Statement: As defined in Section 4(a)
----------------------------
hereof.
Suspension Period: As defined in Section 4(a) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
---
77, et seq.) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the
------------------------------
earliest to occur of (a) the date on which such 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 Act, (b) the date on which such Note has been disposed of in
accordance with a Shelf Registration Statement, (c) the date on which
such Note is disposed of by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date
on which such Note is distributed to the public pursuant to Rule 144
under the Act.
Trustee: State Street Bank and Trust Company, as trustee
-------
under the Indenture.
Underwritten Registration or Underwritten Offering: A
------------------------- ---------------------
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer
------
Restricted Securities.
3
<PAGE>
<PAGE>
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law (after the procedures set forth in Section
6(a)(i) below have been complied with), the Company and the Guarantors
shall (i) cause to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 90 days after the
Closing Date, the Exchange Offer Registration Statement, (ii) use its
best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later
than 180 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such
Exchange Offer Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws
of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting registration
of the Series B Notes to be offered in exchange for the Series A Notes
that are Transfer Restricted Securities and to permit sales of Broker-
Dealer Transfer Restricted Securities by Restricted Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their
respective best efforts to cause the Exchange Offer Registration
Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantors shall cause
the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Notes shall be included
in the Exchange Offer Registration Statement. The Company and the
Guarantors shall use their respective best efforts to cause the Exchange
Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no
event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration
Statement and indicate therein that any Restricted Broker-Dealer who
holds Series A Notes that are Transfer Restricted Securities and that
were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities, may exchange such
Series A Notes (other than Transfer Restricted Securities acquired
directly from the Company or any Affiliate of the Company) pursuant to
the Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver
a prospectus meeting the requirements of the Act in connection with its
initial sale of each Series B Note received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied
by the delivery by such Broker-Dealer of the Prospectus contained in the
Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name
any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy after the date of this Agreement.
4
<PAGE>
<PAGE>
The Exchange Offer shall not be subject to any conditions,
other than (i) that the Exchange Offer, or the making of any exchange by
a Holder, does not violate applicable law or any applicable
interpretation of the staff of the Commission, (ii) that no action or
proceeding shall have been instituted or threatened in any court or by
or before any governmental agency or body with respect to the Exchange
Offer, (iii) that there shall not have been adopted or enacted any law,
statute, rule or regulation, (iv) that there shall not have been
declared by United States federal or New York state authorities a
banking moratorium, (v) that trading on the New York Stock Exchange or
generally in the United States over-the-counter market shall not have
been suspended by order of the Commission or any other governmental
authority and (vi) such other conditions as may be reasonably acceptable
to the Initial Purchasers, in each of clauses (ii) through (v), which,
in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer.
The Company and the Guarantors shall use their respective
best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented and amended as required by the
provisions of Section 6(c) below to the extent necessary to ensure that
it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such
Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of one year, if required, from
the date on which the Exchange Offer is Consummated.
The Company and the Guarantors shall promptly provide
sufficient copies of the latest version of such Prospectus to such
Restricted Broker-Dealers promptly upon request, at any time during such
one-year period in order to facilitate such sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not
------------------
required to file an Exchange Offer Registration Statement with respect
to the Series B Notes because the Exchange Offer is not permitted by
applicable law (after the procedures set forth in Section 6(a)(i) below
have been complied with) or Commission policy, (ii) the Exchange Offer
is not consummated within 210 days of the Closing Date or (iii) if any
Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that
(A) such Holder has been advised by counsel that such Holder may be
prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder has been advised by counsel that it
may not resell the Series B Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such
Holder is a Broker-Dealer and holds Series A Notes acquired directly
from the Company or one of its affiliates, then the Company and the
Guarantors shall (x) 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
Exchange Offer Registration Statement pursuant to clause (i) above, 30
days after the date on which the obligation specified in clause (ii)
above becomes not satisfied or 30 days after the date on which the
Company receives the notice specified in clause (iii) above (but in each
case no earlier than 90 days after the date hereof) a shelf registration
statement pursuant to Rule 415 under the Act (which may be an amendment
to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement")), relating to all Transfer Restricted
----------------------------
Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof, and shall (y) use their
respective best efforts to cause such Shelf Registration Statement to
5
<PAGE>
<PAGE>
become effective on or prior to 90 days after the date on which the
Company and the Guarantors become obligated to file such Shelf
Registration Statement (but no earlier than 180 days after the date
hereof). If, after the Company has filed an Exchange Offer Registration
Statement which satisfies the requirements of Section 3(a) above, the
Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of
clause (x) above. Such an event shall have no effect on the
requirements of clause (y) above. The Company and the Guarantors shall
use their respective best efforts to keep the Shelf Registration
Statement discussed in this Section 4(a) continuously effective,
supplemented and amended as required by and subject to the provisions of
Sections 6(b) and (c) hereof to the extent necessary to ensure that it
is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that
it conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time
to time, for a period of at least three years (as extended pursuant to
Section 6(c)(i)) following the date on which such Shelf Registration
Statement first becomes effective under the Act or such shorter period
that will terminate when all the Transfer Restricted Securities covered
by the Shelf Registration Statement (i) have been sold pursuant thereto
(in any such case, such period being called the "Shelf Registration
-------------------
Period"), (ii) are distributed to the public pursuant to Rule 144 of
- ------
the Securities Act or are saleable pursuant to Rule 144(k) under the
Securities Act and can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144 (or any
successor rule thereof); provided, however, that the Company shall not
be obligated to keep the Shelf Registration Statement effective if (i)
the Company determines, in its reasonable judgment, upon advice of
counsel, as authorized by a resolution of its Board of Directors, that
the continued effectiveness and usability of the Shelf Registration
Statement would (x) require the disclosure of material information,
which the Company has a bona fide business reason for preserving as
confidential, or (y) interfere with any financing, acquisition,
corporate reorganization or other material transaction involving the
Company or any of its subsidiaries, provided that the failure to keep
the Shelf Registration Statement effective and usable for offers and
sales of Transfer Restricted Securities for such reasons shall last no
longer than 45 days in any 12-month period (whereafter a Registration
Default), and (ii) the Company promptly thereafter complies with the
requirements of Section 6(c)(i) hereof, if applicable. Any such period
during which the Company is excused from keeping the Shelf Registration
Statement effective and usable for offers and sales of Transfer
Restricted Securities is referred to herein as a "Suspension Period."
-----------------
A Suspension Period shall commence on and include the date that the
Company gives notice that the Shelf Registration Statement is no longer
effective or the prospectus included therein is no longer usable for
offers and sales of Transfer Restricted Securities as a result of the
application of the proviso in the second preceding sentence and shall
end on the earlier to occur of (1) the date on which each seller of
Transfer Restricted Securities covered by the Shelf Registration
Statement either receives the copies of the supplemented or amended
prospectus contemplated by Section 6(c)(i) hereof or is advised in
writing by the Company that use of the prospectus may be resumed and (2)
the expiration of the 45 days in any 12-month period during which one or
more Suspension Periods has been in effect.
(b) Provision by Holders of Certain Information in
-----------------------------------------------
Connection with the Shelf Registration Statement. No Holder of
- ------------------------------------------------
Transfer Restricted Securities may include any of its Transfer
Restricted Securities in any Shelf Registration Statement pursuant to
this Agreement unless and until such Holder furnishes to the Company in
writing, within 20 days after receipt of a request therefor, such
information specified in item 507 of Regulation S-K under the Act for
use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant
to Section 5 hereof unless and until such Holder
6
<PAGE>
<PAGE>
shall have provided all such information. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by
such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this
Agreement is not filed with the Commission on or prior to the date
specified for such filing in this Agreement, (ii) any such Registration
Statement has not been declared effective by the Commission on or prior
to the date specified for such effectiveness in this Agreement, (iii)
the Exchange Offer has not been Consummated within 30 Business Days
after the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required
by this Agreement is filed and declared effective but shall thereafter
cease to be effective or fail to be usable for its intended purpose
without being succeeded within three business days by a post-effective
amendment to such Registration Statement that cures such failure and
that is itself declared effective within such three business day period
(each such event referred to in clauses (i) through (iv), a
"Registration Default"; provided, however, that (A) any failure to
--------------------
file a Shelf Registration Statement as required by this Agreement shall
not constitute a Registration Default unless and until such failure
arises on or after the ninetieth (90th) day after the Closing Date and
(B) any failure to have declared effective a Shelf Registration
Statement as required by this Agreement shall not constitute a
Registration Default unless and until such failure arises on or after
the one hundred eightieth (180th) day after the Closing Date), then the
Company and the Guarantors hereby jointly and severally agree to pay
liquidated damages to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence
of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such
Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.50 per week per $1,000 principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, Holders
of Transfer Restricted Securities who do not provide in all material
respects the information required in Sections 4(b) or 6(a)(ii) hereof
will not be entitled to such Liquidated Damages. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the
Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the
Registration Statement or an additional Registration Statement that
causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made
usable in the case of (iv) above, the liquidated damages payable with
respect to the Transfer Restricted Securities as a result of such clause
(i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Global
Noteholder by wire transfer of immediately available funds or by federal
funds check and to Holders of Certificated Securities by mailing checks
to their registered addresses on each Damages Payment Date. All
obligations of the Company and the Guarantors set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with
respect to such security shall have been satisfied in full.
7
<PAGE>
<PAGE>
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In
-------------------------------------
connection with the Exchange Offer, the Company and the Guarantors shall
comply with all applicable provisions of Section 6(c) below, shall use
their respective best efforts to effect such exchange and to permit the
sale of Broker-Dealer Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof,
and shall comply with all of the following provisions:
(i) If, following the date hereof there has been
published a change in Commission policy with respect to
exchange offers such as the Exchange Offer, such that in the
reasonable opinion of counsel to the Company there is a
substantial question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the
Guarantors hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and
the Guarantors to Consummate an Exchange Offer for such Series
A Notes. The Company and the Guarantors hereby agree to pursue
the issuance of such a decision to the Commission staff level,
but shall not be required to take action to effect a change of
stated or recognized Commission policy. In connection with the
foregoing, the Company and the Guarantors hereby agree to (A)
participate in telephonic conferences with the Commission, (B)
deliver to the Commission staff an analysis prepared by counsel
to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursue a resolution
(which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each
Holder of Transfer Restricted Securities shall furnish, upon
the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an affiliate (as defined in Rule
405 of the Act) of the Company, (B) 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 Series A Notes to be issued in the Exchange Offer,
(C) it is acquiring the Series B Notes in its ordinary course
of business and (D) if such Holder is a broker-dealer, that it
will receive Series B Notes for its own account in exchange for
Series A 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 such Series B
Notes. Each Holder shall be required to make such other
representations as may be reasonably necessary under applicable
Commission rules, regulations or interpretations to render the
use of Form S-4 or another appropriate form under the
Securities Act available and will be required to agree to
comply with their agreements and covenants set forth in this
Agreement. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as
in effect on the date of this Agreement rely on the position of
the Commission enunciated in Morgan Stanley and Co., Inc.
----------------------------
(available June 5, 1991) and Exxon Capital Holdings
-----------------------
Corporation (available May 13, 1988), as interpreted in the
-----------
Commission's letter to Shearman & Sterling dated July 2, 1993,
and similar no-action letters (including, if applicable, any
no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing
the
8
<PAGE>
<PAGE>
selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K if the resales are of
Series B Notes obtained by such Holder in exchange for Series
A Notes acquired by such Holder directly from the Company or
an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall,
if requested by the Commission, provide a supplemental letter
to the Commission (A) stating that the Company and the
Guarantors are registering the Exchange Offer in reliance on
the position of the Commission enunciated in Exxon Capital
--------------
Holdings Corporation (available May 13, 1988), Morgan Stanley
-------------------- ---------------
and Co., Inc. (available June 5, 1991) and, if applicable, any
-------------
no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding
with any Person to distribute the Series B Notes to be received
in the Exchange Offer and that, to the best of the Company's
and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B
Notes in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange
Offer and (C) any other undertaking or representation required
by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with
----------------------------
the Shelf Registration Statement, the Company and the Guarantors shall
comply with all the provisions of Section 6(c) below and shall use their
respective best efforts to effect such registration to permit the sale
of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof),
and pursuant thereto the Company and the Guarantors will prepare and
file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof
within the time periods and otherwise in accordance with the provisions
hereof.
(c) General Provisions. In connection with any
------------------
Registration Statement and any related Prospectus required by this
Agreement to permit the sale or resale of Transfer Restricted Securities
(including, without limitation, any Exchange Offer Registration
Statement and the related Prospectus, to the extent that the same are
required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the
Guarantors shall (1) file promptly an appropriate amendment to
such Registration Statement (which, in the case of clause (A),
corrects any such misstatement or omission) and (2) use their
respective best efforts to cause such amendment to be declared
effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter.
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration
Statement effective for the
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applicable period set forth in Section 3 or 4 hereof, or such
shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act, and to comply fully with Rules
424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method
or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriters, if any, and selling
Holders promptly and, if requested by such Persons, confirm
such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to
or changes in the Registration Statement in order to make the
statements therein not misleading, or that requires the making
of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company and the Guarantors
shall use their respective best efforts to obtain the
withdrawal or lifting of such order at the earliest possible
time;
(iv) if requested by any of the Initial Purchasers or
the managing underwriter, if any, with respect to the
Registration Statement, the Company shall furnish to each
Initial Purchaser or such managing underwriter, prior to the
filing thereof with the Commission, a copy of the applicable
registration statement and each amendment thereof and each
supplement, if any, to the prospectus included therein. The
Company shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as
the Initial Purchasers or managing underwriter reasonably may
propose.
(v) make available at reasonable times for inspection
by representatives appointed by Holders of a majority in
aggregate principal amount of Transfer Restricted Securities
(the "Majority Holders"), any managing underwriter
----------------
participating in any disposition pursuant to such Registration
Statement and one attorney or accountant retained by such
Majority Holders or such managing underwriters, all relevant
financial and other records, pertinent corporate documents and
properties of the Company and the Guarantors and cause the
Company's and the Guarantors' officers, directors and employees
to supply relevant information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with
such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its
effectiveness; provided, however,
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that any information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of
such information shall be kept confidential by the Holders or any
such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required
by law, or such information becomes available to the public
generally through a third party without an accompanying obligation
of confidentiality.
(vi) if requested by any selling Holders or the
underwriters in connection with such sale, if any, promptly
include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriters, if any,
may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriters, the
purchase price being paid therefor and any other terms of the
offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in
such Prospectus supplement or post-effective amendment;
(vii) furnish to each selling Holder and each of the
underwriters in connection with such sale, if any, upon request
and without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits
incorporated therein by reference);
(viii) deliver to each selling Holder and each of the
underwriters, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may
request; the Company and the Guarantors hereby consent to the
use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders
and each of the underwriters, if any, in connection with the
offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement
thereto;
(ix) enter into such agreements (including an
underwriting agreement) and make such representations and
warranties and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration
Statement contemplated by this Agreement as may be reasonably
requested by the Majority Holders of Transfer Restricted
Securities or managing underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated
by this Agreement (provided, however, that the Company shall
have no obligation to enter into an underwriting agreement or
permit an underwritten offering unless a request therefor shall
have been received from the holders of not less than 33 1/3% of
the aggregate principal amount of Transfer Restricted
Securities) and in such connection the Company and the
Guarantors shall:
(A) furnish (or in the case of paragraphs (2) and (3),
use its best efforts to furnish) to each selling Holder and
each underwriter, if any, upon the effectiveness of the
Shelf Registration Statement and to each Restricted Broker-
Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be,
signed on behalf of
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<PAGE>
the Company and each Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as
of the date thereof, the matters set forth in paragraph (hh)
of Section 6 and paragraphs (a) and (b) of Section 9 of the
Purchase Agreement and such other similar matters as the
representative of the Majority Holders and/or managing
underwriter(s) may reasonably request;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of
counsel for the Company and the Guarantors covering
matters similar to those set forth in paragraph (e) of
Section 9 of the Purchase Agreement and such other
matter as the representative of the Majority Holders
and/or managing underwriters may reasonably request,
and in any event including a statement to the effect
that such counsel has participated in conferences with
officers and other representatives of the Company and
the Guarantors, representatives of the independent
public accountants for the Company and the Guarantors
and have considered the matters required to be stated
therein and the statements contained therein, although
such counsel has not independently verified the
accuracy, completeness or fairness of such statements;
and that such counsel advises that, on the basis of the
foregoing (relying as to materiality to a large extent
upon facts provided to such counsel by officers and
other representatives of the Company and the Guarantors
and without independent check or verification), no
facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration
Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or that the
Prospectus contained in such Registration Statement as
of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the
date of Consummation, contained an untrue statement of
a material fact or omitted to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the
date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the
matters set forth in the comfort letters delivered
pursuant to Section 9(g) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified
pursuant to said Section; and
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<PAGE>
(C) deliver such other documents and certificates as
may be reasonably requested by the representative of the
Majority Holders, the managing underwriters, if any, and
Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement
entered into by the Company and the Guarantors pursuant to
this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent
required thereunder, and if at any time the representations and
warranties of the Company and the Guarantors contemplated in
(A)(1) above cease to be true and correct, the Company and the
Guarantors shall so advise the underwriters, if any, the
selling Holders and each Restricted Broker-Dealer promptly and
if requested by such Persons, shall confirm such advice in
writing;
(x) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in
connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders or
underwriters, if any, may request and do any and all other acts
or things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided,
however, that neither the Company nor any Guarantor shall be
required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would
subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now
so subject;
(xi) issue, upon the request of any Holder of Series A
Notes covered by any Shelf Registration Statement contemplated
by this Agreement, Series B Notes having an aggregate principal
amount equal to the aggregate principal amount of Series A
Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder, such Series B Notes to
be registered in the name of such Holder or in the name of the
purchasers of such Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xii) in connection with any sale of Transfer
Restricted Securities that will result in such securities no
longer being Transfer Restricted Securities, cooperate with the
selling Holders and the underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the Holders
or the underwriters, if any, may request at least two Business
Days prior to such sale of Transfer Restricted Securities;
(xiii) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by
the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso
contained in clause (x) above;
(xiv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to
the Registration Statement or related Prospectus or any
document incorporated therein by reference or
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<PAGE>
file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
(xv) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted
Securities and provide the Trustee under the Indenture with
printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository
Trust Company;
(xvi) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter (including any
"qualified independent underwriter") that is required to be
retained in accordance with the rules and regulations of the
NASD, and use their respective best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to
enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted
Securities;
(xvii) otherwise use their respective best efforts to
comply with all applicable rules and regulations of the
Commission, and make generally available to its security
holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the
effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under the
TIA not later than the effective date of the first Registration
Statement required by this Agreement and, in connection
therewith, cooperate with the Trustee and the Holders of Notes
to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner; and
(xix) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange
Act.
(d) Restrictions on Holders. Each Holder agrees by
-----------------------
acquisition of a Transfer Restricted Security that, upon receipt of the
notice referred to in Section 6(c)(i) or any notice from the Company of
the existence of any fact of the kind described in Section 6(c)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) hereof, or until it is
advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the
"Advice"). If so directed by the Company, each Holder will deliver to
------
the Company (at the Company's expense) all copies, other than permanent
file copies then in such Holder's possession, of the Prospectus covering
such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any
such notice, the time period
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<PAGE>
regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by the number
of days during the period from and including the date of the giving of
such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented
or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the
Guarantors' performance of or compliance with this Agreement will be
borne by the Company, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made by any Purchaser or
Holder with the NASD (and, if applicable, the fees and expenses of any
"qualified independent underwriter") and its counsel that may be
required by the rules and regulations of the NASD); (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and
telephone relating to printing expenses; (iv) all fees and disbursements
of counsel for the Company, the Guarantors and the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection
with listing the Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees
and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit
and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the
Guarantors' internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the
Company or the Guarantors.
(b) In connection with any Registration Statement
required by this Agreement (including, without limitation, the Exchange
Offer Registration Statement and the Shelf Registration Statement), the
Company and the Guarantors will reimburse the Purchasers and the Holders
of Transfer Restricted Securities being tendered in the Exchange Offer
and/or resold pursuant to the "Plan of Distribution" contained in the
Exchange Offer Registration Statement or registered pursuant to the
Shelf Registration Statement, as applicable, 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 Transfer Restricted
Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors, jointly and
severally, agree to indemnify and hold harmless (i) each Holder and (ii)
each person, if any, who controls (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as
a "controlling person") and (iii) the respective officers, directors,
partners, employees, representatives and agents of any Holder or any
controlling person (any person referred to in clause (i), (ii) or (iii)
may hereinafter be referred to as an "Indemnified Holder"), to the
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fullest extent
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lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without
limitation and promptly after receipt of a bill therefor, reimbursement
of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder)
directly or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement, preliminary
prospectus or Prospectus (or any amendment or supplement thereto), or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and
in conformity with information relating to any of the Holders furnished
in writing to the Company by any of the Holders expressly for use
therein, provided, that with respect to any such untrue statement in or
omission from the preliminary prospectus, the indemnity agreement
contained in this Section 8 shall not inure to the benefit of any such
Holder to the extent that the sale to the person asserting any such
loss, claim, damage, liability or action was an initial resale by such
Holder and any such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that (A) to the extent
required by applicable law, a copy of the Prospectus was not sent or
given to such person at or prior to the written confirmation of the sale
of such Transfer Restricted Securities to such person, (B) the untrue
statement in or omission from the preliminary prospectus was corrected
in the Prospectus and such statement or omission formed the basis for
the claim giving rise to such loss, and (C) sufficient quantities of the
Prospectus were delivered to the Holder on a timely basis.
In case any action or proceeding (including any
governmental or regulatory investigation or proceeding) shall be brought
or asserted against any of the Indemnified Holders with respect to which
indemnity may be sought against the Company or the Guarantors, such
Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company and the Guarantors
in writing (provided, that the failure to give such notice shall not
relieve the Company or the Guarantors of their obligations pursuant to
this Agreement except to the extent that the Company and the Guarantors
are materially prejudiced or forfeit substantive rights and defenses by
reason of such failure). Such Indemnified Holder shall have the right
to employ its own counsel in any such action and the fees and expenses
of such counsel shall be paid, as incurred, by the Company and the
Guarantors (regardless of whether it is ultimately determined that an
Indemnified Holder is not entitled to indemnification hereunder). The
Company and the Guarantors shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm
shall be designated by the Holders. The Company and the Guarantors
shall be liable for any settlement of any such action or proceeding
effected with the Company's prior written consent, which consent shall
not be withheld unreasonably, and the Company and the Guarantors agree
to indemnify and hold harmless each Indemnified Holder from and against
any loss, claim, damage, liability or expense by reason of any
settlement of any action effected with the written consent of the
Company. Neither the Company nor any Guarantor shall, without the prior
written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, claim, litigation or proceeding in respect
of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement,
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<PAGE>
compromise, consent or termination includes an unconditional release of
each Indemnified Holder from all liability arising out of such action,
claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities
agrees, severally and not jointly, to indemnify and hold harmless the
Company and the Guarantors, and their respective directors, officers,
and any person controlling (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company, and the respective
officers, directors, partners, employees, representatives and agents of
each such person, to the same extent as the foregoing indemnity from the
Company and the Guarantors to each of the Indemnified Holders, but only
with respect to claims and actions based on information relating to such
Holder furnished in writing by such Holder expressly for use in any
Registration Statement. In case any action or proceeding shall be
brought against the Company, any Guarantor or its directors or officers
or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder
shall have the rights and duties given the Company and the Guarantors,
and the Company, such Guarantor, such directors or officers or such
controlling person shall have the rights and duties given to each Holder
by the preceding paragraph. In no event shall any Holder be liable or
responsible for any amount in excess of the amount by which the total
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount
paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission.
(c) If the indemnification provided for in this Section
8 is unavailable to an indemnified party under Section 8(a) or Section
8(b) hereof (other than by reason of exceptions provided in those
Sections) in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative benefits received by the Company
and the Guarantors, on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or if such allocation
is not permitted by applicable law, the relative fault of the Company
and the Guarantors, on the one hand, and of the Indemnified Holder, on
the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault
of the Company and the Guarantors, on the one hand, and of the
Indemnified Holder, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or such
Guarantor or by the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred
to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees
or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Guarantors and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, liabilities or expenses
referred to in the immediately preceding paragraph shall be deemed to
17
<PAGE>
<PAGE>
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total
received by such Holder with respect to the sale of its Transfer
Restricted Securities pursuant to a Registration Statement exceeds the
sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations
to contribute pursuant to this Section 8(c) are several in proportion to
the respective principal amount of Senior Notes held by each of the
Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company and each Guarantor hereby agrees with each
Holder, for so long as any Transfer Restricted Securities remain
outstanding and during any period in which the Company or such Guarantor
is not subject to Section 13 or 15(d) of the Securities Exchange Act, to
make available, upon request of any Holder of Transfer Restricted
Securities, to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective
purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in customary underwriting
arrangements entered into in connection therewith and (b) completes and
executes all reasonable questionnaires, powers of attorney, and other
documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or
investment bankers and manager or managers for any Underwritten Offering
that will administer such offering will be selected by the Company and
be reasonably acceptable to the Majority Holders. Such investment
bankers and managers are referred to herein as the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being
--------
entitled to exercise all rights provided herein, in the Indenture, the
Purchase Agreement or granted by law, including recovery of liquidated
or other
18
<PAGE>
<PAGE>
damages, will be entitled to specific performance of its rights under
this Agreement. The Company and the Guarantors agree that monetary
damages would not be adequate compensation for any loss incurred by
reason of a breach by them of the provisions of this Agreement and
hereby agree to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company
--------------------------
nor any Guarantor will, on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Neither the Company nor any
Guarantor has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The
rights granted to the Holders hereunder do not in any way conflict with
and are not inconsistent with the rights granted to the holders of the
Company's and the Guarantors' securities under any agreement in effect
on the date hereof.
(c) Adjustments Affecting the Notes. Neither the
-------------------------------
Company nor any Guarantor will take any action, or voluntarily permit
any change to occur, with respect to the Notes that would materially and
adversely affect the ability of the Holders to Consummate any Exchange
Offer.
(d) Amendments and Waivers. The provisions of this
----------------------
Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given
unless (i) in the case of Section 5 hereof and this Section 12(d)(i),
the Company has obtained the written consent of Holders of all
outstanding Transfer Restricted Securities and (ii) in the case of all
other provisions hereof, the Company has obtained the written consent of
the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively
to the rights of Holders whose securities are being tendered pursuant to
the Exchange Offer and that does not affect directly or indirectly the
rights of other Holders whose securities are not being tendered pursuant
to such Exchange Offer may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities subject
to such Exchange Offer.
(e) Notices. All notices and other communications
-------
provided for or permitted hereunder shall be made in writing by hand-
delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier, or air courier guaranteeing overnight
delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to
the Registrar under the Indenture; and
(ii) if to the Company or the Guarantors:
Mail-Well I Corporation
c/o Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Telecopier No.: (303) 397-7400
Attention: Mark Zoeller
19
<PAGE>
<PAGE>
With a copy to:
Rothgerber Johnson & Lyons LLP
1200 17th Street, Suite 3000
Denver, Colorado 80202-5839
Telecopier No.: (303) 628-9560
Attention: Herbert H. Davis III
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall
----------------------
inure to the benefit of and be binding upon the successors and assigns
of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders of Transfer
Restricted Securities; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a
Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in
------------
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(h) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
-------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more
------------
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(k) Entire Agreement. This Agreement is intended by
----------------
the parties as a final expression of their agreement and intended to be
a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the
registration rights granted with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
20
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
MAIL-WELL I CORPORATION
By: /s/ Paul V. Reilly
-------------------------------
Name: Paul V. Reilly
Title: President
EACH ENTITY LISTED ON SCHEDULE A
ATTACHED HERETO
By: /s/ Roger Wertheimer
-------------------------------
Name: Roger Wertheimer
Title: Vice President, General
Counsel and Secretary
21
<PAGE>
<PAGE>
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the
date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PRUDENTIAL SECURITIES INCORPORATED
BEAR, STEARNS, & CO., INC.
HANIFEN, IMHOFF, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael L. Crow
----------------------------------
Name: Michael L. Crow
Title: Senior Vice President
22
<PAGE>
<PAGE>
<TABLE>
SCHEDULE A
----------
<CAPTION>
Name of Guarantor State of Incorporation
- ----------------- ----------------------
<S> <C>
Mail-Well, Inc. Colorado
Anderson Lithograph Company California
Armstrong-White, Inc. Michigan
Barkley, Inc. California
Denver Forms Company Colorado
Digital X-Press, Inc. Florida
Gould Packaging, Inc. Washington
Graphics Arts Center, Inc. Delaware
Graphics Illustrated, Inc. Florida
Griffin Envelope, Inc. Washington
Imperial Litho and Dryography, Inc. Arizona
John D. Lucas Printing Co. Maryland
Mail-Well Commercial Printing, Inc. Delaware
Mail-Well Canada Holdings, Inc. Delaware
Mail-Well Label Holdings, Inc. Colorado
Mail-Well Label USA, Inc. Colorado
Mail-Well West, Inc. Delaware
Murray Envelope Holdings, Inc. Colorado
Class I Non-voting stock 10%
owned by Non-affiliates
Murray Envelope Corporation Mississippi
N-M Envelope, Inc. Mississippi
National Graphics Company Colorado
Poser Business Forms, Inc. Delaware
Production Press, Inc. Illinois
Richtman's Printing of Colorado, LLC Colorado
Trafton Printing, Inc. Texas
Wisco II, L.L.C. Delaware
Wisco Envelope Corp. Tennessee
</TABLE>
23
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
All 100% except as indicated:
Mail-Well I Corporation, a Delaware corporation:
Mail-Well Canada Holdings, Inc., a Delaware corporation:
Supremex Inc.:
PNG Inc.
Classic Envelope Plus, Ltd (75%)
Innova Envelope
Mail-Well Trade Receivables Corp., a Colorado corporation
Murray Envelope Holdings, Inc., a Colorado corporation
(100% voting; 90% capital stock):
Murray Envelope Corp., a Mississippi corporation:
Barkley, Inc., a California corporation
N-M Envelope Co., Inc., a Mississippi
corporation
Atlantis Index, Inc., a Mississippi
corporation (50%)
Consolidated Converting Services, Inc., a
Mississippi corporation (20%)
Graphic Arts Center, Inc., a Delaware corporation
Mail-Well West, Inc., a Delaware corporation
Wisco Envelope Corp, a Tennessee corporation:
Wisco II, LLC, a Delaware limited liability company
Wisco III, LLC, a Delaware limited liability company
Poser Business Forms, Inc., a Delaware corporation
Mail-Well Label Holdings, Inc., a Colorado corporation:
Mail-Well Label Company, a Nova Scotia unlimited
liability company
Mail-Well Label USA, Inc., a Colorado corporation
Mail-Well Commercial Printing, Inc., a Delaware corporation
National Graphics Co., a Colorado corporation
McLaren Morris and Todd Company, a Nova Scotia corporation
Mail-Well Mexico Holdings, Inc., a Colorado corporation
Graphic Arts Center de Mexico, a Mexico corporation
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No.'s 333-35561, 333-36337 and 333-53679 of Mail-Well, Inc. on Forms S-3
and Registration Statement No. 333-26743 of Mail-Well, Inc. on Form S-8
of our report dated January 28, 1999 appearing in this Annual Report on
Form 10-K of Mail-Well, Inc. for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 1, 1999
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No.'s 333-35561, 333-36337 and 333-53679 of Mail-Well, Inc. on Forms S-3
and Registration Statement No. 333-26743 of Mail-Well, Inc. on Form S-8
of our reports 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 this Annual Report on Form 10-K of Mail-
Well, Inc. for the year ended December 31, 1998.
Rubin, Brown, Gornstein & Co. LLP
St. Louis, MO
March 1, 1999
<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> 114,132
<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>
