<PAGE>
<PAGE>
===============================================================================
- -------------------------------------------------------------------------------
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, 1999
COMMISSION FILE NUMBER 1-12551
------------------------
MAIL-WELL, INC.
ADDITIONAL AFFILIATE ISSUERS AND/OR GUARANTORS LISTED ON SCHEDULE ATTACHED
HERETO
(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 80112
ENGLEWOOD, CO
(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:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, $0.01 par value per share The New York Stock Exchange
Convertible Subordinated Notes due 2002 The New York Stock Exchange
</TABLE>
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 March 15, 2000 was $301,106,110.
As of March 15, 2000, the Registrant had 49,234,088 shares of Common Stock,
$0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this form (Items 11, 12 and 13)
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 3, 2000.
- -------------------------------------------------------------------------------
===============================================================================
<PAGE>
<PAGE>
<TABLE>
SCHEDULE OF ADDITIONAL AFFILIATE ISSUERS AND/OR GUARANTORS
<CAPTION>
EXACT NAME OF PRIMARY STANDARD I.R.S. EMPLOYER
REGISTRANTS AS SPECIFIED IN STATE OF INDUSTRIAL IDENTIFICATION
THEIR RESPECTIVE CHARTERS FORMATION CLASSIFICATION NUMBER NUMBER
------------------------- --------- --------------------- ---------------
<S> <C> <C> <C>
Mail-Well I Corporation Delaware 2677 84-1250534
Mail-Well Commercial Printing, Inc. Delaware 2752 84-1461875
Mail-Well Canada Holdings, Inc. Delaware 6719 84-1313090
Mail-Well Label USA, Inc. Colorado 2752 84-1449292
Mail-Well West, Inc. Delaware 2677 84-1313079
Murray Envelope Holdings, Inc. Colorado 6719 84-1421627
Murray Envelope Corporation Mississippi 2677 64-0271038
National Graphics Company Colorado 2761 84-0692676
Poser Business Forms, Inc. Delaware 2761 75-2195786
Wisco III, L.L.C. Delaware 2677 84-1362168
</TABLE>
<PAGE>
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PART I
PAGE
----
<S> <C> <C>
Item 1. Business.................................................... 1
The Company................................................. 1
The Printing Industry....................................... 1
Acquisitions................................................ 1
Products.................................................... 2
Services.................................................... 2
Marketing and Distribution.................................. 3
Printing and Manufacturing.................................. 4
Materials and Supply Arrangements........................... 4
Patents, Trademarks and Brand Names......................... 5
Competition................................................. 5
Seasonality................................................. 5
Employees................................................... 6
Environmental............................................... 6
Recent Developments......................................... 6
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 7
Dividend Policy............................................. 7
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.................................. 9
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 15
Item 8. Financial Statements and Supplementary Data................. 16
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 55
PART III
Item 10. Directors and Executive Officers of Registrant.............. 56
Item 11. Executive Compensation...................................... 59
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 59
Item 13. Certain Relationships and Related Transactions.............. 59
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 60
</TABLE>
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Mail-Well, Inc. is one of the largest printers in North America competing
in the following market segments:
* Commercial Printing
* Envelope
* Label
* Printing for Distributors
We have been a leading consolidator in the highly fragmented printing
industry. Since our inception in February 1994 through December 31, 1999, we
have completed over 50 acquisitions in the printing industry, for purchase
prices ranging from $2.5 million to $120 million. We currently operate 134
printing facilities and numerous sales offices throughout North America and 4
printing facilities in the United Kingdom.
Please refer to Note 12 of our consolidated financial statements included
elsewhere in this report for additional information concerning our operating
and geographic segments.
THE PRINTING INDUSTRY
The printing industry is one of the largest and most fragmented industries
in the United States with total estimated 1999 sales of $156 billion among an
estimated 49,400 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.
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 1998 we made 43 acquisitions in the printing industry.
During 1999, we completed the following 10 acquisitions in various printing
segments:
<TABLE>
<CAPTION>
COMPANY LOCATION DATE SEGMENT REVENUES<F1>
------- -------- ---- ------- ------------
<S> <C> <C> <C> <C>
Champagne Fine Printing Houston, Texas February Commercial $ 22.0
Colorhouse, Inc. Dallas, Texas & Minneapolis, February Commercial 21.2
Minnesota
Porter Chadburn plc North America & UK April Label, 134.3
Distributors
Forman Lithograph, Inc. San Francisco, California May Commercial 6.1
Avon Behren Printing Company San Antonio, Texas June Commercial 4.6
Design Mark Industries, Inc. Wareham, Massachusetts June Label 13.0
Direct Graphics, Inc. Sidney, Ohio August Commercial 21.2
Enterprise Press New York, New York August Commercial 23.0
Northeastern Envelope Braintree, Massachusetts October Envelope 6.9
Phototype Color Graphics Pennsauken, New Jersey December Commercial 18.8
------
Total $271.1
======
<FN>
- -------
<F1> Represents most recent revenues in millions for the full twelve-month
period for which financial information was available immediately preceding
the acquisition as provided to the 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
1
<PAGE>
<PAGE>
financial statements and may not coincide with the revenue generated by
the acquired business for a full fiscal year prior to the date of
acquisition. The information relating to estimated revenue prior to the
date of acquisition set forth above is presented solely for the purpose of
providing information with respect to the relative sizes of the businesses
acquired and is not intended to depict information relating to
profitability or cash flow.
</TABLE>
Please refer to Notes 2 and 3 of our consolidated financial statements
included elsewhere in this report for additional information concerning our
acquisitions.
PRODUCTS
Our commercial printing group produces a wide range of printing, from
premium color printing requiring sophisticated graphic design techniques to
more commonplace printed materials. The group prints virtually every type of
product in the commercial market including advertising literature, direct mail,
corporate identity materials, annual reports, calendars, greeting cards and car
brochures. The commercial printing group also 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.
The North American 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 vivid graphics, multiple colors,
various closures, and interactive devices such as pull-tabs, scratch-offs,
perforations and three-dimensional viewing devices. In the Wholesale segment,
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. For the fiscal year ended December
31, 1999, customized conventional envelopes accounted for approximately 60.9%
and commodity-oriented products accounted for approximately 19.7% of the
envelope segment's net sales, respectively.
Mail-Well Label is one of the largest suppliers in the North American food
and beverage label printing market. This division produces two types of label:
glue applied and pressure sensitive. Glue applied labels are typically printed
on paper substrate for application to various container formats by customers or
third party packing operations. These labels require a separate application of
adhesive to the label during the process of affixing them to the container.
Pressure sensitive labels are printed on paper or other substrate that includes
an active adhesive coating on one side protected by a liner of backing material
separating the adhesive side until application to the container.
The printing for distributors division 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 forms, 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 local area
networks.
SERVICES
In all of our printing businesses, we also offer our customers a wide
variety of related services, such as:
* 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
2
<PAGE>
<PAGE>
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.
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 turnaround
without additional cost.
MARKETING AND DISTRIBUTION
As a result of the wide array of applications, customer preferences and
order sizes, our marketing efforts vary significantly among markets and by
region. Although our marketing efforts have traditionally been local or
regional, we continue to emphasize a more focused national accounts program to
attract customers whose needs are national or cover multiple regions.
The vast majority of our printed products are 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 all of our
printing groups. Sales representatives are typically compensated by salary plus
commission or straight commission. Commissions generally depend on such factors
as order size and type, prepress work, reruns or rework and overall
profitability of the job. We also coordinate marketing efforts among regions
within our operating groups, and among the operating groups themselves, in
order 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.
The commercial print 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.
Because of the highly fragmented nature of the commercial printing and
envelope businesses, and the wide array of customer needs and preferences, we
market most of our general commercial printing and envelopes locally. We market
our label printing through a sales force that is specialized according to the
product lines of the customer and geographic coverage. Due to the
project-oriented nature of these market segments, sales to particular customers
may vary significantly from year to year depending upon
3
<PAGE>
<PAGE>
the number and size of their projects. Our customer supply agreements are
typically on an order by order basis or for a specified period of time.
The sales force is supported by a technical service team which provides
customers with highly customized printing solutions. Most of our 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.
Our printing for distributors division sells custom printed business
documents through sales service representatives and telemarketing
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. Other 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.
These products are also featured in national catalogs produced for the office
products market.
PRINTING AND MANUFACTURING
Our commercial printing group operates 45 printing plants throughout the
United States, and one in Canada. These plants combine advanced prepress
technology with high-quality web and sheet-fed color presses and extensive
binding and finishing operations. Many of our commercial printing facilities
are open 7 days a week, 24 hours a day to meet customer printing requirements.
Our envelope division operates 54 printing facilities throughout North
America. Envelopes are produced from either flat sheets or rolls of paper. The
paper is folded into an envelope, which is glued at the seams and on the flap,
and then printed as required. Webs are typically used for larger runs with
multiple colors and numerous features, and die cut machines, which require a
preliminary step to provide die cut envelope blanks from paper sheets, are used
primarily for smaller orders typically including customized value added
features. The manufacturing process used is dependent upon the size of a
particular order, custom features required, machine availability and delivery
requirements.
Our label division operates 17 facilities in North America as well as four
in the United Kingdom. Label printing consists of four main processes: film
preparation, printing, cutting and finishing. 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. Cutting is usually a combination of square cutting and
die cutting. 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.
Our printing for distributors division operates 17 facilities throughout
the United States. We also offer our customers design services using desktop
publishing, which have become particularly important in the very short run
("VSR") and short-run continuous forms markets and enable us to easily make
changes to repeat orders and produce the documents as cost effectively as an
exact repeat. 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.
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
4
<PAGE>
<PAGE>
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
The envelope and commercial printing industries are highly competitive and
fragmented. We compete against a number of large, diversified and financially
stronger printing companies, as well as regional and local 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.
We also face competition from alternative advertising media and other means
of communication and information transfer such as e-commerce and the internet.
Although these alternative media may reduce the need for some envelopes and
printed materials in the future, we believe that we will experience continued
demand for our 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 other features to achieve the desired presentation
effect, (ii) the ability of our direct mail customers to target and penetrate
desired markets as a result of the increasingly sophisticated use of data
mining and other technology to create more effective mailing lists, and (iii)
the continued widespread delivery of mail to residences and businesses through
the United States Postal Service and the Canadian Post Corporation.
The label industry is also highly fragmented with a few large manufacturers
with significant North American market presence. In addition, 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 and pressure-sensitive 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.
Our closest competitors in the printing for distributors market 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.
SEASONALITY
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.
Several Consumer Direct market segments served by our envelope division,
such as photo finishing packaging and 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
5
<PAGE>
<PAGE>
the increase in sales to the direct mail market due to holiday purchases.
Seasonality is offset in part by the diversity of our other products and
markets which are not materially affected by seasonal conditions.
In the label segment, demand for spirit labels is typically highest in
August and September, as distillers and bottlers increase production to meet
increased demand during the year-end holidays.
EMPLOYEES
We employed approximately 13,350 people as of December 31, 1999.
Approximately 2,850 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.
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. We do not anticipate that
material capital expenditures will be required to achieve or maintain
compliance with environmental laws and regulations.
RECENT DEVELOPMENTS
On February 22, 2000, the Company completed its acquisition of American
Business Products, Inc. ABP's operations are comprised of two businesses:
specialty packaging and printed office products. Specialty packaging is
comprised of three segments: the extrusion of polyethylene and other materials
onto papers and nonwovens used in packaging and other products, the manufacture
of soft packages and mailers (primarily from Tyvek(R)) and file folders, and
the manufacture of pressure sensitive labels for business office applications.
The printed office products business is a printer and distributor of custom-
printed envelopes and labels and a distributor of business forms.
ITEM 2. PROPERTIES
At December 31, 1999, the Company operated 138 printing facilities in North
America and the United Kingdom. Mail-Well owns 59 facilities and leases 143
facilities for printing and warehouse space. The Company also leases 12,000
square feet of office space for its corporate headquarters and 9,500 square
feet for the Envelope, Printing for Distributors, and Label division
headquarters in Englewood, Colorado.
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.
6
<PAGE>
<PAGE>
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.
<TABLE>
<CAPTION>
1998 HIGH LOW
- ---- ------ ------
<S> <C> <C>
First Quarter......................................... $20.75 $17.63
Second Quarter........................................ 24.94 18.75
Third Quarter......................................... 22.75 8.44
Fourth Quarter........................................ 14.06 5.75
1999
- ----
First Quarter......................................... $15.68 $11.12
Second Quarter........................................ 17.00 11.75
Third Quarter......................................... 17.81 12.87
Fourth Quarter........................................ 14.06 11.12
</TABLE>
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 17, 2000, there were
approximately 477 stockholders of record and, based upon security position
listings, the Company believes that it has in excess of 9,500 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.
7
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The summary of historical financial data presented below is derived from
the historical audited financial statements of the Company. 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>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
1999 1998 1997 1996 1995
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $1,848.0 $1,504.7 $1,073.9 $944.5 $758.9
Income before extraordinary item....... 64.5 25.8<Fb> 35.0 21.2 15.4
Net income............................. 64.5 21.7<Fb> 28.9 21.2 13.0
Earnings per basic share:<Fa>
Income per share before extraordinary
item................................. $ 1.32 $ 0.55 $ 0.86 $ 0.53 $ 0.58
Extraordinary item..................... -- (0.08) (0.15) -- (0.09)
-------- -------- -------- ------ ------
Net income per basic share............. $ 1.32 $ 0.47 $ 0.71 $ 0.53 $ 0.49
======== ======== ======== ====== ======
Earnings per diluted share:<Fa>
Income per share before extraordinary
item................................. $ 1.20 $ 0.53<Fb> $ 0.82 $ 0.52 $ 0.56
Extraordinary item..................... -- (0.08) (0.14) -- (0.09)
-------- -------- -------- ------ ------
Net income per diluted share........... $ 1.20 $ 0.45 $ 0.68 $ 0.52 $ 0.47
======== ======== ======== ====== ======
Total assets........................... $1,344.0 $1,128.0 $ 671.4 $552.0 $582.6
Total long term debt................... 653.1 583.4 330.4 237.8 347.4
<FN>
- -------
<Fa> 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.
<Fb> 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 Envelope 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>
8
<PAGE>
<PAGE>
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, the following:
* availability of acquisition opportunities and their related costs
* ability to obtain productivity savings
* ability to achieve cost savings from integration of acquisitions
* ability to obtain additional financing
* interest rates and foreign currency exchange rates
* paper and other raw material costs and the ability to pass through paper
costs to customers
* postage rates and other changes in the direct mail industry
* growth unavailability due to competing information delivery media
* general labor conditions
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.
YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Net sales for 1999 increased 22.8% to $1,848.0 million compared to net
sales of $1,504.7 million for 1998. This increase in net sales was attributable
to sales from companies acquired during 1999, a full year of sales from
companies acquired during 1998 and internal growth in each segment except
Envelope. Envelope volume was negatively impacted by a plant closure, our
decision to abandon low-margin business, and a slowdown in the sweepstakes
related direct mail market. Gross profit of $429.3 million for 1999 represents
a 34.5% increase over 1998. Expressed as a percent of net sales, gross profit
increased by 200 basis points (BP) to 23.2% for 1999 compared to 21.2% for 1998
primarily due to the Company's productivity improvements, the impact of
purchasing programs and benefits from restructuring initiatives. Expressed as a
percent of net sales, selling, general and administrative expense increased to
14.3% in 1999 from 13.3% in 1998. The increase was mainly due to increased
amortization expense, the impact of acquisitions, and an increase in corporate
administrative expense attributable to expanded treasury and finance
operations. Operating income, before restructuring and other unusual charge
(see Note 11 of the Notes to Consolidated Financial Statements) and merger
costs, of $164.2 million for 1999 increased 37.9% from 1998, primarily due to
acquisitions, internal growth and improved gross margins.
Earnings for 1999 increased 35.5% to $64.5 million from $47.6 million,
before extraordinary item and restructuring and other unusual charge in the
prior year. Earnings per diluted share increased 27.7% to $1.20 in 1999 from
$0.94 per share before extraordinary item and the effect of the restructuring
and other unusual charge in 1998.
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 110 BP to 21.2% for 1998
compared to 22.3% for 1997, primarily due to the impact of acquisitions.
Expressed as a percent
9
<PAGE>
<PAGE>
of net sales, selling, general and administrative expense decreased to 13.3% in
1998 from 14.3% in 1997, due to efficiency improvements as a result of the
integration 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.
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
Commercial Printing
The following table presents historical financial data for the Commercial
Printing segment, including acquisitions from their purchase dates. The results
for one location were moved from Envelope to Commercial Printing beginning
January 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
$ % $ % $ %
(DOLLARS IN THOUSANDS) -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $770,391 100.0 $555,535 100.0 $359,285 100.0
Cost of sales................ 598,301 77.7 441,357 79.4 284,638 79.2
Operating expenses........... 108,892 14.1 78,056 14.1 54,227 15.1
-------- ----- -------- ----- -------- -----
Operating income............. $ 63,198 8.2 $ 36,122 6.5 $ 20,420 5.7
======== ===== ======== ===== ======== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Net Sales--Net sales for the year ended December 31, 1999 increased by
$214.9 million, or 38.7%, as compared to sales for the year ended December 31,
1998, primarily due to acquisitions in 1998 and 1999. Excluding acquisitions,
sales increased due to volume by 2%.
Cost of Sales--Cost of sales includes material net of waste recovery
revenue, labor, depreciation and other manufacturing and distribution costs.
Total cost of sales, as a percent of sales, decreased from 79.4% for the year
ended December 31, 1998 to 77.7% for the year ended December 31, 1999. This
decline was primarily due to the benefits from new acquisitions adopting
corporate purchasing programs.
Operating Expenses--Operating expenses include selling and administrative
expenses. For the year ended December 31, 1999, operating expenses, as a
percent of sales, remained at 14.1% for the years ended December 31, 1999 and
1998.
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 $196.3
million, or 54.6%, over the year ended December 31, 1997, primarily due to
acquisitions in 1997 and 1998. Excluding acquisitions, net sales were
essentially unchanged, as volume gains in the financial services sector and
advertising literature were offset by declining prices.
Cost of Sales--Total cost of sales, as a percent of sales, increased from
79.2% for the year ended December 31, 1997 to 79.4% for the year ended December
31, 1998. This increase was attributable to material cost increases due to
competitive pricing pressure, offset by a reduction in other manufacturing
costs due to increased web capacity in 1998 versus 1997, as well as other plant
efficiency improvements offset by inflationary cost increases.
Operating Expenses--For the year ended December 31, 1998, operating
expenses as a percent of sales decreased 100 BP to 14.1% from 15.1% in the year
ended December 31, 1997. Operating expenses
10
<PAGE>
<PAGE>
decreased, as a percent of sales, due to the integration of acquisitions and
consolidation of selling and administrative functions, offset by inflationary
cost increases.
Envelope
The following table presents historical financial data for the Envelope
operations of the Company, including acquisitions from their purchase dates.
The results for one location were moved from Envelope to Commercial Printing
beginning January 1, 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
$ % $ % $ %
(DOLLARS IN THOUSANDS) -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $745,555 100.0 $763,147 100.0 $704,223 100.0
Cost of sales................ 564,051 75.7 590,135 77.3 538,648 76.5
Operating expenses........... 87,609 11.7 86,374 11.3 83,510 11.9
-------- ----- -------- ----- -------- -----
Operating income............. $ 93,895 12.6 $ 86,638 11.4 $ 82,065 11.6
======== ===== ======== ===== ======== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Net Sales--Net sales decreased by $17.6 million (2.3%) for the year ended
December 31, 1999, compared to the year ended December 31, 1998. Volume was
negatively impacted by a plant closure, our decision to abandon low-margin
business, and a slowdown in the sweepstakes related direct mail market.
Cost of Sales--Total cost of sales, as a percent of sales, decreased from
77.3% for the year ended December 31, 1998, to 75.7% for the year ended
December 31, 1999. The decrease was due to the benefits of the Company's
restructuring plan and purchasing and productivity programs. Inflationary cost
increases were offset by efficiency improvements and volume increases. Cost of
sales includes paper net of waste recovery revenue, labor, depreciation and
other manufacturing and distribution costs.
Operating Expenses--Operating expenses include selling and administrative
expenses. For the year ended December 31, 1999, operating expenses as a percent
of sales increased to 11.7% from 11.3% in the prior year, due to the decrease
in net sales from 1998 to 1999.
YEAR ENDED DECEMBER 31, 1998, COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Net Sales--Net sales increased by $58.9 million (8.4%) for the year ended
December 31, 1998, compared to the year ended December 31, 1997, primarily due
to acquisitions. Excluding acquisitions, sales decreased $9.0 million due to
lower paper costs, as paper cost changes have historically been passed to
customers. Volume increases were offset by the impact of exchange rate
fluctuations in Canada.
Cost of Sales--Total cost of sales, as a percent of sales, increased from
76.5% for the year ended December 31, 1997, to 77.3% for the year ended
December 31, 1998, primarily due to the effect of acquisitions. Before the
effect of higher cost products from acquisitions, material cost decreased in
1998 versus 1997 due primarily to lower paper costs. Inflationary cost
increases were offset by efficiency improvements and volume increases.
Operating Expenses--For the year ended December 31, 1998, operating
expenses as a percent of sales decreased to 11.3% from 11.9% in the prior year,
due to efficiency improvements as acquisitions were integrated.
Corporate Expenses
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 classifies the excess of the operating lease expense over depreciation
as a corporate expense in analyzing segment operations. The Company does not
include the amortization of intangibles recorded in acquisitions in segment
results but includes it on a corporate basis. In addition, corporate expenses
include corporate administrative expense and loss (gain) on disposal of assets.
11
<PAGE>
<PAGE>
Corporate expenses, excluding restructuring and other unusual charge and
merger costs, for the year ended December 31, 1999, increased $5.6 million
compared to 1998, as a result of increases in amortization expense and
corporate administrative expense. Amortization expense increased as a result of
the acquisitions made in the years ended December 31, 1998 and 1999. Corporate
administrative expense increased due to expanded treasury and finance
operations.
Corporate expenses, excluding restructuring and other unusual charge and
merger costs, for the year ended December 31, 1998, decreased $0.3 million 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 increased as a result of the significant number of acquisitions made in
the years ended December 31, 1998 and 1997.
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 of
$3.3 million were expensed in 1998. These costs consist primarily of investment
banking, legal, and accounting fees. For more information on these mergers,
refer to Note 2 of the Notes to Consolidated Financial Statements.
Restructuring and Other Unusual Charge--In November 1998, the Company
committed to implement a restructuring program affecting the Commercial
Printing and Envelope segments and recorded a pre-tax provision of $16.0
million, of which $11.7 million represented non-cash charges for asset
write-offs and impairments. The Company also incurred $0.8 million and $1.9
million of restructuring costs in 1998 and 1999, respectively, relating to the
relocation of personnel, equipment and inventory, which under generally
accepted accounting principles could not be accrued for 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, refer to Note 11 of the Notes
to Consolidated Financial Statements.
Interest Expense--Interest expense, including accounts receivable
securitization discount, for the year ended December 31, 1999, increased $17.1
million compared to the year ended 1998. The increase occurred as a result of
higher average bank debt balances, primarily due to acquisitions, and a slight
increase in the weighted-average borrowing rate. Interest expense for the year
ended December 31, 1998, compared to 1997 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.
The Company continued to participate in an accounts receivable
securitization facility, 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 $150.0 million until June 2004. At December 31,
1999 and 1998, the Company had sold accounts receivable of $203.3 million (net
of an allowance of $4.3 million) and $100.0 million, respectively, to a
wholly-owned subsidiary, Mail-Well Trade Receivables Corp (MTRC). MTRC had sold
beneficial interests totaling $148.5 million and $52.6 million to the
securitization company at December 31, 1999 and 1998, respectively. See Note 6
of the Notes to Consolidated Financial Statements for additional information.
Income Taxes--The effective tax rate for 1999 of approximately 40.2% was
higher than the federal statutory rate due to state and provincial income taxes
and certain goodwill amortization that is not tax deductible. The effective tax
rate for 1998 and 1997 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 reflected 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 further information. For 2000, the Company expects its
effective tax rate to be approximately 41.0%.
12
<PAGE>
<PAGE>
Approximately $8.3 million of deferred tax assets related to federal
alternative minimum tax credits and net operating loss carryforwards will be
realized through future taxable income. Management believes these assets will
be realized through the continuation of current levels of taxable income over a
six-year period. Approximately $1.2 million of deferred tax assets related to
various state tax credits will be realized through future taxable income.
Management believes these assets will be realized through the continuation of
current levels of taxable income over a three-year period.
GOODWILL
As of December 31, 1999, goodwill net of accumulated amortization related
to acquisitions of businesses since the Company's inception represents 33.7%
and 120.8% of total assets and shareholders' equity, respectively. The carrying
amount of goodwill is reviewed if facts and circumstances suggest that it may
be impaired. During the year, facts and circumstances have not changed to
indicate a potential impairment.
LIQUIDITY AND CAPITAL RESOURCES
Historical Cash Flow--Net cash flow provided by operating activities was
$112.9 million, $93.1 million, and $94.4 million for the years ended December
31, 1999, 1998, and 1997, respectively. Acquisitions required cash payments of
$203.4 million, $351.6 million, and $82.9 million for the years ended December
31, 1999, 1998, and 1997, respectively. Other investing activities include
capital expenditures which were $85.5 million, $87.3 million, and $36.8 million
for the years ended December 31, 1999, 1998 and 1997, respectively. The capital
expenditures were offset by the proceeds of $5.8 million, $9.7 million, and
$1.8 million from the disposal of assets and other for the years ended December
31, 1999, 1998 and 1997, respectively. Net cash flow from financing activities
was positively affected by the increase in receivables sold under the
securitization agreement at December 31, 1999, of $95.9 million compared to
December 31, 1998. 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.
At December 31, 1999, the Company had approximately $147.7 million of
available credit under the $320.0 million Bank of America credit facilities. In
addition, at December 31, 1999, the Company had availability of $1.5 million
under the $150.0 million securitization facility.
Security Offering--In November 1998, the Company's wholly-owned subsidiary,
Mail-Well I Corporation, issued $300.0 million in aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2008 (the "Senior Notes"). The Senior
Notes were sold to qualified institutional buyers pursuant to Rule 144A under
the Securities Act of 1933. In June 1999, Mail-Well I completed an exchange
offer whereby it exchanged $300 million in aggregate principal amount of the
8 3/4% Series B Senior Subordinated Notes due 2008 for all of the outstanding
Senior Notes in a transaction registered under the Securities Act. The Senior
Notes are unconditionally guaranteed by the Company and all of its domestic
operating subsidiaries.
Capital Requirements--The Company estimates that based on current
utilization of its equipment and expected volume growth at existing businesses,
it will spend approximately $80.0 million per year on capital expenditures
without considering the acquisition of American Business Products discussed in
"Recent Developments".
Inflation--The effects of inflation have not been material to the Company
primarily due to our ability to pass paper price increases on to our customers.
However, due to the competitive nature of its business, we may not always be
able to pass on inflationary cost increases in the future.
Foreign Currency--The Company's foreign currency exposure primarily relates
to its Canadian operations. Net sales provided by the Canadian operations for
the years ended December 31, 1999 and 1998 were USD $190.4 million and USD
$154.5, respectively. The impact of the change in Canadian Dollar exchange
rates was minimal during these periods.
Seasonality and Environment--As the Company expands its operations into
more commercial printing and label segments, it has been affected more by
seasonality. Management expects the first and third quarter to report higher
sales for the Commercial Printing segment because of annual report and car
brochure business. In addition, the third quarter is traditionally the
strongest for the Label segment.
13
<PAGE>
<PAGE>
The effects of 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
In February 2000, the Company acquired 13,450,588 shares (or 91%
outstanding) of the common stock of Atlanta-based American Business Products
(ABP) for $20 per share in a cash tender offer. In the second step of the
acquisition, ABP merged with a wholly-owned subsidiary of the Company. The
total value of the transaction, including the assumption of debt, was
approximately $333.6 million.
ABP is a premier provider of printed office products and specialty
packaging solutions through its Curtis 1000, International Envelope, Discount
Labels and Jen-Coat business units. ABP reported 1999 sales of $475.9 million
and net income and earnings per share from continuing operations of $19.7
million and $1.31, respectively.
In February 2000, the Company entered into an $800.0 million senior secured
credit facility (the "New Facility"). The proceeds were used to finance the
acquisition of ABP, pay related costs and expenses, refinance the unsecured
revolving loan facilities, and reduce the amounts drawn under the accounts
receivable securitization to a total of $25.0 million, with the remainder to
provide funds for ongoing general corporate purposes and proposed acquisitions
under letters of intent. In conjunction with the financing, MTRC reduced its
ability to sell an undivided variable percentage interest in the pool of
receivables to $25.0 million, which is permitted to be increased to $75.0
million at any time.
The New Facility consists of a $250 million revolving credit facility, a
$300 million Tranche A term loan and a $250 million Tranche B term loan. The
Tranche A facility and Tranche B facility amortize over six and seven years,
respectively. The Company borrowed $100.0 million under the revolving credit
facility on February 22, 2000. Therefore, under the terms of the New Facility,
the annual debt payments at December 31, 1999, would have been as follows (in
thousands):
<TABLE>
<S> <C>
2000....................................................... $ 34,514
2001....................................................... 43,685
2002....................................................... 206,034
2003....................................................... 60,350
2004....................................................... 65,780
2005 and thereafter........................................ 734,616
----------
Total...................................................... $1,144,979
==========
</TABLE>
The New Facility contains certain financial and other covenants that are
customary for credit facilities of its type and size. The New Facility is
secured by substantially all tangible and intangible property of U.S. entities,
except for that security of the accounts receivable securitization program and
certain capital lease obligations.
The Company expects to write off deferred financing costs of $372,000 (net
of $258,000 of income tax benefits) capitalized in connection with the
unsecured revolving loan facility which was repaid February 2000. The write-off
will be shown as an extraordinary item in the statements of operations.
Effective with the borrowing under the facilities, we estimate the
availability will be $150.0 million of which approximately $35.0 million may be
used for acquisitions currently under signed letters of intent.
The Company has begun executing a plan to reduce debt since completion of
the ABP acquisition. Alternatives include:
* Focusing all operations on maximizing cash flow;
* Disposing of non-core assets;
* Reducing acquisition activity;
* Issuing an equity-type instrument that will be accretive when combined
with the ABP acquisition.
14
<PAGE>
<PAGE>
Previously the Company announced that letters of intent had been signed to
acquire two commercial printers: Strathmore Press of Cherry Hill, New Jersey,
and Braceland Brothers of Philadelphia. Braceland Brothers closed January 28,
2000, subject to the successful transfer of certain government contracts.
Strathmore Press is expected to close no later than April 2000, pending receipt
of state approval. The combined sales of the two companies for the trailing
twelve months were approximately $44 million.
YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 compliant. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
its critical information technology and non-information technology systems, and
believes those systems successfully responded to the Year 2000 date change. The
Company replaced some of its existing computer systems with Year 2000 compliant
systems and capitalized approximately $13 million through 1999. These costs
were funded through operating cash flows. Several computers systems were due to
be replaced but were accelerated because of the Year 2000 issue.
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 2001, 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 $22,816,000 and US $25,461,000 at December 31,
1999 and 1998, respectively) and the interest rate risk for the investment in
accounts receivable securitization ($54,396,000 and $41,669,000 at December 31,
1999 and 1998, respectively) are not considered to be significant since the
difference between 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, 1999 and 1998, $172.2 million and $93.0 million, respectively, 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, 1999 and 1998
and the Company borrowed the maximum amount available under its variable rate
debt ($320 million), the Company's interest expense would increase by $3.2
million, and income after income taxes would decrease by approximately $2.0
million using a marginal income tax rate of 38.5%. 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 interest rates were to decrease 1%, the fair value of the Company's
fixed rate debt, excluding other long-term debt ($494.7 million and $457.4
million at December 31, 1999 and 1998, respectively), would decrease by
approximately $22.1 million and $25.3 million at December 31, 1999 and 1998,
respectively. 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.
15
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Mail-Well, Inc.
Englewood, Colorado
We have audited the accompanying consolidated balance sheet of Mail-Well,
Inc. as of December 31, 1999, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for the year then
ended. Our audit also included the 1999 financial statement schedules listed in
the Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1999 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Mail-Well, Inc. at December 31, 1999, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related 1999 financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
ERNST & YOUNG LLP
Denver, Colorado
January 26, 2000,
except for Note 14, as to which the date is February 22, 2000
16
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Mail-Well, Inc.
We have audited the accompanying consolidated balance sheet of Mail-Well
and Subsidiaries ("Company") as of December 31, 1998, and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows for the years ended December 31, 1998 and 1997. Our audits also
included the financial statement schedules as of December 31, 1998 and for the
years ended December 31, 1998 and 1997 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 for the year ended December 31, 1997, which reflect total revenues
of $76,099,000 for the year ended December 31, 1997. 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 period, 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 the results of their operations and their cash flows
for the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the 1998 and 1997
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
17
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Color Art, Inc.
St. Louis, Missouri
We have audited the consolidated statements of income, shareholders' equity
and cash flows of Color Art, Inc., an S Corporation, and subsidiaries for the
year ended December 31, 1997 (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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Color Art, Inc. and subsidiaries for the year ended December 31, 1997
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)
18
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
DECEMBER 31
---------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 3,618 $ 1,375
Trade receivables, net.................................. 85,044 130,523
Investment in accounts receivable securitization........ 54,396 47,069
Accounts receivable--other.............................. 20,764 23,401
Inventories, net........................................ 144,756 114,131
Other current assets.................................... 25,551 19,351
---------- ----------
Total current assets................................ 334,129 335,850
PROPERTY, PLANT AND EQUIPMENT, NET.......................... 532,156 437,732
GOODWILL, NET............................................... 453,483 322,149
OTHER ASSETS, NET........................................... 24,273 32,225
---------- ----------
TOTAL....................................................... $1,344,041 $1,127,956
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................................ $ 122,740 $ 87,023
Accrued compensation and vacation....................... 50,042 41,401
Other current liabilities............................... 52,999 47,192
Current portion of long-term debt and capital leases.... 13,889 8,036
---------- ----------
Total current liabilities........................... 239,670 183,652
LONG-TERM DEBT AND CAPITAL LEASES........................... 653,090 583,427
DEFERRED INCOME TAXES....................................... 64,112 47,534
OTHER LONG-TERM LIABILITIES................................. 8,351 10,468
---------- ----------
Total liabilities................................... 965,223 825,081
---------- ----------
MINORITY INTEREST IN NON-VOTING STOCK OF SUBSIDIARY......... 3,508 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, 49,215,078 and 48,846,904 shares issued at
1999 and 1998, respectively (including 3,896,544
shares held by ESOP).................................. 492 488
Paid-in capital......................................... 219,795 217,218
Retained earnings....................................... 155,222 90,740
Accumulated other comprehensive income (loss)........... (199) (9,071)
---------- ----------
Total shareholders' equity.......................... 375,310 299,375
---------- ----------
TOTAL....................................................... $1,344,041 $1,127,956
========== ==========
See notes to consolidated financial statements.
</TABLE>
19
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES............................................ $1,848,041 $1,504,686 $1,073,937
COST OF SALES........................................ 1,418,715 1,185,373 834,212
---------- ---------- ----------
GROSS PROFIT......................................... 429,326 319,313 239,725
OTHER OPERATING COSTS
Selling, general and administrative.............. 265,087 200,193 153,897
Restructuring and other unusual charge........... 1,946 28,922 --
Merger costs..................................... -- 3,318 --
---------- ---------- ----------
Total other operating costs.................. 267,033 232,433 153,897
---------- ---------- ----------
OPERATING INCOME..................................... 162,293 86,880 85,828
OTHER (INCOME) EXPENSE
Interest expense................................. 55,247 38,127 30,157
Other (income) expense........................... (784) (1,036) (2,088)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM.... 107,830 49,789 57,759
PROVISION FOR INCOME TAXES........................... 43,348 23,948 22,783
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM..................... 64,482 25,841 34,976
EXTRAORDINARY ITEM, NET OF TAX BENEFIT OF $2,587 in
1998 and $3,814 in 1997............................ -- (4,132) (6,100)
---------- ---------- ----------
NET INCOME........................................... $ 64,482 $ 21,709 $ 28,876
========== ========== ==========
EARNINGS PER SHARE--BASIC
BEFORE EXTRAORDINARY ITEM........................ $ 1.32 $ 0.55 $ 0.86
EXTRAORDINARY ITEM............................... -- (0.08) (0.15)
EARNINGS PER SHARE--BASIC........................ $ 1.32 $ 0.47 $ 0.71
EARNINGS PER SHARE--DILUTED
BEFORE EXTRAORDINARY ITEM........................ $ 1.20 $ 0.53 $ 0.82
EXTRAORDINARY ITEM............................... -- (0.08) (0.14)
EARNINGS PER SHARE--DILUTED...................... $ 1.20 $ 0.45 $ 0.68
WEIGHTED AVERAGE SHARES--BASIC....................... 48,990 46,499 40,575
========== ========== ==========
WEIGHTED AVERAGE SHARES--DILUTED..................... 58,154 48,585 43,027
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
20
<PAGE>
<PAGE>
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................. $ 64,482 $ 21,709 $ 28,876
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation....................................... 43,631 30,678 21,590
Amortization....................................... 15,177 9,576 7,696
Extraordinary loss on early retirement of
debt--pre-tax.................................... -- 6,719 9,914
Restructuring charges.............................. -- 15,961 --
Deferred income taxes.............................. 15,049 12,204 8,512
ESOP compensation expense.......................... -- 14,326 2,614
(Gain) loss on disposal of assets.................. (1,495) (1,196) 2,719
Other.............................................. (24) (202) 38
Changes in operating assets and liabilities, net of
effects of acquired businesses:
Trade receivables.............................. (13,661) (2,151) 11,177
Inventories.................................... (14,862) 10,339 47
Accounts payable............................... 1,638 (7,164) (5,576)
Other working capital.......................... 3,644 (13,787) 4,525
Other assets and other long-term liabilities... (640) (3,934) 2,277
--------- --------- ---------
Net cash provided by operating activities... 112,939 93,078 94,409
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash acquired...................... (203,436) (351,603) (82,874)
Capital expenditures.................................... (85,501) (87,335) (36,838)
Proceeds from sale of assets and other.................. 5,814 9,661 1,817
--------- --------- ---------
Net cash used in investing activities....... (283,123) (429,277) (117,895)
CASH FLOWS FROM FINANCING ACTIVITIES
Changes due to accounts receivable securitization,
net................................................... 95,900 (19,350) (12,814)
Net proceeds from common stock issuance................. 2,029 92,336 1,202
Proceeds from issuance of convertible subordinated
notes, net of issuance costs.......................... -- -- 147,436
Proceeds from long-term debt............................ 386,116 799,111 139,616
Repayments of long-term debt and capital leases......... (310,253) (556,736) (219,125)
Debt issuance costs..................................... (1,481) (9,184) --
Repurchase of stock, dividends and distributions by
pooled entities....................................... -- (3,738) (5,254)
--------- --------- ---------
Net cash provided by financing activities... 172,311 302,439 51,061
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 116 (5,776) 1,039
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................... 2,243 (39,536) 28,614
BALANCE AT BEGINNING OF YEAR................................ 1,375 40,911 12,297
--------- --------- ---------
BALANCE AT END OF YEAR...................................... $ 3,618 $ 1,375 $ 40,911
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
21
<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, 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
Comprehensive income:
Net income........................... 64,482 64,482
Other comprehensive income (loss),
net of tax:
Pension liability adjustment....... 122 122
Currency translation adjustments... 8,768 8,768
Unrealized loss on investments..... (18) (18)
--------
Other comprehensive income (loss).... 8,872
--------
Total comprehensive income............. 73,354
Exercise of stock options.............. 4 2,025 2,029
Adjustment to deferred tax asset for:
Pooled entities...................... (168) (168)
Stock options........................ 757 757
Other.................................. (37) (37)
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1999........... $492 $219,795 $155,222 -- $ (199) $375,310
==== ======== ======== ======= ======= ========
See notes to consolidated financial statements.
</TABLE>
22
<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 a market leader in four highly-fragmented
segments of the printing industry. 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 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
through the resale market to include office products and merchant/printer
markets. The Company is also a leading commercial printer specializing in
printing advertising literature, high-end catalogs, annual reports and
calendars and is recognized as an innovative provider of quality printed
products to leading companies in the United States. Printing for Distributors
prints a diverse line of custom products addressing the documents needs of
small and medium-sized markets. The Label segment is a supplier of labels to
the food and beverage markets. 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.
Revenue Recognition--Revenue is recognized when products are shipped or
risk of ownership has passed to the buyer.
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand,
demand deposits, and short-term investments with original maturities of three
months or less.
Investments in Accounts Receivable Securitization--The Company has entered
into an 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 $150.0
million. The investment in accounts receivable 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:
<TABLE>
<S> <C>
Land improvements...................................... 25 years
Buildings, building and leasehold improvements......... 15-45 years
Machinery and equipment................................ 15 years
Furniture, fixtures and other.......................... 3-10 years
</TABLE>
23
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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):
<TABLE>
<CAPTION>
USEFUL
LIFE 1998 1997 1996
---------- ------- ------ ------
<S> <C> <C> <C> <C>
Amortization of:
Deferred financing costs<Fa>................. 5-6 years $ 1,207 $ 614 $2,913
Debt issue costs<Fa>......................... 5 years 940 940 --
Goodwill..................................... 40 years 10,924 6,914 3,778
Non-compete agreements....................... 3-5 years 1,342 652 489
Acquisition costs and other.................. 3-40 years 764 456 516
------- ------ ------
Total........................................ $15,177 $9,576 $7,696
======= ====== ======
<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 to its fair
value. 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 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 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 subsidiaries because the Company intends to indefinitely reinvest such
unremitted earnings. Unremitted earnings of the Company's foreign subsidiaries
as of December 31, 1999 is $37,557,000. 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--The Company's pension liability adjustment,
currency translation adjustments, and unrealized gains and losses on its
investments, are included in accumulated other comprehensive income.
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 2001, 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
24
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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--The unallocated shares issued under the Employee Stock
Ownership Plan are excluded from both the basic and diluted earnings per share
calculations in 1998 and 1997. 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
(NUMERATOR) (DENOMINATOR) AMOUNT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ----------- ------------- ---------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1999
EARNINGS PER SHARE--BASIC
Income available to common shareholders.............. $64,482 48,990 $1.32
=====
EFFECT OF DILUTIVE SECURITIES
Stock options........................................ -- 940
Convertible Subordinated Notes....................... 5,254 8,003
Other................................................ -- 221
------- ------
EARNINGS PER SHARE--DILUTED
Income available to common shareholders including
assumed conversions................................ $69,736 58,154 $1.20
======= ====== =====
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
======= ====== =====
</TABLE>
Options to purchase 118,000, 24,000 and 177,000 shares of common stock in
1999, 1998 and 1997, respectively, were not included in the computation of
diluted earnings per share, because certain of the options' exercise price was
greater than the average market price of the common shares.
25
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation--The financial statements include the results
of Canadian, Mexican and United Kingdom operations which are translated from
local currencies, their functional currencies, 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),
net of income tax. Foreign currency transaction gains and losses are recorded
in income when realized.
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 1997 and
1998 financial statements to conform to the 1999 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.
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 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
26
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. MERGERS WITH COMMERCIAL PRINTING COMPANIES (CONTINUED)
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>
INCOME UNAUDITED
(LOSS) UNAUDITED PRO FORMA
BEFORE NET PRO FORMA DILUTED
NET EXTRAORDINARY INCOME NET INCOME EARNINGS
SALES ITEMS (LOSS) (LOSS)<F1> PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ---------- ------------- ------- ---------- ---------
<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
========== ======= ======= ======= =====
<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.
</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.
27
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS
The presentation below summarizes the Company's 1999 acquisitions:
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
MONTH OPERATING SALES
NAME OF BUSINESS ACQUIRED LOCATION ACQUIRED SEGMENT (MILLIONS)
- ------------------------- -------- -------- --------- ----------
<S> <C> <C> <C> <C>
Champagne Fine Printing Houston, Texas February Commercial $ 22.0
Colorhouse, Inc. Dallas, Texas & Minneapolis, MN February Commercial 21.2
Porter Chadburn, plc North America & UK April Label, 134.3
Distributors
Forman Lithograph, Inc. San Francisco, California May Commercial 6.1
Avon Behren Printing Company San Antonio, Texas June Commercial 4.6
Design Mark Industries, Inc. Wareham, Massachusetts June Label 13.0
Direct Graphics, Inc. Sidney, Ohio August Commercial 21.2
Enterprise Press New York, New York August Commercial 23.0
Northeastern Envelope Braintree, Massachusetts October Envelope 6.9
Phototype Color Graphics Pennsauken, New Jersey December Commercial 18.8
------
$271.1
======
</TABLE>
The presentation below summarizes the purchase price, including all
adjustments made through December 31, 1999. 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.
<TABLE>
<CAPTION>
CASH
AND TOTAL
TYPE OF MONTH STOCK DEBT PURCHASE GOODWILL
PURCHASE ACQUIRED PAID ASSUMED PRICE RECORDED
(IN MILLIONS) -------- -------- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 ACQUISITIONS
Six acquisitions, as a Assets (3) June, July, $ 85.7 $ 0.6 $ 86.3 $ 38.9
group...................... Stock (3) September,
October, and
December
1998 ACQUISITIONS
23 acquisitions, as a Assets (10) Various 362.8 9.1 371.9 180.6
group...................... Stock (13)
1999 ACQUISITIONS
10 acquisitions, as a Assets (2) Various 207.2 11.4 218.6 136.1
group...................... Stock (8)
</TABLE>
The fair value of stock issued for acquisitions was $0, $8,780,000 and
$6,018,000 for the year ended December 31, 1999, 1998 and 1997, respectively.
28
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
The following table presents the unaudited pro forma results of operations
as if the 1999, 1998 and 1997 acquisitions had occurred on January 1, 1998,
1997, and 1996, 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
--------------------------------------
1999 1998 1997
(IN MILLIONS, EXCEPT PER SHARE) -------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $1,939.3 $1,975.8 $1,726.7
Income before extraordinary item........................... 65.6 26.6 47.2
Extraordinary item......................................... -- (4.1) (6.1)
Net income................................................. $ 65.6 $ 22.5 $ 41.1
Earnings per basic share:
Income before extraordinary item...................... $ 1.34 $ 0.57 $ 1.16
Extraordinary item.................................... -- (0.08) (0.15)
Net income............................................ $ 1.34 $ 0.49 $ 1.01
Earnings per diluted share:
Income before extraordinary item...................... $ 1.22 $ 0.55 $ 1.11
Extraordinary item.................................... -- (0.08) (0.14)
Net income............................................ $ 1.22 $ 0.47 $ 0.97
</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. This interest in the non-voting common stock of the subsidiary has been
recorded as a minority interest in the consolidated balance sheet. These shares
were redeemed by the holder in February 2000 for $3,500,000.
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 has not been finalized.
Therefore, the amount of goodwill could be adjusted within one year of the
purchase.
29
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1999 1998
(IN THOUSANDS) --------- ---------
<S> <C> <C>
INVENTORIES:
Raw materials.......................................... $ 55,896 $ 45,720
Work in process........................................ 32,020 22,089
Finished goods......................................... 61,620 49,256
--------- ---------
149,536 117,065
Reserve for obsolescence, loss and other................ (4,780) (2,934)
--------- ---------
Total....................................................... $ 144,756 $ 114,131
========= =========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements.............................. $ 24,580 $ 23,818
Buildings, building and leasehold improvements.......... 122,835 115,264
Machinery and equipment................................. 455,166 336,509
Furniture, fixtures and other........................... 57,700 33,108
Construction in progress................................ 14,942 37,982
--------- ---------
675,223 546,681
Less accumulated depreciation........................... (143,067) (108,949)
--------- ---------
Total....................................................... $ 532,156 $ 437,732
========= =========
RESERVES:
Allowance for doubtful accounts receivable.............. $ (2,874) $ (6,727)
Accumulated amortization:
Deferred financing costs included in other assets... (3,411) (1,413)
Goodwill............................................ (27,058) (15,902)
Other intangibles included in other assets.......... (8,587) (5,169)
</TABLE>
30
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT AND CAPITAL LEASES
Long term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
INTEREST RATE AT -----------------------
DECEMBER 31, 1999 1999 1998
----------------- -------- --------
<S> <C> <C> <C>
Bank Borrowings:
Unsecured loan, due June 9, 2003.............. 6.88% $ 21,876 $ 25,461
Unsecured revolving loan facility, due March
31, 2003.................................... 7.04% 172,000 93,000
Unsecured revolving loan facility, due June 9,
2003........................................ 5.56% 242 --
Senior Subordinated Notes, due 2008................ 8.75% 300,000 300,000
Convertible Subordinated Notes, due 2002........... 5.00% 152,050 152,050
Other.............................................. 20,811 20,952
-------- --------
666,979 591,463
Less current maturities............................ (13,889) (8,036)
-------- --------
Long term debt and capital leases.................. $653,090 $583,427
======== ========
</TABLE>
In November 1998, Mail-Well I Corporation issued $300,000,000 of 8.75%
Senior Subordinated Notes (the "Senior Notes"). 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 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. The Senior
Notes are unconditionally guaranteed by the Company and all of its domestic
operating subsidiaries.
On March 18, 1998, the Company entered into a unsecured 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.
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 primarily comprised of capital lease obligations
and term debt with banks. Interest rates on other term debt with banks range
from 6.0% to 9.0% at December 31, 1999.
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.
31
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT AND CAPITAL LEASES (CONTINUED)
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, 1999 are (in thousands):
<TABLE>
<S> <C>
2000...................................................... $ 13,889
2001...................................................... 8,685
2002...................................................... 161,034
2003...................................................... 177,350
2004...................................................... 780
2005 and thereafter....................................... 305,241
--------
$666,979
========
</TABLE>
Cash paid for interest on long-term debt was $51,849,000, $33,996,000 and
$22,818,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
See Note 14 for discussion of changes to the Company's capital structure
subsequent to December 31, 1999.
6. COMMITMENTS AND CONTINGENCIES
In July 1999, the Company and certain of its subsidiaries ("Originators")
entered into an agreement to sell, on a revolving basis, trade receivables to a
wholly-owned subsidiary, Mail-Well Trade Receivables Corp. ("MTRC"). MTRC was
capitalized by the Company as a bankruptcy-remote special purpose entity that
is subject to certain covenants and restrictions, including a restriction from
engaging in any business activity or activity unrelated to acquiring and
selling interests in trade receivables. New trade receivables, except those
failing certain eligibility criteria, are sold to MTRC on a daily basis as
previously sold accounts receivable are collected. MTRC, in turn, sells an
undivided variable percentage interest in the pool of receivables, up to a
maximum of $150.0 million, to a multi-seller receivables securitization
company, for which there are no purchase agreements. From November 1996 to June
1999, the maximum under a prior agreement was $100.0 million. The Company
maintains a subordinated interest in the portion of the pooled receivables,
which are not transferred to the securitization company.
The Company's securitization is accounted for as a sale in accordance with
FASB Statement No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. Therefore, the Company's accounts
receivable have been reduced by the amount of receivables sold to MTRC and the
retained interest in the pool of receivables has been reported as an investment
available for sale, recorded at its estimated fair value. An allowance for
doubtful accounts is also maintained for both receivables not included in the
pool and for its retained interest in the pool. As of December 31, 1999 and
1998, the Company had sold $203.3 million (net of an allowance of $4.3 million)
and $100.0 million of accounts receivable to MTRC, respectively. MTRC had sold
beneficial interests totaling $148.5 million and $52.6 million to the
securitization company at December 31, 1999 and 1998, respectively.
In November 1996, the Company refinanced certain equipment under a
sale/leaseback arrangement. 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
32
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 (1) purchase the equipment for $16.0
million, (2) sell the equipment on behalf of the lessor for a selling price of
no less than $13.2 million or (3) 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 under all operating
leases at December 31, 1999 were as follows (in thousands):
<TABLE>
<S> <C>
2000...................................................... $ 28,979
2001...................................................... 25,683
2002...................................................... 21,727
2003...................................................... 13,967
2004...................................................... 9,982
2005 and thereafter....................................... 24,863
--------
Total..................................................... $125,201
========
</TABLE>
Lease expense for the years ended December 31, 1999, 1998, and 1997 was
$28,860,000, $25,831,000, and $17,301,000, respectively.
The Company is involved in various lawsuits incidental to its businesses.
In management's opinion, it is not probable that an adverse determination
against the Company relating to these suits would occur that would be material
to the consolidated financial statements.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following is a comparison of the fair value and carrying value at
December 31, 1999 and 1998 of the Company's financial instruments (in
thousands):
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents............... $ 3,618 $ 3,618 $ 1,375 $ 1,375
Trade Receivables....................... 85,044 85,044 130,523 130,523
Investment in accounts receivable
securitization........................ 54,396 54,396 47,069 47,069
Financial liabilities
Unsecured loan.......................... 20,885 21,876 24,465 25,461
Unsecured revolving loan facilities..... 168,276 172,242 89,114 93,000
Senior subordinated notes.................... 282,000 300,000 304,500 300,000
Convertible subordinated notes............... 139,886 152,050 128,482 152,050
Other long-term debt......................... 20,811 20,811 20,952 20,952
</TABLE>
Cash and Cash Equivalents and Trade Receivables--The carrying value of cash
and cash equivalents and trade receivables approximates fair value due to the
short term maturities of these investments.
33
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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 consist
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, 1999 and 1998, the Company
had no significant concentrations of credit risk.
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN
Security Offering--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.
Preferred Stock--The Company has authorized 25,000 shares of $0.01 par
value preferred stock. No shares have been issued at December 31, 1999 or 1998.
Stock Option Plans--The following summarizes the various stock option plans
at December 31, 1999:
<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>.............. 1,918,350 967,717 105,958 4 or 5
1996 Directors Stock Option Plan<Fb>.... 420,000 69,000 309,000 Immediately
1997 Non-Qualified Stock Option
Plan<Fa>................................ 1,950,000 854,730 768,870 5 years
Allied Acquisition Non-Qualified Stock
Option Plan<Fc>....................... 124,800 119,902 -- 4 years
1998 Incentive Stock Option Plan<Fa>.... 1,000,000 586,770 413,230 5 years
<FN>
- -------
<Fa> Plan is for directors and key employees
<Fb> Plan is for directors only
<Fc> Plan is for key employees of an acquired company, 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.
34
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN (CONTINUED)
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, 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
---------
1999
Granted...................................... 466,300 $11.14 - $15.09 $13.54
Exercised.................................... (388,555) $1.32 - $12.00 $ 5.53
Canceled or forfeited........................ (99,385) $3.73 - $21.86 $ 6.59
---------
Outstanding, December 31, 1999............... 2,598,119 $1.32 - $21.86 8.2 years $ 8.76
=========
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
=========
Vested and exercisable at December 31,
1999..................................... 820,740 $1.32 - $21.86 $ 6.35
=========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<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 1999 LIFE PRICE 1999 PRICE
--------------- -------------- --------- -------- --------------- --------
<S> <C> <C> <C> <C> <C>
$ 1.32 - $ 3.74............... 463,073 5.9 years $ 2.46 397,823 $ 2.25
$ 6.17 - $ 6.67............... 916,744 7.2 years $ 6.64 178,440 $ 6.63
$ 8.58 - $12.46............... 633,000 8.4 years $11.69 151,600 $11.36
$13.01 - $15.09............... 567,302 9.0 years $13.65 74,877 $13.58
$21.86.................... 18,000 8.3 years $21.86 18,000 $21.86
--------- -------
$ 1.32 - $21.86............... 2,598,119 7.7 years $ 8.76 820,740 $ 6.35
========= =======
</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
35
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN (CONTINUED)
options is the fair value of the common stock as of the date of grant.
Accordingly, no compensation cost has been recognized. Had the Company elected
to adopt recognition provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") under which
compensation expense is based upon the fair value of each option at the date of
grant using an option-pricing model, 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 1999, 1998, and 1997 were
$8.43, $6.73, and $3.83, 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
1999 Options............................. 0% 64% 5.8% 5 years
</TABLE>
The following table presents the pro forma effect of applying SFAS 123:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
AS PRO AS PRO AS PRO
(IN THOUSANDS, EXCEPT REPORTED FORMA REPORTED FORMA REPORTED FORMA
PER SHARE AMOUNTS) -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item...... $64,482 $61,481 $25,841 $24,073 $34,976 $33,852
Extraordinary item........ -- -- (4,132) (4,132) (6,100) (6,100)
Net income................ $64,482 $61,481 $21,709 $19,941 $28,876 $27,752
Income per basic share
before extraordinary
item.................... $ 1.32 $ 1.25 $ 0.55 $ 0.52 $ 0.86 $ 0.83
Net income per basic
share................... $ 1.32 $ 1.25 $ 0.47 $ 0.43 $ 0.71 $ 0.68
Income per diluted share
before extraordinary
item.................... $ 1.20 $ 1.15 $ 0.53 $ 0.50 $ 0.82 $ 0.80
Net income per diluted
share................... $ 1.20 $ 1.15 $ 0.45 $ 0.41 $ 0.68 $ 0.66
</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.
36
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SHAREHOLDERS' EQUITY AND STOCK OPTION PLAN (CONTINUED)
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, 1999
Pension liability adjustment...... $ (153) $ 198 $ 76 $ 122 $ (31)
Currency translation
adjustments..................... (8,680) 8,768 -- 8,768 88
Unrealized loss on investments.... (238) (29) (11) (18) (256)
------- ------- ----- ------- -------
$(9,071) $ 8,937 $ 65 $ 8,872 $ (199)
======= ======= ===== ======= =======
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)
======= ======= ===== ======= =======
</TABLE>
9. INCOME TAXES
Taxes are based on income before income taxes and extraordinary item for
the years ended December 31, as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS) -------- ------- -------
<S> <C> <C> <C>
Domestic.............................................. $ 83,264 $31,886 $42,677
Foreign............................................... 24,566 17,903 15,082
-------- ------- -------
$107,830 $49,789 $57,759
======== ======= =======
</TABLE>
37
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The provision for income taxes consists of the following for the years
ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS) ------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................. $18,075 $ 5,550 $ 9,539
Foreign................................................. 7,237 5,246 3,335
State................................................... 2,987 948 1,397
------- ------- -------
28,299 11,744 14,271
Deferred:
Federal................................................. 12,346 9,492 5,298
Foreign................................................. 1,469 1,792 2,651
State................................................... 1,234 920 563
------- ------- -------
15,049 12,204 8,512
------- ------- -------
Total provision for income taxes........................ $43,348 $23,948 $22,783
======= ======= =======
</TABLE>
Components of the Company's deferred tax assets and liabilities at December
31 are as follows:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS) ------- -------
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit carryforwards............ $ 4,435 $ 4,525
Net operating loss carryforwards........................ 3,883 3,533
Compensation related accruals........................... 8,333 6,352
Intangibles............................................. 6,357 3,735
Miscellaneous accruals and reserves..................... 3,902 2,195
Accounts receivable and inventories..................... 4,569 3,137
Land basis differences and other........................ 684 691
State tax credits (expire 2002-2007).................... 1,178 916
Valuation allowance..................................... (874) (267)
------- -------
Total deferred tax assets................................... 32,467 24,817
------- -------
Deferred tax liabilities:
Property, plant and equipment........................... 73,516 54,756
Intangibles............................................. 6,439 5,035
Prepaids and inventories................................ 2,170 1,197
------- -------
Total deferred tax liabilities.............................. 82,125 60,988
------- -------
Deferred tax liability, net................................. $49,658 $36,171
======= =======
</TABLE>
38
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (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
--------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate....................... 35.0% 35.0% 35.0%
State income tax, net of federal benefit................ 3.5 3.5 3.4
Goodwill amortization................................... 2.8 3.5 1.5
Employee stock ownership plan........................... -- 9.3 1.2
Effect of pooled entities electing nontaxable status
prior to the mergers................................... -- (2.4) (2.8)
Other................................................... (1.1) (.8) 1.1
---- ---- ----
Effective income tax rate............................... 40.2% 48.1% 39.4%
==== ==== ====
</TABLE>
At December 31, 1999, 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 DATES TAX
LOSSES FOR OPERATING LOSSES CREDITS
(IN THOUSANDS) --------- -------------------- -------
<S> <C> <C> <C>
Consolidated Company............................ $ -- $2,447
Acquired from Poser............................. 6,740 2002 - 2012 --
Acquired from GAC............................... -- 1,203
Acquired from SP................................ -- 590
Acquired from Porter Chadburn................... 4,140 Not applicable --
Acquired from Other............................. 121 2005 - 2008 195
------- ------
Total........................................... $11,001 $4,435
======= ======
</TABLE>
Cash paid for income taxes was $21,255,000, $23,762,000 and $15,090,000 for
the years ended December 31, 1999, 1998, and 1997, 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.
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).
39
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BENEFIT PLANS (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
---------------------
1999 1998
------- -------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year................. $27,188 $26,803
Service cost............................................ 1,435 1,477
Interest cost........................................... 2,037 1,812
Amendments.............................................. 695 --
Actuarial gains and loss................................ (1,048) 837
Foreign currency exchange rate changes.................. 1,157 (1,294)
Benefits paid........................................... (2,771) (2,393)
Curtailment............................................. -- (54)
------- -------
Benefit obligation at end of year................... 28,693 27,188
Change in plan assets:
Fair value of plan assets at beginning of year.......... 32,689 34,119
Foreign currency exchange rate changes.................. 1,561 (1,822)
Actual return on plan assets............................ 1,600 1,591
Employer contributions.................................. 1,344 1,194
Benefits paid........................................... (2,771) (2,393)
------- -------
Fair value of plan assets at end of year............ 34,423 32,689
------- -------
Funded status........................................... 5,730 5,501
Unrecognized actuarial loss (gain)...................... 2,275 1,527
Unrecognized prior service cost......................... 279 272
Unrecognized transition asset........................... (5,344) (5,663)
------- -------
Net amount recognized............................... $ 2,940 $ 1,637
======= =======
Amounts recognized in the consolidated balance sheet:
Prepaid benefit cost.................................... $ 3,592 $ 2,404
Accrued benefit liability............................... (702) (1,283)
Intangible asset........................................ -- 267
Deferred tax asset...................................... 19 96
Accumulated other comprehensive (income) loss........... 31 153
------- -------
Net amount recognized............................... $ 2,940 $ 1,637
======= =======
</TABLE>
40
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BENEFIT PLANS (CONTINUED)
Net pension expense for the plans for the year ended December 31 included
the following components (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service cost............................................ $ 1,435 $ 1,477 $ 1,300
Interest cost on projected benefit obligation........... 2,037 1,812 1,847
Expected return on plan assets.......................... (2,958) (2,814) (3,278)
Net amortization and deferral........................... (423) (377) 31
Recognized actuarial loss............................... 37 -- --
------- ------- -------
Net periodic pension cost (income)...................... $ 128 $ 98 $ (100)
======= ======= =======
</TABLE>
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>
1999 1998 1997
--------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate................. 7.50% 6.75 - 7.5% 7.25 - 7.5%
Expected long-term rate of return on assets.... 8.75 - 9% 8.75 - 9.5% 8.75 - 9%
Rate of compensation increase.................. 2 - 4% 2 - 4% 2 - 4%
</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 $4,118,000 and $3,622,000, respectively, as of December 31,
1999. 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 $5,355,000 and $4,089,000, respectively, as of December 31,
1998.
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 $3,768,000, $2,240,000, and
$1,877,000 for 1999, 1998 and 1997, 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 $5,164,000, $4,119,000,
and $3,159,000 for the years ended December 31, 1999, 1998, and 1997,
respectively.
Incentive Compensation--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 for the year ended
December 31, 1997.
Employee Stock Ownership Plan--See Note 11.
41
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RESTRUCTURING AND OTHER UNUSUAL CHARGE
Restructuring Charges
In November 1998, the Company committed to implement a restructuring
program affecting the Envelope 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. Envelope operations and reorganization of
the Company's Commercial Printing operations, primarily in the Northwest. The
Company also incurred $761,000 and $1,946,000 of restructuring costs in 1998
and 1999, respectively, 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" 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 and 564 personnel had been terminated by the end of 1998, and 1999,
respectively. The remaining terminations are expected to be completed by the
first quarter of 2000. The remaining asset write-down is for one building
expected to be sold in 2000. The remaining property exit costs are for one
lease, which expires in 2002, which is expected to be sub-leased or exited by
the end of 2000.
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>
ENVELOPE
Initial reserve...................... $ 8,912 $ 2,825 $ 500 $ 12,237
Utilized in 1998..................... (8,431) (441) (26) (8,898)
-------- ------- ------- --------
Balance 12/31/98..................... 481 2,384 474 3,339
Utilized in 1999..................... (417) (1,608) (83) (2,108)
Transferred.......................... 959 (418) (391) 150
-------- ------- ------- --------
Balance 12/31/99..................... $ 1,023 $ 358 $ -- $ 1,381
======== ======= ======= ========
COMMERCIAL PRINTING
Initial reserve...................... $ 2,787 $ 82 $ 855 $ 3,724
Utilized in 1998..................... (1,673) (82) (55) (1,810)
-------- ------- ------- --------
Balance 12/31/98..................... 1,114 -- 800 1,914
Utilized in 1999..................... (174) -- (928) (1,102)
Transferred.......................... (940) -- 790 (150)
-------- ------- ------- --------
Balance 12/31/99..................... $ -- $ -- $ 662 $ 662
======== ======= ======= ========
TOTAL
Initial reserve...................... $ 11,699 $ 2,907 $ 1,355 $ 15,961
Utilized in 1998..................... (10,104) (523) (81) (10,708)
-------- ------- ------- --------
Balance 12/31/98..................... 1,595 2,384 1,274 5,253
Utilized in 1999..................... (591) (1,608) (1,011) (3,210)
Transferred.......................... 19 (418) 399 --
-------- ------- ------- --------
Balance 12/31/99..................... $ 1,023 $ 358 $ 662 $ 2,043
======== ======= ======= ========
</TABLE>
42
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RESTRUCTURING AND OTHER UNUSUAL CHARGE (CONTINUED)
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 were 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 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) and $2,614,000
for the years ended December 31, 1998 and 1997, respectively.
At December 31, 1999 and 1998 the ESOP held the following shares of common
stock:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Shares allocated to participant accounts............ 3,896,544 2,238,758
Shares committed to be allocated to participant
accounts in connection with current year
contribution...................................... -- 1,657,786
--------- ---------
Total............................................... 3,896,544 3,896,544
========= =========
</TABLE>
The Company has replaced the terminated leveraged ESOP with a non-leveraged
ESOP.
43
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SEGMENT INFORMATION
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 Envelope, Commercial Printing, Printing for Distributors
and Label. The latter two segments were added via acquisitions in the first
quarter of 1998. Early in 1999, the Company moved one location from Envelope to
Commercial Printing. Segment information for all periods has been restated to
reflect this change. Intersegment sales from 1997 through 1999 were
insignificant. Segment information as of and for the years ended December 31,
1999, 1998 and 1997 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
(IN THOUSANDS) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES:
Commercial Printing..................................... $ 770,391 $ 555,535 $ 359,285
Envelope................................................ 745,555 763,147 704,223
Printing for Distributors............................... 147,393 113,590 10,429
Label................................................... 184,702 72,414 --
---------- ---------- ----------
Total............................................... $1,848,041 $1,504,686 $1,073,937
========== ========== ==========
OPERATING INCOME (LOSS):
Commercial Printing..................................... $ 63,198 $ 36,122 $ 20,420
Envelope................................................ 93,895 86,638 82,065
Printing for Distributors............................... 13,059 8,943 532
Label................................................... 14,535 4,280 --
Corporate<Fa>........................................... (22,394) (49,103) (17,189)
---------- ---------- ----------
Total............................................... $ 162,293 $ 86,880 $ 85,828
========== ========== ==========
IDENTIFIABLE ASSETS:
Commercial Printing..................................... $ 637,013 $ 449,722 $ 248,932
Envelope................................................ 530,733 646,068 517,481
Printing for Distributors............................... 124,394 106,698 5,437
Label................................................... 218,023 96,029 --
Corporate<Fb>........................................... (166,122) (170,561) (100,439)
---------- ---------- ----------
Total............................................... $1,344,041 $1,127,956 $ 671,411
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Commercial Printing..................................... $ 22,266 $ 16,208 $ 10,426
Envelope................................................ 15,908 14,399 11,077
Printing for Distributors............................... 2,711 1,830 365
Label................................................... 6,778 3,117 --
Corporate............................................... 8,998 4,086 4,505
---------- ---------- ----------
Total............................................... $ 56,661 $ 39,640 $ 26,373
========== ========== ==========
CAPITAL EXPENDITURES:
Commercial printing..................................... $ 33,864 $ 36,245 $ 12,397
Envelope................................................ 30,896 42,088 22,263
Printing for Distributors............................... 5,562 3,932 2,178
Label................................................... 14,805 5,070 --
Corporate............................................... 374 -- --
---------- ---------- ----------
Total............................................... $ 85,501 $ 87,335 $ 36,838
========== ========== ==========
<FN>
- -------
<Fa> Corporate operating income in 1998 includes the restructuring charges
discussed in Note 11 and the merger costs related to segments because they
were not considered by the chief operating decision maker in deciding how
to allocate resources.
44
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SEGMENT INFORMATION (CONTINUED)
<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.
</TABLE>
Geographic information as of and for the years ended December 31, 1999,
1998 and 1997 is presented below:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------
(IN THOUSANDS) 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES:
U.S............................................. $1,625,928 $1,350,197 $ 958,644
Canada.......................................... 190,435 154,489 115,293
Other foreign................................... 31,678 -- --
---------- ---------- ----------
Total........................................ $1,848,041 $1,504,686 $1,073,937
========== ========== ==========
IDENTIFIABLE ASSETS:
U.S.............................................. $1,115,984 $ 962,857 $ 576,209
Canada........................................... 179,529 165,099 95,202
Other foreign.................................... 48,528 -- --
---------- ---------- ----------
Total........................................ $1,344,041 $1,127,956 $ 671,411
========== ========== ==========
</TABLE>
13. SUMMARY QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS) (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
12/31/99 9/30/99 6/30/99 3/31/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales.................................... $475,791 $492,787 $439,046 $440,417
Gross profit................................. 109,305 113,014 107,342 99,665
Net income................................... $ 17,225 $ 17,501 $ 14,984 $ 14,772
Earnings per share--basic:................... $ 0.35 $ 0.36 $ 0.31 $ 0.30
Earnings per share--diluted:................. $ 0.32 $ 0.32 $ 0.28 $ 0.28
<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
</TABLE>
45
<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) (CONTINUED)
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 affected the
results of the fourth quarter of 1998.
14. SUBSEQUENT EVENTS
In February 2000, the Company acquired 13,450,588 shares (or 91%
outstanding) of the common stock of Atlanta-based American Business Products
(ABP) for $20 per share in a cash tender offer. In the second step of the
acquisition, ABP merged with a wholly-owned subsidiary of the Company. The
total value of the transaction, including the assumption of debt, was
approximately $333.6 million.
ABP is a premier provider of printed office products and specialty
packaging solutions through its Curtis 1000, International Envelope, Discount
Labels and Jen-Coat business units. ABP reported 1999 sales of $475.9 million
and net income and earnings per share from continuing operations of $19.7
million and $1.31, respectively.
In February 2000, the Company entered into an $800.0 million senior secured
credit facility (the "New Facility"). The proceeds were used to finance the
acquisition of ABP, pay related costs and expenses, refinance the unsecured
revolving loan facilities, and reduce the amounts drawn under the accounts
receivable securitization to a total of $25.0 million, with the remainder to
provide funds for ongoing general corporate purposes and proposed acquisitions
under letters of intent. In conjunction with the financing, MTRC reduced its
ability to sell an undivided variable percentage interest in the pool of
receivables to $25.0 million, which is permitted to be increased to $75.0
million at any time.
The New Facility consists of a $250 million revolving credit facility, a
$300 million Tranche A term loan and a $250 million Tranche B term loan. The
Tranche A facility and Tranche B facility amortize over six and seven years,
respectively. The Company borrowed $100.0 million under the revolving credit
facility on February 22, 2000. Therefore, under the terms of the New Facility
the annual debt payments at December 31, 1999, would have been as follows (in
thousands):
<TABLE>
<S> <C>
2000.................................................... $ 34,514
2001.................................................... 43,685
2002.................................................... 206,034
2003.................................................... 60,350
2004.................................................... 65,780
2005 and thereafter..................................... 734,616
----------
Total................................................... $1,144,979
==========
</TABLE>
The New Facility contains certain financial and other covenants that are
customary for credit facilities of its type and size. The New Facility is
secured by substantially all tangible and intangible property of U.S. entities,
except for that security of the accounts receivable securitization program and
certain capital lease obligations.
The Company expects to write off deferred financing costs of $372,000 (net
of $258,000 of income tax benefits) capitalized in connection with the
unsecured revolving loan facility which was repaid February 2000. The write-off
will be shown as an extraordinary item in the statements of operations.
Previously the Company announced that letters of intent had been signed to
acquire two commercial printers: Strathmore Press of Cherry Hill, New Jersey,
and Braceland Brothers of Philadelphia. Braceland
46
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS (CONTINUED)
Brothers closed January 28, 2000, subject to the successful transfer of certain
government contracts. Strathmore Press is expected to close no later than April
2000, pending receipt of state approval. The combined sales of the two
companies for the trailing twelve months were approximately $44 million.
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In December 1998, MWI ("Issuer" or "MWI"), the Company's wholly-owned
subsidiary, and the only direct subsidiary of the Company, issued $300.0
million aggregate principal amount of 8 3/4% Senior Subordinated Notes ("Senior
Notes") due in 2008 (see Note 5). The Senior Notes are guaranteed by all of the
U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of which are
wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The guarantees are
joint and several, full, complete and unconditional. There are no material
restrictions on the ability of the Guarantor Subsidiaries to transfer funds to
MWI in the form of cash dividends, loans or advances, other than ordinary legal
restrictions under corporate law, fraudulent transfer and bankruptcy laws.
The following condensed consolidating financial information illustrates the
composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and
non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the
non-guarantor subsidiaries comprise all of the direct and indirect subsidiaries
of the Parent Guarantor. Management has determined that separate complete
financial statements would not provide additional material information that
would be useful in assessing the financial composition of the Guarantor
Subsidiaries.
Investments in subsidiaries are accounted for under the equity method,
wherein the investor company's share of earnings and income taxes applicable to
the assumed distribution of such earnings are included in net income. In
addition, investments increase in the amount of permanent contributions to
subsidiaries and decrease in the amount of distributions from subsidiaries. The
elimination entries eliminate the equity method investment in subsidiaries and
the equity in earnings of subsidiaries, intercompany payables and receivables
and other transactions between subsidiaries.
47
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES...................... $ -- $362,542 $1,190,177 $295,322 $ -- $1,848,041
COST OF SALES.................. -- 280,006 924,642 214,067 -- 1,418,715
------- -------- ---------- -------- --------- ----------
GROSS PROFIT................... -- 82,536 265,535 81,255 -- 429,326
OTHER OPERATING COSTS.......... 200 63,265 159,315 44,253 -- 267,033
------- -------- ---------- -------- --------- ----------
OPERATING INCOME (LOSS)........ (200) 19,271 106,220 37,002 -- 162,293
OTHER (INCOME) EXPENSE
Interest expense............... 8,543 47,431 22,018 4,828 (27,573) 55,247
Other (income) expense......... (8,846) (19,007) (733) 229 27,573 (784)
------- -------- ---------- -------- --------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES................. 103 (9,153) 84,935 31,945 -- 107,830
PROVISION FOR INCOME TAXES..... 39 (3,737) 37,415 9,631 -- 43,348
------- -------- ---------- -------- --------- ----------
INCOME (LOSS) BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES................. 64 (5,416) 47,520 22,314 -- 64,482
EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARIES..... 64,418 69,834 18,742 -- (152,994) --
------- -------- ---------- -------- --------- ----------
NET INCOME..................... $64,482 $ 64,418 $ 66,262 $ 22,314 ($152,994) $ 64,482
======= ======== ========== ======== ========= ==========
</TABLE>
48
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES....................... $ -- $425,156 $925,041 $155,142 $ (653) $1,504,686
COST OF SALES................... -- 337,468 737,318 111,240 (653) 1,185,373
------- -------- -------- -------- -------- ----------
GROSS PROFIT.................... -- 87,688 187,723 43,902 -- 319,313
OTHER OPERATING COSTS
Selling, administrative and
other......................... 1,127 60,415 118,309 20,342 -- 200,193
Restructuring and other unusual
charge........................ -- 28,846 76 -- -- 28,922
Merger costs.................... -- -- 3,318 -- -- 3,318
------- -------- -------- -------- -------- ----------
Total Other Operating
Costs..................... 1,127 89,261 121,703 20,342 -- 232,433
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS)......... (1,127) (1,573) 66,020 23,560 -- 86,880
OTHER (INCOME) EXPENSE
Interest expense................ 7,833 27,734 5,845 5,568 (8,853) 38,127
Other (income) expense.......... (8,853) (435) (519) (82) 8,853 (1,036)
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND EXTRAORDINARY
ITEM.......................... (107) (28,872) 60,694 18,074 -- 49,789
PROVISION FOR INCOME TAXES...... -- (13,887) 30,795 7,040 -- 23,948
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND EXTRAORDINARY
ITEM.......................... (107) (14,985) 29,899 11,034 -- 25,841
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES............... 21,816 40,933 11,034 -- (73,783) --
------- -------- -------- -------- -------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM.......................... 21,709 25,948 40,933 11,034 (73,783) (25,841)
EXTRAORDINARY ITEM.............. -- (4,132) -- -- -- (4,132)
------- -------- -------- -------- -------- ----------
NET INCOME...................... $21,709 $ 21,816 $ 40,933 $ 11,034 $(73,783) $ 21,709
======= ======== ======== ======== ======== ==========
</TABLE>
49
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES....................... $ -- $369,394 $589,250 $115,293 $ -- $1,073,937
COST OF SALES................... -- 290,671 463,817 79,724 -- 834,212
------- -------- -------- -------- -------- ----------
GROSS PROFIT.................... -- 78,723 125,433 35,569 -- 239,725
OTHER OPERATING COSTS........... 269 56,965 79,403 17,260 -- 153,897
------- -------- -------- -------- -------- ----------
OPERATING INCOME (LOSS)......... (269) 21,758 46,030 18,309 -- 85,828
OTHER (INCOME) EXPENSE
Interest expense................ 634 16,332 9,672 3,519 -- 30,157
Other (income) expense.......... (4) (761) (1,031) (292) -- (2,088)
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND EXTRAORDINARY
ITEM.......................... (899) 6,187 37,389 15,082 -- 57,759
PROVISION FOR INCOME TAXES...... -- 2,438 14,358 5,987 -- 22,783
------- -------- -------- -------- -------- ----------
INCOME (LOSS) BEFORE EQUITY IN
UNDISTRIBUTED EARNINGS OF
SUBSIDIARIES AND
EXTRAORDINARY ITEM............ (899) 3,749 23,031 9,095 -- 34,976
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES............... 29,775 28,791 8,202 -- (66,768) --
------- -------- -------- -------- -------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM.......................... 28,876 32,540 31,233 9,095 (66,768) 34,976
EXTRAORDINARY ITEM.............. -- (2,765) (2,442) (893) -- (6,100)
------- -------- -------- -------- -------- ----------
NET INCOME...................... $28,876 $ 29,775 $ 28,791 $ 8,202 $(66,768) $ 28,876
======= ======== ======== ======== ======== ==========
</TABLE>
50
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1999
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- ---------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents... $ -- $ 27,667 $ (28,003) $ 3,954 $ -- $ 3,618
Receivables, net............ -- 87 35,860 49,097 -- 85,044
Investment in accounts
receivable
Securitization............ -- -- -- 54,396 -- 54,396
Accounts
receivable--other........... -- 8,572 10,004 2,188 -- 20,764
Inventories, net............ -- 36,337 82,277 26,142 -- 144,756
Note receivable from
Issuer...................... 147,436 -- -- -- (147,436) --
Other current assets........ 345 24,247 3,597 4,348 (6,986) 25,551
-------- ---------- --------- -------- ----------- ----------
Total current assets.... 147,781 96,910 103,735 140,125 (154,422) 334,129
INVESTMENT IN
SUBSIDIARIES................ 377,318 663,928 48,574 -- (1,089,820) --
PROPERTY, PLANT AND
EQUIPMENT, NET............ -- 104,938 323,180 104,038 -- 532,156
GOODWILL, NET............... -- 45,460 279,252 128,771 -- 453,483
NOTE RECEIVABLE FROM
SUBSIDIARIES.............. -- 245,000 -- -- (245,000) --
OTHER ASSETS, NET........... 2,943 32,517 3,851 8,432 (23,470) 24,273
-------- ---------- --------- -------- ----------- ----------
TOTAL....................... $528,042 $1,188,753 $ 758,592 $381,366 $(1,512,712) $1,344,041
======== ========== ========= ======== =========== ==========
CURRENT LIABILITIES
Accounts payable............ $ -- $ 19,499 $ 79,447 $ 23,794 $ -- $ 122,740
Accrued compensation and
vacation.................. -- 8,388 32,638 9,016 -- 50,042
Other current liabilities... 682 99,317 (163,815) 123,801 (6,986) 52,999
Note payable to Parent...... -- 147,436 -- -- (147,436) --
Current portion of long-term
debt and capital leases... -- 674 4,652 8,563 -- 13,889
-------- ---------- --------- -------- ----------- ----------
Total current
liabilities........... 682 275,314 (47,078) 165,174 (154,422) 239,670
LONG-TERM DEBT AND CAPITAL
LEASES.................... 152,050 472,180 6,690 22,170 -- 653,090
NOTE PAYABLE TO ISSUER...... -- -- 245,000 -- (245,000) --
DEFERRED INCOME TAXES....... -- 57,881 -- 9,709 (3,478) 64,112
OTHER LONG-TERM
LIABILITIES............... -- 2,560 25,160 623 (19,992) 8,351
-------- ---------- --------- -------- ----------- ----------
Total liabilities....... 152,732 807,935 229,772 197,676 (422,892) 965,223
MINORITY INTEREST........... -- 3,500 -- 8 -- 3,508
SHAREHOLDERS' EQUITY........ 375,310 377,318 528,820 183,682 (1,089,820) 375,310
-------- ---------- --------- -------- ----------- ----------
TOTAL....................... $528,042 $1,188,753 $ 758,592 $381,366 $(1,512,712) $1,344,041
======== ========== ========= ======== =========== ==========
</TABLE>
51
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 1998
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents..... $ -- $ 6,952 $ (7,311) $ 1,734 $ -- $ 1,375
Receivables, net.............. -- 13,607 91,148 25,768 -- 130,523
Investment in accounts
receivable securitization... -- 6,114 40,955 -- -- 47,069
Accounts receivable--other.... -- 3,981 7,593 1,112 -- 12,686
Income tax receivable......... -- 43,908 -- -- (33,193) 10,715
Inventories, net.............. -- 39,267 60,286 14,578 -- 114,131
Note receivable from Issuer... 147,436 -- -- -- (147,436) --
Other current assets.......... 116 8,515 7,935 2,785 -- 19,351
-------- -------- -------- -------- ----------- ----------
Total current assets...... 147,552 122,344 200,606 45,977 (180,629) 335,850
INVESTMENT IN SUBSIDIARIES.... 301,447 609,661 76,104 -- (987,212) --
PROPERTY, PLANT AND EQUIPMENT,
NET......................... -- 121,733 249,002 66,997 -- 437,732
GOODWILL, NET................. -- 59,900 210,067 52,182 -- 322,149
OTHER ASSETS, NET............. 3,902 13,111 15,155 57 -- 32,225
-------- -------- -------- -------- ----------- ----------
TOTAL......................... $452,901 $926,749 $750,934 $165,213 $(1,167,841) $1,127,956
======== ======== ======== ======== =========== ==========
CURRENT LIABILITIES
Accounts payable.............. $ -- $ 18,171 $ 56,441 $ 12,411 $ -- $ 87,023
Accrued compensation and
vacation.................... -- 12,320 23,926 5,155 -- 41,401
Other current liabilities..... 1,476 26,759 16,953 35,197 (33,193) 47,192
Note payable to Parent........ -- 147,436 -- -- (147,436) --
Current portion of long-term
debt and capital leases..... -- 5 2,796 5,235 -- 8,036
-------- -------- -------- -------- ----------- ----------
Total current
liabilities............... 1,476 204,691 100,116 57,998 (180,629) 183,652
LONG-TERM DEBT AND CAPITAL
LEASES...................... 152,050 393,004 15,415 22,958 -- 583,427
DEFERRED INCOME TAXES......... -- 19,890 20,078 7,566 -- 47,534
OTHER LONG-TERM LIABILITIES... -- 4,217 5,664 587 -- 10,468
-------- -------- -------- -------- ----------- ----------
Total liabilities......... 153,526 621,802 141,273 89,109 (180,629) 825,081
MINORITY INTEREST............. -- 3,500 -- -- -- 3,500
SHAREHOLDERS' EQUITY.......... 299,375 301,447 609,661 76,104 (987,212) 299,375
-------- -------- -------- -------- ----------- ----------
TOTAL......................... $452,901 $926,749 $750,934 $165,213 $(1,167,841) $1,127,956
======== ======== ======== ======== =========== ==========
</TABLE>
52
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1999
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES................... $ 4,595 $ (1,707) $ 118,669 $ (8,618) $ -- $ 112,939
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired..................... -- (2,628) (85,239) (115,569) -- (203,436)
Capital expenditures........... -- (12,944) (59,614) (12,943) -- (85,501)
Investment in subsidiaries..... (2,029) (236,080) (91,649) -- 329,758 --
Loan to Subsidiaries........... -- (245,000) -- -- 245,000 --
Other activity with subsidiary,
net.......................... -- 390,226 (410,274) (96,852) 116,900 --
Other investing activities..... (4,595) (656) 9,668 1,397 -- 5,814
------- --------- --------- --------- --------- ---------
Net cash used in investing
activities............... (6,624) (107,082) (637,108) (223,967) 691,658 (283,123)
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts
receivable securitization,
net.......................... -- 49,519 67,381 95,900 (116,900) 95,900
Net proceeds from common stock
issuance..................... 2,029 -- -- -- -- 2,029
Proceeds from long-term debt... -- 374,235 -- 11,881 -- 386,116
Repayments of long-term debt
and capital lease
obligations.................. -- (294,798) (3,140) (12,315) -- (310,253)
Loan from Issuer............... -- -- 245,000 -- (245,000) --
Investment by parent........... -- 2,029 188,506 139,223 (329,758) --
Other financing activities..... -- (1,481) -- -- -- (1,481)
------- --------- --------- --------- --------- ---------
Net cash provided by
financing activities..... 2,029 129,504 497,747 234,689 (691,658) 172,311
EFFECT OF EXCHANGE RATE CHANGES
ON CASH...................... -- -- -- 116 -- 116
------- --------- --------- --------- --------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS.................. -- 20,715 (20,692) 2,220 -- 2,243
BALANCE AT BEGINNING OF YEAR... -- 6,952 (7,311) 1,734 -- 1,375
------- --------- --------- --------- --------- ---------
BALANCE AT END OF YEAR......... $ -- $ 27,667 $ (28,003) $ 3,954 $ -- $ 3,618
======= ========= ========= ========= ========= =========
</TABLE>
53
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1998
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES.................. $ 1,631 $ 76,422 $ 45,781 $ (30,756) $ -- $ 93,078
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired.................... -- (9,390) (308,293) (33,920) -- (351,603)
Capital expenditures.......... -- (25,327) (48,035) (13,973) -- (87,335)
Investment in subsidiaries.... (92,336) (310,000) (34,000) -- 436,336 --
Other investing activities.... (1,887) 10,760 233 555 -- 9,661
-------- -------- --------- --------- ----------- ---------
Net cash used in investing
activities.............. (94,223) (333,957) (390,095) (47,338) 436,336 (429,277)
-------- -------- --------- --------- ----------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts
receivable securitization,
net......................... -- (2,315) (17,035) -- -- (19,350)
Net proceeds from common stock
issuance.................... 92,336 -- -- -- -- 92,336
Proceeds from long-term
debt........................ -- 592,556 1,067 205,488 -- 799,111
Repayments of long-term debt
and capital lease
obligations................. -- (358,139) (44,621) (153,976) -- (556,736)
Investment by parent.......... -- -- 402,336 34,000 (436,336) --
Other financing activities.... -- (9,098) (3,824) -- -- (12,922)
-------- -------- --------- --------- ----------- ---------
Net cash provided by
financing activities.... 92,336 223,004 337,923 85,512 (436,336) 302,439
EFFECT OF EXCHANGE RATE
CHANGES ON CASH............. -- -- -- (5,776) -- (5,776)
-------- -------- --------- --------- ----------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS................. (256) (34,531) (6,391) 1,642 -- (39,536)
BALANCE AT BEGINNING OF
YEAR........................ 256 41,483 (920) 92 -- 40,911
-------- -------- --------- --------- ----------- ---------
BALANCE AT END OF YEAR........ $ -- $ 6,952 $ (7,311) $ 1,734 $ -- $ 1,375
======== ======== ========= ========= =========== =========
</TABLE>
54
<PAGE>
<PAGE>
MAIL-WELL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1997
(in thousands)
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES.................. $ (242) $ 51,016 $ 33,041 $ 10,594 $ -- $ 94,409
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition costs, net of cash
acquired.................... -- (20,979) (61,878) (17) -- (82,874)
Capital expenditures.......... -- (9,496) (25,148) (2,194) -- (36,838)
Loan to Issuer................ (147,436) -- -- -- 147,436 --
Investment in subsidiaries.... -- (62,000) -- -- 62,000 --
Other investing activities.... 252 (185) 1,346 404 -- 1,817
--------- --------- -------- -------- --------- ---------
Net cash used in investing
activities.............. (147,184) (92,660) (85,680) (1,807) 209,436 (117,895)
--------- --------- -------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Changes due to accounts
receivable securitization,
net......................... -- (3,715) (9,099) -- -- (12,814)
Net proceeds from common stock
issuance.................... 201 -- 1,001 -- -- 1,202
Proceeds from long-term
debt........................ 147,436 67,197 12,419 60,000 -- 287,052
Repayments of long-term debt
and capital lease
obligations................. -- (137,401) (11,990) (69,734) -- (219,125)
Loan from Parent Guarantor.... -- 147,436 -- -- (147,436) --
Investment by parent.......... -- -- 62,000 -- (62,000) --
Other financing activities.... -- -- (5,254) -- -- (5,254)
--------- --------- -------- -------- --------- ---------
Net cash provided by (used
in) financing
activities.............. 147,637 73,517 49,077 (9,734) (209,436) 51,061
EFFECT OF EXCHANGE RATE
CHANGES ON CASH............. -- -- -- 1,039 -- 1,039
--------- --------- -------- -------- --------- ---------
NET CHANGE IN CASH AND CASH
EQUIVALENTS................. 211 31,873 (3,562) 92 -- 28,614
BALANCE AT BEGINNING OF
YEAR........................ 45 9,610 2,642 -- -- 12,297
--------- --------- -------- -------- --------- ---------
BALANCE AT END OF YEAR........ $ 256 $ 41,483 $ (920) $ 92 $ -- $ 40,911
========= ========= ======== ======== ========= =========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
55
<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>......... 56 Chairman of the Board & Chief Executive 1994
Officer
Paul V. Reilly................ 47 President & Chief Operating Officer 1998
Gary H. Ritondaro............. 53 Senior Vice President--Finance & Chief
Financial Officer
V. Bruce Thompson............. 52 Senior Vice President--Corporate
Development
Julie Clark................... 35 Vice President, Internal Audit
Robert Meyer.................. 43 Vice President, Treasury & Tax
Keith T. Pratt................ 53 Vice President, Purchasing
Roger Wertheimer.............. 40 Vice President, General Counsel and
Secretary
Luc Desjardins................ 47 President and Chief Executive Officer of
Envelope Printing Operations
David H. Holt................. 46 President and Chief Executive Officer of
the Printing for Distributors
Michael A. Zawalski........... 40 President and Chief Executive Officer of
Mail-Well Label
Frank P. Diassi<F2>........... 66 Director 1993
Frank J. Hevrdejs<F2>......... 54 Director 1993
Janice C. Peters<F2>.......... 48 Director 1999
Jerome W. Pickholz<F1><F3>.... 67 Director 1994
William R. Thomas<F3>......... 71 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 1994. He was Chairman of the Board,
President and Chief Executive Officer of Pavey Envelope & Tag Corp. from 1991
until it became a subsidiary of the Company in 1994. From 1987 to 1989, Mr.
Mahoney served as President of Transkrit Corp., a direct mail and 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. He served as Senior Vice President--Finance
and Chief Financial Officer of the Company from 1995 to 1998. Mr. Reilly spent
14 years with Polychrome Corporation, a prepress supplier to the printing
industry, where he held a number of senior management positions. 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.
56
<PAGE>
<PAGE>
GARY H. RITONDARO has been Senior Vice President--Finance and Chief
Financial Officer of the Company since 1999. Previously, Mr. Ritondaro spent 13
years with Ferro Corporation, a manufacturer of specialty plastics, chemicals,
coatings and ceramics with operations in 21 countries. He served as Ferro's
Vice President and CFO with worldwide responsibilities for financial management
including accounting, treasury and tax. Prior to joining Ferro, Mr. Ritondaro
held numerous financial positions with Diamond Shamrock Corporation. He has
significant experience with multinational businesses and in investor relations.
V. BRUCE THOMPSON has been Senior Vice President--Corporate Development of
the Company since 1998. From 1994 to 1998, Mr. Thompson was Senior Vice
President of Marketing and Administration and General Counsel of Forest Oil
Corporation, a publicly held petroleum exploration and production company. From
1993 to 1994, Mr. Thompson was Vice President, Legal Affairs, for Mid-America
Dairymen, Inc., a dairy cooperative, and from 1990 to 1993 he served as Chief
of Staff for James M. Inhofe who is currently a U.S. Senator for Oklahoma.
JULIE M. CLARK has been Vice President--Internal Audit of the Company since
1999. From 1996 to 1999, Ms. Clark served as Director of Internal Audit for the
Company, and from 1994 to 1996 she was Assistant Treasurer for the Company. Ms.
Clark began her career with Deloitte and Touche LLP in 1986, and was a Senior
Manager when she left in 1994 to join the Company. Ms. Clark is a Certified
Public Accountant.
ROBERT MEYER has been Vice President--Treasurer and Tax of the Company
since 1998. Mr. Meyer is a licensed attorney, Certified Public Accountant and
Certified Financial Planner. From 1988 to 1998, Mr. Meyer was a partner in the
tax department of the accounting firm of Deloitte & Touche LLP.
KEITH T. PRATT has been Vice President--Purchasing of the Company since
1998. From 1994 to 1998, Mr. Pratt was Vice President of Material Sourcing and
Logistics of Ply Gem Industries. From 1981 to 1994, Mr. Pratt was responsible
for purchasing and logistics with several companies, where he held a variety of
positions up to the director level.
ROGER WERTHEIMER has been Vice President--General Counsel and Secretary of
the Company since 1995. Mr. Wertheimer has been engaged in the practice of law
since 1984. He served as Corporate Counsel for PACE Membership Warehouse, Inc.,
a food and merchandise wholesaler, from 1988 to 1994 and practiced privately
from 1994 to 1995 when he joined the Company.
LUC DESJARDINS has been the President and Chief Executive Officer of
Envelope Printing Operations since May 1998. Prior to that, he served as
President and Chief Executive Officer of Supremex, Inc., from January 1992 to
May 1998. Before joining Supremex, Mr. Desjardins was President and General
Manager of Culinar Ltd.'s Dry Products Division, a business with sales of $225
million. He successively held positions of sales representative, sales manager,
marketing manager, general manager and vice president in various companies. He
is a graduate of Harvard University's program for Management Development and
holds a master's degree in Business Administration from the Universite du
Quebec in Montreal. He is a member of the Presidents Association (American
Management Association) and the Young Presidents Organization.
DAVID H. HOLT has been the President and Chief Executive Officer of the
Printing for Distributors division since July 1999. Prior to that, Mr. Holt
spent over 20 years with Beloit Corporation, a world leader in the design and
manufacture of pulping and papermaking equipment. His positions included
Controller of a $300 million division, Corporate Director of Administration,
Vice President/Director of a $150 million multiplant operation and Group Vice
President--Pulping Systems. His experience encompasses multinational corporate
environments, mergers and acquisitions and turnaround situations. Mr. Holt has
his Bachelor's and Master's degrees in Business Administration from the
University of Wisconsin.
MICHAEL A. ZAWALSKI has been the President and Chief Executive Officer of
Mail-Well Label since May 1999. Prior to that, he served as Senior Vice
President--Finance and Chief Financial Officer of Mail-Well beginning in August
1998. Previously, Mr. Zawalski was CFO of Ryder TRS, Inc., a moving and
transportation business, responsible for all facets of finance including
investor and bank relations. Before that, he was Vice President--Finance with
the Coleman Company, directing worldwide planning and
57
<PAGE>
<PAGE>
analysis, tax, accounting and reporting. He also held various executive
positions with Quaker Oats, including Director, Financial Control for Quaker's
U.S. food business, Director and CFO of the Breakfast Division, and Vice
President and General Manager of a $130 million food service subsidiary. Mr.
Zawalski, a CPA, began his career with Arthur Andersen & Co. He earned a B.S.
from Illinois State University and a Master's in Management from Northwestern
University.
FRANK P. DIASSI has been a director of the Company since its inception in
1993. Since 1996 Mr. Diassi has been Chairman of Sterling Chemicals, Inc., a
manufacturer of chemicals, acrylic and fibers. He was a founding director of
Arcadian Corporation, the largest nitrogen fertilizer company in North America.
Mr. Diassi was a director and Chairman of the Finance Committee of Arcadian
Corporation from 1989 to 1994. Mr. Diassi is a director of Fibreglass Holdings,
Inc., a truck accessory manufacturer, Amerlux Corp., a commercial lighting
company, and Software Plus, Inc., a human resources/payroll software design
firm. 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
1993. In 1982 Mr. Hevrdejs co-founded The Sterling Group, Inc., a major
management buyout company, where he is currently a principal shareholder and
president. He also serves as Chairman of First Sterling Ventures Corp., an
investment company, Endoro Holdings, Inc., a structural and electrical
manufacturing company, and Fibreglass Holdings, Inc., a truck accessory
manufacturer. He is a director of Eagle U.S.A., an air-freight company, and
Sterling Chemicals, Inc., a petroleum chemical company. Mr. Hevrdejs serves as
Chairman of the Compensation Committee of the Board of Directors.
JANICE C. PETERS has been a director of the Company since 1999. Since 1997
Ms. Peters has served as President and Chief Executive Officer of MediaOne(R),
the broadband services arm of MediaOne Group. From 1995 to 1997, Ms. Peters was
employed by US WEST, MediaOne's former parent company, in various positions
including managing director of One2One, a United Kingdom wireless
communications joint venture between US WEST and Cable & Wireless, and
President of Wireless Operations for US WEST Media Group. Ms. Peters serves as
a director of C-SPAN (the Cable-Satellite Public Affairs Network), Primus
Knowledge Solutions, Inc., a provider of web-based software for customer
service and support, and the Walter Kaitz Foundation, a cable industry
organization that places diversity candidates in industry management positions.
Ms. Peters serves as a member of the Compensation Committee of the Board of
Directors.
JEROME W. PICKHOLZ has been a director of the Company since 1994. From 1978
to 1994, he was Chief Executive Officer of Ogilvy & Mather Direct Worldwide, a
direct advertising agency. From 1994 to 1995, he served as Chairman of Ogilvy &
Mather Direct Worldwide where he is now Chairman Emeritus. Since 1996 Mr.
Pickholz has served as founder and Chairman of Pickholz, Tweedy, Cowan, L.L.C.,
a marketing communications company. Mr. Pickholz serves as Chairman of the
Audit Committee and a member of the Nominating Committee of the Board of
Directors.
WILLIAM R. THOMAS has been a director of the Company since 1998. He has
served as Chairman of Capital Southwest Corporation, a publicly owned venture
capital investment company, since 1982 and as President since 1980. Mr. Thomas
has been a director of Capital Southwest Corporation since 1972 and was Senior
Vice President from 1969 to 1980. Mr. Thomas also serves as a director of Alamo
Group, Inc., a heavy-duty mowing equipment company, Encore Wire Corporation, an
electrical wire and cable company, and Palm Harbor Homes, Inc., a home-building
manufacturer. Mr. Thomas is a member of the Audit Committee of the Board of
Directors.
58
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The sections captioned "Director Compensation", "Compensation Committee
Interlocks and Insider Participation", "Certain Relationships and Related
Transactions", "Executive Compensation", "Summary Compensation Table", "Option
Grants in the Last Fiscal Year", "Aggregated Option Exercises in the Last
Fiscal Year and Fiscal 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 2000 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 2000 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections captioned "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related Transactions" appearing
in the Company's Proxy Statement filed pursuant to Regulation 14A in connection
with the 2000 Annual Meeting of Stockholders are incorporated herein by
reference.
59
<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:
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Schedule I Condensed Balance Sheets as of December 31, 1999 and 1998
and Condensed Statements of Operations for the Years Ended
December 31, 1999, 1998, and 1997......................... 63
Schedule II Valuation and Qualifying Accounts for the Years Ended
December 31, 1999, 1998, and 1997......................... 67
</TABLE>
(A)(3) EXHIBITS
EXHIBIT
INDEX DESCRIPTION OF EXHIBIT
- ------- ----------------------
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 September 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 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 aggre-
gate principal amount of 8 3/4% Senior Subordinated Notes
due 2008--incorporated by reference from the Company's
Annual Report on Form 10-K for the year ended December 31,
1998.
4.5 Form of Senior Subordinated Note. Incorporated by reference
from the company's Annual Report of Form 10-K for the year
ended December 31, 1998.
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.
60
<PAGE>
<PAGE>
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.
10.5 Mail-Well, Inc. 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 September 30, 1997.
10.6 Form of 1994 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 reference 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 Mail-Well, Inc. 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
10.13 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.
10.14 Mail-Well, Inc. 1998 Incentive Stock Option Plan--
incorporated by reference from Exhibit 10.58 to the
Company's Quarterly report on Form 10-Q for the quarter
ended March 31, 1998.
10.15 Form of 1998 Incentive Stock Option Agreement--incorporated
by reference from Exhibit 10.59 to the Company's Quarterly
report on Form 10-Q for the quarter ended March 31, 1998.
10.16 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 Agreement--
incorporated by reference from Exhibit 10.60 to
the Company's Quarterly report on Form 10-Q for the
quarter ended March 31, 1998.
10.17 Credit Agreement dated as of March 16, 1998 among Supremex
Inc., certain Guarantors, Bank of America National Trust
and Savings Association, as Agent and other financial
institutions party thereto--incorporated by reference from
Exhibit 10.61 to the Company's Quarterly report on Form
10-Q for the quarter ended March 31, 1998.
10.18 Participation Agreement dated as of December 15, 1997 among
Mail-Well I Corporation, Keybank National Association, as
Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.62 to the
Company's Quarterly report on Form 10-Q for the quarter
ended March 31, 1998.
61
<PAGE>
<PAGE>
10.19 Equipment Lease dated as of December 15, 1997 among
Mail-Well I Corporation, Keybank National Association, as
Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.63 to the
Company's Quarterly report on Form 10-Q for the quarter
ended March 31, 1998.
10.20 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--incorporated by
reference from Exhibit 10.64 to the Company's Quarterly
report on Form 10-Q for the quarter ended March 31, 1998.
10.21 Receivables Purchase Agreement dated as of July 1, 1999
among Mail-Well Trade Receivables Corporation, as Seller,
Quincy Capital Corporation, as Issuer, The Alternative
Purchasers from Time to Time Party thereto, Mail-Well I
Corporation, as Servicer and Bank of America National
Trust and Savings Association, as Administrator; and First
Amendment thereto.
10.22 Purchase and Sales Agreement between Mail-Well I Corporation
as initial Servicer and as Guarantor, The Originators from
Time to Time Party thereto and Mail-Well Trade Receivable
Corporation, as Purchaser dated as of July 1, 1999;
and First Amendment thereto.
10.23 Servicing Agreement dated as of July 1, 1999 by and among
Mail-Well I Corporation, as Servicer, Mail-Well Trade
Receivables Corporation, as Seller under the Receivables
Purchase Agreement and Bank of America National Trust and
Saving Association, as Administrator; and First Amendment
thereto.
10.24 Merger Agreement and Plan of Merger by and among American
Business Products, Inc., Mail-Well, Inc. and Sherman
Acquisition Corporation dated January 13, 2000--
incorporated by reference from Exhibit (c) (1) to the
Registrant's Tender Offer Statement on Schedule 14D-1
filed with the commission on January 21, 2000.
10.25<F*> Change of Control Agreement dated November 15, 1999, between
the Company and Gerald F. Mahoney.
10.26<F*> Change of Control Agreement dated November 15, 1999, between
the Company and Paul V. Reilly.
10.27<F*> Change of Control Agreement dated November 15, 1999, between
the Company and Gary Ritondaro.
10.28<F*> Change of Control Agreement dated November 15, 1999, between
the Company and Robert Meyer.
10.29<F*> Change of Control Agreement dated November 15, 1999, between
the Company and Michael A. Zawalski.
23.1<F*> Consent of Ernst & Young LLP.
23.2<F*> Consent of Deloitte & Touche LLP.
23.3<F*> Consent of Rubin, Brown, Gornstein & Co., LLP.
27.1<F*> Financial Data Schedule for year ended December 31, 1999.
27.2<F*> Financial Data Schedule for year ended December 31, 1998.
[FN]
- -------
<F*> Filed herewith.
(B) REPORTS ON FORM 8-K
A report on Form 8-K was filed on October 21, 1999, announcing the
financial results of the company for the quarter ending September 30, 1999.
62
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
MAIL-WELL, INC.
(PARENT-ONLY SUPPLEMENTAL FINANCIAL STATEMENTS)
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
DECEMBER 31
-----------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Other current assets.................................... $ 345 $ 116
Note receivable from Mail-Well I Corporation............ 147,436 147,436
-------- --------
Total current assets................................ 147,781 147,552
INVESTMENT IN SUBSIDIARY 377,318 301,447
INTANGIBLE ASSETS (net of accumulated amortization of
$2,069 and $1,109)........................................ 2,943 3,902
-------- --------
TOTAL....................................................... $528,042 $452,901
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued interest........................................ $ 682 $ 1,476
-------- --------
Total current liabilities........................... 682 1,476
CONVERTIBLE SUBORDINATED NOTES.............................. 152,050 152,050
-------- --------
Total liabilities................................... 152,732 153,526
SHAREHOLDERS' EQUITY........................................ 375,310 299,375
-------- --------
TOTAL....................................................... $528,042 $452,901
======== ========
See notes to condensed financial statements.
</TABLE>
63
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
MAIL-WELL, INC.
(PARENT-ONLY SUPPLEMENTAL FINANCIAL STATEMENTS)
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
OTHER OPERATING COSTS
Administrative.......................................... $ 24 $ 168 $ 172
Amortization............................................ 176 959 97
------- ------- -------
Total other operating costs......................... 200 1,127 269
------- ------- -------
OPERATING LOSS.............................................. (200) (1,127) (269)
OTHER (INCOME) EXPENSE
Interest expense-debt................................... 8,543 7,833 634
Interest income from subsidiary......................... (8,846) (8,846) --
Other income............................................ -- (7) (4)
------- ------- -------
LOSS BEFORE INCOME TAXES.................................... 103 (107) (899)
------- ------- -------
PROVISION FOR INCOME TAXES
Current..................................................... (39) -- --
Deferred.................................................... -- -- --
------- ------- -------
LOSS BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY.................................... 64 (107) (899)
EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARY................................................ 64,418 21,816 29,775
------- ------- -------
NET INCOME.................................................. $64,482 $21,709 $28,876
======= ======= =======
See notes to condensed financial statements.
</TABLE>
64
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
MAIL-WELL, INC.
(PARENT-ONLY SUPPLEMENTAL FINANCIAL STATEMENTS)
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
---------------------------------------
1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................... $ 64,482 $ 21,709 $ 28,876
Adjustments to reconcile net income to net cash
provided (used in) by operating activities:
Equity in undistributed earnings of
subsidiary.................................... (64,418) (21,816) (29,775)
Amortization.................................... 959 959 97
Changes in operating assets and liabilities, net
of effects of acquired businesses:
Other working capital....................... 3,572 624 586
Other assets................................ -- 155 (26)
-------- -------- ---------
Net cash provided by (used in) operating
activities............................ 4,595 1,631 (242)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary........................ (2,029) (92,336) --
Other activity with subsidiary, net............. (4,595) (1,887) 252
Issuance of note receivable from subsidiary..... -- -- (147,436)
-------- -------- ---------
Net cash used in investing activities... (6,624) (94,223) (147,184)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from common stock issuance............. 2,029 92,336 201
Proceeds from issuance of convertible subordinated
notes............................................. -- -- 147,436
-------- -------- ---------
Net cash provided by financing
activities............................ 2,029 92,336 147,637
-------- -------- ---------
NET CHANGE IN CASH...................................... -- (256) 211
BALANCE AT BEGINNING OF YEAR............................ -- 256 45
-------- -------- ---------
BALANCE AT END OF YEAR.................................. $ -- $ -- $ 256
======== ======== =========
Stock issued for acquisitions........................... $ -- $ 8,780 $ 1,000
See notes to condensed financial statements.
</TABLE>
65
<PAGE>
<PAGE>
SCHEDULE I
MAIL-WELL, INC.
(PARENT-ONLY SUPPLEMENTAL FINANCIAL STATEMENTS)
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 1997 and
1998 financial statements to conform to the 1999 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.
($514.9 million outstanding at December 31, 1999, 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
1999 are: 2000--$13,889,000; 2001--$8,685,000; 2002--$8,984,000;
2003--$177,350,000; 2004--$780,000; and $305,241,000 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.
* * * * *
66
<PAGE>
<PAGE>
SCHEDULE II
<TABLE>
MAIL-WELL, INC. AND SUBSIDIARIES
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
---------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year......................... $ 6,727 $ 3,795 $ 3,734
Charged to costs and expenses........................ 4,034 3,425 1,454
Charged to other accounts<F2>........................ (4,464)<F5> 3,065<F4> 909<F3>
Deductions<F6>....................................... (3,423) (3,558) (2,302)
------- ------- -------
Balance at end of year............................... $ 2,874 $ 6,727 $ 3,795
======= ======= =======
<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 ($643) of the allowance for doubtful
accounts for the companies acquired in 1997.
<F4> Includes the beginning balances ($2,910) of the allowance for doubtful
accounts for the companies acquired in 1998.
<F5> Includes the beginning balances ($910) of the allowance for doubtful
accounts for the companies acquired in 1999 and $5,049 of amounts
transferred to Mail-Well Trade Receivable Corporation.
<F6> Accounts written off.
</TABLE>
67
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have 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 March 24, 2000.
Mail-Well I Corporation
Mail-Well, Inc.
By: /s/ GERALD F. MAHONEY
------------------------------------------
Gerald F. Mahoney, Chief Executive Officer
Mail-Well Canada Holdings, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Label USA, Inc.
Mail-Well West, Inc.
Murray Envelope Holdings, Inc.
Murray Envelope Corporation
National Graphics Company
Poser Business Forms, Inc.
Wisco III, L.L.C.
By: /s/ PAUL V. REILLY
------------------------------------------
Paul V. Reilly, Chief Executive Officer
68
<PAGE>
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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, and each of them, as attorneys-in-fact, each with
the power of substitution, for him or her in any and all capacities, to sign
any amendments to this 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
--------- ----- ----
<C> <C> <C>
/s/ GERALD F. MAHONEY Chairman of the Board, March 24, 2000
------------------------------------------- Chief Executive Officer
Gerald F. Mahoney and Director of Mail-Well I
Corporation and Mail-Well,
Inc.
/s/ PAUL V. REILLY President, Chief Operating March 24, 2000
------------------------------------------- Officer and Director of
Paul V. Reilly Mail-Well I Corporation and
Mail-Well, Inc., and Chief
Executive Officer and Director
of all other Registrants
/s/ GARY RITONDARO Senior Vice President, Chief March 24, 2000
------------------------------------------- Financial Officer of all
Gary Ritondaro Registrants and Director
of all Registrants
except Mail-Well, Inc.
/s/ FRANK P. DIASSI Director of Mail-Well, Inc. March 24, 2000
-------------------------------------------
Frank P. Diassi
/s/ FRANK J. HEVRDEJS Director of Mail-Well, Inc. March 24, 2000
-------------------------------------------
Frank J. Hevrdejs
/s/ JANICE C. PETERS Director of Mail-Well, Inc. March 24, 2000
-------------------------------------------
Janice C. Peters
/s/ JEROME W. PICKHOLZ Director of Mail-Well, Inc. March 24, 2000
-------------------------------------------
Jerome W. Pickholz
/s/ WILLIAM R. THOMAS Director of Mail-Well, Inc. March 24, 2000
-------------------------------------------
William R. Thomas
/s/ ROGER WERTHEIMER Director of all Registrants March 24, 2000
------------------------------------------- except Mail-Well, Inc.
Roger Wertheimer
</TABLE>
69
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is effective
as of November 15, 1999 (the "Effective Date"), by and between
MAIL-WELL, INC., a Colorado corporation (the "Company"), and
Gerald F. Mahoney ("Executive").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein);
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of Executive and dilution of the
time of Executive, by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, (ii) to encourage
Executive's full attention and dedication to the Company currently and
in the event of any threatened or pending Change in Control, and (iii)
to provide Executive with compensation arrangements in the event of a
Change in Control which provide Executive with financial security, which
are competitive with those of other corporations; and
WHEREAS, in order to accomplish the objectives described in the
two immediately preceding recitals, the Board desires to cause the
Company to enter into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the following meanings:
(a) Accrued Obligations. The term "Accrued Obligations"
-------------------
shall have the meaning ascribed to such term in Section 2.3(a) of
this Agreement.
(b) Additional Compensation. The term "Additional
-----------------------
Compensation" shall mean, in addition to the Base Salary, the
following:
(i) all benefits under:
(A) any and all welfare benefit and similar
employee benefit plans, programs, arrangements, or
policies that are made available by the Company or any
of its affiliates to Executive immediately prior to
the first to occur of (1) a termination by the Company
of Executive's employment with the
-1-
<PAGE>
<PAGE>
Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control, including,
but not limited to, any hospitalization, medical,
prescription, dental, disability, salary continuance,
individual life insurance, executive life insurance,
group life insurance, accidental death insurance, and
travel accident insurance plans, programs,
arrangements, and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, stock option,
restricted stock, employee stock ownership,
supplemental executive retirement and other employee
benefit plans, programs, arrangements, and policies
that are made available by the Company or any of its
affiliates to Executive immediately prior to the first
to occur of (1) a termination by the Company of
Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control; and
(ii) annual vacations and sick leave made available
by the Company or any of its affiliates to Executive
immediately prior to the first to occur of (1) a termination
by the Company of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the occurrence
of a Change in Control; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company or any of its affiliates
made available by the Company or any of its affiliates to
Executive immediately prior to the first to occur of (1) a
termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control.
(c) Affiliate. The term "affiliate" or "affiliates"
---------
shall mean, when used with respect to any specified entity,
individual, or other person, any other entity, individual, or
other person which, directly or indirectly, through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with such specified entity, individual or person.
(d) Agreement. The term "Agreement" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(e) Base Salary. The term "Base Salary" shall mean
-----------
Executive's per annum base salary payable by the Company to
Executive as in effect immediately prior to the first to occur of
(1) a termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or (2) the
occurrence of a Change in Control as the same may be increased
from time to time after the occurrence of a Change in Control.
(f) Board. The term "Board" shall have the meaning
-----
ascribed to such term in the first Whereas clause of this
Agreement.
-2-
<PAGE>
<PAGE>
(g) Cause. The term "Cause" shall mean (i) willful
-----
misconduct by Executive or gross neglect by Executive of
Executive's duties as an employee, officer or director of the
Company which continues for more than thirty (30) days after
Executive's receipt of written notice from the Board to Executive
specifically identifying the willful misconduct or gross neglect
of Executive and directing Executive to discontinue the same,
(ii) the commission by Executive of a crime constituting a felony,
or (iii) the commission by Executive of an act, other than an act
taken in good faith within the course and scope of Executive's
employment, which is directly detrimental to the Company and
exposes the Company to material liability.
(h) Change in Control. The term "Change in Control"
-----------------
shall have the meaning ascribed to such term in Section 2.5 of
this Agreement.
(i) COBRA Coverage. The term "COBRA Coverage" shall
--------------
have the meaning ascribed to such term in Section 2.3(b)(iii)(A)
of this Agreement.
(j) Code. The term "Code" shall mean the Internal
----
Revenue Code of 1986, as amended.
(k) Company. The term "Company" shall have the meaning
-------
ascribed to such term in the introductory paragraph and Section
3.2 of this Agreement.
(l) Control. The term "Control" and derivations thereof
-------
shall mean the ownership, directly or indirectly, of 50% or more
of the voting securities of an entity or other person or
possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether
through the ownership of voting securities, by contract or
otherwise.
(m) Controlling Entity. The term "Controlling Entity"
------------------
shall have the meaning ascribed to such term in Section
2.4(a)(viii)(E) of this Agreement.
(n) Disabled. The term "Disabled" shall mean a mental
--------
or physical impairment which, in the reasonable opinion of a
qualified doctor selected by the Company, renders Executive unable
to perform with reasonable diligence the ordinary functions and
duties of the Office on a full-time basis, which inability
continues for a period of not less than 180 consecutive days.
(o) Effective Date. The term "Effective Date" shall
--------------
have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
(p) Eliminated Duties and Responsibilities. The term
--------------------------------------
"Eliminated Duties and Responsibilities" shall have the meaning
ascribed to such term in Section 2.4(a)(i) of this Agreement.
(q) Executive. The term "Executive" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
-3-
<PAGE>
<PAGE>
(r) Good Reason. The term "Good Reason" shall have the
-----------
meaning ascribed to such term in Section 2.4(a) of this Agreement.
(s) Incumbent Board. The term "Incumbent Board" shall
---------------
have the meaning ascribed to such term in Section 2.5(f) of this
Agreement.
(t) New Office. The term "New Office" shall have the
----------
meaning ascribed to such term in Section 2.4(b) of this Agreement.
(u) Office. The term "Office" shall mean Chairman and CEO.
------
(v) Successor Entity. The term "Successor Entity" shall
----------------
have the meaning ascribed to such term in Section 2.4(a)(viii)(B)
of this Agreement.
(w) Term. The term "Term" shall have the meaning
----
ascribed to such term in Section 2.1 of this Agreement.
1.2 Other Terms. Other capitalized terms defined elsewhere
-----------
herein shall have the meanings ascribed to them in the definitions
therefor appearing elsewhere herein.
ARTICLE II
TERM AND TERMINATION
2.1 Term. The term of this Agreement ("Term") shall be for
----
three years commencing on the Effective Date; provided however, that if
a Change in Control occurs during such three year period, the Term shall
be for the period commencing on the Effective Date and ending on the
second anniversary of such Change in Control, notwithstanding such
three-year period.
2.2 Termination of Employment. Executive's employment with
-------------------------
the Company may be terminated by the Company prior to the end of the
Term, or may be terminated by Executive prior to the end of the Term, as
of the date which is thirty (30) days after written notice of
termination is given by either party to the other.
Any notice of termination given by the Company to Executive under
Section 2.2 above shall specify whether such termination is with or
without Cause. Any notice of termination given by Executive to the
Company under Section 2.2 above shall specify whether such termination
is made with or without Good Reason. A termination of Executive's
employment by the Company (other than due to Disability as provided in
Section 2.3(d)) shall be deemed to be in anticipation of a Change in
Control if a possible or potential Change in Control is a factor in the
decision of the Company to terminate the employment of Executive.
2.3 Obligations of the Company Upon Termination in Anticipation
-----------------------------------------------------------
of, on or after a Change In Control
- -----------------------------------
(a) Cause; Without Good Reason. If the Company terminates
--------------------------
Executive's employment with the Company in anticipation of, on or after
the occurrence of a Change in
-4-
<PAGE>
<PAGE>
Control with Cause pursuant to Section 2.2 hereof, or if Executive
terminates Executive's employment with the Company on or after the
occurrence of a Change in Control without Good Reason pursuant to
Section 2.2 hereof, Executive's employment with the Company shall
terminate without further obligations to Executive, other than
those obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to:
(i) to the extent not theretofore paid, the Base
Salary in effect at the time of such termination through the
date of termination; and
(ii) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not yet
paid by the Company;
(iii) all other amounts or benefits owing or accrued
to, vested in or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, the Additional
Compensation;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, such amounts and benefits specified in clauses (i),
(ii), and (iii) of this sentence, being hereinafter collectively
referred to as the "Accrued Obligations." The aggregate amount of
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, the Accrued Obligations, shall be paid or caused to be
paid by the Company to Executive in accordance with the plans,
programs or agreements under which the Accrued Obligations were
earned.
(b) Good Reason; Without Cause. If Executive terminates
--------------------------
Executive's employment with the Company on or after the occurrence
of a Change in Control with Good Reason pursuant to Section 2.2
hereof, or if the Company terminates Executive's employment with
the Company without Cause in anticipation of, on or after the
occurrence of a Change in Control pursuant to Section 2.2 hereof:
(i) the Company shall pay the aggregate of the
following amounts to Executive in one lump sum within thirty
(30) days after the date of such termination or in a manner
and at such later time as specified by Executive, provided
that all such payments must be made no later than the last
day of the twenty-four (24) month period commencing on the
date of such termination:
(A) to the extent not theretofore paid,
Executive's Base Salary in effect at the time of such
termination (but prior to giving effect to any
reduction therein which precipitated such termination)
through the date of termination; and
-5-
<PAGE>
<PAGE>
(B) an amount equal to the sum of: (x) three
(3) times Executive's Base Salary in effect at the
time of such termination (but prior to giving effect
to any reduction therein which precipitated such
termination), (y) one and one-half (1 1/2) times the
highest annual bonus paid by the Company to Executive
in respect of the two (2) calendar years of the
Company immediately preceding such termination, and
(z) the pro-rata share of Executive's target bonus for
the calendar year in which such termination occurred
based upon the proportion that the number of complete
months in such calendar year up to the date of
termination bears to the complete calendar year.
(ii) In addition, the Company shall pay or cause to
be paid the aggregate of the following amounts to Executive
at the following times:
(A) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, within thirty (30) days after
the date of such termination of employment or such
other period as may be required in accordance with any
such deferral arrangement; and
(B) in accordance with the terms of each such
plan, program, arrangement or policy, all other
amounts or benefits owing or accrued to, vested in, or
earned by Executive through the date of termination
under the then existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, all
Additional Compensation; and
(C) any and all other Accrued Obligations not
otherwise described in subsection (b)(i) above or
clauses (A) and (B) of this subsection (b)(ii); and
(iii) Executive shall receive the following additional
benefits:
(A) if Executive elects medical or dental
coverage under the Company's group medical or dental
plans pursuant to Section 4980B of the Code ("COBRA
Coverage"), the Company shall reimburse Executive,
promptly upon request by Executive, an amount equal to
the remainder, if any, resulting from the subtraction
of (1) the monthly medical and/or dental premium paid
each month by Executive for COBRA Coverage during the
first twelve (12) months of such COBRA Coverage (or
during such shorter period that COBRA Coverage for
Executive is in effect), from (2) the medical and/or
dental premium paid by Executive for the last month of
coverage under the Company's group medical or dental
plans immediately before Executive's employment with
the Company was terminated; and
-6-
<PAGE>
<PAGE>
(B) such individual outplacement service as is
appropriate for Executive's position for up to 24
months after termination of employment for a cost not
to exceed $20,000; and
(C) assistance to Executive to be provided by
a "Big Five" accounting firm selected by the Company
or other mutually agreeable accounting firm for
federal and state income tax planning and federal and
state income tax return preparation for Executive for
the calendar year in which such termination of
employment occurred.
(c) Death. If Executive's employment is terminated on
-----
or after the occurrence of a Change in Control by reason of
Executive's death, the Company shall pay to Executive's legal
representatives the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the date of
Executive's death, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned. Anything in this
Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits provided by the Company and
any of its affiliates to surviving families under the then
existing or applicable plans, programs, or arrangements and
policies of the Company and its affiliates.
(d) Disability. The Company may, at its option, terminate
----------
Executive's employment by written notice to Executive upon
Executive's becoming Disabled. Such termination shall not be deemed
to be a termination of Executive's employment in anticipation of, on
or after a Change in Control. If Executive's employment is terminated
on or after the occurrence of a Change in Control by reason of
Executive becoming Disabled, the Company shall pay to Executive or
Executive's legal representative the full amount of the obligations
owing or accrued to, vested in, or earned by Executive through the
date of termination, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned.
2.4 Good Reason.
-----------
(a) Except as provided in Section 2.4(b) below, as used in
this Agreement, the term "Good Reason" means a good faith
determination by Executive that any one or more of the following
events has occurred on or after the occurrence of a Change in
Control:
(i) a material change in the nature of Executive's
Office, including, but not limited to, Executive's
authorities, duties, responsibilities or status (including
offices, titles, reporting requirements and supervisory
functions), from those in effect immediately prior to the
Change in Control. Notwithstanding the foregoing, Executive
shall not assert as "Good Reason" the sole fact that the
portion of Executive's duties and responsibilities directly
attributable to a change in the ownership of the outstanding
capital stock or outstanding indebtedness of the Company,
the presence or absence of a trading market for any of the
securities of the Company, any refinancing of indebtedness
of the Company or the incurrence of any additional
indebtedness by the Company has been eliminated (the
"Eliminated Duties
-7-
<PAGE>
<PAGE>
and Responsibilities"), unless the performance of all or any
portion of the Eliminated Duties and Responsibilities
continue to be required; or
(ii) the relocation of Executive's place of
employment to a location in excess of thirty-five (35) miles
from the Company's current offices in Englewood, Colorado,
except for required travel on Company business to an extent
substantially equivalent to Executive's business travel
obligations immediately prior to the Change in Control; or
(iii) any reduction by the Company of Executive's
Base Salary, or a material reduction in Executive's bonus,
profit sharing, other incentive benefits or Additional
Compensation from those in effect immediately prior to the
Change in Control; or
(iv) the failure by the Company to increase
Executive's Base Salary in a manner consistent (both as to
frequency and percentage increase) with (A) the Company's
practices in effect immediately prior to the Change in
Control with respect to similarly positioned employees or
(B) the Company's practices implemented subsequent to the
Change in Control with respect to similarly positioned
employees, unless, in either case, such failure is due to
the failure by Executive to meet performance standards
applicable to similarly positioned employees; or
(v) the failure of the Company to continue in
effect Executive's participation in the Company's employee
benefit plans, programs, arrangements and policies, at a
level substantially equivalent in value to and on a basis
consistent with the relative levels of participation of
other similarly positioned employees; or
(vi) the failure of the Company to obtain from a
successor (including a successor to a material portion of
the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under
this Agreement; or
(vii) the failure of the Company to continue to
provide Executive with office space, related facilities and
support personnel (including, but not limited to,
administrative and secretarial assistance) that are both
commensurate in all material respects with the Office and
Executive's responsibilities to and position with the
Company immediately prior to the Change in Control and not
materially dissimilar to the office space, related
facilities and support personnel provided to other key
executive officers of the Company; or
(viii) if Executive served on the Board of Directors
of the Company prior to a Change in Control, (A) the removal
of Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of the Company, if
it is a surviving entity in the Change in Control
transaction, or (B) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be named
-8-
<PAGE>
<PAGE>
as a director of any successor to the Company, including any
successor to a material portion of the business or assets of
the Company (each, a "Successor Entity"), or (C) the failure
of Executive or the current Chairman of the Board of the
Company, if not Executive, to be nominated for election to
the Board of Directors of the Company or any Successor
Entity or (D) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be elected or reelected to the Board of Directors of the
Company or any such Successor Entity, or (E) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be appointed to the Board of
Directors of any entity or entities that Control the Company
or any Successor Entity (each, a "Controlling Entity") or
(F) the removal of Executive or the current Chairman of the
Board of the Company, if not Executive, as a director of any
Controlling Entity, or (G) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive to be nominated for election to the Board of
Directors of any Controlling Entity, or (H) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be elected or reelected to the
Board of Directors of any Controlling Entity, or (I) the
removal of the current Chairman of the Board of the Company
from such position with the Company, or the failure of the
current Chairman of the Board of the Company to be appointed
to such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) or the
removal of the current Chairman of the Board of the Company
from such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) without,
in each case, Executive's prior written consent; or
(ix) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the
obligations of the Company under this Agreement; or
(x) the Company breaches any provision of this
Agreement and such breach is not cured within thirty (30)
days after the Company's receipt of notice thereof from
Executive.
(b) If, after the occurrence of a Change in Control,
Executive receives a written description from the Company of the
nature of Executive's Office thereafter, stating Executive's
authorities, duties, responsibilities, status, salary, bonus and
other employee benefits, or job location, and Executive accepts in
writing such new authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location ("New
Office") with the Company without determining that the New Office
causes a Good Reason as set forth in Section 2.4(a), then for the
remaining Term the New Office shall be the authorities, duties,
responsibilities, status, salary, bonus and other employee
benefits, or job location to be used by Executive in determining
whether Good Reason occurs thereafter pursuant to Section 2.4(a).
-9-
<PAGE>
<PAGE>
2.5 Change in Control. As used herein, the term "Change in
-----------------
Control" shall mean the occurrence with respect to the Company of any of
the following events:
(a) a report on Schedule 13D is filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), is the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(b) an event of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Exchange Act or would have been required to be so
reported but for the fact that such event had been "previously
reported" as that term is defined in Rule 12b-2 promulgated under
the Exchange Act;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), shall
become the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(d) the stockholders of the Company shall approve any
liquidation or dissolution of the Company;
(e) the stockholders of the Company shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, acquisition or disposition of assets or other transaction
after the consummation of which any person, entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act)
would become the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly,
of 50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(f) individuals who constitute the Board on the date
hereof ("Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election
-10-
<PAGE>
<PAGE>
by the Company's stockholders, was approved by a vote of at least
two-thirds of the directors comprising the remaining members of
the Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named
as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (f), considered as though
such person were a member of the Incumbent Board; or
(g) a recapitalization or other transaction or series of
related transactions occurs which results in a decrease by 50% or
more in the aggregate percentage ownership of the then outstanding
common stock of the Company or 50% or more in the combined voting
power of the outstanding securities of the Company held by the
stockholders of the Company immediately prior to giving effect
thereto (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants).
2.6 Legal Fees and Expenses. If Executive shall prevail in
-----------------------
any contest by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this
Agreement, the Company shall pay any and all reasonable attorneys',
accountants' and experts' fees and expenses and court costs incurred by
Executive as a result of any such contest. Otherwise, each party shall
bear his, her or its own expenses in connection with any such contest.
2.7 Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, arrangement or
policy provided by the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy constituting
Additional Compensation) and for which Executive and/or Executive's
family may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive and/or Executive's family may have under any
other agreements with the Company or any of its affiliates. Amounts
which are vested benefits or which Executive and/or Executive's family
is otherwise entitled to receive under any plan, program, arrangement,
or policy of the Company or any of its affiliates (including, but not
limited to, any plan, program, arrangement or policy constituting
Additional Compensation) at or subsequent to the date of termination of
Executive's employment under this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
2.8 Full Payment; No Mitigation Obligation. The Company's
--------------------------------------
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against Executive or others. In no
event shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.
2.9 Delivery of Release. Within thirty (30) days after
-------------------
termination of Executive's employment (other than due to death of
Executive) in anticipation of, on or after the occurrence of a Change in
Control, the Company shall provide to Executive, or Executive's legal
representative, a form of written release, which form shall be
reasonably satisfactory to the Company and generally consistent with the
form of release used by the Company prior to the earlier of (a) such
termination of employment, if the Company has terminated Executive's
employment in anticipation of a Change of Control, or (b) the occurrence
of the Change in Control. As a condition to the obligation of the
-11-
<PAGE>
<PAGE>
Company to make the payments provided for in this Agreement and
otherwise perform its obligations hereunder to Executive upon
termination of Executive's employment (other than due to death of
Executive) Executive, or Executive's legal representative, shall deliver
to the Company a written release, substantially in the form described
above and provided to Executive by the Company within such thirty (30)
day period, releasing the Company and its affiliates from any and all
liability related to Executive's employment or the termination thereof,
other than liabilities arising under this Agreement.
ARTICLE III
GENERAL PROVISIONS
3.1 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Colorado.
3.2 Assignability. This Agreement is personal to Executive
-------------
and without the prior written consent of the Company shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any
corporation, entity, individual or other person who is the successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to
perform, by a written agreement in form and substance satisfactory to
Executive, all of the obligations of the Company under this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
3.3 Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
3.4 Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement and understanding between Executive and the Company
and, except as otherwise expressly provided herein, supersedes any prior
agreements or understandings, whether written or oral, with respect to
the subject matter hereof. Except as may be otherwise provided herein,
this Agreement may not be amended or modified except by subsequent
written agreement executed by both parties hereto.
3.5 Multiple Counterparts. This Agreement may be executed in
---------------------
multiple counterparts, each of which shall constitute an original, but
all of which together shall constitute one Agreement.
3.6 Notices. Any notice provided for in this Agreement shall
-------
be deemed delivered upon deposit in the United States mails, registered
or certified mail, addressed to the party to whom directed at the
addresses set forth below or at such other addresses as may be
substituted therefor by notice given hereunder. Notice given by any
other means must be in writing and shall be deemed delivered only upon
actual receipt.
-12-
<PAGE>
<PAGE>
If to the Company:
Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Attention: President
If to Executive:
Gerald F. Mahoney
21 Cherry Hills Farm Drive
Englewood, CO 80110
3.7 Waiver. The waiver of any breach of any term or condition
------
of this Agreement shall not be deemed to constitute the waiver of any
breach of the same or any other term or condition of this Agreement.
3.8 Severability. In the event any provision of this Agreement
------------
is found to be unenforceable or invalid, such provision shall be severable
from this Agreement and shall not effect the enforceability or validity
of any other provision of this Agreement. If any provision of this
Agreement is capable to two constructions, one of which would render the
provision void and the other which would render the provision valid, then
the provision shall have the construction which renders it valid.
3.9 Other Severance Benefits. This Agreement replaces and
------------------------
supercedes any and all provisions of and benefits under any other
severance agreement or program under which Executive would otherwise be
entitled to severance benefits on or after the occurrence of a Change in
Control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
MAIL-WELL, INC.
By: /s/ Roger Wertheimer
-------------------------------
Roger Wertheimer
Vice President-General Counsel
EXECUTIVE
/s/ Gerald F. Mahoney
-----------------------------------
Gerald F. Mahoney
-13-
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is effective
as of November 15, 1999 (the "Effective Date"), by and between
MAIL-WELL, INC., a Colorado corporation (the "Company"), and
Paul V. Reilly ("Executive").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein);
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of Executive and dilution of the
time of Executive, by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, (ii) to encourage
Executive's full attention and dedication to the Company currently and
in the event of any threatened or pending Change in Control, and (iii)
to provide Executive with compensation arrangements in the event of a
Change in Control which provide Executive with financial security, which
are competitive with those of other corporations; and
WHEREAS, in order to accomplish the objectives described in the
two immediately preceding recitals, the Board desires to cause the
Company to enter into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the following meanings:
(a) Accrued Obligations. The term "Accrued Obligations"
-------------------
shall have the meaning ascribed to such term in Section 2.3(a) of
this Agreement.
(b) Additional Compensation. The term "Additional
-----------------------
Compensation" shall mean, in addition to the Base Salary, the
following:
(i) all benefits under:
-1-
<PAGE>
<PAGE>
(A) any and all welfare benefit and similar
employee benefit plans, programs, arrangements, or
policies that are made available by the Company or any
of its affiliates to Executive immediately prior to
the first to occur of (1) a termination by the Company
of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control, including, but not
limited to, any hospitalization, medical,
prescription, dental, disability, salary continuance,
individual life insurance, executive life insurance,
group life insurance, accidental death insurance, and
travel accident insurance plans, programs,
arrangements, and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, stock option,
restricted stock, employee stock ownership,
supplemental executive retirement and other employee
benefit plans, programs, arrangements, and policies
that are made available by the Company or any of its
affiliates to Executive immediately prior to the first
to occur of (1) a termination by the Company of
Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control; and
(ii) annual vacations and sick leave made available
by the Company or any of its affiliates to Executive
immediately prior to the first to occur of (1) a termination
by the Company of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the occurrence
of a Change in Control; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company or any of its affiliates
made available by the Company or any of its affiliates to
Executive immediately prior to the first to occur of (1) a
termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control.
(c) Affiliate. The term "affiliate" or "affiliates"
---------
shall mean, when used with respect to any specified entity,
individual, or other person, any other entity, individual, or
other person which, directly or indirectly, through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with such specified entity, individual or person.
(d) Agreement. The term "Agreement" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(e) Base Salary. The term "Base Salary" shall mean
-----------
Executive's per annum base salary payable by the Company to
Executive as in effect immediately prior to the first to occur of
(1) a termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or (2) the
occurrence of a Change in Control as the same may be increased
from time to time after the occurrence of a Change in Control.
-2-
<PAGE>
<PAGE>
(f) Board. The term "Board" shall have the meaning
-----
ascribed to such term in the first Whereas clause of this
Agreement.
(g) Cause. The term "Cause" shall mean (i) willful
-----
misconduct by Executive or gross neglect by Executive of
Executive's duties as an employee, officer or director of the
Company which continues for more than thirty (30) days after
Executive's receipt of written notice from the Board to Executive
specifically identifying the willful misconduct or gross neglect
of Executive and directing Executive to discontinue the same,
(ii) the commission by Executive of a crime constituting a felony,
or (iii) the commission by Executive of an act, other than an act
taken in good faith within the course and scope of Executive's
employment, which is directly detrimental to the Company and
exposes the Company to material liability.
(h) Change in Control. The term "Change in Control"
-----------------
shall have the meaning ascribed to such term in Section 2.5 of
this Agreement.
(i) COBRA Coverage. The term "COBRA Coverage" shall
--------------
have the meaning ascribed to such term in Section 2.3(b)(iii)(A)
of this Agreement.
(j) Code. The term "Code" shall mean the Internal
----
Revenue Code of 1986, as amended.
(k) Company. The term "Company" shall have the meaning
-------
ascribed to such term in the introductory paragraph and Section
3.2 of this Agreement.
(l) Control. The term "Control" and derivations thereof
-------
shall mean the ownership, directly or indirectly, of 50% or more
of the voting securities of an entity or other person or
possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether
through the ownership of voting securities, by contract or
otherwise.
(m) Controlling Entity. The term "Controlling Entity"
------------------
shall have the meaning ascribed to such term in Section
2.4(a)(viii)(E) of this Agreement.
(n) Disabled. The term "Disabled" shall mean a mental
--------
or physical impairment which, in the reasonable opinion of a
qualified doctor selected by the Company, renders Executive unable
to perform with reasonable diligence the ordinary functions and
duties of the Office on a full-time basis, which inability
continues for a period of not less than 180 consecutive days.
(o) Effective Date. The term "Effective Date" shall
--------------
have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
(p) Eliminated Duties and Responsibilities. The term
--------------------------------------
"Eliminated Duties and Responsibilities" shall have the meaning
ascribed to such term in Section 2.4(a)(i) of this Agreement.
-3-
<PAGE>
<PAGE>
(q) Executive. The term "Executive" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(r) Good Reason. The term "Good Reason" shall have the
-----------
meaning ascribed to such term in Section 2.4(a) of this Agreement.
(s) Incumbent Board. The term "Incumbent Board" shall
---------------
have the meaning ascribed to such term in Section 2.5(f) of this
Agreement.
(t) New Office. The term "New Office" shall have the
----------
meaning ascribed to such term in Section 2.4(b) of this Agreement.
(u) Office. The term "Office" shall mean President and COO.
------
(v) Successor Entity. The term "Successor Entity" shall
----------------
have the meaning ascribed to such term in Section 2.4(a)(viii)(B)
of this Agreement.
(w) Term. The term "Term" shall have the meaning
----
ascribed to such term in Section 2.1 of this Agreement.
1.2 Other Terms. Other capitalized terms defined elsewhere
-----------
herein shall have the meanings ascribed to them in the definitions
therefor appearing elsewhere herein.
ARTICLE II
TERM AND TERMINATION
2.1 Term. The term of this Agreement ("Term") shall be for
----
three years commencing on the Effective Date; provided however, that if
a Change in Control occurs during such three year period, the Term shall
be for the period commencing on the Effective Date and ending on the
second anniversary of such Change in Control, notwithstanding such
three-year period.
2.2 Termination of Employment. Executive's employment with
-------------------------
the Company may be terminated by the Company prior to the end of the
Term, or may be terminated by Executive prior to the end of the Term, as
of the date which is thirty (30) days after written notice of
termination is given by either party to the other.
Any notice of termination given by the Company to Executive under
Section 2.2 above shall specify whether such termination is with or
without Cause. Any notice of termination given by Executive to the
Company under Section 2.2 above shall specify whether such termination
is made with or without Good Reason. A termination of Executive's
employment by the Company (other than due to Disability as provided in
Section 2.3(d)) shall be deemed to be in anticipation of a Change in
Control if a possible or potential Change in Control is a factor in the
decision of the Company to terminate the employment of Executive.
-4-
<PAGE>
<PAGE>
2.3 Obligations of the Company Upon Termination in Anticipation
-----------------------------------------------------------
of, on or after a Change In Control
- -----------------------------------
(a) Cause; Without Good Reason. If the Company terminates
--------------------------
Executive's employment with the Company in anticipation of, on or
after the occurrence of a Change in Control with Cause pursuant to
Section 2.2 hereof, or if Executive terminates Executive's
employment with the Company on or after the occurrence of a Change
in Control without Good Reason pursuant to Section 2.2 hereof,
Executive's employment with the Company shall terminate without
further obligations to Executive, other than those obligations
owing or accrued to, vested in, or earned by Executive through
the date of termination, including, but not limited to:
(i) to the extent not theretofore paid, the Base
Salary in effect at the time of such termination through the
date of termination; and
(ii) in the case of compensation previously deferred
by Executive, all amounts previously deferred (together with
any accrued interest thereon) and not yet paid by the
Company;
(iii) all other amounts or benefits owing or accrued
to, vested in or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, the Additional
Compensation;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, such amounts and benefits specified in clauses (i),
(ii), and (iii) of this sentence, being hereinafter collectively
referred to as the "Accrued Obligations." The aggregate amount of
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, the Accrued Obligations, shall be paid or caused to be
paid by the Company to Executive in accordance with the plans,
programs or agreements under which the Accrued Obligations were
earned.
(b) Good Reason; Without Cause. If Executive terminates
--------------------------
Executive's employment with the Company on or after the occurrence
of a Change in Control with Good Reason pursuant to Section 2.2
hereof, or if the Company terminates Executive's employment with
the Company without Cause in anticipation of, on or after the
occurrence of a Change in Control pursuant to Section 2.2 hereof:
(i) the Company shall pay the aggregate of the
following amounts to Executive in one lump sum within thirty
(30) days after the date of such termination or in a manner
and at such later time as specified by Executive, provided
that all such payments must be made no later than the last
day of the twenty-four (24) month period commencing on the
date of such termination:
(A) to the extent not theretofore paid,
Executive's Base Salary in effect at the time of such
termination (but prior to giving effect to any
reduction therein which precipitated such termination)
through the date of termination; and
-5-
<PAGE>
<PAGE>
(B) an amount equal to the sum of: (x) three
(3) times Executive's Base Salary in effect at the
time of such termination (but prior to giving effect
to any reduction therein which precipitated such
termination), (y) one and one-half (1 1/2) times the
highest annual bonus paid by the Company to Executive
in respect of the two (2) calendar years of the
Company immediately preceding such termination, and
(z) the pro-rata share of Executive's target bonus for
the calendar year in which such termination occurred
based upon the proportion that the number of complete
months in such calendar year up to the date of
termination bears to the complete calendar year.
(ii) In addition, the Company shall pay or cause to
be paid the aggregate of the following amounts to Executive
at the following times:
(A) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, within thirty (30) days after
the date of such termination of employment or such
other period as may be required in accordance with any
such deferral arrangement; and
(B) in accordance with the terms of each such
plan, program, arrangement or policy, all other
amounts or benefits owing or accrued to, vested in, or
earned by Executive through the date of termination
under the then existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, all
Additional Compensation; and
(C) any and all other Accrued Obligations not
otherwise described in subsection (b)(i) above or
clauses (A) and (B) of this subsection (b)(ii); and
(iii) Executive shall receive the following additional
benefits:
(A) if Executive elects medical or dental
coverage under the Company's group medical or dental
plans pursuant to Section 4980B of the Code ("COBRA
Coverage"), the Company shall reimburse Executive,
promptly upon request by Executive, an amount equal to
the remainder, if any, resulting from the subtraction
of (1) the monthly medical and/or dental premium paid
each month by Executive for COBRA Coverage during the
first twelve (12) months of such COBRA Coverage (or
during such shorter period that COBRA Coverage for
Executive is in effect), from (2) the medical and/or
dental premium paid by Executive for the last month of
coverage under the Company's group medical or dental
plans immediately before Executive's employment with
the Company was terminated; and
-6-
<PAGE>
<PAGE>
(B) such individual outplacement service as is
appropriate for Executive's position for up to 24
months after termination of employment for a cost not
to exceed $20,000; and
(C) assistance to Executive to be provided by
a "Big Five" accounting firm selected by the Company
or other mutually agreeable accounting firm for
federal and state income tax planning and federal and
state income tax return preparation for Executive for
the calendar year in which such termination of
employment occurred.
(c) Death. If Executive's employment is terminated on
-----
or after the occurrence of a Change in Control by reason of
Executive's death, the Company shall pay to Executive's legal
representatives the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the date of
Executive's death, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned. Anything in this
Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits provided by the Company and
any of its affiliates to surviving families under the then
existing or applicable plans, programs, or arrangements and
policies of the Company and its affiliates.
(d) Disability. The Company may, at its option, terminate
----------
Executive's employment by written notice to Executive upon
Executive's becoming Disabled. Such termination shall not be
deemed to be a termination of Executive's employment in
anticipation of, on or after a Change in Control. If Executive's
employment is terminated on or after the occurrence of a Change in
Control by reason of Executive becoming Disabled, the Company
shall pay to Executive or Executive's legal representative the
full amount of the obligations owing or accrued to, vested in, or
earned by Executive through the date of termination, including,
but not limited to, the Accrued Obligations in accordance with the
plans, programs, or agreements under which the Accrued Obligations
were earned.
2.4 Good Reason.
-----------
(a) Except as provided in Section 2.4(b) below, as used in
this Agreement, the term "Good Reason" means a good faith
determination by Executive that any one or more of the following
events has occurred on or after the occurrence of a Change in
Control:
(i) a material change in the nature of Executive's
Office, including, but not limited to, Executive's
authorities, duties, responsibilities or status (including
offices, titles, reporting requirements and supervisory
functions), from those in effect immediately prior to the
Change in Control. Notwithstanding the foregoing, Executive
shall not assert as "Good Reason" the sole fact that the
portion of Executive's duties and responsibilities directly
attributable to a change in the ownership of the outstanding
capital stock or outstanding indebtedness of the Company,
the presence or absence of a trading market for any of the
securities
-7-
<PAGE>
<PAGE>
of the Company, any refinancing of indebtedness of the
Company or the incurrence of any additional indebtedness by
the Company has been eliminated (the "Eliminated Duties and
Responsibilities"), unless the performance of all or any
portion of the Eliminated Duties and Responsibilities
continue to be required; or
(ii) the relocation of Executive's place of
employment to a location in excess of thirty-five (35) miles
from the Company's current offices in Englewood, Colorado,
except for required travel on Company business to an extent
substantially equivalent to Executive's business travel
obligations immediately prior to the Change in Control; or
(iii) any reduction by the Company of Executive's Base
Salary, or a material reduction in Executive's bonus, profit
sharing, other incentive benefits or Additional Compensation
from those in effect immediately prior to the Change in
Control; or
(iv) the failure by the Company to increase
Executive's Base Salary in a manner consistent (both as to
frequency and percentage increase) with (A) the Company's
practices in effect immediately prior to the Change in
Control with respect to similarly positioned employees or
(B) the Company's practices implemented subsequent to the
Change in Control with respect to similarly positioned
employees, unless, in either case, such failure is due to
the failure by Executive to meet performance standards
applicable to similarly positioned employees; or
(v) the failure of the Company to continue in effect
Executive's participation in the Company's employee benefit
plans, programs, arrangements and policies, at a level
substantially equivalent in value to and on a basis
consistent with the relative levels of participation of
other similarly positioned employees; or
(vi) the failure of the Company to obtain from a
successor (including a successor to a material portion of
the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under
this Agreement; or
(vii) the failure of the Company to continue to
provide Executive with office space, related facilities and
support personnel (including, but not limited to,
administrative and secretarial assistance) that are both
commensurate in all material respects with the Office and
Executive's responsibilities to and position with the
Company immediately prior to the Change in Control and not
materially dissimilar to the office space, related
facilities and support personnel provided to other key
executive officers of the Company; or
-8-
<PAGE>
<PAGE>
(viii) if Executive served on the Board of
Directors of the Company prior to a Change in Control, (A)
the removal of Executive or the current Chairman of the
Board of the Company, if not Executive, as a director of the
Company, if it is a surviving entity in the Change in
Control transaction, or (B) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive, to be named as a director of any successor to the
Company, including any successor to a material portion of
the business or assets of the Company (each, a "Successor
Entity"), or (C) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be nominated for election to the Board of Directors of the
Company or any Successor Entity or (D) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be elected or reelected to the
Board of Directors of the Company or any such Successor
Entity, or (E) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be appointed to the Board of Directors of any entity or
entities that Control the Company or any Successor Entity
(each, a "Controlling Entity") or (F) the removal of
Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of any Controlling
Entity, or (G) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive to be
nominated for election to the Board of Directors of any
Controlling Entity, or (H) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive, to be elected or reelected to the Board of
Directors of any Controlling Entity, or (I) the removal of
the current Chairman of the Board of the Company from such
position with the Company, or the failure of the current
Chairman of the Board of the Company to be appointed to such
position with any Successor Entity or Controlling Entity
(other than a Successor Entity or Controlling Entity whose
common equity securities are publicly traded) or the removal
of the current Chairman of the Board of the Company from
such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) without,
in each case, Executive's prior written consent; or
(ix) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the
obligations of the Company under this Agreement; or
(x) the Company breaches any provision of this
Agreement and such breach is not cured within thirty (30)
days after the Company's receipt of notice thereof from
Executive.
(b) If, after the occurrence of a Change in Control,
Executive receives a written description from the Company of the
nature of Executive's Office thereafter, stating Executive's
authorities, duties, responsibilities, status, salary, bonus and
other employee benefits, or job location, and Executive accepts in
writing such new authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location ("New
Office") with the Company without determining that the New Office
causes a Good Reason as set forth in Section 2.4(a), then for the
remaining Term the New Office
-9-
<PAGE>
<PAGE>
shall be the authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location to be
used by Executive in determining whether Good Reason occurs
thereafter pursuant to Section 2.4(a).
2.5 Change in Control. As used herein, the term "Change in
-----------------
Control" shall mean the occurrence with respect to the Company of any of
the following events:
(a) a report on Schedule 13D is filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), is the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(b) an event of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Exchange Act or would have been required to be so
reported but for the fact that such event had been "previously
reported" as that term is defined in Rule 12b-2 promulgated under
the Exchange Act;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), shall
become the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(d) the stockholders of the Company shall approve any
liquidation or dissolution of the Company;
(e) the stockholders of the Company shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, acquisition or disposition of assets or other transaction
after the consummation of which any person, entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act)
would become the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly,
of 50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated
-10-
<PAGE>
<PAGE>
under the Exchange Act, in the case of rights to acquire common
stock or other securities);
(f) individuals who constitute the Board on the date
hereof ("Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least two-thirds of the directors
comprising the remaining members of the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of
this clause (f), considered as though such person were a member of
the Incumbent Board; or
(g) a recapitalization or other transaction or series of
related transactions occurs which results in a decrease by 50% or
more in the aggregate percentage ownership of the then outstanding
common stock of the Company or 50% or more in the combined voting
power of the outstanding securities of the Company held by the
stockholders of the Company immediately prior to giving effect
thereto (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants).
2.6 Legal Fees and Expenses. If Executive shall prevail in
-----------------------
any contest by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this
Agreement, the Company shall pay any and all reasonable attorneys',
accountants' and experts' fees and expenses and court costs incurred by
Executive as a result of any such contest. Otherwise, each party shall
bear his, her or its own expenses in connection with any such contest.
2.7 Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, arrangement or
policy provided by the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy constituting
Additional Compensation) and for which Executive and/or Executive's
family may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive and/or Executive's family may have under any
other agreements with the Company or any of its affiliates. Amounts
which are vested benefits or which Executive and/or Executive's family
is otherwise entitled to receive under any plan, program, arrangement,
or policy of the Company or any of its affiliates (including, but not
limited to, any plan, program, arrangement or policy constituting
Additional Compensation) at or subsequent to the date of termination of
Executive's employment under this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
2.8 Full Payment; No Mitigation Obligation. The Company's
--------------------------------------
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against Executive or others. In no
event shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.
-11-
<PAGE>
<PAGE>
2.9 Delivery of Release. Within thirty (30) days after
-------------------
termination of Executive's employment (other than due to death of
Executive) in anticipation of, on or after the occurrence of a Change in
Control, the Company shall provide to Executive, or Executive's legal
representative, a form of written release, which form shall be
reasonably satisfactory to the Company and generally consistent with the
form of release used by the Company prior to the earlier of (a) such
termination of employment, if the Company has terminated Executive's
employment in anticipation of a Change of Control, or (b) the occurrence
of the Change in Control. As a condition to the obligation of the
Company to make the payments provided for in this Agreement and
otherwise perform its obligations hereunder to Executive upon
termination of Executive's employment (other than due to death of
Executive) Executive, or Executive's legal representative, shall deliver
to the Company a written release, substantially in the form described
above and provided to Executive by the Company within such thirty (30)
day period, releasing the Company and its affiliates from any and all
liability related to Executive's employment or the termination thereof,
other than liabilities arising under this Agreement.
ARTICLE III
GENERAL PROVISIONS
3.1 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Colorado.
3.2 Assignability. This Agreement is personal to Executive
-------------
and without the prior written consent of the Company shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any
corporation, entity, individual or other person who is the successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to
perform, by a written agreement in form and substance satisfactory to
Executive, all of the obligations of the Company under this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
3.3 Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
3.4 Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement and understanding between Executive and the Company
and, except as otherwise expressly provided herein, supersedes any prior
agreements or understandings, whether written or oral, with respect to
the subject matter hereof. Except as may be otherwise provided herein,
this Agreement may not be amended or modified except by subsequent
written agreement executed by both parties hereto.
-12-
<PAGE>
<PAGE>
3.5 Multiple Counterparts. This Agreement may be executed in
---------------------
multiple counterparts, each of which shall constitute an original, but
all of which together shall constitute one Agreement.
3.6 Notices. Any notice provided for in this Agreement shall
-------
be deemed delivered upon deposit in the United States mails, registered
or certified mail, addressed to the party to whom directed at the
addresses set forth below or at such other addresses as may be
substituted therefor by notice given hereunder. Notice given by any
other means must be in writing and shall be deemed delivered only upon
actual receipt.
If to the Company:
Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Attention: President
If to Executive:
Paul V. Reilly
68 Golden Eagle Lane
Littleton, CO 80127
3.7 Waiver. The waiver of any breach of any term or condition
------
of this Agreement shall not be deemed to constitute the waiver of any
breach of the same or any other term or condition of this Agreement.
3.8 Severability. In the event any provision of this Agreement
------------
is found to be unenforceable or invalid, such provision shall be
severable from this Agreement and shall not effect the enforceability
or validity of any other provision of this Agreement. If any provision
of this Agreement is capable to two constructions, one of which would
render the provision void and the other which would render the provision
valid, then the provision shall have the construction which renders it
valid.
3.9 Other Severance Benefits. This Agreement replaces and
------------------------
supercedes any and all provisions of and benefits under any other
severance agreement or program under which Executive would otherwise be
entitled to severance benefits on or after the occurrence of a Change in
Control.
-13-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
MAIL-WELL, INC.
By: /s/ Gerald F. Mahoney
--------------------------------
Gerald F. Mahoney
Chairman and CEO
EXECUTIVE
/s/ Paul V. Reilly
------------------------------------
Paul V. Reilly
-14-
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is effective
as of November 15, 1999 (the "Effective Date"), by and between
MAIL-WELL, INC., a Colorado corporation (the "Company"), and
Gary H. Ritondaro ("Executive").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein);
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of Executive and dilution of the
time of Executive, by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, (ii) to encourage
Executive's full attention and dedication to the Company currently and
in the event of any threatened or pending Change in Control, and (iii)
to provide Executive with compensation arrangements in the event of a
Change in Control which provide Executive with financial security, which
are competitive with those of other corporations; and
WHEREAS, in order to accomplish the objectives described in the
two immediately preceding recitals, the Board desires to cause the
Company to enter into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the following meanings:
(a) Accrued Obligations. The term "Accrued Obligations"
-------------------
shall have the meaning ascribed to such term in Section 2.3(a) of
this Agreement.
(b) Additional Compensation. The term "Additional
-----------------------
Compensation" shall mean, in addition to the Base Salary, the
following:
(i) all benefits under:
(A) any and all welfare benefit and similar
employee benefit
-1-
<PAGE>
<PAGE>
plans, programs, arrangements, or policies that are
made available by the Company or any of its affiliates
to Executive immediately prior to the first to occur
of (1) a termination by the Company of Executive's
employment with the Company in anticipation of a
Change in Control, or (2) the occurrence of a Change
in Control, including, but not limited to, any
hospitalization, medical, prescription, dental,
disability, salary continuance, individual life
insurance, executive life insurance, group life
insurance, accidental death insurance, and travel
accident insurance plans, programs, arrangements,
and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, stock option,
restricted stock, employee stock ownership,
supplemental executive retirement and other employee
benefit plans, programs, arrangements, and policies
that are made available by the Company or any of its
affiliates to Executive immediately prior to the first
to occur of (1) a termination by the Company of
Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control; and
(ii) annual vacations and sick leave made available
by the Company or any of its affiliates to Executive
immediately prior to the first to occur of (1) a termination
by the Company of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the occurrence
of a Change in Control; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company or any of its affiliates
made available by the Company or any of its affiliates to
Executive immediately prior to the first to occur of (1) a
termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control.
(c) Affiliate. The term "affiliate" or "affiliates"
---------
shall mean, when used with respect to any specified entity,
individual, or other person, any other entity, individual, or
other person which, directly or indirectly, through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with such specified entity, individual or person.
(d) Agreement. The term "Agreement" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(e) Base Salary. The term "Base Salary" shall mean
-----------
Executive's per annum base salary payable by the Company to
Executive as in effect immediately prior to the first to occur of
(1) a termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or (2) the
occurrence of a Change in Control as the same may be increased
from time to time after the occurrence of a Change in Control.
-2-
<PAGE>
<PAGE>
(f) Board. The term "Board" shall have the meaning
-----
ascribed to such term in the first Whereas clause of this
Agreement.
(g) Cause. The term "Cause" shall mean (i) willful
-----
misconduct by Executive or gross neglect by Executive of
Executive's duties as an employee, officer or director of the
Company which continues for more than thirty (30) days after
Executive's receipt of written notice from the Board to Executive
specifically identifying the willful misconduct or gross neglect
of Executive and directing Executive to discontinue the same,
(ii) the commission by Executive of a crime constituting a felony,
or (iii) the commission by Executive of an act, other than an act
taken in good faith within the course and scope of Executive's
employment, which is directly detrimental to the Company and
exposes the Company to material liability.
(h) Change in Control. The term "Change in Control"
-----------------
shall have the meaning ascribed to such term in Section 2.5 of
this Agreement.
(i) COBRA Coverage. The term "COBRA Coverage" shall
--------------
have the meaning ascribed to such term in Section 2.3(b)(iii)(A)
of this Agreement.
(j) Code. The term "Code" shall mean the Internal
----
Revenue Code of 1986, as amended.
(k) Company. The term "Company" shall have the meaning
-------
ascribed to such term in the introductory paragraph and Section
3.2 of this Agreement.
(l) Control. The term "Control" and derivations thereof
-------
shall mean the ownership, directly or indirectly, of 50% or more
of the voting securities of an entity or other person or
possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether
through the ownership of voting securities, by contract or
otherwise.
(m) Controlling Entity. The term "Controlling Entity"
------------------
shall have the meaning ascribed to such term in Section
2.4(a)(viii)(E) of this Agreement.
(n) Disabled. The term "Disabled" shall mean a mental
--------
or physical impairment which, in the reasonable opinion of a
qualified doctor selected by the Company, renders Executive unable
to perform with reasonable diligence the ordinary functions and
duties of the Office on a full-time basis, which inability
continues for a period of not less than 180 consecutive days.
(o) Effective Date. The term "Effective Date" shall
--------------
have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
(p) Eliminated Duties and Responsibilities. The term
--------------------------------------
"Eliminated Duties and Responsibilities" shall have the meaning
ascribed to such term in Section 2.4(a)(i) of this Agreement.
-3-
<PAGE>
<PAGE>
(q) Executive. The term "Executive" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(r) Good Reason. The term "Good Reason" shall have the
-----------
meaning ascribed to such term in Section 2.4(a) of this Agreement.
(s) Incumbent Board. The term "Incumbent Board" shall
---------------
have the meaning ascribed to such term in Section 2.5(f) of this
Agreement.
(t) New Office. The term "New Office" shall have the
----------
meaning ascribed to such term in Section 2.4(b) of this Agreement.
(u) Office. The term "Office" shall mean Senior Vice
------
President-Finance and CFO.
(v) Successor Entity. The term "Successor Entity" shall
----------------
have the meaning ascribed to such term in Section 2.4(a)(viii)(B)
of this Agreement.
(w) Term. The term "Term" shall have the meaning ascribed
----
to such term in Section 2.1 of this Agreement.
1.2 Other Terms. Other capitalized terms defined elsewhere
-----------
herein shall have the meanings ascribed to them in the definitions
therefor appearing elsewhere herein.
ARTICLE II
TERM AND TERMINATION
2.1 Term. The term of this Agreement ("Term") shall be for
----
three years commencing on the Effective Date; provided however, that if
a Change in Control occurs during such three year period, the Term shall
be for the period commencing on the Effective Date and ending on the
second anniversary of such Change in Control, notwithstanding such
three-year period.
2.2 Termination of Employment. Executive's employment with
-------------------------
the Company may be terminated by the Company prior to the end of the
Term, or may be terminated by Executive prior to the end of the Term, as
of the date which is thirty (30) days after written notice of
termination is given by either party to the other.
Any notice of termination given by the Company to Executive under
Section 2.2 above shall specify whether such termination is with or
without Cause. Any notice of termination given by Executive to the
Company under Section 2.2 above shall specify whether such termination
is made with or without Good Reason. A termination of Executive's
employment by the Company (other than due to Disability as provided in
Section 2.3(d)) shall be deemed to be in anticipation of a Change in
Control if a possible or potential Change in Control is a factor in the
decision of the Company to terminate the employment of Executive.
-4-
<PAGE>
<PAGE>
2.3 Obligations of the Company Upon Termination in Anticipation
-----------------------------------------------------------
of, on or after a Change In Control
- -----------------------------------
(a) Cause; Without Good Reason. If the Company terminates
--------------------------
Executive's employment with the Company in anticipation of, on
or after the occurrence of a Change in Control with Cause
pursuant to Section 2.2 hereof, or if Executive terminates
Executive's employment with the Company on or after the occurrence
of a Change in Control without Good Reason pursuant to Section 2.2
hereof, Executive's employment with the Company shall terminate
without further obligations to Executive, other than those
obligations owing or accrued to, vested in, or earned by Executive
through the date of termination, including, but not limited to:
(i) to the extent not theretofore paid, the Base
Salary in effect at the time of such termination through the
date of termination; and
(ii) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not yet
paid by the Company;
(iii) all other amounts or benefits owing or accrued
to, vested in or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, the Additional
Compensation;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, such amounts and benefits specified in clauses (i),
(ii), and (iii) of this sentence, being hereinafter collectively
referred to as the "Accrued Obligations." The aggregate amount of
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, the Accrued Obligations, shall be paid or caused to be
paid by the Company to Executive in accordance with the plans,
programs or agreements under which the Accrued Obligations were
earned.
(b) Good Reason; Without Cause. If Executive terminates
--------------------------
Executive's employment with the Company on or after the occurrence
of a Change in Control with Good Reason pursuant to Section 2.2
hereof, or if the Company terminates Executive's employment with
the Company without Cause in anticipation of, on or after the
occurrence of a Change in Control pursuant to Section 2.2 hereof:
(i) the Company shall pay the aggregate of the
following amounts to Executive in one lump sum within thirty
(30) days after the date of such termination or in a manner
and at such later time as specified by Executive, provided
that all such payments must be made no later than the last
day of the twenty-four (24) month period commencing on the
date of such termination:
(A) to the extent not theretofore paid,
Executive's Base Salary in effect at the time of such
termination (but prior to giving effect to any
-5-
<PAGE>
<PAGE>
reduction therein which precipitated such termination)
through the date of termination; and
(B) an amount equal to the sum of: (x) two
(2) times Executive's Base Salary in effect at the
time of such termination (but prior to giving effect
to any reduction therein which precipitated such
termination), (y) one (1) times the highest annual
bonus paid by the Company to Executive in respect of
the two (2) calendar years of the Company immediately
preceding such termination, and (z) the pro-rata share
of Executive's target bonus for the calendar year in
which such termination occurred based upon the
proportion that the number of complete months in such
calendar year up to the date of termination bears to
the complete calendar year.
(ii) In addition, the Company shall pay or cause to
be paid the aggregate of the following amounts to Executive
at the following times:
(A) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, within thirty (30) days after
the date of such termination of employment or such
other period as may be required in accordance with any
such deferral arrangement; and
(B) in accordance with the terms of each such
plan, program, arrangement or policy, all other
amounts or benefits owing or accrued to, vested in, or
earned by Executive through the date of termination
under the then existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, all
Additional Compensation; and
(C) any and all other Accrued Obligations not
otherwise described in subsection (b)(i) above or
clauses (A) and (B) of this subsection (b)(ii); and
(iii) Executive shall receive the following additional
benefits:
(A) if Executive elects medical or dental
coverage under the Company's group medical or dental
plans pursuant to Section 4980B of the Code ("COBRA
Coverage"), the Company shall reimburse Executive,
promptly upon request by Executive, an amount equal to
the remainder, if any, resulting from the subtraction
of (1) the monthly medical and/or dental premium paid
each month by Executive for COBRA Coverage during the
first twelve (12) months of such COBRA Coverage (or
during such shorter period that COBRA Coverage for
Executive is in effect), from (2) the medical and/or
dental premium paid by Executive for the last month of
coverage under the Company's group medical or dental
plans
-6-
<PAGE>
<PAGE>
immediately before Executive's employment with the
Company was terminated; and
(B) such individual outplacement service as is
appropriate for Executive's position for up to 24
months after termination of employment for a cost not
to exceed $15,000; and
(C) assistance to Executive to be provided by
a "Big Five" accounting firm selected by the Company
or other mutually agreeable accounting firm for
federal and state income tax planning and federal and
state income tax return preparation for Executive for
the calendar year in which such termination of
employment occurred.
(c) Death. If Executive's employment is terminated on
-----
or after the occurrence of a Change in Control by reason of
Executive's death, the Company shall pay to Executive's legal
representatives the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the date of
Executive's death, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned. Anything in this
Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits provided by the Company and
any of its affiliates to surviving families under the then
existing or applicable plans, programs, or arrangements and
policies of the Company and its affiliates.
(d) Disability. The Company may, at its option, terminate
----------
Executive's employment by written notice to Executive upon
Executive's becoming Disabled. Such termination shall not be
deemed to be a termination of Executive's employment in
anticipation of, on or after a Change in Control. If Executive's
employment is terminated on or after the occurrence of a Change in
Control by reason of Executive becoming Disabled, the Company
shall pay to Executive or Executive's legal representative the
full amount of the obligations owing or accrued to, vested in, or
earned by Executive through the date of termination, including,
but not limited to, the Accrued Obligations in accordance with the
plans, programs, or agreements under which the Accrued Obligations
were earned.
2.4 Good Reason.
-----------
(a) Except as provided in Section 2.4(b) below, as used in
this Agreement, the term "Good Reason" means a good faith
determination by Executive that any one or more of the following
events has occurred on or after the occurrence of a Change in
Control:
(i) a material change in the nature of Executive's
Office, including, but not limited to, Executive's
authorities, duties, responsibilities or status (including
offices, titles, reporting requirements and supervisory
functions), from those in effect immediately prior to the
Change in Control. Notwithstanding the foregoing, Executive
shall not assert as "Good Reason" the sole fact that the
-7-
<PAGE>
<PAGE>
portion of Executive's duties and responsibilities directly
attributable to a change in the ownership of the outstanding
capital stock or outstanding indebtedness of the Company,
the presence or absence of a trading market for any of the
securities of the Company, any refinancing of indebtedness
of the Company or the incurrence of any additional
indebtedness by the Company has been eliminated (the
"Eliminated Duties and Responsibilities"), unless the
performance of all or any portion of the Eliminated Duties
and Responsibilities continue to be required; or
(ii) the relocation of Executive's place of employment
to a location in excess of thirty-five (35) miles from the
Company's current offices in Englewood, Colorado, except for
required travel on Company business to an extent substantially
equivalent to Executive's business travel obligations
immediately prior to the Change in Control; or
(iii) any reduction by the Company of Executive's
Base Salary, or a material reduction in Executive's bonus,
profit sharing, other incentive benefits or Additional
Compensation from those in effect immediately prior to the
Change in Control; or
(iv) the failure by the Company to increase
Executive's Base Salary in a manner consistent (both as to
frequency and percentage increase) with (A) the Company's
practices in effect immediately prior to the Change in
Control with respect to similarly positioned employees or
(B) the Company's practices implemented subsequent to the
Change in Control with respect to similarly positioned
employees, unless, in either case, such failure is due to
the failure by Executive to meet performance standards
applicable to similarly positioned employees; or
(v) the failure of the Company to continue in
effect Executive's participation in the Company's employee
benefit plans, programs, arrangements and policies, at a
level substantially equivalent in value to and on a basis
consistent with the relative levels of participation of
other similarly positioned employees; or
(vi) the failure of the Company to obtain from a
successor (including a successor to a material portion of
the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under
this Agreement; or
(vii) the failure of the Company to continue to
provide Executive with office space, related facilities and
support personnel (including, but not limited to,
administrative and secretarial assistance) that are both
commensurate in all material respects with the Office and
Executive's responsibilities to and position with the
Company immediately prior to the Change in Control and not
materially dissimilar to the office space, related
facilities and support personnel provided to other key
executive officers of the Company; or
-8-
<PAGE>
<PAGE>
(viii) if Executive served on the Board of Directors
of the Company prior to a Change in Control, (A) the removal
of Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of the Company, if
it is a surviving entity in the Change in Control
transaction, or (B) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be named as a director of any successor to the Company,
including any successor to a material portion of the
business or assets of the Company (each, a "Successor
Entity"), or (C) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be nominated for election to the Board of Directors of the
Company or any Successor Entity or (D) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be elected or reelected to the
Board of Directors of the Company or any such Successor
Entity, or (E) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be appointed to the Board of Directors of any entity or
entities that Control the Company or any Successor Entity
(each, a "Controlling Entity") or (F) the removal of
Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of any Controlling
Entity, or (G) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive to be
nominated for election to the Board of Directors of any
Controlling Entity, or (H) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive, to be elected or reelected to the Board of
Directors of any Controlling Entity, or (I) the removal of
the current Chairman of the Board of the Company from such
position with the Company, or the failure of the current
Chairman of the Board of the Company to be appointed to such
position with any Successor Entity or Controlling Entity
(other than a Successor Entity or Controlling Entity whose
common equity securities are publicly traded) or the removal
of the current Chairman of the Board of the Company from
such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) without,
in each case, Executive's prior written consent; or
(ix) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the
obligations of the Company under this Agreement; or
(x) the Company breaches any provision of this
Agreement and such breach is not cured within thirty (30)
days after the Company's receipt of notice thereof from
Executive.
(b) If, after the occurrence of a Change in Control,
Executive receives a written description from the Company of the
nature of Executive's Office thereafter, stating Executive's
authorities, duties, responsibilities, status, salary, bonus and
other employee benefits, or job location, and Executive accepts in
writing such new authorities,
-9-
<PAGE>
<PAGE>
duties, responsibilities, status, salary, bonus and other employee
benefits, or job location ("New Office") with the Company without
determining that the New Office causes a Good Reason as set forth
in Section 2.4(a), then for the remaining Term the New Office
shall be the authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location to be
used by Executive in determining whether Good Reason occurs
thereafter pursuant to Section 2.4(a).
2.5 Change in Control. As used herein, the term "Change in
-----------------
Control" shall mean the occurrence with respect to the Company of any of
the following events:
(a) a report on Schedule 13D is filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), is the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(b) an event of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Exchange Act or would have been required to be so
reported but for the fact that such event had been "previously
reported" as that term is defined in Rule 12b-2 promulgated under
the Exchange Act;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), shall
become the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(d) the stockholders of the Company shall approve any
liquidation or dissolution of the Company;
(e) the stockholders of the Company shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, acquisition or disposition of assets or other transaction
after the consummation of which any person, entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act)
would become the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act),
-10-
<PAGE>
<PAGE>
directly or indirectly, of 50% or more of the outstanding shares
of common stock of the Company or 50% or more of the combined
voting power of the then outstanding securities of the Company (as
determined under paragraph (d) of Rule 13d-3 promulgated under the
Exchange Act, in the case of rights to acquire common stock or
other securities);
(f) individuals who constitute the Board on the date
hereof ("Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least two-thirds of the directors
comprising the remaining members of the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of
this clause (f), considered as though such person were a member of
the Incumbent Board; or
(g) a recapitalization or other transaction or series of
related transactions occurs which results in a decrease by 50% or
more in the aggregate percentage ownership of the then outstanding
common stock of the Company or 50% or more in the combined voting
power of the outstanding securities of the Company held by the
stockholders of the Company immediately prior to giving effect
thereto (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants).
2.6 Legal Fees and Expenses. If Executive shall prevail in
-----------------------
any contest by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this
Agreement, the Company shall pay any and all reasonable attorneys',
accountants' and experts' fees and expenses and court costs incurred by
Executive as a result of any such contest. Otherwise, each party shall
bear his, her or its own expenses in connection with any such contest.
2.7 Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, arrangement or
policy provided by the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy constituting
Additional Compensation) and for which Executive and/or Executive's
family may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive and/or Executive's family may have under any
other agreements with the Company or any of its affiliates. Amounts
which are vested benefits or which Executive and/or Executive's family
is otherwise entitled to receive under any plan, program, arrangement,
or policy of the Company or any of its affiliates (including, but not
limited to, any plan, program, arrangement or policy constituting
Additional Compensation) at or subsequent to the date of termination of
Executive's employment under this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
2.8 Full Payment; No Mitigation Obligation. The Company's
--------------------------------------
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action
-11-
<PAGE>
<PAGE>
which the Company may have against Executive or others. In no event
shall Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Executive under
any of the provisions of this Agreement.
2.9 Delivery of Release. Within thirty (30) days after
-------------------
termination of Executive's employment (other than due to death of
Executive) in anticipation of, on or after the occurrence of a Change in
Control, the Company shall provide to Executive, or Executive's legal
representative, a form of written release, which form shall be
reasonably satisfactory to the Company and generally consistent with the
form of release used by the Company prior to the earlier of (a) such
termination of employment, if the Company has terminated Executive's
employment in anticipation of a Change of Control, or (b) the occurrence
of the Change in Control. As a condition to the obligation of the
Company to make the payments provided for in this Agreement and
otherwise perform its obligations hereunder to Executive upon
termination of Executive's employment (other than due to death of
Executive) Executive, or Executive's legal representative, shall deliver
to the Company a written release, substantially in the form described
above and provided to Executive by the Company within such thirty (30)
day period, releasing the Company and its affiliates from any and all
liability related to Executive's employment or the termination thereof,
other than liabilities arising under this Agreement.
ARTICLE III
GENERAL PROVISIONS
3.1 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Colorado.
3.2 Assignability. This Agreement is personal to Executive
-------------
and without the prior written consent of the Company shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any
corporation, entity, individual or other person who is the successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to
perform, by a written agreement in form and substance satisfactory to
Executive, all of the obligations of the Company under this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
3.3 Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
3.4 Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement and understanding between Executive and the Company
and, except as otherwise expressly provided herein, supersedes any prior
agreements or understandings, whether written or oral,
-12-
<PAGE>
<PAGE>
with respect to the subject matter hereof. Except as may be otherwise
provided herein, this Agreement may not be amended or modified except by
subsequent written agreement executed by both parties hereto.
3.5 Multiple Counterparts. This Agreement may be executed in
---------------------
multiple counterparts, each of which shall constitute an original, but
all of which together shall constitute one Agreement.
3.6 Notices. Any notice provided for in this Agreement shall
-------
be deemed delivered upon deposit in the United States mails, registered
or certified mail, addressed to the party to whom directed at the
addresses set forth below or at such other addresses as may be
substituted therefor by notice given hereunder. Notice given by any
other means must be in writing and shall be deemed delivered only upon
actual receipt.
If to the Company:
Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Attention: President
If to Executive:
Gary H. Ritondaro
5210 Pinyon Jay Road
Parker, CO 80134
3.7 Waiver. The waiver of any breach of any term or condition
------
of this Agreement shall not be deemed to constitute the waiver of any
breach of the same or any other term or condition of this Agreement.
3.8 Severability. In the event any provision of this Agreement
------------
is found to be unenforceable or invalid, such provision shall be severable
from this Agreement and shall not effect the enforceability or validity
of any other provision of this Agreement. If any provision of this
Agreement is capable to two constructions, one of which would render the
provision void and the other which would render the provision valid, then
the provision shall have the construction which renders it valid.
3.9 Other Severance Benefits. This Agreement replaces and
------------------------
supercedes any and all provisions of and benefits under any other
severance agreement or program under which Executive would otherwise be
entitled to severance benefits on or after the occurrence of a Change in
Control.
-13-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
MAIL-WELL, INC.
By: /s/ Gerald F. Mahoney
--------------------------------
Gerald F. Mahoney
Chairman and CEO
EXECUTIVE
/s/ Gary H. Ritondaro
------------------------------------
Gary H. Ritondaro
-14-
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is effective
as of November 15, 1999 (the "Effective Date"), by and between
MAIL-WELL, INC., a Colorado corporation (the "Company"), and
D. Robert Meyer ("Executive").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein);
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of Executive and dilution of the
time of Executive, by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, (ii) to encourage
Executive's full attention and dedication to the Company currently and
in the event of any threatened or pending Change in Control, and (iii)
to provide Executive with compensation arrangements in the event of a
Change in Control which provide Executive with financial security, which
are competitive with those of other corporations; and
WHEREAS, in order to accomplish the objectives described in the
two immediately preceding recitals, the Board desires to cause the
Company to enter into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the following meanings:
(a) Accrued Obligations. The term "Accrued Obligations"
-------------------
shall have the meaning ascribed to such term in Section 2.3(a) of
this Agreement.
(b) Additional Compensation. The term "Additional
-----------------------
Compensation" shall mean, in addition to the Base Salary, the
following:
(i) all benefits under:
-1-
<PAGE>
<PAGE>
(A) any and all welfare benefit and similar
employee benefit plans, programs, arrangements, or
policies that are made available by the Company or any
of its affiliates to Executive immediately prior to
the first to occur of (1) a termination by the Company
of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control, including, but not
limited to, any hospitalization, medical,
prescription, dental, disability, salary continuance,
individual life insurance, executive life insurance,
group life insurance, accidental death insurance, and
travel accident insurance plans, programs,
arrangements, and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, stock option,
restricted stock, employee stock ownership,
supplemental executive retirement and other employee
benefit plans, programs, arrangements, and policies
that are made available by the Company or any of its
affiliates to Executive immediately prior to the first
to occur of (1) a termination by the Company of
Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control; and
(ii) annual vacations and sick leave made available
by the Company or any of its affiliates to Executive
immediately prior to the first to occur of (1) a termination
by the Company of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the occurrence
of a Change in Control; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company or any of its affiliates
made available by the Company or any of its affiliates to
Executive immediately prior to the first to occur of (1) a
termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control.
(c) Affiliate. The term "affiliate" or "affiliates"
---------
shall mean, when used with respect to any specified entity,
individual, or other person, any other entity, individual, or
other person which, directly or indirectly, through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with such specified entity, individual or person.
(d) Agreement. The term "Agreement" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(e) Base Salary. The term "Base Salary" shall mean
-----------
Executive's per annum base salary payable by the Company to
Executive as in effect immediately prior to the first to occur of
(1) a termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or (2) the
occurrence of a Change in Control as the same may be increased
from time to time after the occurrence of a Change in Control.
-2-
<PAGE>
<PAGE>
(f) Board. The term "Board" shall have the meaning
-----
ascribed to such term in the first Whereas clause of this
Agreement.
(g) Cause. The term "Cause" shall mean (i) willful
-----
misconduct by Executive or gross neglect by Executive of
Executive's duties as an employee, officer or director of the
Company which continues for more than thirty (30) days after
Executive's receipt of written notice from the Board to Executive
specifically identifying the willful misconduct or gross neglect
of Executive and directing Executive to discontinue the same,
(ii) the commission by Executive of a crime constituting a felony,
or (iii) the commission by Executive of an act, other than an act
taken in good faith within the course and scope of Executive's
employment, which is directly detrimental to the Company and
exposes the Company to material liability.
(h) Change in Control. The term "Change in Control"
-----------------
shall have the meaning ascribed to such term in Section 2.5 of
this Agreement.
(i) COBRA Coverage. The term "COBRA Coverage" shall
--------------
have the meaning ascribed to such term in Section 2.3(b)(iii)(A)
of this Agreement.
(j) Code. The term "Code" shall mean the Internal
----
Revenue Code of 1986, as amended.
(k) Company. The term "Company" shall have the meaning
-------
ascribed to such term in the introductory paragraph and Section
3.2 of this Agreement.
(l) Control. The term "Control" and derivations thereof
-------
shall mean the ownership, directly or indirectly, of 50% or more
of the voting securities of an entity or other person or
possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether
through the ownership of voting securities, by contract or
otherwise.
(m) Controlling Entity. The term "Controlling Entity"
------------------
shall have the meaning ascribed to such term in Section
2.4(a)(viii)(E) of this Agreement.
(n) Disabled. The term "Disabled" shall mean a mental
--------
or physical impairment which, in the reasonable opinion of a
qualified doctor selected by the Company, renders Executive unable
to perform with reasonable diligence the ordinary functions and
duties of the Office on a full-time basis, which inability
continues for a period of not less than 180 consecutive days.
(o) Effective Date. The term "Effective Date" shall
--------------
have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
(p) Eliminated Duties and Responsibilities. The term
--------------------------------------
"Eliminated Duties and Responsibilities" shall have the meaning
ascribed to such term in Section 2.4(a)(i) of this Agreement.
-3-
<PAGE>
<PAGE>
(q) Executive. The term "Executive" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(r) Good Reason. The term "Good Reason" shall have the
-----------
meaning ascribed to such term in Section 2.4(a) of this Agreement.
(s) Incumbent Board. The term "Incumbent Board" shall
---------------
have the meaning ascribed to such term in Section 2.5(f) of this
Agreement.
(t) New Office. The term "New Office" shall have the
----------
meaning ascribed to such term in Section 2.4(b) of this Agreement.
(u) Office. The term "Office" shall mean Vice
------
President-Treasurer and Tax.
(v) Successor Entity. The term "Successor Entity" shall
----------------
have the meaning ascribed to such term in Section 2.4(a)(viii)(B)
of this Agreement.
(w) Term. The term "Term" shall have the meaning
----
ascribed to such term in Section 2.1 of this Agreement.
1.2 Other Terms. Other capitalized terms defined elsewhere
-----------
herein shall have the meanings ascribed to them in the definitions
therefor appearing elsewhere herein.
ARTICLE II
TERM AND TERMINATION
2.1 Term. The term of this Agreement ("Term") shall be for
----
three years commencing on the Effective Date; provided however, that if
a Change in Control occurs during such three year period, the Term shall
be for the period commencing on the Effective Date and ending on the
second anniversary of such Change in Control, notwithstanding such
three-year period.
2.2 Termination of Employment. Executive's employment with
-------------------------
the Company may be terminated by the Company prior to the end of the
Term, or may be terminated by Executive prior to the end of the Term, as
of the date which is thirty (30) days after written notice of
termination is given by either party to the other.
Any notice of termination given by the Company to Executive under
Section 2.2 above shall specify whether such termination is with or
without Cause. Any notice of termination given by Executive to the
Company under Section 2.2 above shall specify whether such termination
is made with or without Good Reason. A termination of Executive's
employment by the Company (other than due to Disability as provided in
Section 2.3(d)) shall be deemed to be in anticipation of a Change in
Control if a possible or potential Change in Control is a factor in the
decision of the Company to terminate the employment of Executive.
-4-
<PAGE>
<PAGE>
2.3 Obligations of the Company Upon Termination in Anticipation
-----------------------------------------------------------
of, on or after a Change In Control
- -----------------------------------
(a) Cause; Without Good Reason. If the Company terminates
--------------------------
Executive's employment with the Company in anticipation of, on or
after the occurrence of a Change in Control with Cause pursuant to
Section 2.2 hereof, or if Executive terminates Executive's
employment with the Company on or after the occurrence of a Change
in Control without Good Reason pursuant to Section 2.2 hereof,
Executive's employment with the Company shall terminate without
further obligations to Executive, other than those obligations
owing or accrued to, vested in, or earned by Executive through
the date of termination, including, but not limited to:
(i) to the extent not theretofore paid, the Base
Salary in effect at the time of such termination through the
date of termination; and
(ii) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not yet
paid by the Company;
(iii) all other amounts or benefits owing or accrued
to, vested in or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, the Additional
Compensation;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, such amounts and benefits specified in clauses (i),
(ii), and (iii) of this sentence, being hereinafter collectively
referred to as the "Accrued Obligations." The aggregate amount of
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, the Accrued Obligations, shall be paid or caused to be
paid by the Company to Executive in accordance with the plans,
programs or agreements under which the Accrued Obligations were
earned.
(b) Good Reason; Without Cause. If Executive terminates
--------------------------
Executive's employment with the Company on or after the occurrence
of a Change in Control with Good Reason pursuant to Section 2.2
hereof, or if the Company terminates Executive's employment with
the Company without Cause in anticipation of, on or after the
occurrence of a Change in Control pursuant to Section 2.2 hereof:
(i) the Company shall pay the aggregate of the
following amounts to Executive in one lump sum within thirty
(30) days after the date of such termination or in a manner
and at such later time as specified by Executive, provided
that all such payments must be made no later than the last
day of the twenty-four (24) month period commencing on the
date of such termination:
(A) to the extent not theretofore paid,
Executive's Base Salary in effect at the time of such
termination (but prior to giving effect to any
reduction therein which precipitated such termination)
through the date of termination; and
-5-
<PAGE>
<PAGE>
(B) an amount equal to the sum of: (x) one
(1) times Executive's Base Salary in effect at the
time of such termination (but prior to giving effect
to any reduction therein which precipitated such
termination), (y) one-half (1/2) times the highest
annual bonus paid by the Company to Executive in
respect of the two (2) calendar years of the Company
immediately preceding such termination, and (z) the
pro-rata share of Executive's target bonus for the
calendar year in which such termination occurred based
upon the proportion that the number of complete months
in such calendar year up to the date of termination
bears to the complete calendar year.
(ii) In addition, the Company shall pay or cause to
be paid the aggregate of the following amounts to Executive
at the following times:
(A) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, within thirty (30) days after
the date of such termination of employment or such
other period as may be required in accordance with any
such deferral arrangement; and
(B) in accordance with the terms of each such
plan, program, arrangement or policy, all other
amounts or benefits owing or accrued to, vested in, or
earned by Executive through the date of termination
under the then existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, all
Additional Compensation; and
(C) any and all other Accrued Obligations not
otherwise described in subsection (b)(i) above or
clauses (A) and (B) of this subsection (b)(ii); and
(iii) Executive shall receive the following additional
benefits:
(A) if Executive elects medical or dental
coverage under the Company's group medical or dental
plans pursuant to Section 4980B of the Code ("COBRA
Coverage"), the Company shall reimburse Executive,
promptly upon request by Executive, an amount equal to
the remainder, if any, resulting from the subtraction
of (1) the monthly medical and/or dental premium paid
each month by Executive for COBRA Coverage during the
first twelve (12) months of such COBRA Coverage (or
during such shorter period that COBRA Coverage for
Executive is in effect), from (2) the medical and/or
dental premium paid by Executive for the last month of
coverage under the Company's group medical or dental
plans immediately before Executive's employment with
the Company was terminated; and
-6-
<PAGE>
<PAGE>
(B) such individual outplacement service as is
appropriate for Executive's position for up to 24
months after termination of employment for a cost not
to exceed $10,000; and
(C) assistance to Executive to be provided by
a "Big Five" accounting firm selected by the Company
or other mutually agreeable accounting firm for
federal and state income tax planning and federal and
state income tax return preparation for Executive for
the calendar year in which such termination of
employment occurred.
(c) Death. If Executive's employment is terminated on
-----
or after the occurrence of a Change in Control by reason of
Executive's death, the Company shall pay to Executive's legal
representatives the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the date of
Executive's death, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned. Anything in this
Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits provided by the Company and
any of its affiliates to surviving families under the then
existing or applicable plans, programs, or arrangements and
policies of the Company and its affiliates.
(d) Disability. The Company may, at its option, terminate
----------
Executive's employment by written notice to Executive upon
Executive's becoming Disabled. Such termination shall not be
deemed to be a termination of Executive's employment in
anticipation of, on or after a Change in Control. If Executive's
employment is terminated on or after the occurrence of a Change in
Control by reason of Executive becoming Disabled, the Company
shall pay to Executive or Executive's legal representative the
full amount of the obligations owing or accrued to, vested in, or
earned by Executive through the date of termination, including,
but not limited to, the Accrued Obligations in accordance with the
plans, programs, or agreements under which the Accrued Obligations
were earned.
2.4 Good Reason.
-----------
(a) Except as provided in Section 2.4(b) below, as used in
this Agreement, the term "Good Reason" means a good faith
determination by Executive that any one or more of the following
events has occurred on or after the occurrence of a Change in
Control:
(i) a material change in the nature of Executive's
Office, including, but not limited to, Executive's
authorities, duties, responsibilities or status (including
offices, titles, reporting requirements and supervisory
functions), from those in effect immediately prior to the
Change in Control. Notwithstanding the foregoing, Executive
shall not assert as "Good Reason" the sole fact that the
portion of Executive's duties and responsibilities directly
attributable to a change in the ownership of the outstanding
capital stock or outstanding indebtedness of the Company,
the presence or absence of a trading market for any of the
securities
-7-
<PAGE>
<PAGE>
of the Company, any refinancing of indebtedness of the
Company or the incurrence of any additional indebtedness by
the Company has been eliminated (the "Eliminated Duties and
Responsibilities"), unless the performance of all or any
portion of the Eliminated Duties and Responsibilities
continue to be required; or
(ii) the relocation of Executive's place of
employment to a location in excess of thirty-five (35) miles
from the Company's current offices in Englewood, Colorado,
except for required travel on Company business to an extent
substantially equivalent to Executive's business travel
obligations immediately prior to the Change in Control; or
(iii) any reduction by the Company of Executive's
Base Salary, or a material reduction in Executive's bonus,
profit sharing, other incentive benefits or Additional
Compensation from those in effect immediately prior to the
Change in Control; or
(iv) the failure by the Company to increase
Executive's Base Salary in a manner consistent (both as to
frequency and percentage increase) with (A) the Company's
practices in effect immediately prior to the Change in
Control with respect to similarly positioned employees or
(B) the Company's practices implemented subsequent to the
Change in Control with respect to similarly positioned
employees, unless, in either case, such failure is due to
the failure by Executive to meet performance standards
applicable to similarly positioned employees; or
(v) the failure of the Company to continue in
effect Executive's participation in the Company's employee
benefit plans, programs, arrangements and policies, at a
level substantially equivalent in value to and on a basis
consistent with the relative levels of participation of
other similarly positioned employees; or
(vi) the failure of the Company to obtain from a
successor (including a successor to a material portion of
the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under
this Agreement; or
(vii) the failure of the Company to continue to
provide Executive with office space, related facilities and
support personnel (including, but not limited to,
administrative and secretarial assistance) that are both
commensurate in all material respects with the Office and
Executive's responsibilities to and position with the
Company immediately prior to the Change in Control and not
materially dissimilar to the office space, related
facilities and support personnel provided to other key
executive officers of the Company; or
-8-
<PAGE>
<PAGE>
(viii) if Executive served on the Board of Directors
of the Company prior to a Change in Control, (A) the removal
of Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of the Company, if
it is a surviving entity in the Change in Control
transaction, or (B) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be named as a director of any successor to the Company,
including any successor to a material portion of the
business or assets of the Company (each, a "Successor
Entity"), or (C) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be nominated for election to the Board of Directors of the
Company or any Successor Entity or (D) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be elected or reelected to the
Board of Directors of the Company or any such Successor
Entity, or (E) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be appointed to the Board of Directors of any entity or
entities that Control the Company or any Successor Entity
(each, a "Controlling Entity") or (F) the removal of
Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of any Controlling
Entity, or (G) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive to be
nominated for election to the Board of Directors of any
Controlling Entity, or (H) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive, to be elected or reelected to the Board of
Directors of any Controlling Entity, or (I) the removal of
the current Chairman of the Board of the Company from such
position with the Company, or the failure of the current
Chairman of the Board of the Company to be appointed to such
position with any Successor Entity or Controlling Entity
(other than a Successor Entity or Controlling Entity whose
common equity securities are publicly traded) or the removal
of the current Chairman of the Board of the Company from
such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) without,
in each case, Executive's prior written consent; or
(ix) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the
obligations of the Company under this Agreement; or
(x) the Company breaches any provision of this
Agreement and such breach is not cured within thirty (30)
days after the Company's receipt of notice thereof from
Executive.
(b) If, after the occurrence of a Change in Control,
Executive receives a written description from the Company of the
nature of Executive's Office thereafter, stating Executive's
authorities, duties, responsibilities, status, salary, bonus and
other employee benefits, or job location, and Executive accepts in
writing such new authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location ("New
Office") with the Company without determining that the New Office
causes a Good Reason as set forth in Section 2.4(a), then for the
remaining Term the New Office
-9-
<PAGE>
<PAGE>
shall be the authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location to be
used by Executive in determining whether Good Reason occurs
thereafter pursuant to Section 2.4(a).
2.5 Change in Control. As used herein, the term "Change in
-----------------
Control" shall mean the occurrence with respect to the Company of any of
the following events:
(a) a report on Schedule 13D is filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), is the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(b) an event of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Exchange Act or would have been required to be so
reported but for the fact that such event had been "previously
reported" as that term is defined in Rule 12b-2 promulgated under
the Exchange Act;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), shall
become the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(d) the stockholders of the Company shall approve any
liquidation or dissolution of the Company;
(e) the stockholders of the Company shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, acquisition or disposition of assets or other transaction
after the consummation of which any person, entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act)
would become the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly,
of 50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated
-10-
<PAGE>
<PAGE>
under the Exchange Act, in the case of rights to acquire common
stock or other securities);
(f) individuals who constitute the Board on the date
hereof ("Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least two-thirds of the directors
comprising the remaining members of the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of
this clause (f), considered as though such person were a member of
the Incumbent Board; or
(g) a recapitalization or other transaction or series of
related transactions occurs which results in a decrease by 50% or
more in the aggregate percentage ownership of the then outstanding
common stock of the Company or 50% or more in the combined voting
power of the outstanding securities of the Company held by the
stockholders of the Company immediately prior to giving effect
thereto (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants).
2.6 Legal Fees and Expenses. If Executive shall prevail in
-----------------------
any contest by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this
Agreement, the Company shall pay any and all reasonable attorneys',
accountants' and experts' fees and expenses and court costs incurred by
Executive as a result of any such contest. Otherwise, each party shall
bear his, her or its own expenses in connection with any such contest.
2.7 Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, arrangement or
policy provided by the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy constituting
Additional Compensation) and for which Executive and/or Executive's
family may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive and/or Executive's family may have under any
other agreements with the Company or any of its affiliates. Amounts
which are vested benefits or which Executive and/or Executive's family
is otherwise entitled to receive under any plan, program, arrangement,
or policy of the Company or any of its affiliates (including, but not
limited to, any plan, program, arrangement or policy constituting
Additional Compensation) at or subsequent to the date of termination of
Executive's employment under this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
2.8 Full Payment; No Mitigation Obligation. The Company's
--------------------------------------
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against Executive or others. In no
event shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.
-11-
<PAGE>
<PAGE>
2.9 Delivery of Release. Within thirty (30) days after
-------------------
termination of Executive's employment (other than due to death of
Executive) in anticipation of, on or after the occurrence of a Change in
Control, the Company shall provide to Executive, or Executive's legal
representative, a form of written release, which form shall be
reasonably satisfactory to the Company and generally consistent with the
form of release used by the Company prior to the earlier of (a) such
termination of employment, if the Company has terminated Executive's
employment in anticipation of a Change of Control, or (b) the occurrence
of the Change in Control. As a condition to the obligation of the
Company to make the payments provided for in this Agreement and
otherwise perform its obligations hereunder to Executive upon
termination of Executive's employment (other than due to death of
Executive) Executive, or Executive's legal representative, shall deliver
to the Company a written release, substantially in the form described
above and provided to Executive by the Company within such thirty (30)
day period, releasing the Company and its affiliates from any and all
liability related to Executive's employment or the termination thereof,
other than liabilities arising under this Agreement.
ARTICLE III
GENERAL PROVISIONS
3.1 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Colorado.
3.2 Assignability. This Agreement is personal to Executive
-------------
and without the prior written consent of the Company shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any
corporation, entity, individual or other person who is the successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to
perform, by a written agreement in form and substance satisfactory to
Executive, all of the obligations of the Company under this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
3.3 Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
3.4 Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement and understanding between Executive and the Company
and, except as otherwise expressly provided herein, supersedes any prior
agreements or understandings, whether written or oral, with respect to
the subject matter hereof. Except as may be otherwise provided herein,
this Agreement may not be amended or modified except by subsequent
written agreement executed by both parties hereto.
-12-
<PAGE>
<PAGE>
3.5 Multiple Counterparts. This Agreement may be executed in
---------------------
multiple counterparts, each of which shall constitute an original, but
all of which together shall constitute one Agreement.
3.6 Notices. Any notice provided for in this Agreement shall
-------
be deemed delivered upon deposit in the United States mails, registered
or certified mail, addressed to the party to whom directed at the
addresses set forth below or at such other addresses as may be
substituted therefor by notice given hereunder. Notice given by any
other means must be in writing and shall be deemed delivered only upon
actual receipt.
If to the Company:
Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Attention: President
If to Executive:
D. Robert Meyer
6055 South Chester Way
Englewood, CO 80111
3.7 Waiver. The waiver of any breach of any term or condition
------
of this Agreement shall not be deemed to constitute the waiver of any
breach of the same or any other term or condition of this Agreement.
3.8 Severability. In the event any provision of this Agreement
------------
is found to be unenforceable or invalid, such provision shall be severable
from this Agreement and shall not effect the enforceability or validity of
any other provision of this Agreement. If any provision of this Agreement
is capable to two constructions, one of which would render the provision
void and the other which would render the provision valid, then the
provision shall have the construction which renders it valid.
3.9 Other Severance Benefits. This Agreement replaces and
------------------------
supercedes any and all provisions of and benefits under any other
severance agreement or program under which Executive would otherwise be
entitled to severance benefits on or after the occurrence of a Change in
Control.
-13-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
MAIL-WELL, INC.
By: /s/ Gerald F. Mahoney
--------------------------------
Gerald F. Mahoney
Chairman and CEO
EXECUTIVE
/s/ D. Robert Meyer
------------------------------------
D. Robert Meyer
-14-
<PAGE>
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this "Agreement") is effective
as of November 15, 1999 (the "Effective Date"), by and between
MAIL-WELL, INC., a Colorado corporation (the "Company"), and
Michael A. Zawalski ("Executive").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued
dedication of Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined herein);
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of Executive and dilution of the
time of Executive, by virtue of the personal uncertainties and risks
created by a pending or threatened Change in Control, (ii) to encourage
Executive's full attention and dedication to the Company currently and
in the event of any threatened or pending Change in Control, and (iii)
to provide Executive with compensation arrangements in the event of a
Change in Control which provide Executive with financial security, which
are competitive with those of other corporations; and
WHEREAS, in order to accomplish the objectives described in the
two immediately preceding recitals, the Board desires to cause the
Company to enter into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Executive hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the following meanings:
(a) Accrued Obligations. The term "Accrued Obligations"
-------------------
shall have the meaning ascribed to such term in Section 2.3(a) of
this Agreement.
(b) Additional Compensation. The term "Additional
-----------------------
Compensation" shall mean, in addition to the Base Salary, the
following:
(i) all benefits under:
-1-
<PAGE>
<PAGE>
(A) any and all welfare benefit and similar
employee benefit plans, programs, arrangements, or
policies that are made available by the Company or any
of its affiliates to Executive immediately prior to
the first to occur of (1) a termination by the Company
of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control, including, but not
limited to, any hospitalization, medical,
prescription, dental, disability, salary continuance,
individual life insurance, executive life insurance,
group life insurance, accidental death insurance, and
travel accident insurance plans, programs,
arrangements, and policies; and
(B) any and all bonus, incentive, savings,
retirement, profit sharing, pension, stock option,
restricted stock, employee stock ownership,
supplemental executive retirement and other employee
benefit plans, programs, arrangements, and policies
that are made available by the Company or any of its
affiliates to Executive immediately prior to the first
to occur of (1) a termination by the Company of
Executive's employment with the Company in
anticipation of a Change in Control, or (2) the
occurrence of a Change in Control; and
(ii) annual vacations and sick leave made available
by the Company or any of its affiliates to Executive
immediately prior to the first to occur of (1) a termination
by the Company of Executive's employment with the Company in
anticipation of a Change in Control, or (2) the occurrence
of a Change in Control; and
(iii) fringe benefits in accordance with the fringe
benefit policies of the Company or any of its affiliates
made available by the Company or any of its affiliates to
Executive immediately prior to the first to occur of (1) a
termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or
(2) the occurrence of a Change in Control.
(c) Affiliate. The term "affiliate" or "affiliates"
---------
shall mean, when used with respect to any specified entity,
individual, or other person, any other entity, individual, or
other person which, directly or indirectly, through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with such specified entity, individual or person.
(d) Agreement. The term "Agreement" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(e) Base Salary. The term "Base Salary" shall mean
-----------
Executive's per annum base salary payable by the Company to
Executive as in effect immediately prior to the first to occur of
(1) a termination by the Company of Executive's employment with
the Company in anticipation of a Change in Control, or (2) the
occurrence of a Change in Control as the same may be increased
from time to time after the occurrence of a Change in Control.
-2-
<PAGE>
<PAGE>
(f) Board. The term "Board" shall have the meaning
-----
ascribed to such term in the first Whereas clause of this
Agreement.
(g) Cause. The term "Cause" shall mean (i) willful
-----
misconduct by Executive or gross neglect by Executive of
Executive's duties as an employee, officer or director of the
Company which continues for more than thirty (30) days after
Executive's receipt of written notice from the Board to Executive
specifically identifying the willful misconduct or gross neglect
of Executive and directing Executive to discontinue the same,
(ii) the commission by Executive of a crime constituting a felony,
or (iii) the commission by Executive of an act, other than an act
taken in good faith within the course and scope of Executive's
employment, which is directly detrimental to the Company and
exposes the Company to material liability.
(h) Change in Control. The term "Change in Control"
-----------------
shall have the meaning ascribed to such term in Section 2.5 of
this Agreement.
(i) COBRA Coverage. The term "COBRA Coverage" shall
--------------
have the meaning ascribed to such term in Section 2.3(b)(iii)(A)
of this Agreement.
(j) Code. The term "Code" shall mean the Internal
----
Revenue Code of 1986, as amended.
(k) Company. The term "Company" shall have the meaning
-------
ascribed to such term in the introductory paragraph and Section
3.2 of this Agreement.
(l) Control. The term "Control" and derivations thereof
-------
shall mean the ownership, directly or indirectly, of 50% or more
of the voting securities of an entity or other person or
possessing the power to direct or cause the direction of the
management and policies of such entity or other person, whether
through the ownership of voting securities, by contract or
otherwise.
(m) Controlling Entity. The term "Controlling Entity"
------------------
shall have the meaning ascribed to such term in Section
2.4(a)(viii)(E) of this Agreement.
(n) Disabled. The term "Disabled" shall mean a mental
--------
or physical impairment which, in the reasonable opinion of a
qualified doctor selected by the Company, renders Executive unable
to perform with reasonable diligence the ordinary functions and
duties of the Office on a full-time basis, which inability
continues for a period of not less than 180 consecutive days.
(o) Effective Date. The term "Effective Date" shall
--------------
have the meaning ascribed to such term in the introductory
paragraph of this Agreement.
(p) Eliminated Duties and Responsibilities. The term
--------------------------------------
"Eliminated Duties and Responsibilities" shall have the meaning
ascribed to such term in Section 2.4(a)(i) of this Agreement.
-3-
<PAGE>
<PAGE>
(q) Executive. The term "Executive" shall have the
---------
meaning ascribed to such term in the introductory paragraph of
this Agreement.
(r) Good Reason. The term "Good Reason" shall have the
-----------
meaning ascribed to such term in Section 2.4(a) of this Agreement.
(s) Incumbent Board. The term "Incumbent Board" shall
---------------
have the meaning ascribed to such term in Section 2.5(f) of this
Agreement.
(t) New Office. The term "New Office" shall have the
----------
meaning ascribed to such term in Section 2.4(b) of this Agreement.
(u) Office. The term "Office" shall mean President of
------
Mail-Well Label.
(v) Successor Entity. The term "Successor Entity" shall
----------------
have the meaning ascribed to such term in Section 2.4(a)(viii)(B)
of this Agreement.
(w) Term. The term "Term" shall have the meaning
----
ascribed to such term in Section 2.1 of this Agreement.
1.2 Other Terms. Other capitalized terms defined elsewhere
-----------
herein shall have the meanings ascribed to them in the definitions
therefor appearing elsewhere herein.
ARTICLE II
TERM AND TERMINATION
2.1 Term. The term of this Agreement ("Term") shall be for
----
three years commencing on the Effective Date; provided however, that if
a Change in Control occurs during such three year period, the Term shall
be for the period commencing on the Effective Date and ending on the
second anniversary of such Change in Control, notwithstanding such
three-year period.
2.2 Termination of Employment. Executive's employment with
-------------------------
the Company may be terminated by the Company prior to the end of the
Term, or may be terminated by Executive prior to the end of the Term, as
of the date which is thirty (30) days after written notice of
termination is given by either party to the other.
Any notice of termination given by the Company to Executive under
Section 2.2 above shall specify whether such termination is with or
without Cause. Any notice of termination given by Executive to the
Company under Section 2.2 above shall specify whether such termination
is made with or without Good Reason. A termination of Executive's
employment by the Company (other than due to Disability as provided in
Section 2.3(d)) shall be deemed to be in anticipation of a Change in
Control if a possible or potential Change in Control is a factor in the
decision of the Company to terminate the employment of Executive.
-4-
<PAGE>
<PAGE>
2.3 Obligations of the Company Upon Termination in Anticipation
-----------------------------------------------------------
of, on or after a Change In Control
- -----------------------------------
(a) Cause; Without Good Reason. If the Company terminates
--------------------------
Executive's employment with the Company in anticipation of, on or
after the occurrence of a Change in Control with Cause pursuant to
Section 2.2 hereof, or if Executive terminates Executive's
employment with the Company on or after the occurrence of a Change
in Control without Good Reason pursuant to Section 2.2 hereof,
Executive's employment with the Company shall terminate without
further obligations to Executive, other than those obligations
owing or accrued to, vested in, or earned by Executive through
the date of termination, including, but not limited to:
(i) to the extent not theretofore paid, the Base
Salary in effect at the time of such termination through the
date of termination; and
(ii) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not yet
paid by the Company;
(iii) all other amounts or benefits owing or accrued
to, vested in or earned by Executive through the date of
termination under the then existing or applicable plans,
programs, arrangements, and policies of the Company and its
affiliates, including, but not limited to, the Additional
Compensation;
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, such amounts and benefits specified in clauses (i),
(ii), and (iii) of this sentence, being hereinafter collectively
referred to as the "Accrued Obligations." The aggregate amount of
such obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not
limited to, the Accrued Obligations, shall be paid or caused to be
paid by the Company to Executive in accordance with the plans,
programs or agreements under which the Accrued Obligations were
earned.
(b) Good Reason; Without Cause. If Executive terminates
--------------------------
Executive's employment with the Company on or after the occurrence
of a Change in Control with Good Reason pursuant to Section 2.2
hereof, or if the Company terminates Executive's employment with
the Company without Cause in anticipation of, on or after the
occurrence of a Change in Control pursuant to Section 2.2 hereof:
(i) the Company shall pay the aggregate of the
following amounts to Executive in one lump sum within thirty
(30) days after the date of such termination or in a manner
and at such later time as specified by Executive, provided
that all such payments must be made no later than the last
day of the twenty-four (24) month period commencing on the
date of such termination:
(A) to the extent not theretofore paid,
Executive's Base Salary in effect at the time of such
termination (but prior to giving effect to any
reduction therein which precipitated such termination)
through the date of termination; and
-5-
<PAGE>
<PAGE>
(B) an amount equal to the sum of: (x) two
(2) times Executive's Base Salary in effect at the
time of such termination (but prior to giving effect
to any reduction therein which precipitated such
termination), (y) one (1) times the highest annual
bonus paid by the Company to Executive in respect of
the two (2) calendar years of the Company immediately
preceding such termination, and (z) the pro-rata share
of Executive's target bonus for the calendar year in
which such termination occurred based upon the
proportion that the number of complete months in such
calendar year up to the date of termination bears to
the complete calendar year.
(ii) In addition, the Company shall pay or cause to
be paid the aggregate of the following amounts to Executive
at the following times:
(A) in the case of compensation previously
deferred by Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, within thirty (30) days after
the date of such termination of employment or such
other period as may be required in accordance with any
such deferral arrangement; and
(B) in accordance with the terms of each such
plan, program, arrangement or policy, all other
amounts or benefits owing or accrued to, vested in, or
earned by Executive through the date of termination
under the then existing or applicable plans, programs,
arrangements, and policies of the Company and its
affiliates, including, but not limited to, all
Additional Compensation; and
(C) any and all other Accrued Obligations not
otherwise described in subsection (b)(i) above or
clauses (A) and (B) of this subsection (b)(ii); and
(iii) Executive shall receive the following additional
benefits:
(A) if Executive elects medical or dental
coverage under the Company's group medical or dental
plans pursuant to Section 4980B of the Code ("COBRA
Coverage"), the Company shall reimburse Executive,
promptly upon request by Executive, an amount equal to
the remainder, if any, resulting from the subtraction
of (1) the monthly medical and/or dental premium paid
each month by Executive for COBRA Coverage during the
first twelve (12) months of such COBRA Coverage (or
during such shorter period that COBRA Coverage for
Executive is in effect), from (2) the medical and/or
dental premium paid by Executive for the last month of
coverage under the Company's group medical or dental
plans immediately before Executive's employment with
the Company was terminated; and
-6-
<PAGE>
<PAGE>
(B) such individual outplacement service as is
appropriate for Executive's position for up to 24
months after termination of employment for a cost not
to exceed $10,000; and
(C) assistance to Executive to be provided by
a "Big Five" accounting firm selected by the Company
or other mutually agreeable accounting firm for
federal and state income tax planning and federal and
state income tax return preparation for Executive for
the calendar year in which such termination of
employment occurred.
(c) Death. If Executive's employment is terminated on
-----
or after the occurrence of a Change in Control by reason of
Executive's death, the Company shall pay to Executive's legal
representatives the full amount of the obligations owing or
accrued to, vested in, or earned by Executive through the date of
Executive's death, including, but not limited to, the Accrued
Obligations in accordance with the plans, programs, or agreements
under which the Accrued Obligations were earned. Anything in this
Agreement to the contrary notwithstanding, Executive's family
shall be entitled to receive benefits provided by the Company and
any of its affiliates to surviving families under the then
existing or applicable plans, programs, or arrangements and
policies of the Company and its affiliates.
(d) Disability. The Company may, at its option, terminate
----------
Executive's employment by written notice to Executive upon
Executive's becoming Disabled. Such termination shall not be deemed
to be a termination of Executive's employment in anticipation of,
on or after a Change in Control. If Executive's employment is
terminated on or after the occurrence of a Change in Control by
reason of Executive becoming Disabled, the Company shall pay to
Executive or Executive's legal representative the full amount of
the obligations owing or accrued to, vested in, or earned by
Executive through the date of termination, including, but not limited
to, the Accrued Obligations in accordance with the plans, programs,
or agreements under which the Accrued Obligations were earned.
(e) Notwithstanding any other provision in this
Agreement, Executive may, at Executive's sole and exclusive
option, elect to have the severance provisions contained in that
certain letter agreement dated May 17, 1999 (the "Letter
Agreement") apply under the circumstances described therein, to
the exclusion of the provisions of 2.3(b) of this Agreement. In
other words, Employee may elect, upon termination of employment
under Section 2.3(b) of this Agreement or his Letter Agreement,
but not both. Notwithstanding the foregoing, or the election by
Executive to avail himself of the provisions hereof in the
circumstances described herein, the terms of this Agreement shall
not otherwise alter, amend, modify or terminate any of the
provisions of the Letter Agreement.
2.4 Good Reason.
-----------
(a) Except as provided in Section 2.4(b) below, as used in
this Agreement, the term "Good Reason" means a good faith
determination by Executive that any one or more of the following
events has occurred on or after the occurrence of a Change in
Control:
-7-
<PAGE>
<PAGE>
(i) a material change in the nature of Executive's
Office, including, but not limited to, Executive's
authorities, duties, responsibilities or status (including
offices, titles, reporting requirements and supervisory
functions), from those in effect immediately prior to the
Change in Control. Notwithstanding the foregoing, Executive
shall not assert as "Good Reason" the sole fact that the
portion of Executive's duties and responsibilities directly
attributable to a change in the ownership of the outstanding
capital stock or outstanding indebtedness of the Company,
the presence or absence of a trading market for any of the
securities of the Company, any refinancing of indebtedness
of the Company or the incurrence of any additional
indebtedness by the Company has been eliminated (the
"Eliminated Duties and Responsibilities"), unless the
performance of all or any portion of the Eliminated Duties
and Responsibilities continue to be required; or
(ii) the relocation of Executive's place of employment
to a location in excess of thirty-five (35) miles from the
Company's current offices in Englewood, Colorado, except for
required travel on Company business to an extent substantially
equivalent to Executive's business travel obligations
immediately prior to the Change in Control; or
(iii) any reduction by the Company of Executive's
Base Salary, or a material reduction in Executive's bonus,
profit sharing, other incentive benefits or Additional
Compensation from those in effect immediately prior to the
Change in Control; or
(iv) the failure by the Company to increase
Executive's Base Salary in a manner consistent (both as to
frequency and percentage increase) with (A) the Company's
practices in effect immediately prior to the Change in
Control with respect to similarly positioned employees or
(B) the Company's practices implemented subsequent to the
Change in Control with respect to similarly positioned
employees, unless, in either case, such failure is due to
the failure by Executive to meet performance standards
applicable to similarly positioned employees; or
(v) the failure of the Company to continue in
effect Executive's participation in the Company's employee
benefit plans, programs, arrangements and policies, at a
level substantially equivalent in value to and on a basis
consistent with the relative levels of participation of
other similarly positioned employees; or
(vi) the failure of the Company to obtain from a
successor (including a successor to a material portion of
the business or assets of the Company) a satisfactory
assumption in writing of the Company's obligations under
this Agreement; or
-8-
<PAGE>
<PAGE>
(vii) the failure of the Company to continue to
provide Executive with office space, related facilities and
support personnel (including, but not limited to,
administrative and secretarial assistance) that are both
commensurate in all material respects with the Office and
Executive's responsibilities to and position with the
Company immediately prior to the Change in Control and not
materially dissimilar to the office space, related
facilities and support personnel provided to other key
executive officers of the Company; or
(viii) if Executive served on the Board of Directors
of the Company prior to a Change in Control, (A) the removal
of Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of the Company, if
it is a surviving entity in the Change in Control
transaction, or (B) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be named as a director of any successor to the Company,
including any successor to a material portion of the
business or assets of the Company (each, a "Successor
Entity"), or (C) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be nominated for election to the Board of Directors of the
Company or any Successor Entity or (D) the failure of
Executive or the current Chairman of the Board of the
Company, if not Executive, to be elected or reelected to the
Board of Directors of the Company or any such Successor
Entity, or (E) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive, to
be appointed to the Board of Directors of any entity or
entities that Control the Company or any Successor Entity
(each, a "Controlling Entity") or (F) the removal of
Executive or the current Chairman of the Board of the
Company, if not Executive, as a director of any Controlling
Entity, or (G) the failure of Executive or the current
Chairman of the Board of the Company, if not Executive to be
nominated for election to the Board of Directors of any
Controlling Entity, or (H) the failure of Executive or the
current Chairman of the Board of the Company, if not
Executive, to be elected or reelected to the Board of
Directors of any Controlling Entity, or (I) the removal of
the current Chairman of the Board of the Company from such
position with the Company, or the failure of the current
Chairman of the Board of the Company to be appointed to such
position with any Successor Entity or Controlling Entity
(other than a Successor Entity or Controlling Entity whose
common equity securities are publicly traded) or the removal
of the current Chairman of the Board of the Company from
such position with any Successor Entity or Controlling
Entity (other than a Successor Entity or Controlling Entity
whose common equity securities are publicly traded) without,
in each case, Executive's prior written consent; or
(ix) the Company notifies Executive of the Company's
intention not to observe or perform one or more of the
obligations of the Company under this Agreement; or
(x) the Company breaches any provision of this
Agreement and such breach is not cured within thirty (30)
days after the Company's receipt of notice thereof from
Executive.
-9-
<PAGE>
<PAGE>
(b) If, after the occurrence of a Change in Control,
Executive receives a written description from the Company of the
nature of Executive's Office thereafter, stating Executive's
authorities, duties, responsibilities, status, salary, bonus and
other employee benefits, or job location, and Executive accepts in
writing such new authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location ("New
Office") with the Company without determining that the New Office
causes a Good Reason as set forth in Section 2.4(a), then for the
remaining Term the New Office shall be the authorities, duties,
responsibilities, status, salary, bonus and other employee
benefits, or job location to be used by Executive in determining
whether Good Reason occurs thereafter pursuant to Section 2.4(a).
2.5 Change in Control. As used herein, the term "Change in
-----------------
Control" shall mean the occurrence with respect to the Company of any of
the following events:
(a) a report on Schedule 13D is filed with the Securities
and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), is the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(b) an event of a nature that would be required to be
reported in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Exchange Act or would have been required to be so
reported but for the fact that such event had been "previously
reported" as that term is defined in Rule 12b-2 promulgated under
the Exchange Act;
(c) any person, entity or group (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), other than (i) the
Company (or one of its subsidiaries) or (ii) any employee benefit
plan sponsored by the Company (or one of its subsidiaries), shall
become the beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(d) the stockholders of the Company shall approve any
liquidation or dissolution of the Company;
-10-
<PAGE>
<PAGE>
(e) the stockholders of the Company shall approve a
merger, consolidation, reorganization, recapitalization, exchange
offer, acquisition or disposition of assets or other transaction
after the consummation of which any person, entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act)
would become the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly,
of 50% or more of the outstanding shares of common stock of the
Company or 50% or more of the combined voting power of the then
outstanding securities of the Company (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in
the case of rights to acquire common stock or other securities);
(f) individuals who constitute the Board on the date
hereof ("Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least two-thirds of the directors
comprising the remaining members of the Incumbent Board (either by
a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of
this clause (f), considered as though such person were a member of
the Incumbent Board; or
(g) a recapitalization or other transaction or series of
related transactions occurs which results in a decrease by 50% or
more in the aggregate percentage ownership of the then outstanding
common stock of the Company or 50% or more in the combined voting
power of the outstanding securities of the Company held by the
stockholders of the Company immediately prior to giving effect
thereto (on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and warrants).
2.6 Legal Fees and Expenses. If Executive shall prevail in
-----------------------
any contest by the Company or others contesting the validity or
enforcement of, or liability under, any term or provision of this
Agreement, the Company shall pay any and all reasonable attorneys',
accountants' and experts' fees and expenses and court costs incurred by
Executive as a result of any such contest. Otherwise, each party shall
bear his, her or its own expenses in connection with any such contest.
2.7 Non-exclusivity of Rights. Nothing in this Agreement
-------------------------
shall prevent or limit Executive's continuing or future participation in
any benefit, bonus, incentive or other plan, program, arrangement or
policy provided by the Company or any of its affiliates (including, but
not limited to, any plan, program, arrangement or policy constituting
Additional Compensation) and for which Executive and/or Executive's
family may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive and/or Executive's family may have under any
other agreements with the Company or any of its affiliates. Amounts
which are vested benefits or which Executive and/or Executive's family
is otherwise entitled to receive under any plan, program, arrangement,
or policy of the Company or any of its affiliates (including, but not
limited to, any plan, program, arrangement or policy constituting
Additional Compensation) at or subsequent to the date of termination of
Executive's employment under this Agreement shall be payable in
accordance with such plan, program, arrangement or policy.
-11-
<PAGE>
<PAGE>
2.8 Full Payment; No Mitigation Obligation. The Company's
--------------------------------------
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against Executive or others. In no
event shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.
2.9 Delivery of Release. Within thirty (30) days after
-------------------
termination of Executive's employment (other than due to death of
Executive) in anticipation of, on or after the occurrence of a Change in
Control, the Company shall provide to Executive, or Executive's legal
representative, a form of written release, which form shall be
reasonably satisfactory to the Company and generally consistent with the
form of release used by the Company prior to the earlier of (a) such
termination of employment, if the Company has terminated Executive's
employment in anticipation of a Change of Control, or (b) the occurrence
of the Change in Control. As a condition to the obligation of the
Company to make the payments provided for in this Agreement and
otherwise perform its obligations hereunder to Executive upon
termination of Executive's employment (other than due to death of
Executive) Executive, or Executive's legal representative, shall deliver
to the Company a written release, substantially in the form described
above and provided to Executive by the Company within such thirty (30)
day period, releasing the Company and its affiliates from any and all
liability related to Executive's employment or the termination thereof,
other than liabilities arising under this Agreement.
ARTICLE III
GENERAL PROVISIONS
3.1 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Colorado.
3.2 Assignability. This Agreement is personal to Executive
-------------
and without the prior written consent of the Company shall not be
assignable by Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by Executive's legal representatives and heirs. This
Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any
corporation, entity, individual or other person who is the successor
(whether direct or indirect, by purchase, merger, consolidation,
reorganization, or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to
perform, by a written agreement in form and substance satisfactory to
Executive, all of the obligations of the Company under this Agreement.
As used in this Agreement, the term "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
3.3 Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
-12-
<PAGE>
<PAGE>
3.4 Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement and understanding between Executive and the Company
and, except as otherwise expressly provided herein, supersedes any prior
agreements or understandings, whether written or oral, with respect to
the subject matter hereof. Except as may be otherwise provided herein,
this Agreement may not be amended or modified except by subsequent
written agreement executed by both parties hereto.
3.5 Multiple Counterparts. This Agreement may be executed in
---------------------
multiple counterparts, each of which shall constitute an original, but
all of which together shall constitute one Agreement.
3.6 Notices. Any notice provided for in this Agreement shall
-------
be deemed delivered upon deposit in the United States mails, registered
or certified mail, addressed to the party to whom directed at the
addresses set forth below or at such other addresses as may be
substituted therefor by notice given hereunder. Notice given by any
other means must be in writing and shall be deemed delivered only upon
actual receipt.
If to the Company:
Mail-Well, Inc.
23 Inverness Way East
Englewood, Colorado 80112
Attention: President
If to Executive:
Michael A. Zawalski
14 Prairie Clover
Littleton, CO 80127
3.7 Waiver. The waiver of any breach of any term or condition
------
of this Agreement shall not be deemed to constitute the waiver of any
breach of the same or any other term or condition of this Agreement.
3.8 Severability. In the event any provision of this Agreement
------------
is found to be unenforceable or invalid, such provision shall be severable
from this Agreement and shall not effect the enforceability or validity
of any other provision of this Agreement. If any provision of this
Agreement is capable to two constructions, one of which would render the
provision void and the other which would render the provision valid,
then the provision shall have the construction which renders it valid.
3.9 Other Severance Benefits. This Agreement replaces and
------------------------
supercedes any and all provisions of and benefits under any other
severance agreement or program under which Executive would otherwise be
entitled to severance benefits on or after the occurrence of a Change in
Control.
-13-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
MAIL-WELL, INC.
By: /s/ Paul V. Reilly
--------------------------------
Paul V. Reilly
President and COO
EXECUTIVE
/s/ Michael A. Zawalski
-----------------------------------
Michael A. Zawalski
-14-
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement No.'s 333-60595, 333-59201 and 333-53679 of Mail-Well, Inc.
on Forms S-3 and Registration Statement No.'s 333-26743 and 333-61467
of Mail-Well, Inc. on Forms S-8 of our report dated January 26, 2000
(except Note 14, as to which the date is February 22, 2000), with
respect to the consolidated financial statements and schedules of
Mail-Well, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1999.
Ernst & Young LLP
Denver, Colorado
March 22, 2000
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No.'s 333-60595, 333-59201 and 333-53679 of Mail-Well, Inc. on Forms S-3
and Registration Statement No.'s 333-26743 and 333-61467 of Mail-Well,
Inc. on Forms 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, 1999.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 22, 2000
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No.'s 333-60595, 333-59201 and 333-53679 of Mail-Well, Inc. on Forms S-3
and Registration Statement No.'s 333-26743 and 333-61467 of Mail-Well,
Inc. on Forms 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, 1999.
Rubin, Brown, Gornstein & Co. LLP
St. Louis, MO
March 21, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,618
<SECURITIES> 54,396
<RECEIVABLES> 108,682
<ALLOWANCES> (2,874)
<INVENTORY> 144,756
<CURRENT-ASSETS> 334,129
<PP&E> 675,223
<DEPRECIATION> (143,067)
<TOTAL-ASSETS> 1,344,041
<CURRENT-LIABILITIES> 239,670
<BONDS> 653,090
<COMMON> 492
0
0
<OTHER-SE> 374,818
<TOTAL-LIABILITY-AND-EQUITY> 1,344,041
<SALES> 1,848,041
<TOTAL-REVENUES> 1,848,041
<CGS> 1,418,715
<TOTAL-COSTS> 1,685,748
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,034
<INTEREST-EXPENSE> 55,247
<INCOME-PRETAX> 107,830
<INCOME-TAX> 43,348
<INCOME-CONTINUING> 64,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,482
<EPS-BASIC> 1.32
<EPS-DILUTED> 1.20
</TABLE>
<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> 47,069
<RECEIVABLES> 160,651
<ALLOWANCES> (6,727)
<INVENTORY> 114,131
<CURRENT-ASSETS> 335,850
<PP&E> 546,681
<DEPRECIATION> (108,949)
<TOTAL-ASSETS> 1,127,956
<CURRENT-LIABILITIES> 183,652
<BONDS> 583,427
<COMMON> 488
0
0
<OTHER-SE> 298,887
<TOTAL-LIABILITY-AND-EQUITY> 1,127,956
<SALES> 1,504,686
<TOTAL-REVENUES> 1,504,686
<CGS> 1,185,373
<TOTAL-COSTS> 1,417,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,425
<INTEREST-EXPENSE> 38,127
<INCOME-PRETAX> 49,789
<INCOME-TAX> 23,948
<INCOME-CONTINUING> 25,841
<DISCONTINUED> 0
<EXTRAORDINARY> (4,132)
<CHANGES> 0
<NET-INCOME> 21,709
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.45
</TABLE>
