<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIG FLOWER PRESS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 13-376-8322
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
------------------------
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
MARK A. ANGELSON, ESQ.
EXECUTIVE PRESIDENT, GENERAL COUNSEL AND
SECRETARY OF THE BOARD OF DIRECTORS
BIG FLOWER PRESS HOLDINGS, INC.
3 EAST 54TH STREET
NEW YORK, NEW YORK 10022
(212) 521-1600
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
ROBERT E. BUCKHOLZ, JR., ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
AMOUNT OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
8 7/8% Senior Subordinated Notes
due July 1, 2007............................... $250,000,000 $994.375 $248,593,750 $75,331.44
</TABLE>
(1) Estimated Solely for the purpose of calculating the registration fee
pursuant to Rule 457(f); the proposed maximum offering price is based on the
average of the high and low bid prices of the Notes on July 24, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 25, 1997
OFFER TO EXCHANGE
8 7/8% SENIOR SUBORDINATED NOTES DUE JULY 1, 2007
FOR ALL OUTSTANDING 8 7/8% SENIOR SUBORDINATED NOTES DUE JULY 1, 2007
[LOGO]
of
BIG FLOWER PRESS HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1997 UNLESS EXTENDED.
Big Flower Press Holdings, Inc., a Delaware corporation (the "Company"), is
hereby offering (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 8 7/8% Senior Subordinated Notes due July 1, 2007 (the "Exchange Notes"),
which exchange has been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a registration statement of which this
Prospectus is a part (the "Registration Statement"), for each $1,000 principal
amount of its outstanding 8 7/8% Senior Subordinated Notes due July 1, 2007 (the
"Private Notes"), of which $250,000,000 in aggregate principal amount was issued
on June 20, 1997 and is outstanding as of the date hereof. The form and terms of
the Exchange Notes are identical in all material respects to those of the
Private Notes, except for certain transfer restrictions and registration rights
relating to the Private Notes and except for certain interest provisions related
to such registration rights. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be entitled to
the benefits of an Indenture dated as of June 20, 1997 governing the Private
Notes and the Exchange Notes (the "Indenture"). The Private Notes and the
Exchange Notes are sometimes referred to herein collectively as the "Notes." See
"The Exchange Offer" and "Description of the Notes."
The Exchange Notes will not be redeemable prior to July 1, 2002. On or after
July 1, 2002, the Exchange Notes are redeemable at the option of the Company, in
whole or in part, at the redemption prices set forth herein plus accrued and
unpaid interest to the date of redemption. In addition, prior to July 1, 2000,
the Company may, at its option, redeem up to an aggregate of 35% of the
principal amount of Exchange Notes originally issued with the net proceeds from
issuances of Equity Interests (as defined) of the Company at the redemption
price set forth herein plus accrued and unpaid interest to the date of
redemption; PROVIDED that at least $162.5 million in aggregate principal amount
of Exchange Notes remains outstanding after any such redemption.
Upon a Change of Control (as defined), (i) the Company will have the option,
at any time on or prior to July 1, 2002, to redeem the Exchange Notes, in whole
but not in part, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined), together with accrued and
unpaid interest to the date of redemption, and (ii) if the Company does not so
redeem the Exchange Notes or if such Change of Control occurs after July 1,
2002, the Company will be required to make an offer to repurchase the Exchange
Notes at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest to the date of repurchase. In addition, under certain
circumstances, the Company will be obligated to offer to repurchase the Exchange
Notes at 100% of the principal amount thereof plus accrued and unpaid interest,
to the date of repurchase, with the proceeds of certain Asset Sales (as
defined). See "Description of the Notes."
The Exchange Notes will be unsecured, senior subordinated obligations of the
Company, will rank PARI PASSU in right of payment with the 10 3/4% Notes (as
defined) and will be junior in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company (including borrowings under the
New Credit Facility, as defined). At March 31, 1997, on a PRO FORMA basis after
giving effect to the offering of the Private Notes (the "Private Note Offering")
and application of the proceeds thereof, consummation of the Tender Offer (as
defined) and the New Credit Facility, the Company would have had approximately
$230.7 million of Senior Indebtedness outstanding. The Company is a holding
company and, accordingly, the Exchange Notes will be effectively subordinated to
all liabilities of the Company's subsidiaries, including trade payables. At
March 31, 1997, on a PRO FORMA basis after giving effect to the consummation of
the Private Note Offering and application of the proceeds thereof and the New
Credit Facility, the Company's subsidiaries would have had approximately $285.4
million of liabilities (including trade payables and the New Credit Facility).
SEE "RISK FACTORS", ON PAGES 17 TO 20, FOR A DISCUSSION OF CERTAIN FACTORS
THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
---------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is , 1997
<PAGE>
NOTICE TO INVESTORS
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a holder thereof without compliance with the
registration and prospectus delivery provisions of the Securities Act, PROVIDED
that the holder is acquiring the Exchange Notes in the ordinary course of its
business, is not participating and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes and is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act.
Holders of Private Notes wishing to accept the Exchange Offer must represent to
the Company that such conditions have been met. Each broker-dealer who holds
Private Notes acquired for its own account as a result of market-making or other
trading activities and who receives Exchange Notes for its own account in
exchange for such Private Notes pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Company believes that none of the registered holders of the Private
Notes is an "affiliate" (as such term is defined in Rule 405 under the
Securities Act) of the Company.
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes acquired by such broker-dealer as a result of
market-making or other trading activities. The Letter of Transmittal states that
by acknowledging that it will deliver a prospectus in connection with any resale
of such Exchange Notes, and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed to make this Prospectus (as it may be
amended or supplemented) available to any such broker-dealer that requests
copies of such Prospectus in the Letter of Transmittal for use in connection
with any such resale for a period of up to 180 days after the Expiration Date.
See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Exchange Notes. There can be no assurance as to the liquidity of any market that
may develop for the Exchange Notes, the ability of holders to sell the Exchange
Notes, or the price at which holders would be able to sell the Exchange Notes.
The Company does not intend to apply for listing of the Exchange Notes for
trading on any securities exchange or for inclusion of the Exchange Notes in any
automated quotation system. The National Association of Securities Dealers, Inc.
("NASD") has designated the Private Notes as securities eligible for trading in
the Private Offerings, Resales and Trading through Automatic Linkages ("PORTAL")
market of the NASD (see "Price Range of the Private Notes") and the Company has
been advised that BT Securities Corporation, Credit Suisse First Boston
Corporation and Goldman, Sachs & Co. have heretofore acted as market makers for
the Private Notes. The Company has been advised by each of the aforesaid market
makers that it currently intends to make a market in the Exchange Notes. Future
trading prices of the Exchange Notes will depend on many factors, including
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities. Historically, the market for securities
similar to the Exchange Notes, including non-investment grade debt, has been
subject to disruptions that have caused substantial volatility in the prices of
such securities. There can be no assurance that any market for the Exchange
Notes, if such market develops, will not be subject to similar disruptions. See
"Risk Factors-- Lack of Public Market for Securities."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY, 3 EAST 54TH STREET, NEW YORK, NEW YORK 10022, ATTENTION: IRENE B.
FISHER, ESQ., TELEPHONE: (212) 521-1600. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE DAYS PRIOR TO THE
EXPIRATION DATE.
The following documents filed by the Company (File No. 1-4084) with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), are incorporated herein
by reference and are made a part hereof:
(i) The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996, filed with the Commission on March 26, 1997;
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, filed with the Commission on May 12, 1997;
(iii) The Company's Proxy Statement, dated May 13, 1997, filed with the
Commission on May 13, 1997; and
(iv) The Company's Current Report on Form 8-K filed with the Commission
on June 16, 1997.
(v) The Company's Current Report on Form 8-K filed with the Commission
on July 14, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering made hereby shall be deemed to be incorporated
herein by reference and to be a part hereof on and from the respective date of
filing of such documents.
Any statement contained herein or in a document incorporated, or deemed to
be incorporated, by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or incorporated herein by reference or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. Copies of all documents
incorporated by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents), will
be provided without charge to each person, including any beneficial owner, to
whom a copy of this Prospectus has been delivered upon the written or oral
request of such person.
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, is required to file reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of the reports, proxy statements and
other information can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates. In addition, all
reports filed by the Company via the Commission's Electronic Data Gathering and
Retrieval System (EDGAR) can be obtained from the Commission's Internet web site
located at http:\\www.sec.gov. The Common Stock of the Company is traded on The
New York Stock Exchange, and such reports, proxy statements and other
information concerning the Company also can be inspected at the offices of The
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
Big Flower was incorporated in Delaware in 1993. Big Flower's principal
executive offices are located at 3 East 54th Street, New York, New York 10022
and its telephone number is (212) 521-1600.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933. DISCUSSIONS CONTAINING SUCH
FORWARD-LOOKING STATEMENTS MAY BE FOUND IN "SUMMARY," "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS,"
AS WELL AS WITHIN THIS PROSPECTUS GENERALLY. IN ADDITION, WHEN USED IN THIS
PROSPECTUS THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL RESULTS IN THE FUTURE
COULD DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF MANY FACTORS OUTSIDE THE CONTROL OF THE COMPANY, INCLUDING
FLUCTUATIONS IN THE COST OF PAPER AND OTHER RAW MATERIALS USED BY THE COMPANY,
CHANGES IN THE ADVERTISING AND PRINTING MARKETS, THE FINANCIAL CONDITION OF THE
COMPANY'S CUSTOMERS, THE GENERAL CONDITION OF THE UNITED STATES ECONOMY, AND THE
MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY. CONSEQUENTLY, SUCH FORWARD-
LOOKING STATEMENTS SHOULD BE REGARDED SOLELY AS THE COMPANY'S CURRENT PLANS,
ESTIMATES AND BELIEFS. THE COMPANY DOES NOT UNDERTAKE AND SPECIFICALLY DECLINES
ANY OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE FORWARD-LOOKING
STATEMENTS TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH
STATEMENTS OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
4
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND TO THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO (THE
"CONSOLIDATED FINANCIAL STATEMENTS") INCORPORATED HEREIN BY REFERENCE. UNLESS
OTHERWISE INDICATED OR THE CONTEXT CLEARLY IMPLIES OTHERWISE, ALL REFERENCES IN
THE PROSPECTUS TO THE "COMPANY" OR "BIG FLOWER" REFER TO BIG FLOWER PRESS
HOLDINGS, INC. AND ITS SUBSIDIARIES.
THE COMPANY
Big Flower is a leading advertising and marketing services company which
provides integrated advertising solutions through its three principal operating
units: Treasure Chest Advertising Company, Inc. ("TC Advertising"), Webcraft
Technologies, Inc. ("Webcraft") and Laser Tech Color, Inc. ("Laser Tech"). The
Company and its subsidiaries are currently focused on the advertising insert,
direct mail and premedia sectors of the industry.
- TC ADVERTISING is a leading producer of advertising insert programs for
retailers, and produces TV listing magazines, Sunday comics, Sunday
magazines and special supplements for many of the most widely circulated
U.S. newspapers. In 1996, the Company produced more than 22 billion
advertising inserts, 1.6 billion Sunday comics, 140 million locally edited
Sunday magazines and 620 million TV listing guides. As the only
advertising insert producer offering a national network of both heatset
and cold web offset production facilities and one of the largest U.S.
consumers of newsprint and ink, TC Advertising can address the diverse
needs of its customers and achieve significant cost and distribution
advantages. The Company believes that the advertising inserts industry
sector generates revenues of $8 to $9 billion per year, with approximately
50% of the dollars spent on the production of inserts and the balance on
distribution of the product.
- WEBCRAFT is a market leader in producing highly customized direct mail and
specialty advertising products such as commercial games and fragrance
samplers. Webcraft derives the majority of its revenues from the
integrated production of personalized advertising mailings, a marketing
medium that has exceeded the annual growth rate for overall advertising
spending for the period 1991-1996. The Company believes that in the
individualized industry sector in which Webcraft operates, customized
direct mail expenditures account for $20.8 billion per year, with
approximately 33% going to the production of direct mail and the remainder
to other services, including agency services, data analysis and
manipulation and creative development.
- LASER TECH is a leading provider of outsourced, digital premedia and
content management services to retailers, advertising agencies, and
consumer products companies. Services and technologies offered by Laser
Tech include digital photography studios, leading-edge desktop publishing
and client/ server software and hardware, turnkey catalog and advertising
insert production, and digital image management systems for high speed
image retrieval. The Company believes that the premedia industry sector
exceeds $5.3 billion annually, and will continue to grow with the
emergence of new distribution technologies such as CD-ROM and the World
Wide Web that use digitized images.
BUSINESS STRATEGY
The Company's strategic objective is to enhance its position as an
integrated provider of a diverse range of advertising and marketing services
across a broad spectrum of media. Through internal growth and acquisitions, Big
Flower aims to broaden its technology and services in a manner that allows its
subsidiaries to interact dynamically to create both new services for existing
customers and new customers for its traditional products.
Marketers aim to reach target customers with the most effective message and
the greatest possible impact. Technological advancements increasingly allow
marketers to understand customer preferences and
5
<PAGE>
to differentiate and individualize advertising messages. Big Flower's strategy
is to assist its customers by providing a broad array of advertising and
marketing services which capitalize on these advancements. Key elements of this
strategy include the following:
PROVIDE INTEGRATED ADVERTISING SOLUTIONS FOR CUSTOMERS. The Company
believes that by combining the products and services of TC Advertising, Webcraft
and Laser Tech it can work with customers to develop cost-effective and
comprehensive solutions to their particular advertising and marketing needs. Big
Flower has the expertise to work with customers from inception of an advertising
concept through layout design and production, to targeting and distribution of
the printed product, thereby helping customers achieve their advertising goals
in a cost-effective manner. For example, for a recent store opening by a home
improvement retailer, Big Flower presented the customer with a five-piece plan
that combined TC Advertising's and Webcraft's capabilities. The campaign
involved two "teaser" direct mail items, followed by an individualized,
highly-customized direct mail package that included a pre-approved credit card
for the customer. The fourth piece was a 72-page advertising brochure
distributed through the local newspaper, followed by a large, glossy advertising
insert. The Company believes that by integrating its digital premedia services,
advertising insert capabilities, geographic and demographic insert targeting
programs and highly customized direct mail and specialty products, it offers its
customers certain solutions not offered by the Company's competitors.
DEVELOP TARGETED ADVERTISING PROGRAMS. The Company's customers are
increasingly targeting their advertising messages based on more detailed
knowledge of consumers and what they buy. Big Flower has responded to this trend
in all of its businesses:
- TC ADVERTISING'S Market Reach system enables the Company to attract new
categories of customers by providing them with tools to utilize the
targeted distribution capabilities of major market newspapers. Advertisers
can customize their advertising to match the demographic characteristics
and other targeting requirements of over 12,000 newspaper delivery zones
in the nation's top 150 designated market areas.
- WEBCRAFT'S highly individualized, multiple component direct mail campaigns
utilize information refined from customers' databases as well as
Webcraft's own expertise in direct mail personalization techniques.
- LASER TECH'S image management expertise allows customers' images to be
stored, archived, and retrieved to and from any remote location. Images
stored in Laser Tech's system can have multiple applications across a
variety of advertising media. For example, in addition to their use in
print media, images are readily accessible for use in Web sites and
inclusion in CD-ROMs. The Company's Digital Dimensions business unit also
provides consulting and development services to large clients, assisting
them in the development of high impact, commercially effective Web sites.
MAXIMIZE CROSS-SELLING OPPORTUNITIES. Currently, TC Advertising serves a
large customer base of regional and national retailers, while Webcraft's and
Laser Tech's customer base consists mainly of national manufacturers,
advertising agencies and marketing companies. Big Flower has established
employee incentive compensation programs to promote cross-selling of the entire
Big Flower products and services lines. For example, TC Advertising has begun
providing advertising insert programs to Webcraft's direct mail customers, while
Webcraft has begun to deliver targeted direct mail advertising on behalf of TC
Advertising's retail clients. TC Advertising also has begun to provide
Webcraft's commercial games products to its retail customers. In addition,
certain premedia functions previously performed by customers of TC Advertising
and Webcraft are now performed by Laser Tech under facilities management
agreements.
CAPITALIZE ON NATIONAL DIGITAL WORKFLOW PLATFORM. The Company continues to
optimize its nationwide digital network capability that employs
telecommunications technologies to connect TC Advertising's and Laser Tech's
facilities, enabling the Company and its customers to conceive, manipulate,
transmit, produce
6
<PAGE>
and distribute their advertising concepts seamlessly on a national scale. The
platform development is based on open-standard digital communications
technologies and is continuously refined to meet a customer's particular needs.
It currently connects customers and the production centers at all Laser Tech
facilities and 14 of the TC Advertising production facilities. Each TC
Advertising production facility is equipped to meet the rapid output
requirements of highly-versioned insert advertising programs, using efficient
state of the art, digital page processing systems.
PURSUE STRATEGIC ACQUISITIONS. Big Flower continues to review opportunities
to extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Laser Tech business
units. In addition, Big Flower adds value to strategic acquisitions by
identifying operating synergies, effecting cost savings and improving
efficiency. Since its initial acquisitions of TC Advertising, Laser Tech and
Webcraft, Big Flower has expanded its products and services through a number of
strategic acquisitions that increased the span and scope of each of these
industry sectors, as summarized in the table below:
<TABLE>
<CAPTION>
BUSINESS UNIT BUSINESS ACQUIRED DATE STRATEGIC SIGNIFICANCE
- ----------------- -------------------- ------------ --------------------------------------------------
<S> <C> <C> <C> <C>
TC KTB Associates, April 1994 - Increased TC Advertising's capacity and broadened
Advertising Inc., and Retail its customer base in the advertising insert
Graphics Holding industry sector
Company
PrintCo., Inc. October 1996 - Added significant retail accounts and new
production capacity
Webcraft Scanforms, Inc. October 1996 - Expanded customer base among leading financial
services and publishing companies
- Added additional high-quality laser
personalization and short-run capabilities
Laser Tech Pacific Color October 1996 - Enhanced expertise in digital premedia services
Connection, Inc.
- Expanded presence in California
- Added internet production services
- Expanded product lines to include large format
advertising products
Designer Color December - Added capability to produce interactive multimedia
Systems, Ltd. 1996 systems for electronic catalogs and ordering
systems
Digital Dimensions, December - Enhanced digital imaging services platform
Inc. 1996
- Added capability to provide Web site design and
execution
</TABLE>
7
<PAGE>
RECENT DEVELOPMENTS
On November 28, 1995, TC Advertising entered into a six year $350.0 million
revolving credit facility, which was amended on March 19, 1996 to add a $75.0
million term loan (the "Old Credit Facility"). On June 12, 1997, the Company (i)
entered into a new credit facility (as amended to date, the "New Credit
Facility") with a group of lenders providing up to $475.0 million of revolving
credit loans and (ii) terminated the Old Credit Facility and repaid its loans
thereunder. The New Credit Facility provides greater borrowing capacity on more
favorable terms, including lower interest rates, and covenant terms which the
Company believes provide greater financial flexibility. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources".
On June 16, 1997, the Company announced the completion of a secondary
offering of 5,958,524 shares of its common stock. On July 15, 1997, a further
750,000 shares of the Company's common stock were sold pursuant to the
underwriters' over-allotment option. In the offering (including the
underwriters' over-allotment option), Apollo Big Flower Partners L.P. sold
4,470,922 shares, BT Investment Partners, Inc. sold 1,738,692 shares and certain
other stockholders who acquired their shares in connection with Big Flower's
acquisitions of their businesses sold 498,910 shares. Each of Apollo Big Flower
Partners L.P. and BT Investment Partners, Inc. sold its entire holding in this
offering. Neither the Company's Chairman of the Board, R. Theodore Ammon, nor
members of senior management sold any shares in the offering.
On June 24, 1997, the Company commenced a tender offer (the "Tender Offer")
for all of the Company's outstanding 10 3/4% Senior Subordinated Notes due 2003
(the "10 3/4% Notes"). The Tender Offer expired on July 23, 1997. An aggregate
principal amount of $126.7 million was tendered by holders of the 10 3/4% Notes
and accepted for payment by the Company, the funding for which came from
borrowings under the New Credit Facility.
8
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........................... The Company is hereby offering to exchange
$1,000 principal amount of Exchange Notes for
each $1,000 principal amount of Private Notes
that are properly tendered and accepted. The
Company will issue Exchange Notes on or as
promptly as practicable after the Expiration
Date. As of the date hereof, there is
$250,000,000 aggregate principal amount of
Private Notes outstanding. See "The Exchange
Offer."
Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Private
Notes may be offered for resale, resold and
otherwise transferred by a holder thereof
without compliance with the registration and
prospectus delivery provisions of the
Securities Act, PROVIDED that the holder is
acquiring Exchange Notes in the ordinary
course of its business, is not participating
and has no arrangement or understanding with
any person to participate in the distribution
of the Exchange Notes and is not an
"affiliate" of the Company within the meaning
of Rule 405 under the Securities Act. Each
broker-dealer who holds Private Notes
acquired for its own account as a result of
market-making or other trading activities and
who receives Exchange Notes pursuant to the
Exchange Offer for its own account in
exchange therefor must acknowledge that it
will deliver a prospectus in connection with
any resale of such Exchange Notes.
This Prospectus, as it may be amended or
supplemented from time to time, may be used
by a broker-dealer in connection with resales
of Exchange Notes received in exchange for
Private Notes acquired by such broker-dealer
as a result of market-making activities or
other trading activities. The Letter of
Transmittal that accompanies this Prospectus
states that by so acknowledging and by
delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Any holder of Private Notes
who tenders in the Exchange Offer with the
intention to participate, or for the purpose
of participating, in a distribution of the
Exchange Notes could not rely on the
above-referenced position of the staff of the
Commission and, in the
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
absence of an exemption therefrom, would have
to comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. Failure to comply with such
requirements in such instance could result in
such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company. See "The Exchange
Offer--Resale of the Exchange Notes."
Registration Rights Agreement................ The Private Notes were sold by the Company on
June 20, 1997 to BT Securities Corporation,
Credit Suisse First Boston Corporation and
Goldman, Sachs & Co. (collectively, the
"Initial Purchasers") pursuant to a Purchase
Agreement, dated June 16, 1997, by and among
the Company and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the
Purchase Agreement, the Company and the
Initial Purchasers entered into a
Registration Rights Agreement, dated as of
June 20, 1997 (the "Registration Rights
Agreement"), which grants the holders of the
Private Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy such rights, which will
terminate upon the consummation of the
Exchange Offer. The holders of the Exchange
Notes will not be entitled to any exchange or
registration rights with respect to the
Exchange Notes. See "The Exchange
Offer--Termination of Certain Rights." The
Company will not receive any proceeds from,
and has agreed to bear the expenses of, the
Exchange Offer.
Expiration Date.............................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997,
unless the Exchange Offer is extended by the
Company in its sole discretion, in which case
the term "Expiration Date" shall mean the
latest date and time to which the Exchange
Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions;
Amendments."
Procedures for Tendering Private Notes....... Each holder of Private Notes wishing to
accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Private Notes and any other required
documentation to State Street Bank and Trust
Company, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
executing the Letter of Transmittal, the
holder will represent to and agree with the
Company that, among other things, (i) the
Exchange Notes to be acquired by such holder
of Private Notes in connection with the
Exchange Offer are being acquired by such
holder in the ordinary course of its
business, (ii) such holder has no arrangement
or understanding with any person to
participate in a distribution of the Exchange
Notes, and (iii) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder
is a broker-dealer that will receive Exchange
Notes for its own account in exchange for
Private Notes that were acquired as a result
of market-making or other trading activities,
such holder will be required to acknowledge
in the Letter of Transmittal that such holder
will deliver a prospectus in connection with
any resale of such Exchange Notes; however,
by so acknowledging and by delivering a
prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. See The
Exchange Offer Procedures for Tendering.
Special Procedures for Beneficial Owners..... Any beneficial owner whose Private Notes are
held through a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender such Private Notes in the
Exchange Offer should contact such
intermediary promptly and instruct such
intermediary to tender on such beneficial
owner's behalf. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery Procedures............... Holders of Private Notes who wish to tender
their Private Notes and whose Private Notes
are not immediately available or who cannot
deliver their Private Notes, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
must tender their Private Notes according to
the guaranteed delivery procedures set forth
under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private Notes and Subject to the satisfaction or waiver of the
Delivery of the Exchange Notes............. conditions to the Exchange Offer, the Company
will accept for exchange any and all Private
Notes that are properly tendered in the
Exchange Offer prior to the Expiration Date.
The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the
earliest practicable date following the
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights............................ Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. See
"The Exchange Offer--Withdrawal of Tenders."
Certain Federal Income Tax Considerations.... For a discussion of certain federal income
tax considerations relating to the exchange
of the Exchange Notes for the Private Notes,
see "Certain United States Federal Income Tax
Considerations."
Exchange Agent............................... State Street Bank and Trust Company is
serving as the Exchange Agent in connection
with the Exchange Offer. State Street Bank
and Trust Company also serves as trustee
under the Indenture.
</TABLE>
12
<PAGE>
THE NOTES
The Exchange Offer applies to $250,000,000 aggregate principal amount of the
Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes except that the
exchange will have been registered under the Securities Act, and, therefore, the
Exchange Notes will not bear legends restricting the transfer thereof and
holders of the Exchange Notes will not be entitled to any of the registration
rights of holders of the Private Notes under the Registration Rights Agreement,
which rights will terminate upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same indebtedness as the Private Notes (which
they replace) and will be issued under, and be entitled to the benefits of, the
Indenture. For further information and for definitions of certain capitalized
terms used below, see "Description of the Notes."
<TABLE>
<S> <C>
Securities Offered........................... $250,000,000 principal amount of the
Company's 8 7/8% Senior Subordinated Notes
due 2007.
Maturity Date................................ July 1, 2007.
Interest Payment Dates....................... January 1 and July 1, commencing January 1,
1998.
Optional Redemption.......................... The Notes are not redeemable prior to July 1,
2002. Thereafter, the Notes will be
redeemable at the option of the Company, in
whole or in part, at the redemption prices
set forth herein plus accrued and unpaid
interest to the date of redemption. In
addition, prior to July 1, 2000, the Company
may, at its option, redeem up to an aggregate
of 35% of the principal amount of Notes
originally issued with the net proceeds from
issuances of Equity Interests (as defined) of
the Company at the redemption price set forth
herein plus accrued and unpaid interest to
the date of redemption; PROVIDED that at
least $162.5 million in aggregate principal
amount of Notes remains outstanding after any
such redemption.
Change of Control............................ Upon a Change of Control (as defined), (i)
the Company will have the option, at any time
on or prior to July 1, 2002, to redeem the
Notes, in whole but not in part, at a
redemption price equal to 100% of the
principal amount thereof plus the Applicable
Premium (as defined), together with accrued
and unpaid interest to the date of
redemption, and (ii) if the Company does not
so redeem the Notes or if such Change of
Control occurs after July 1, 2002, the
Company will be required to make an offer to
repurchase the Notes at a price equal to 101%
of the principal amount thereof plus accrued
and unpaid interest to the date of
repurchase. A Change of Control shall not be
deemed to have occurred if, after giving
effect to the transactions giving rise to the
events or circumstances which would trigger a
Change of Control, the Company's Fixed Charge
Coverage Ratio (as defined) is 3.0 to 1 or
greater.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Ranking...................................... The Notes are unsecured, senior subordinated
obligations of the Company and are junior in
right of payment to all existing and future
Senior Indebtedness (as defined) of the
Company (including borrowings under the New
Credit Facility). At March 31, 1997, on a PRO
FORMA basis, after giving effect to the
Private Notes Offering and the application of
the proceeds thereof, the New Credit Facility
and the Tender Offer, the Company would have
had approximately $480.7 million of
indebtedness, $230.7 million of which would
have been Senior Indebtedness and $250.0
million of which would have been subordinated
indebtedness. The Company is a holding
company and, accordingly, the Notes are
effectively subordinated to all liabilities
of the Company's subsidiaries, including
trade payables. At March 31, 1997, on a PRO
FORMA basis after giving effect to the
Private Notes Offering and the application of
the proceeds thereof and the New Credit
Facility, the Company's subsidiaries would
have had approximately $285.4 million of
liabilities (including trade payables and the
New Credit Facility).
Offer to Repurchase.......................... The Company is required in certain
circumstances to make an offer to repurchase
Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest to the date of repurchase,
with the net cash proceeds of certain Asset
Sales (as defined).
Restrictive Covenants........................ The Indenture contains covenants that, among
other things, limit the ability of the
Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness,
pay certain dividends or make certain other
restricted payments and investments, create
liens, or enter into certain transactions
with affiliates, and limit the ability of the
Company to merge, consolidate or transfer
substantially all of its assets and to impose
restrictions on the ability of the Company's
Restricted Subsidiaries to pay dividends or
to make certain payments to the Company.
</TABLE>
RISK FACTORS
See "Risk Factors", beginning on page 17, for a discussion of certain
factors that should be considered in evaluating an investment in the Notes.
14
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth summary financial data of predecessor TC
Advertising prior to its acquisition by Big Flower ("Predecessor TC
Advertising") and of Big Flower and its subsidiaries (including TC Advertising)
following Big Flower's acquisition of TC Advertising. On March 21, 1996, Big
Flower's Board of Directors elected to change the Company's fiscal year from a
12-month period ending June 30th to a calendar year, effective with the period
ended December 31, 1995. The summary financial data as of and for each of the
two fiscal years in the periods ended June 30, 1993 and for the 42 days ended
August 11, 1993 were derived from the audited consolidated financial statements
of Predecessor TC Advertising. The summary financial data of Big Flower as of
and for the 323 day period ended June 30, 1994, the fiscal year ended June 30,
1995, the six months ended December 31, 1995 and the year ended December 31,
1996 were derived from the audited financial statements of Big Flower, restated
for the merger with Scanforms, Inc. ("Scanforms"). The summary financial data
for the three-month periods ended March 31, 1996 and 1997 were derived from the
Company's unaudited condensed consolidated interim financial statements for such
periods. On October 4, 1996, Big Flower consummated the acquisition of Scanforms
in a transaction accounted for as a pooling of interests. Accordingly, the Big
Flower financial information has been restated for prior periods to include the
results of Scanforms for all periods presented. For additional information, see
the Consolidated Financial Statements and the notes thereto. The summary
financial data should also be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR TC ADVERTISING BIG FLOWER
--------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THREE
SIX MONTH MONTHS
YEAR ENDED 42 DAYS 323 DAYS YEAR TRANSITION ENDED
JUNE 30, ENDED ENDED ENDED PERIOD ENDED YEAR MARCH 31,
-------------------- AUGUST 11, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, ---------
1992 1993 1993 1994 1995 1995 1996 1996
--------- --------- ----------- ----------- --------- ------------- ------------ ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales..................... $ 536,113 $ 555,013 $ 59,584 $ 587,630 $ 920,149 $ 546,840 $1,201,860 $ 229,128
Operating income.............. 23,475 22,436 665 25,488 50,712 39,739 69,343 5,018
Interest expense (a).......... 9,249 6,792 578 19,735 37,452 19,072 36,165 7,587
Income (loss) before income
taxes....................... 7,696 10,204 (228) (549) 5,268 12,694 4,998 (9,046)
Income (loss) before
extraordinary item.......... 4,196 4,685 (139) (3,277) (1,612) 6,491 (3,285) (4,423)
Extraordinary item, net (b)... -- -- -- -- -- (19,248) (2,078) (1,892)
Net income (loss)............. 4,196 4,685 (139) (3,277) (1,612) (12,757) (5,363) (6,315)
Average shares outstanding.... -- -- -- 11,294 12,458 13,919 18,315 18,065
Ratio of earnings to fixed
charges (c)................. 1.5x 1.7x --(d) --(d) 1.1x 1.5x 1.1x --(d)
OTHER DATA:
EBITDA(e)..................... $ 37,232 $ 34,560 $ 1,901 $ 54,238 $ 93,699 $ 58,372 $ 122,588 $ 15,068
Capital expenditures.......... 7,354 6,967 1,280 6,133 8,496 16,812 55,391 9,468
PRO FORMA DATA (F):
EBITDA........................ -- -- -- -- -- -- $ 142,338 $ 24,538
Interest expense.............. -- -- -- -- -- -- 38,203 --
Ratio of EBITDA to interest
expense..................... -- -- -- -- -- -- 3.7x --
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............... $ 4,567 $ (3,597) -- $25,198 $ 34,173 $ 29,797 $(30,821)(g) $(42,107)(g)
Net property, plant and
equipment................... 84,238 62,850 -- 152,306 137,081 145,323 296,426 239,643
Total assets.................. 185,710 160,356 -- 521,461 502,939 573,393 749,742 684,040
Long-term debt, net of current
portion..................... 73,183 34,485 -- 331,940 301,935 274,161 430,766 390,744
Redeemable preferred stock of
a subsidiary................ -- -- -- 16,913 19,357 -- -- --
Common stockholders' equity... 27,595 32,663 -- 19,449 16,593 84,476 96,350 82,688
<CAPTION>
<S> <C>
1997
---------
<S> <C>
OPERATING DATA:
Net sales..................... $ 297,501
Operating income.............. 15,576
Interest expense (a).......... 9,710
Income (loss) before income
taxes....................... 3,296
Income (loss) before
extraordinary item.......... 1,681
Extraordinary item, net (b)... --
Net income (loss)............. 1,681
Average shares outstanding.... 19,327
Ratio of earnings to fixed
charges (c)................. 1.2x
OTHER DATA:
EBITDA(e)..................... $ 31,106
Capital expenditures.......... 15,343
PRO FORMA DATA (F):
EBITDA........................ $ 31,106
Interest expense.............. 9,875
Ratio of EBITDA to interest
expense..................... 3.2x
BALANCE SHEET DATA (AT PERIOD
END):
Working capital............... $ (12,905)(g)
Net property, plant and
equipment................... 297,343
Total assets.................. 735,096
Long-term debt, net of current
portion..................... 450,390
Redeemable preferred stock of
a subsidiary................ --
Common stockholders' equity... 95,792
</TABLE>
- ------------------------
(a) Interest expense excludes amortization of deferred financing fees for all
periods. Interest expense for the year ended December 31, 1996 includes the
amortization of interest rate swap fees of $1,200,000.
(b) Big Flower's net loss for the six months ended December 31, 1995 includes an
extraordinary loss, net of tax, of $19,248,000 on early extinguishment of
debt and termination of a swap agreement. Big Flower's net loss for the
quarter ended March 31, 1996 includes an extraordinary loss, net of tax,
15
<PAGE>
of $1,892,000 on early extinguishment of debt and Big Flower's net loss for
the year ended December 31, 1996 includes an extraordinary loss, net of tax,
of $2,078,000 on early extinguishment of debt.
(c) For purposes of this computation, fixed charges consist of interest expense
and amortization of deferred financing fees, capitalized interest and one-
third of rental expenses, representative of that portion of rental expenses
attributable to interest and preferred stock dividends. Earnings consist of
income before income taxes plus fixed charges (other than capitalized
interest, but including the amortization thereof).
(d) Earnings were inadequate to cover fixed charges by $0.2 million for
predecessor TC Advertising for the 42 days ended August 11, 1993 and $0.8
million and $9.1 million for Big Flower for the 323 days ended June 30, 1994
and the three months ended March 31, 1996, respectively. Adjusted to
eliminate non-cash charges of depreciation and amortization of $28.8 million
and $10.1 million for the 323 days ended June 30, 1994 and the three months
ended March 31, 1996, respectively, such earnings would have exceeded fixed
charges by $27.9 million and $1.0 million, respectively.
(e) "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles and merger costs. EBITDA does not include expenses associated
with the A/R Securitization and is presented here to provide additional
information about the Company's ability to meet its future debt service,
capital expenditure and working capital requirements and should not be
construed as a better indicator of operating performance than income from
operations as determined in accordance with generally accepted accounting
principles ("GAAP"), or a better indicator of liquidity than cash flow from
operating activities as determined in accordance with GAAP.
(f) Pro forma EBITDA for the periods presented reflect the 1996 Acquisitions (as
defined) as if they were consummated on January 1, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations." Pro forma interest expense reflects the
Private Notes Offering, the New Credit Facility and the application of the
proceeds of each of the foregoing, as if such Private Notes Offering and New
Credit Facility had occurred at the beginning of each period presented, and
the Tender Offer.
(g) On October 4, 1996, the Company entered into the A/R Securitization (as
defined). Between March 19, 1996 and October 4, 1996, the Company operated
under a bridge facility with similar terms and conditions as the A/R
Securitization and, accordingly, results for periods subsequent to March 19,
1996 reflect the effects of those facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
16
<PAGE>
RISK FACTORS
THE RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION APPEARING
IN THIS PROSPECTUS SHOULD BE CAREFULLY CONSIDERED BEFORE DECIDING TO SURRENDER
THE PRIVATE NOTES IN EXCHANGE FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
LEVEL OF INDEBTEDNESS
At March 31, 1997, on a PRO FORMA basis after giving effect to the Private
Notes Offering and the application of the proceeds thereof and the New Credit
Facility, the Company would have had, on a consolidated basis, approximately
$480.7 million of indebtedness, including capitalized lease obligations. The
Company may also borrow an additional amount of up to $65.2 million without
restriction under the New Credit Facility. In addition, subject to the
restrictions in the New Credit Facility and the Indenture, the Company may incur
additional indebtedness from time to time to finance acquisitions or capital
expenditures or for other purposes. In addition, at March 31, 1997, the Company
had significant commitments under operating leases and approximately $89.3
million was outstanding under the A/R Securitization (as defined). See Notes 5
and 10 of the Notes to the Consolidated Financial Statements.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a significant portion of the Company's cash
flow from operations must be dedicated to debt service and will not be available
for other purposes; (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures or
acquisitions may be limited; and (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in its industry and economic
conditions generally. Certain of the Company's competitors currently operate on
a less leveraged basis, and have significantly greater operating and financing
flexibility than the Company.
HOLDING COMPANY STRUCTURE
The Company is a holding company and, accordingly, its only material assets
consist of the outstanding shares of capital stock of its subsidiaries. The
Company is the sole obligor on the Notes, and the Notes are not guaranteed by
any subsidiary of the Company. Therefore, the Notes are structurally
subordinated to all indebtedness of subsidiaries of the Company. The Company
must rely on dividends and other advances and transfers of funds from its
subsidiaries to provide the funds necessary to meet its debt service obligations
under the Notes. The ability of such subsidiaries to pay such dividends and make
such advances and transfers will be subject to applicable state laws regulating
the payment of dividends. Claims of creditors of the Company's subsidiaries,
including general creditors, will generally have priority as to the assets of
such subsidiaries over the claims of the Company and the holders of the Notes.
At March 31, 1997, on a PRO FORMA basis after giving effect to the Private Notes
Offering, the application of the proceeds thereof and the New Credit Facility,
the Company's subsidiaries would have had approximately $285.4 million of
liabilities (including trade payables and the New Credit Facility). In addition,
at March 31, 1997, certain subsidiaries of the Company had significant
commitments under operating leases. See Note 10 of the Notes to the Consolidated
Financial Statements.
COMPETITION
The advertising and marketing services industry in the United States is
highly competitive in most product categories and geographic regions.
Competition is largely based on price, quality and servicing the specialized
needs of customers. During recent periods of economic downturn, excess
production capacity in the Company's business sectors has resulted in more
competitive pricing in such sectors.
17
<PAGE>
RAW MATERIALS--PAPER
The cost of paper is a principal factor in the Company's pricing to certain
customers and consequently the cost of paper significantly affects the Company's
net sales. The Company is generally able to pass increases in the cost of paper
to its customers, while declines in paper costs generally result in lower prices
to customers. Volatility in paper costs results in a corresponding volatility in
the Company's net sales, but generally has not affected volume or profits to any
significant extent. However, sharp increases in paper prices and related
reduction in print advertising programs are more likely to adversely affect
volumes and profits. To the extent that there are future paper cost increases
and the Company is not able to pass such increases to its customers or its
customers reduce the size of their print advertising programs, the Company's
results of operations (primarily those of TC Advertising) could be materially
adversely affected.
Capacity in the paper industry has remained relatively stable in recent
years. Increases or decreases in demand for paper have led to corresponding
pricing changes and, in periods of high demand, to limitations on the
availability of certain grades of paper, including grades utilized by the
Company. Any loss of the sources for paper supply or any disruption in such
sources' business or failure by them to meet the Company's product needs on a
timely basis could cause, at a minimum, temporary shortages in needed materials
which could have a material adverse effect on the Company's results of
operations. Although the Company actively manages its paper supply and has
established strong relationships with its suppliers, which include many of the
leading paper companies in North America, there can be no assurance that the
Company's sources of supply for its paper will be adequate or, in the event that
such sources are not adequate, that alternative sources can be developed in a
timely manner.
MANAGEMENT OF GROWTH
The Company's primary objective is to be the leading provider of marketing
and advertising services for retailers, national manufacturers and advertising
agencies, among others. One of the key elements of the Company's strategy
includes strategic acquisitions to expand and diversify the Company's products
and services in the advertising and marketing services industry. Over the past
four years, the Company has completed 11 acquisitions to increase its market
position. The Company continues to seek similar or complementary businesses and
intends to continue its acquisition program in the future. This program may
require significant management time and capital resources. Such acquisitions are
likely to require the incurrence and/or assumption of indebtedness and other
obligations, the issuance of equity securities or some combination thereof.
While the Company anticipates that its acquisitions will be beneficial, the
Company cannot predict if any such transactions will be consummated, the terms
or forms of consideration required in any such transactions, nor whether the
acquired businesses will be successfully integrated into the Company's
operations. Accordingly, no assurance can be made that such acquisitions will
not have a material adverse effect on the Company's performance.
CERTAIN FINANCIAL AND OPERATING RESTRICTIONS
The New Credit Facility and the Indenture impose certain operating and
financial restrictions on the Company, affecting, and in certain cases limiting,
among other activities, the ability of the Company to incur additional
indebtedness or create liens on its assets, pay dividends, sell assets, engage
in mergers or acquisitions or make investments. Failure to comply with any such
restrictions could limit the availability of borrowings or result in a default
under the terms of any such indebtedness, and there can be no assurance that the
Company will be able to comply with such restrictions. Moreover, these
restrictions could limit the Company's ability to engage in certain business
transactions which the Company may desire to consummate. The Company's inability
to consummate any such transaction could have an adverse effect on the Company's
operations and the ability of the Company and its subsidiaries to make principal
and interest payments on their outstanding debt, including the Notes.
18
<PAGE>
LIMITATION ON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company is obligated to make
an offer to purchase all outstanding Notes at a price equal to 101% of the
principal amount of the Notes, plus accrued and unpaid interest thereon. The New
Credit Facility prohibits the Company from purchasing any Notes, and also
provides that the occurrence of certain Change of Control events with respect to
the Company constitute a default thereunder. Therefore, in the event of a Change
of Control, the Company must offer to repay all borrowings under the New Credit
Facility or obtain the consent of its lenders under the New Credit Facility to
the purchase of Notes. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Notes. In
such case, the Company's failure to purchase tendered Notes would constitute a
default under the Indenture, which, in turn, would constitute a default under
the New Credit Facility. There can be no assurance that the Company will have
the financial ability to purchase the Notes upon the occurrence of a Change of
Control. There can be no assurance that the Company will be able to comply with
all of its obligations under the New Credit Facility, the Indenture and the
other indebtedness upon the occurrence of a Change of Control. See "Description
of the Notes--Change of Control."
ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS
The Company is subject to federal, state and local environmental laws,
regulations and ordinances relating to protection of the environment and human
health and safety, including those concerning the discharge, storage, handling
and disposal of hazardous or toxic waste and materials. Such laws, regulations
and ordinances provide for the imposition of significant fines and penalties and
may impose liability for the costs of cleaning up sites of past spills,
disposals or other releases of hazardous substances. From time to time,
operations of the Company have resulted or may result in noncompliance with or
liability for cleanup pursuant to such laws, regulations and ordinances. In
addition, TC Advertising and Webcraft have been identified as potentially
responsible parties under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and under certain analogous
state laws, for several sites to which TC Advertising or Webcraft, among others,
sent waste in the past. While the Company believes that any such noncompliance
or liability under current environmental laws will not have a material adverse
effect on its results of operations and financial condition, there can be no
assurances that such matters will not ultimately have such an effect and nor can
management predict what environmental laws will be enacted in the future, how
existing or future laws or regulations will be enforced, administered or
interpreted, or the amount of future expenditures which may be required in order
to comply with such laws. See "Business--Additional Company
Information--Governmental Regulations" and "Business-- Additional Company
Information--Environmental Matters."
RELIANCE ON KEY PERSONNEL
The efforts of a relatively small number of key management and operating
personnel will largely determine the Company's success. The loss of any of such
personnel could adversely affect the Company. The Company's success also depends
in part upon its ability to hire and retain highly skilled and qualified
operating, marketing, financial and technical personnel. There can be no
assurance that the Company will be able to hire or retain necessary personnel.
See "Management."
LACK OF PUBLIC MARKET FOR SECURITIES
The Exchange Notes are new securities for which there is currently no
market. The Company does not intend to apply for listing of the Exchange Notes
on any securities exchange or for inclusion of the Exchange Notes in any
automated quotation system. The Company has been advised by each of the Initial
Purchasers that it currently intends to make a market in the Exchange Notes.
However, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes. If a market for the Exchange Notes were to
develop, the Exchange Notes could trade at prices that may be higher or lower
19
<PAGE>
than their principal amount depending upon many factors, including prevailing
interest rates, the Company's operating results and the markets for similar
securities. Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility in the prices of
securities similar to the Exchange Notes. There can be no assurance that, if a
market for the Exchange Notes were to develop, such a market would not be
subject to similar disruptions.
FAILURE TO EXCHANGE PRIVATE NOTES
The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly completed
and duly executed Letter of Transmittal and all other required documentation.
Therefore, holders of Private Notes desiring to tender such Private Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Private
Notes for exchange. Private Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Private Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer who holds Private
Notes acquired for its own account as a result of market-making or other trading
activities and who receives Exchange Notes for its own account in exchange for
such Private Notes pursuant to the Exchange Offer, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. To
the extent that Private Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Private Notes
could be adversely affected due to the limited amount, or "float," of the
Private Notes that are expected to remain outstanding following the Exchange
Offer. Generally, a lower "float" of a security could result in less demand to
purchase such security and could, therefore, result in lower prices for such
security. For the same reason, to the extent that a large amount of Private
Notes are not tendered or are tendered and not accepted in the Exchange Offer,
the trading market for the Exchange Notes could be adversely affected. See "Plan
of Distribution" and "The Exchange Offer."
NO CASH PROCEEDS TO THE COMPANY
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby and has
agreed to pay the expenses of the Exchange Offer. In consideration for issuing
the Exchange Notes as contemplated in this Prospectus, the Company will receive,
in exchange, Private Notes in like principal amount. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Private Notes, except as otherwise described herein under "The Exchange
Offer--Terms of the Exchange Offer." The Private Notes surrendered in exchange
for the Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding debt of the Company.
20
<PAGE>
PRICE RANGE OF THE PRIVATE NOTES
The Private Notes were designated for trading in the PORTAL market of the
NASD effective June 17, 1997. The following table sets forth, for the periods
indicated, the range of reported high and low bid quotations for the Private
Notes as reported by BT Securities Corporation, a market maker for the Private
Notes:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Quarter Ending June 30, 1997 (beginning June 20, 1997 $ 980.00
and through June 30, 1997)................................................................ $ 990.00
Quarter Ending September 30, 1997 (beginning July 1, 1997 990.00
and through July 24, 1997)................................................................ 996.25
</TABLE>
Such reported quotations may not reflect actual transactions. On July 24,
1997, the closing bid quotation for the Private Notes was $996.25 per $1,000
principal amount (representing approximately 99.6% of principal amount). As of
July 22, 1997 there was 1 record holder of the Private Notes and 30 participants
in the Global Notes deposited with the Depositary.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997, on a historical basis and as adjusted to give effect to the issuance
of the Private Notes, the application of the net proceeds thereof, the New
Credit Facility and the purchase of all of the 10 3/4% Notes at an aggregate
price of $137.0 million.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Short-term debt:
Current portion of long-term debt...................................... $ 1,396 $ (750)(a) $ 646
---------- ----------- -----------
---------- ----------- -----------
Long-term debt:..........................................................
Old Credit Facility.................................................... $ 320,565 $(320,565)(a) $ --
New Credit Facility.................................................... -- 225,416(a) 225,416
10 3/4% Notes, net of discount......................................... 125,208 (125,192)(a) 16
Private Notes.......................................................... -- 250,000(a) 250,000
Other long-term debt................................................... 4,617 -- 4,617
---------- ----------- -----------
Total long-term debt(b)................................................ 450,390 29,659 480,049
Total stockholders' equity............................................... 95,792 (11,218)(c) 84,574
---------- ----------- -----------
Total capitalization................................................... $ 546,182 $ 18,441 $ 564,623
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(a) Represents the issuance of the Private Notes, the application of the net
proceeds thereof, the New Credit Facility and the purchase of all of the
10 3/4% Notes at an aggregate price of $137.0 million.
(b) See Note 5 of the Notes to the December 31, 1996 Consolidated Financial
Statements.
(c) Includes the premium and fees related to the purchase of the 10 3/4% Notes
and the write-off of deferred financing fees, net of income tax benefit.
21
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on June 20, 1997 (the "Issue
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently sold the Private Notes to "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A. As a condition to the initial sale of the
Private Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on June 20, 1997. Pursuant to the Registration
Rights Agreement, the Company agreed that it would (i) file with the Commission
within 60 days after the Issue Date a registration statement under the
Securities Act with respect to the Exchange Notes and (ii) use its reasonable
best efforts to cause such Registration Statement to become effective under the
Securities Act within 120 days after the Issue Date. The Company agreed to issue
and exchange Exchange Notes for all Private Notes validly tendered and not
withdrawn before the expiration of the Exchange Offer. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement and the Purchase Agreement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date.
The Company will issue $1,000 principal amount of Exchange Notes in exchange
for each $1,000 principal amount of outstanding Private Notes validly tendered
pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date.
Private Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Notes will not
be entitled to any of the registration rights of holders of Private Notes under
the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued under,
and be entitled to the benefits of, the Indenture, which also authorized the
issuance of the Private Notes, such that both series of Notes will be treated as
a single class of debt securities under the Indenture.
As of the date of this Prospectus, $250,000,000 in aggregate principal
amount of the Private Notes is outstanding, all of which is registered in the
name of Cede & Co., as nominee for The Depository Trust Company (the
"Depositary"). Solely for reasons of administration, the Company has fixed the
close of business on July 25, 1997 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially. There will be no fixed record date for
determining holders of the Private Notes entitled to participate in the Exchange
Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the provisions of the Registration Rights Agreement and
the applicable requirements of the Securities Act and the rules and regulations
of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as
22
<PAGE>
agent for the tendering holders of Private Notes for the purposes of receiving
the Exchange Notes from the Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the terms "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice and (ii) issue a press
release or other public announcement which shall include disclosure of the
approximate number of Private Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if, in
the opinion of counsel for the Company, the consummation of the Exchange Offer
would violate any applicable law, rule or regulation or any applicable
interpretation of the staff of the Commission, to terminate or amend the
Exchange Offer by giving oral or written notice of such delay, extension,
termination or amendment to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a press release or other public announcement thereof. If the Exchange Offer
is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of disclosure to
the holders, if the Exchange Offer would otherwise expire during such five to
ten business day period.
Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Notes will accrue cash interest at the rate of 8 7/8% per annum from
June 20, 1997, payable semi-annually in arrears on January 1 and July 1 of each
year, commencing January 1, 1998.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon interpretations by the staff
of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder who exchanges Private Notes for
Exchange Notes in the ordinary course of business, who is not participating,
does not intend to participate, and has no arrangement with any person to
participate in a distribution of the Exchange Notes, and who is not an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act,
will be allowed to resell Exchange Notes to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Notes a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, if any holder acquires Exchange Notes in the
Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange
23
<PAGE>
Notes, such holder cannot rely on the position of the staff of the Commission
enumerated in such no-action letters issued to third parties and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Each broker-dealer that receives Exchange Notes for its
own account in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of any Exchange Notes received in exchange for
Private Notes acquired by such broker-dealer as a result of market-making or
other trading activities. Pursuant to the Registration Rights Agreement, the
Company has agreed to make this Prospectus, as it may be amended or supplemented
from time to time, available to any such broker-dealer that requests copies of
such Prospectus in the Letter of Transmittal for use in connection with any such
resale for a period of up to 180 days after the Registration Statement is
declared effective. See "Plan of Distribution."
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder of Private Notes must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Private Notes into the Exchange Agent's
account at the Depositary pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the holder must comply with the guaranteed delivery procedures
described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY PRIVATE
NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are held
through a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such intermediary promptly and instruct such
intermediary to tender on such beneficial owner's behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instruction" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the NASD, a commercial bank or
trust company having an office or
24
<PAGE>
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Private Notes listed therein, such Private Notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder exactly as such registered holder's name appears on such Private Notes.
In connection with any tender of Private Notes in definitive certified form,
if the Letter of Transmittal or any Private Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Company in his sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Private
Notes not properly tendered or any Private Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Private Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities in connection with
tenders of Private Notes, neither the Company, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date and, to the extent permitted by applicable law, purchase Private
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering Private Notes pursuant to the Exchange Offer, each holder of
Private Notes will represent to the Company that, among other things, (i) the
Exchange Notes to be acquired by such holder of Private Notes in connection with
the Exchange Offer are being acquired by such holder in the ordinary course of
business of such holder, (ii) such holder has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes, (iii)
such holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purposes of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Exchange Notes acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters, (iv) such holder understands that a secondary resale
transaction described in clause (iii) above and any resales of Exchange Notes
obtained by such holder in exchange for Private Notes acquired by such holder
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or Item 508, as applicable, of Regulation S-K of the Commission and (v) such
holder is not an "affiliate", as defined in
25
<PAGE>
Rule 405 under the Securities Act, of the Company. If the holder is a
broker-dealer that will receive Exchange Notes for such holder's own account in
exchange for Private Notes that were acquired as a result of market-making
activities or other trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are withdrawn
or are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or nonexchanged Private Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Private Notes tendered by book-entry transfer in to the Exchange Agent's account
at the Depositary pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer within
two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"--Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Private Notes (if
applicable) and the principal amount of Private Notes tendered, stating that
the tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or a facsimile thereof), together with the certificate(s)
representing the Private Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer or a Book-Entry Confirmation, as the case may be,
and all other documents required by the Letter of Transmittal are received
by the Exchange Agent within five New York Stock Exchange trading days after
the Expiration Date.
26
<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers, if
applicable, and principal amount of such Private Notes) and (iii) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Private Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. Any Private Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no Exchange Notes will be
issued with respect thereto unless the Private Notes so withdrawn are validly
retendered. Properly withdrawn Private Notes may be retendered by following one
of the procedures described above under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.
TERMINATION OF CERTAIN RIGHTS
All registration rights under the Registration Rights Agreement accorded to
holders of the Private Notes (and all rights to receive additional interest in
the event of a Registration Default as defined therein) will terminate upon
consummation of the Exchange Offer except with respect to the Company's
continuing obligation for a period of up to 180 days after the Registration
Statement is declared effective to keep the Registration Statement effective and
to provide copies of the latest version of the Prospectus to any broker-dealer
that requests copies of such Prospectus in the Letter of Transmittal for use in
connection with any resale by such broker-dealer of Exchange Notes received for
its own account pursuant to the Exchange Offer in exchange for Private Notes
acquired for its own account as a result of market-making or other trading
activities.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<CAPTION>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
<S> <C>
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Deparmennt
P.O. Box 778 4th Floor
Boston, MA 02102-0078 Two International Place
Boston, MA 02110
Attn.: Sandra Szczsponik
Attn.: Sandra Szczsponik
(For Eligible Institutions Only)
Confirm by Telephone: By Facsimile:
(617) 664-5314 (617) 664-5739
</TABLE>
27
<PAGE>
State Street Bank and Trust Company also serves as Trustee under the Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable, out-of-pocket expenses in connection therewith.
The expenses to be incurred in connection with the Exchange Offer, including
rregistration fees, fees and expenses of the Exchange Agent and the Trustee,
accounting and legal fees, and printing costs, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (ii) in an offshore transaction complying with Rule
903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) pursuant to an effective registration statement
under the Securities Act or (v) pursuant to another available exemption from the
registration requirements of the Securities Act, and, in each case, in
accordance with all other applicable securities laws.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL AND
OTHER OPERATING DATA
The following table sets forth selected financial data of predecessor TC
Advertising prior to its acquisition by Big Flower ("Predecessor TC
Advertising") and of Big Flower and its subsidiaries (including TC Advertising)
following Big Flower's acquisition of TC Advertising. On March 21, 1996, Big
Flower's Board of Directors elected to change the Company's fiscal year from a
12-month period ending June 30th to a calendar year, effective with the period
ended December 31, 1995. The selected financial data as of and for each of the
two fiscal years in the periods ended June 30, 1993 and for the 42 days ended
August 11, 1993 were derived from the audited consolidated financial statements
of Predecessor TC Advertising. The selected financial data of Big Flower as of
and for the 323 day period ended June 30, 1994, the fiscal year ended June 30,
1995, the six months ended December 31, 1995 and the year ended December 31,
1996 were derived from the audited financial statements of Big Flower, restated
for the merger with Scanforms, Inc. ("Scanforms"). The selected financial data
for the three-month periods ended March 31, 1996 and 1997 were derived from the
Company's unaudited condensed consolidated interim financial statements for such
periods. On October 4, 1996, Big Flower consummated the acquisition of Scanforms
in a transaction accounted for as a pooling of interests. Accordingly, the Big
Flower financial information has been restated for prior periods to include the
results of Scanforms for all periods presented. For additional information, see
the Consolidated Financial Statements and the notes thereto. The selected
financial data should also be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PREDECESSOR TC ADVERTISING BIG FLOWER
--------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTH
YEAR ENDED 42 DAYS 323 DAYS YEAR TRANSITION
JUNE 30, ENDED ENDED ENDED PERIOD ENDED YEAR
-------------------- AUGUST 11, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1992 1993 1993 1994 1995 1995 1996
--------- --------- ----------- ----------- --------- ------------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales........................... $ 536,113 $ 555,013 $ 59,584 $ 587,630 $ 920,149 $ 546,840 $1,201,860
Operating income.................... 23,475 22,436 665 25,488 50,712 39,739 69,343
Interest expense (a)................ 9,249 6,792 578 19,735 37,452 19,072 36,165
Income (loss) before income taxes... 7,696 10,204 (228) (549) 5,268 12,694 4,998
Income (loss) before extraordinary
item.............................. 4,196 4,685 (139) (3,277) (1,612) 6,491 (3,285)
Extraordinary item, net (b)......... -- -- -- -- -- (19,248) (2,078)
Net income (loss)................... 4,196 4,685 (139) (3,277) (1,612) (12,757) (5,363)
Average shares
outstanding......................... -- -- -- 11,294 12,458 13,919 18,315
Ratio of earnings to fixed charges
(c)............................... 1.5x 1.7x --(d) --(d) 1.1x 1.5x 1.1x
OTHER DATA:
EBITDA(e)........................... $ 37,232 $ 34,560 $ 1,901 $ 54,238 $ 93,699 $ 58,372 $ 122,588
Capital expenditures................ 7,354 6,967 1,280 6,133 8,496 16,812 55,391
PRO FORMA DATA (F):
EBITDA.............................. -- -- -- -- -- -- $ 142,338
Interest expense.................... -- -- -- -- -- -- 38,203
Ratio of EBITDA to interest
expense........................... -- -- -- -- -- -- 3.7x
BALANCE SHEET DATA (AT PERIOD END):
Working capital..................... $ 4,567 $ (3,597) -- $ 25,198 $ 34,173 $ 29,797 $ (30,821)(g)
Net property, plant and equipment... 84,238 62,850 -- 152,306 137,081 145,323 296,426
Total assets........................ 185,710 160,356 -- 521,461 502,939 573,393 749,742
Long-term debt, net of current
portion........................... 73,183 34,485 -- 331,940 301,935 274,161 430,766
Redeemable preferred stock of a
subsidiary........................ -- -- -- 16,913 19,357 -- --
Common stockholders' equity......... 27,595 32,663 -- 19,449 16,593 84,476 96,350
<CAPTION>
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
OPERATING DATA:
Net sales........................... $ 229,128 $ 297,501
Operating income.................... 5,018 15,576
Interest expense (a)................ 7,587 9,710
Income (loss) before income taxes... (9,046) 3,296
Income (loss) before extraordinary
item.............................. (4,423) 1,681
Extraordinary item, net (b)......... (1,892) --
Net income (loss)................... (6,315) 1,681
Average shares
outstanding......................... 18,065 19,327
Ratio of earnings to fixed charges
(c)............................... --(d) 1.2x
OTHER DATA:
EBITDA(e)........................... $ 15,068 $ 31,106
Capital expenditures................ 9,468 15,343
PRO FORMA DATA (F):
EBITDA.............................. $ 24,538 $ 31,106
Interest expense.................... -- 9,875
Ratio of EBITDA to interest
expense........................... -- 3.2x
BALANCE SHEET DATA (AT PERIOD END):
Working capital..................... $ (42,107 (g) $ (12,905)(g)
Net property, plant and equipment... 239,643 297,343
Total assets........................ 684,040 735,096
Long-term debt, net of current
portion........................... 390,744 450,390
Redeemable preferred stock of a
subsidiary........................ -- --
Common stockholders' equity......... 82,688 95,792
</TABLE>
- ------------------------
(a) Interest expense excludes amortization of deferred financing fees for all
periods. Interest expense for the year ended December 31, 1996 includes the
amortization of interest rate swap fees of $1,200,000.
(b) Big Flower's net loss for the six months ended December 31, 1995 includes an
extraordinary loss, net of tax, of $19,248,000 on early extinguishment of
debt and termination of a swap agreement. Big Flower's net loss for the
quarter ended March 31, 1996 includes an extraordinary loss, net of tax, of
$1,892,000 on early extinguishment of debt and Big Flower's net loss for the
year ended December 31, 1996 includes an extraordinary loss, net of tax, of
$2,078,000 on early extinguishment of debt.
29
<PAGE>
(c) For purposes of this computation, fixed charges consist of interest expense
and amortization of deferred financing fees, capitalized interest and one-
third of rental expenses, representative of that portion of rental expenses
attributable to interest and preferred stock dividends. Earnings consist of
income before income taxes plus fixed charges (other than capitalized
interest, but including the amortization thereof).
(d) Earnings were inadequate to cover fixed charges by $0.2 million for
predecessor TC Advertising for the 42 days ended August 11, 1993 and $0.8
million and $9.1 million for Big Flower for the 323 days ended June 30, 1994
and the three months ended March 31, 1996, respectively. Adjusted to
eliminate non-cash charges of depreciation and amortization of $28.8 million
and $10.1 million for the 323 days ended June 30, 1994 and the three months
ended March 31, 1996, respectively, such earnings would have exceeded fixed
charges by $27.9 million and $1.0 million, respectively.
(e) "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles and merger costs. EBITDA does not include expenses associated
with the A/R Securitization and is presented here to provide additional
information about the Company's ability to meet its future debt service,
capital expenditure and working capital requirements and should not be
construed as a better indicator of operating performance than income from
operations as determined in accordance with generally accepted accounting
principles ("GAAP"), or a better indicator of liquidity than cash flow from
operating activities as determined in accordance with GAAP.
(f) Pro forma EBITDA for the periods presented reflect the 1996 Acquisitions (as
defined) as if they were consummated on January 1, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations." Pro forma interest expense reflects the
Private Notes Offering, the New Credit Facility and the application of the
proceeds of each of the foregoing, as if such Private Notes Offering and New
Credit Facility had occurred at the beginning of each period presented, and
the Tender Offer..
(g) On October 4, 1996, the Company entered into the A/R Securitization (as
defined). Between March 19, 1996 and October 4, 1996, the Company operated
under a bridge facility with similar terms and conditions as the A/R
Securitization and, accordingly, results for periods subsequent to March 19,
1996 reflect the effects of those facilities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The discussion below relates to the consolidated financial condition and
results of operations of Big Flower for the six months ended December 31, 1994
and 1995, the year ended December 31, 1995 and 1996 and the three months ended
March 31, 1996 and 1997. All periods prior to October 1, 1996 have been restated
for the merger with Scanforms.
OPERATING DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
---------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1995 1996 1996 1997
---------- ---------- ---------- ------------ ---------- ----------
Net sales............................. $ 468,943 $ 546,840 $ 998,046 $ 1,201,860 $ 229,128 $ 297,501
Operating expenses:
Costs of production................. 396,893 459,788 837,928 971,789 196,786 235,245
Selling, general and
administrative.................... 23,481 28,680 56,616 107,483 17,274 31,150
Depreciation........................ 10,576 10,533 20,826 34,756 6,053 11,429
Amortization of intangibles......... 11,125 8,100 19,093 17,003 3,997 4,101
Merger costs........................ -- -- -- 1,486 -- --
---------- ---------- ---------- ------------ ---------- ----------
442,075 507,101 934,463 1,132,517 224,110 281,925
---------- ---------- ---------- ------------ ---------- ----------
Operating income...................... 26,868 39,739 63,583 69,343 5,018 15,576
---------- ---------- ---------- ------------ ---------- ----------
Other expenses (income):
Interest expense.................... 18,314 19,072 38,209 34,965 7,587 9,710
Amortization of deferred financing
costs............................. 1,699 1,598 3,333 3,002 710 555
Interest income..................... (43) (442) (678) (712) (196) (120)
Loss on sale of Webcraft Games,
Inc............................... -- -- -- 14,277 -- --
Other, net.......................... 345 5,749 7,795 12,813 5,963 2,135
Preferred dividends of a
subsidiary........................ 1,166 1,068 2,346 -- -- --
---------- ---------- ---------- ------------ ---------- ----------
21,481 27,045 51,005 64,345 14,064 12,280
Income (loss) before income taxes..... 5,387 12,694 12,578 4,998 (9,046) 3,296
Income tax expense (benefit).......... 3,333 6,203 9,750 8,283 (4,623) 1,615
---------- ---------- ---------- ------------ ---------- ----------
Income (loss) before extraordinary
item................................ 2,054 6,491 2,828 (3,285) (4,423) 1,681
Extraordinary item, net............... -- (19,248) (19,248) (2,078) (1,892) --
---------- ---------- ---------- ------------ ---------- ----------
Net income (loss)..................... $ 2,054 $ (12,757) $ (16,420) $ (5,363) $ (6,315) $ 1,681
---------- ---------- ---------- ------------ ---------- ----------
---------- ---------- ---------- ------------ ---------- ----------
</TABLE>
31
<PAGE>
GENERAL
The cost of paper is a principal factor in the Company's pricing to certain
customers and consequently the cost of paper significantly affects net sales.
The Company is generally able to pass increases in the cost of paper to its
customers, while declines in paper costs generally result in lower prices to
customers. Volatility in paper costs results in a corresponding volatility in
the Company's net sales, but generally has not affected volume or profits to any
significant extent.
Capacity in the paper industry has remained relatively stable in recent
years, increases or decreases in demand for paper have led to corresponding
pricing changes and, in periods of high demand, to limitations on the
availability of certain grades of paper, including grades utilized by the
Company. The Company believes that its strong relationships with major North
American paper suppliers should enable the Company to satisfy its paper
requirements on competitive terms even in periods of high demand.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 WITH THE THREE MONTHS ENDED
MARCH 31, 1996
Net sales increased to $297.5 million for the three months ended March 31,
1997 from $229.1 million for the three months ended March 31, 1996, an increase
of $68.4 million or 29.8%. The increase resulted from the addition of the
operations of Webcraft, PrintCo., Inc. ("PrintCo"), Pacific Color Connection,
Inc. ("Pacific Color"), Designer Color Systems, Ltd. ("DCS") and Digital
Dimensions, Inc. ("DDI") (collectively the "1996 Acquisitions") for the three
months ended March 31, 1997 which was offset in part by a decrease in TC
Advertising's (excluding PrintCo) net sales as a result of lower paper costs in
1997. Paper costs were 35.9% of the Company's net sales for the three months
ended March 31, 1997 as opposed to 49.4% of net sales for the three months ended
March 31, 1996. Volume of production for TC Advertising, which increased
approximately 8% for the first quarter of 1997 from the first quarter of 1996,
offset the decline in paper costs.
Operating income for the three months ended March 31, 1997 was $15.6 million
compared to $5.0 million for the three months ended March 31, 1996, an increase
of $10.6 million or 210.4%. $8.8 million of the increase resulted from the
inclusion of the operations of the 1996 Acquisitions. Costs of production as a
percent of sales decreased to 79.1% for the three months ended March 31, 1997
from 85.9% for the three months ended March 31, 1996, principally attributable
to the decrease in the cost of paper and the inclusion of the operations of the
1996 Acquisitions where paper is less of a component of costs. Selling, general
and administrative expenses increased to $31.2 million in the three months ended
March 31, 1997 from $17.3 million for the three months ended March 31, 1996, an
increase of $13.9 million or 80.3% which is principally due to the 1996
Acquisitions. Depreciation was $11.4 million for the three months ended March
31, 1997 compared to $6.1 million for the three months ended March 31, 1996, an
increase of $5.4 million or 88.8%. The increase in depreciation was attributable
to the 1996 Acquisitions and increased capital expenditures throughout 1996 at
TC Advertising.
Net interest expense, including the amortization of deferred financing fees,
for the three months ended March 31, 1997 was $10.1 million compared to $8.1
million for the three months ended March 31, 1996. Interest expense increased
due to higher average debt levels in the first quarter of 1997 as a result of
the 1996 Acquisitions, primarily the $75.0 million term loan which was obtained
in March 1996. See "-- Liquidity and Capital Resources."
Other, net, was $2.1 million in the three months ended March 31, 1997
compared to $6.0 million in the comparable period in 1996, which prior period
included $5.0 million in non-recurring financing costs related to the
acquisition of Webcraft. For the three months ended March 31, 1997, other, net
includes charges of $1.5 million related to the A/R Securitization compared to
$0.2 million of recurring costs for the three months ended March 31, 1996.
32
<PAGE>
The extraordinary item, net of tax, of $1.9 million in the first quarter of
1996 was due to early extinguishment of debt subsequent to the acquisition of
Webcraft.
The effective income tax rate for the three months ended March 31, 1997 and
1996 exceeded the federal statutory tax rate due primarily to amortization of
certain goodwill (which is not deductible for income tax purposes) and state
income taxes.
The Company will adopt Statement of Financial Accounting Standard No. 128,
"Earnings Per Share" ("SFAS 128") in the fourth quarter of 1997, as required.
The standard specifies the computation, presentation and disclosure requirements
for earnings per share.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 WITH THE YEAR ENDED DECEMBER 31,
1995
Net sales increased 20.4% or $203.8 million. The addition of the operations
of Laser Tech, Webcraft and their acquisitions for the year ended December 31,
1996 generated an increase of approximately $302.5 million. This increase was
offset by a net decrease in TC Advertising's net sales after the effect of the
fourth quarter 1996 acquisition of PrintCo which generated approximately $28.2
million in sales. Due to a soft retail advertising environment, TC Advertising's
volume was slightly below the prior year. In addition, paper costs, which
significantly affect net sales, were 42.2% of the Company's net sales for the
year ended December 31, 1996 compared to 49.8% of the Company's net sales for
the year ended December 31, 1995. The decrease in paper costs as a percent of
sales is attributable to lower paper prices and acquisitions where paper is less
of a component of costs.
Operating income increased to $69.3 million in the year ended December 31,
1996 from $63.6 million in the year ended December 31, 1995, an increase of $5.8
million or 9.1%. Costs of production as a percent of sales decreased from 84.0%
to 80.9%, principally attributable to the inclusion in 1996 of the operations of
Laser Tech, Webcraft and their acquisitions. In addition, the cost of paper had
an effect on cost of production as a percent of sales for TC Advertising.
Selling, general and administrative costs increased approximately $50.9 million
to $107.5 million for the year ended December 31, 1996 compared to $56.6 million
for the year ended December 31, 1995. The addition of Laser Tech, Webcraft and
their acquisitions increased selling, general and administrative costs by $53.5
million. Amortization of intangibles decreased by $2.1 million from $19.1
million for the year ended December 31, 1995 to $17.0 million for the year ended
December 31, 1996. Certain intangibles related to the acquisition of KTB and
Retail Graphics became fully amortized during the year ended December 31, 1995
offset by the amortization of the goodwill associated with the 1996
acquisitions. Costs of $1.5 million incurred in connection with the merger with
Scanforms also affected operating income in the year ended December 31, 1996.
Net interest expense for the year ended December 31, 1996 was $37.3 million
compared to $40.9 million for the year ended December 31, 1995. Amortization of
deferred financing costs decreased $1.5 million from $3.3 million for the year
ended December 31, 1995 to $1.8 million for the year ended December 31, 1996
(excluding the amortization of interest rate swap fees of $1.2 million). In
connection with the initial public offering of Big Flower (the "Equity
Offering") in November of 1995, the Company repurchased the remainder of its
13 1/2% senior discount notes due 2004 (the "13 1/2% Notes"), 11% debentures due
2005 ("11% Debentures") and a portion of the 10 3/4% Notes. Additional
borrowings in 1996 under the Company's revolving credit facility have been at
lower interest rates.
Other, net increased $5.0 million from $7.8 million for the year ended
December 31, 1995 to $12.8 million for the year ended December 31, 1996. The
increase principally reflects $5.2 million in non-recurring charges related to
the acquisition of Webcraft in March of 1996.
During the fourth quarter of 1996, the Company recorded a $14.3 million loss
on the disposition of its lottery production division, Webcraft Games, Inc.
Management believes that the disposition will enable the Company to focus on
Webcraft's growth-oriented products such as customized direct mail.
33
<PAGE>
The extraordinary item, net of tax, of $2.1 million was due to early
extinguishment of debt subsequent to the acquisitions of Webcraft and PrintCo.
The effective income tax rate for the year ended December 31, 1996 and 1995
exceeded the federal statutory tax rate due primarily to amortization of
goodwill (which is not deductible for income tax purposes), preferred dividends
of a subsidiary, state income taxes and, in 1996, the loss on the sale of
Webcraft Games, Inc.
Net income for the year ended December 31, 1996, adjusted for non-recurring
charges of (i) approximately $2.7 million of compensation expenses related to
the acquisition of DCS and DDI, (ii) $1.5 million of merger expenses associated
with the acquisition of Scanforms, (iii) a $14.3 million loss related to the
sale of Webcraft Games, Inc., (iv) $5.2 million of financing costs related to
the acquisition of Webcraft, and (v) a $2.1 million loss on debt extinguishment
subsequent to the acquisitions of Webcraft and PrintCo, would have been $14.4
million, or $0.78 cents per share.
COMPARISON OF THE SIX MONTHS ENDED DECEMBER 31, 1995 WITH THE SIX MONTHS ENDED
DECEMBER 31, 1994
Net sales increased to $546.8 million for the six months ended December 31,
1995 from $468.9 million for the six months ended December 31, 1994, an increase
of $77.9 million or 16.6%. Volume increased approximately 1%. Paper costs, which
significantly affect net sales, were 51.9% of net sales for the six months ended
December 31, 1995, compared to 45.3% of net sales for the six months ended
December 31, 1994.
Operating income for the six months ended December 31, 1995 increased to
$39.7 million compared to $26.9 million for the six months ended December 31,
1994, an increase of $12.9 million or 47.9%. Despite higher paper costs, costs
of production as a percent of net sales decreased to 84.1% for the six months
ended December 31, 1995 from 84.6% for the six months ended December 31, 1994.
Variable costs (excluding paper and ink costs) were 6% lower for the six months
ended December 31, 1995 compared to the prior comparable period. These reduced
variable costs were the result of higher volume, efficiency improvements and
cost controls. The increase in operating income for the six months ended
December 31, 1995 was also favorably impacted by the addition of Laser Tech in
late November and improved operating performance at the facilities acquired with
KTB and Retail Graphics in April 1994. Amortization of intangibles for the six
months ended December 31, 1995 was $8.1 million compared to $11.1 million for
the six months ended December 31, 1994. Amortization of certain intangible
assets associated with the acquisitions of TC Advertising, KTB and Retail
Graphics was $3.4 million lower in the six months ended December 31, 1995
compared to the prior comparable period as several of these assets became fully
amortized. Offsetting the lower amortization of intangible assets in the six
months ended December 31, 1995 was an increase in the provision for doubtful
accounts of $1.6 million reflecting the higher volume and conditions in certain
sectors of the retail market and $2.7 million due to higher personnel and
related costs and the addition of Laser Tech operations since late November
1995.
Net interest expense for the six months ended December 31, 1995 was $20.2
million compared to $20.0 million for the six months ended December 31, 1994.
Amortization of deferred financing costs were $1.6 million for the six months
ended December 31, 1995 and $1.7 million for the six months ended December 31,
1994. Interest expense for the six months ended December 31, 1995 included $12.9
million in net interest on the 10 3/4% Notes and the 13 1/2% Notes, and $6.0
million in net interest on other debt, primarily under the credit agreement
entered into by TC Advertising in April 1994 (the "1994 TCA Credit Agreement").
Other, net for the six months ended December 31, 1995 was $5.7 million
compared to $0.3 million for the six months ended December 31, 1994. The other,
net, for the six months ended December 31, 1995 included $1.6 million for the
consolidation of two operating locations, and $3.7 million to complete the
relocation of TC Advertising's corporate office to Baltimore, Maryland from
Glendora, California.
34
<PAGE>
The extraordinary item, net of tax, of $19.2 million was due to early
extinguishment of debt as discussed in "--Liquidity and Capital Resources"
below.
The effective income tax rate for the six months ended December 31, 1995 and
1994 exceeded the federal statutory tax rate due primarily to amortization of
goodwill (which is not deductible for income tax purposes), preferred dividends
of a subsidiary and state income taxes.
Net income for the six months ended December 31, 1995 and December 31, 1994
on a pro forma basis, reflecting the impact of the Equity Offering of shares of
the Company's Common Stock and related transactions, would have been $10.1
million, or $0.56 cents per share, and $6.9 million, or $0.38 cents per share,
respectively. Excluding the effects of the second quarter charges for the
consolidation of two operating locations and to complete the relocation of TC
Advertising's corporate office, net income for the six months ended December 31,
1995 would have been $13.3 million, or $0.74 cents per share.
LIQUIDITY AND CAPITAL RESOURCES
The operations of the Company historically have been funded with
internally-generated funds, term loans and borrowings under a revolving credit
facility. The Company believes that internally-generated funds from operations,
the New Credit Facility and the A/R Securitization will be sufficient to meet
its operating requirements, including required interest and principal payments,
for the near future.
The Company's current liabilities exceeded current assets by $12.9 million
at March 31, 1997 compared with $30.8 million at December 31, 1996, an increase
in working capital of $17.9 million. Excluding the effects of the A/R
Securitization, working capital at March 31, 1997 and December 31, 1996 would
have been $76.4 million and $49.0 million, respectively. The ratio of current
assets to current liabilities as of March 31, 1997 was 0.92 to 1 (1.49 to 1
excluding the A/R Securitization), and as of December 31, 1996 was 0.84 to 1
(1.25 to 1 excluding the A/R Securitization).
Net cash provided by operating activities for the three months ended March
31, 1997 was $18.7 million, an increase of $20.2 million from the prior
comparable period in 1996 (excluding the proceeds from the sale of accounts
receivable). Net cash used in investing activities were financed primarily
through borrowings under the Old Credit Facility and the A/R Securitization.
On November 28, 1995, TC Advertising entered into the Old Credit Facility.
The Old Credit Facility was amended and restated on March 19, 1996 to add a
$75.0 million term loan. On June 12, 1997, the Company (i) entered into the New
Credit Facility with a group of lenders providing for up to $475.0 million of
revolving credit loans and (ii) terminated the Old Credit Facility and repaid
its loans thereunder. The New Credit Facility provides greater borrowing
capacity on more favorable terms, including lower interest rates, and covenant
terms which the Company believes provide greater financial flexibility. The New
Credit Facility will mature on June 12, 2002. Interest on revolving loans will
be payable at the Company's option (a) at a base rate plus a margin which ranges
from 0.00% to 0.75% or (b) at a Eurodollar-based rate plus a margin which ranges
from 0.50% to 1.75%. The New Credit Facility also contains covenant requirements
and certain dividend restrictions which are customary for such financings. See
"Description of the New Credit Facility".
On October 4, 1996, the Company entered into a six-year agreement (the "A/R
Securitization") pursuant to which it may sell fractional undivided beneficial
interests in a designated pool of certain eligible accounts receivable. The
maximum allowable amount of receivables to be sold is $150.0 million. The amount
outstanding at any measurement date varies based upon the level of eligible
receivables. Under the terms of the agreement, the Company has retained
substantially the same risk of credit loss as if the receivables had not been
sold and, accordingly, the full amount of the allowance for doubtful accounts
has been retained. At March 31, 1997, an $89.3 million interest had been sold
under the A/R Securitization and is reflected as a reduction of accounts
receivables. Fees of this program vary based on a Eurodollar
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rate plus an average margin of 3/8% per annum on the amount of interest sold.
This rate is lower than the rate under the Company's New Credit Facility.
On June 24, 1997, the Company commenced the Tender Offer, which expired on
July 23, 1997. An aggregate principal amount of $126.7 million was tendered by
holders of the 10 3/4% Notes and accepted for payment by the Company, the
funding for which came from borrowings under the New Credit Facility.
The Company has grown through acquisitions and continues to seek similar or
complementary businesses. Such acquisitions are likely to require the incurrence
and/or assumption of indebtedness and other obligations, the issuance of equity
securities or some combination thereof. In addition, the Company may from time
to time determine to sell or otherwise dispose of certain of its existing
businesses. However, the Company cannot predict if any transactions will be
consummated, nor the terms or forms of consideration required in such
transactions. The Company's recent acquisitions are discussed in Note 2 of the
Notes to the Consolidated Financial Statements.
SEASONALITY
TC Advertising's advertising insert business is seasonal in nature, with
activity increasing prior to the following advertising periods: Easter (March
15-April 15); Memorial Day (April 15-May 15); Back to School (July 15-August
15); and Thanksgiving/Christmas (October 1-December 15). Sunday comics,
newspaper TV listing guides, other newspaper products and other publications are
not seasonal in nature. Net sales percentages for the Company by quarter for the
twelve months ended December 31, 1996 were 19%, 25%, 26% and 30% of total net
sales for the quarters ended March 31, June 30, September 30 and December 31,
respectively. Based on its historical experience and projected operations, the
Company expects its operating results to be highest in the quarter ended
December 31 and weakest in the quarter ended March 31.
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BUSINESS
ORGANIZATIONAL STRUCTURE
The following chart sets forth the current organizational structure of Big
Flower. Big Flower directly or indirectly owns 100% of all of its subsidiaries.
Any reference to TC Advertising, Webcraft or Laser Tech includes their
respective subsidiaries unless the context clearly dictates otherwise.
[LOGO]
<TABLE>
<S> <C> <C> <C>
Products and
Services:
Advertising Inserts Personalized Direct Mail Digital Photography
TV Listing Magazines Fragrance Samplers Electronic Retouching
Sunday Comics Commercial Games Digital Image Scanning
Sunday Magazines Promotional Stamps Facilities Management
Special Supplements Non-Speciality Digital Asset Management
Premedia Services Commercial Printing Page Assembly
Electronic Image Output
Proofing
Packaging
</TABLE>
INTRODUCTION
The Company is a leading advertising and marketing services company which
provides integrated advertising solutions through its three principal operating
units: TC Advertising, Webcraft and Laser Tech. TC Advertising is a leading
producer of advertising insert programs for retailers, and produces TV listing
magazines, Sunday comics, Sunday magazines and special supplements for many of
the most widely circulated U.S. newspapers. Webcraft is a market leader in
producing highly customized direct mail and specialty advertising products such
as commercial games and fragrance samplers. Laser Tech is a leading provider of
outsourced, digital premedia and content management services to retailers,
advertising agencies, and consumer product companies. The Company and its
subsidiaries are currently focused on the advertising insert, direct mail and
premedia sectors of the industry.
INDUSTRY SECTORS
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED FROM INDUSTRY
PUBLICATIONS AND INTERNAL COMPANY ESTIMATES. WHILE THE COMPANY BELIEVES SUCH
INFORMATION IS RELIABLE, THE ACCURACY OF SUCH INFORMATION HAS NOT BEEN
INDEPENDENTLY VERIFIED AND CANNOT BE GUARANTEED.
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ADVERTISING INSERTS. The Company believes that the advertising inserts
industry sector generates revenues of $8 to $9 billion per year, with
approximately 50% of the dollars for the production of inserts and the balance
for distribution of the product. The Company believes this industry sector will
continue to grow as non-traditional insert users have begun including inserts in
their media plans and traditional users such as retailers are spending more of
their advertising dollars in this medium.
The Company further believes advertising insert usage will expand as
advertisers require more versions of their inserts and targeted distribution
services for their messages. According to the Newspaper Association of America,
local retail advertising has changed to a greater reliance on inserts as
advertisers demand more targeting of their message, a distribution method that
run of press ("ROP") advertising is not capable of providing.
DIRECT MAIL. The Company believes that in the individualized industry
sector in which Big Flower operates, customized direct mail expenditures account
for $20.8 billion per year, with approximately 33% going to the production of
direct mail and the remainder to other services, including agency services, data
analysis and manipulation and creative development.
According to the 1996 Veronis, Suhler and Associates Communications Industry
Forecast, "More than three-quarters of U.S. companies use direct mail, and most
find it a powerful tool in meeting their marketing objectives. In addition to
generating sales directly, direct mail has proven to be effective in explaining
complex issues to consumers and business decision makers and in introducing a
new product or service."
PREMEDIA. The Company believes that the premedia industry sector exceeds
$5.3 billion annually, and will continue to grow with the emergence of new
distribution technologies such as CD-ROM and the World Wide Web that use
digitized images. The business, which includes the traditional preparation of
materials for print such as promotional items and advertising inserts, has
recently expanded to include the capture, storage and manipulation of image
management and the management of facilities which house these services. The
Company believes that as its customers require more versions of their
advertising inserts and other advertising and marketing messages, the demand for
easy retrieval and manipulation of images will grow. In addition, there is a
growing pattern of outsourcing of facilities management of premedia services
from which the Company has been benefitting and expects to continue to benefit.
BUSINESS STRATEGY
The Company's strategic objective is to enhance its position as an
integrated provider of a diverse range of advertising and marketing services
across a broad spectrum of media. Through internal growth and acquisitions, Big
Flower aims to broaden its technology and services in a manner that allows its
subsidiaries to interact dynamically to create both new services for existing
customers and new customers for its traditional products.
Marketers aim to reach target customers with the most effective message and
the greatest possible impact. Technological advancements increasingly allow
marketers to understand customer preferences and to differentiate and
individualize advertising messages. Big Flower's strategy is to assist its
customers by providing a broad array of advertising and marketing services which
capitalize on these advancements. Key elements of this strategy include the
following:
PROVIDE INTEGRATED ADVERTISING SOLUTIONS FOR CUSTOMERS. The Company
believes that by combining the products and services of TC Advertising, Webcraft
and Laser Tech it can work with customers to develop cost-effective and
comprehensive solutions to their particular advertising and marketing needs. Big
Flower has the expertise to work with customers from inception of an advertising
concept through layout design and production, to targeting and distribution of
the printed product, thereby helping customers achieve their advertising goals
in a cost-effective manner. For example, for a recent store opening by a home
improvement retailer, Big Flower presented the customer with a five-piece plan
that combined TC
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Advertising's and Webcraft's capabilities. The campaign involved two "teaser"
direct mail items, followed by an individualized, highly-customized direct mail
package that included a pre-approved credit card for the customer. The fourth
piece was a 72-page advertising brochure distributed through the local
newspaper, followed by a large, glossy advertising insert. The Company believes
that by integrating its digital premedia services, advertising insert
capabilities, geographic and demographic insert targeting programs and highly
customized direct mail and specialty products, it offers its customers certain
solutions not offered by the Company's competitors.
DEVELOP TARGETED ADVERTISING PROGRAMS. The Company's customers are
increasingly targeting their advertising messages based on more detailed
knowledge of consumers and what they buy. Big Flower has responded to this trend
in all of its businesses:
- TC ADVERTISING'S Market Reach system enables the Company to attract new
categories of customers by providing them with tools to utilize the
targeted distribution capabilities of major market newspapers. Advertisers
can customize their advertising to match the demographic characteristics
and other targeting requirements of over 12,000 newspaper delivery zones
in the nation's top 150 designated market areas.
- WEBCRAFT'S highly individualized, multiple component direct mail campaigns
utilize information refined from customers' databases as well as
Webcraft's own expertise in direct mail personalization techniques.
- LASER TECH'S image management expertise allows customers' images to be
stored, archived, and retrieved to and from any remote location. Images
stored in Laser Tech's system can have multiple applications across a
variety of advertising media. For example, in addition to their use in
print media, images are readily accessible for use in Web sites and
inclusion in CD-ROMs. The Company's Digital Dimensions business unit also
provides consulting and development services to large clients, assisting
them in the development of high impact, commercially effective Web sites.
MAXIMIZE CROSS-SELLING OPPORTUNITIES. Currently, TC Advertising serves a
large customer base of regional and national retailers, while Webcraft's and
Laser Tech's customer base consists mainly of national manufacturers,
advertising agencies and marketing companies. Big Flower has established
employee incentive compensation programs to promote cross-selling of the entire
Big Flower products and services lines. For example, TC Advertising has begun
providing advertising insert programs to Webcraft's direct mail customers, while
Webcraft has begun to deliver targeted direct mail advertising on behalf of TC
Advertising's retail clients. TC Advertising also has begun to provide
Webcrafts's commercial games to its retail customers. In addition, certain
premedia functions previously performed by customers of TC Advertising and
Webcraft are now performed by Laser Tech under facilities management agreements.
CAPITALIZE ON NATIONAL DIGITAL WORKFLOW PLATFORM. The Company continues to
optimize its nationwide digital network capability that employs
telecommunications technologies to connect TC Advertising's and Laser Tech's
facilities, enabling the Company and its customers to conceive, manipulate,
transmit, produce and distribute their advertising concepts seamlessly on a
national scale. The platform development is based on open-standard digital
communications technologies and is continuously refined to meet a customer's
particular needs. It currently connects customers and the production centers at
all Laser Tech facilities and 14 of the TC Advertising production facilities.
Each TC Advertising production facility is equipped to meet the rapid output
requirements of highly-versioned insert advertising programs, using efficient
state of the art, digital page processing systems.
PURSUE STRATEGIC ACQUISITIONS. Big Flower continues to review opportunities
to extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Laser Tech business
units. In addition, Big Flower adds value to strategic acquisitions by
identifying operating synergies, effective cost savings and improving
efficiency. Since its initial acquisitions of TC
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Advertising, Laser Tech and Webcraft, Big Flower has expanded its products and
services through a number of strategic acquisitions that increased the span and
scope of each of these industry sectors.
- In April 1994, the Company acquired KTB and Retail Graphics, increasing TC
Advertising's capacity and broadening its customer base in the advertising
insert industry sector. In October 1996, the Company completed the
acquisition of PrintCo, a Michigan-based company specializing in
advertising insert programs and TV listing guides. This acquisition added
significant retail accounts to the Company's customer base and PrintCo's
new production lines brought needed capacity to TC Advertising's central
group. These additional production facilities will also enhance the
Company's ability to improve turnaround time and reduce delivery costs.
- In October 1996, the Company acquired Scanforms, a full-service direct
mail advertising company based in Bristol, Pennsylvania. With the
acquisition of Scanforms, the Company expanded its customer base among
leading financial service and publishing companies as well as added
additional high quality laser personalization and short-run to its line of
products and services. The addition of Scanforms enables the Company to
offer its customers fast-turnaround products ranging from specialty
applications in regional markets to longer-run direct mail for nationwide
targeted, customized mailings.
- In October 1996, the Company acquired Pacific Color, thereby enhancing its
expertise in digital premedia services as well as expanding its presence
in California. In the first half of 1996, Pacific Color launched two new
businesses, Innerlogic, specializing in internet production services, and
Big Color, a large format advertising products group that services the
outdoor advertising industry. In addition, Pacific Color's Pacific Display
division produces large format direct digital printing for banners, trade
show displays and billboards up to 16.6' x 96'. Furthermore, in December
1996, the Company acquired DCS and DDI, increasing its premedia presence
in the Midwest and enhancing its on-line digital imaging services. DDI's
software, which allows the Company's customers to store, browse, and
retrieve data and images from a centralized database and repository, will
enhance the Company's digital imaging services platform and support the
imaging needs of its customers. With the addition of DCS, the Company has
the capacity to design and produce interactive multimedia systems for
electronic catalogs and ordering systems as well as provide internet Web
Site design and execution. Furthermore, DCS's significant retail
advertising insert and catalog production expertise will enhance the
Company's ability to service its retail customer base.
ADVERTISING INSERT PROGRAMS AND NEWSPAPER PRODUCTS
The Company produces advertising insert programs for leading retailers and
produces Sunday magazines, TV listing guides and special supplements for some of
the most widely circulated U.S. newspapers. For the 1996 fiscal year, the
Company produced more than 22 billion advertising inserts, 1.6 billion Sunday
comics, 140 million locally edited Sunday magazines and 620 million TV listing
guides. The Company estimates that this represents 19%, 49%, 18% and 20%,
respectively, of the total advertising inserts, Sunday comics, Sunday magazines
and TV listing guides produced in the U.S. in 1996. The Company believes it is
the largest producer of advertising insert programs in the United States. TC
Advertising, the Company's operating unit in this industry sector, is
headquartered in Baltimore, Maryland and operates a national network of 18
production facilities.
PRODUCTS AND SERVICES
BACKGROUND.
The Company believes the advertising insert programs industry sector in the
U.S. has grown at a faster rate in recent years than overall newspaper
advertising expenditures and exceeded $8 billion in 1996. Industry research
indicates that more than 75% of consumers read advertising inserts appearing in
their
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Sunday newspaper. In addition, between 40% and 50% of adult readers use
advertising inserts for making their purchasing decisions in key retail
categories.
ADVERTISING INSERT PROGRAMS. Advertising inserts are stand-alone
advertisements, generally in color, and display a broad range of products sold
by a single retailer or manufacturer. The primary users of advertising insert
programs are general merchandisers, specialty retailers, grocery stores, home
improvement centers and drug stores. Advertising inserts are placed in
newspapers, mailed to consumers or distributed in stores. Advertising inserts
can be produced in color on better quality paper than the reproductions that
typically appear in ROP newspapers. Advertising insert programs also allow users
to vary layout, artwork, design, trim size, paper types, color and formats. TC
Advertising's mix of printing capabilities, which include both heatset and cold
web offset presses, enables it to provide a variety of formats and designs to
meet the diverse needs of its retailing customer base. TC Advertising produces
advertising insert programs for leading U.S. retailers such as American Drug
Stores; Circuit City; The Home Depot; J.C. Penney; Kmart; Lowe's Companies,
Inc.; Montgomery Ward; Safeway; Sears; Walgreens and Wal-Mart.
OTHER NEWSPAPER PRODUCTS AND OTHER PUBLICATIONS. The Company produces TV
listing magazines, Sunday comics, Sunday magazines and special supplements for
over 300 newspapers, including approximately two-thirds of the 50 most widely
circulated newspapers in the United States.
TC Advertising is the largest single producer of newspaper TV listing guides
in the United States. As of December 31, 1996, TC Advertising produced newspaper
TV listing guides for 26 newspapers including The Baltimore Sun, The Boston
Globe, The Los Angeles Times, The Newark Star-Ledger, Newsday, The New York
Times, The Philadelphia Inquirer and The San Francisco Chronicle.
TC Advertising is the largest producer of Sunday comics nationwide. As of
December 31, 1996, TC Advertising produced Sunday comics for approximately 275
newspapers, including The Atlanta Journal, The Baltimore Sun, The Denver Post,
The Los Angeles Times, The Miami Herald, The Newark Star-Ledger and The
Philadelphia Inquirer.
PREMEDIA SERVICES. In connection with its advertising insert programs and
other newspaper publications, the Company offers a number of premedia services
including creative and composition, digital photography, image management, film
output, digital file transfer and facilities management.
ADVERTISING INSERT SECTOR BUSINESS STRATEGY
The Company's business strategy for this industry sector is to maximize the
effectiveness of the advertising insert medium for its customers. Successful
application of this strategy will enable TC Advertising's customers to deliver
their advertising and marketing messages on a cost efficient basis, and will
drive profitability for the Company in its core business of producing
advertising insert programs and newspaper publications. The cornerstone of this
strategy is the continued development of an organization that focuses on
assisting customers in maximizing the effectiveness of their advertising
dollars. Key elements of this strategy include:
NATIONWIDE VERSIONING CAPABILITY. As the only advertising insert producer
offering a national network of both heatset and cold web offset production
facilities, TC Advertising is able to meet the diverse needs of its customers
and achieve significant cost and distribution advantages. TC Advertising
simultaneously produces major national advertising insert programs and other
products in multiple locations, thereby accelerating turnaround time and
reducing shipping costs to the customers' locations. Furthermore, this
nationwide network allows TC Advertising's customers to use a single advertising
insert producer to target specific distribution areas or distribute different
versions of an insert program in different targeted parts of the United States.
As the Company develops its national digital work-flow platform, TC Advertising
expects to improve efficiencies for insert versioning, improve the timeliness of
advertising inserts by
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reducing the production and distribution cycle time and enhance the cost
effectiveness of advertising inserts versus other advertising media.
TARGETED DISTRIBUTION PROGRAM. TC Advertising has developed a database
information system which enables advertisers to use insert programs to target
messages specifically to potential customers meeting the advertisers' desired
geographic, demographic and purchase pattern profiles, resulting in more cost-
effective advertising.
MEASURED MEDIA APPROACH. TC Advertising is marketing advertising insert
programs as a specific category of measured media, like radio or television. TC
Advertising believes that if insert programs are considered a specific measured
media category, TC Advertising may be in a better position to compete for
advertising budgets. To establish advertising insert programs as a specific
measured media category, TC Advertising has developed proprietary research that
positions the power of advertising inserts against other types of measured
media.
COMPETITIVE COST POSITION. TC Advertising maintains stringent cost controls
and has implemented programs to enhance efficiency and improve profitability in
recent years. These programs have resulted in increased press speeds, reduced
paper waste and improved capacity utilization. As one of the largest consumers
of newsprint and ink in the United States, TC Advertising believes it is able to
achieve significant purchasing economies under most market conditions.
PRODUCTION LOAD-LEVELING. TC Advertising has implemented programs which
target the newspaper, grocery and other industry groups whose production needs
are weekly in frequency. Printing services for these industry groups create a
more balanced, load-leveling production environment, allowing TC Advertising to
improve planning and utilization of its production capacity. In addition, TC
Advertising is constantly refining its pressline configurations to optimize
equipment utilization, to improve operating efficiencies, and to improve service
and flexibility to meet the changing needs of its customers.
SALES AND CUSTOMERS
The Company's sales force in this industry sector is organized into
geographic business groups. Its four regional geographic groups in this industry
sector cover the eastern, central and western United States and with the
acquisition of PrintCo, TC Advertising has added coverage of the upper Midwest
U.S. These sales professionals draw upon their industry expertise, knowledge of
retailing and the Company's production capabilities to help customers achieve
their advertising objectives on a cost-effective basis. The Company's top ten
customers in this industry sector, which accounted for 39% of the Company's
sales in this industry sector in 1996, were American Drug Stores; Circuit City;
The Home Depot; Kmart; Lowe's Companies, Inc.; Montgomery Ward; Sears;
Walgreens; Wal-Mart and Western Colorprint. No single customer represented more
than 6.3% of such sales in 1996. As of December 31, 1996, the average length of
the Company's relationship with such top ten customers was approximately 12
years. Consistent with industry practice, TC Advertising generally does not have
long-term contracts with its customers requiring them to use its products or
services. The Company does not believe that the loss of any single customer of
TC Advertising would have a material adverse effect on the Company's
consolidated financial condition or results of operations.
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The following table presents the sales by type of customer as a percentage
of total TC Advertising sales:
<TABLE>
<CAPTION>
PERCENTAGE OF
TC ADVERTISING
CUSTOMER TYPE SALES IN 1996
- ---------------------------------------------------------------------------------------- ---------------
<S> <C>
General merchandisers................................................................... 23.6%
Grocery stores.......................................................................... 15.8
Specialty retail and furniture.......................................................... 15.3
Home improvement centers................................................................ 14.7
Drug stores............................................................................. 11.2
Non-retail products..................................................................... 3.6
---------------
Total advertising inserts......................................................... 84.2
Sunday comics........................................................................... 6.0
Newspaper TV listing guides............................................................. 5.9
Other newspaper products and other publications......................................... 3.9
Total............................................................................. 100.0%
---------------
---------------
</TABLE>
COMPETITION
This industry sector is highly fragmented, and TC Advertising competes with
numerous regional and local companies for the production of advertising insert
programs. TC Advertising also competes for national accounts with several large
producers, some of which have greater resources than the Company. TC Advertising
believes that it and four other companies account for approximately 50% of the
advertising insert market in the United States, with more than 140 regional and
local producers accounting for the balance. In addition, TC Advertising's
products compete with television, radio and other forms of print media. TC
Advertising's main independent competitor in the production of Sunday newspaper
comics is Sullivan Graphics, a division of Sullivan Communications, Inc.,
although some newspapers print their own comics and others could do so. TC
Advertising's newspaper TV listing guides, Sunday magazine and newspaper
supplement operations also face strong competition both from other printers and
newspapers. TC Advertising's major competitors in these areas are R.R. Donnelley
& Sons Company, Quebecor, Inc. and Sullivan Communications, Inc. Although
commercial printing in the United States remains highly fragmented, recent
technological developments and over-capacity in the printing industry have
increased industry consolidation and competitive pressures. The principal
methods of competition in these businesses are pricing, quality, timeliness of
delivery and customer service. Pricing is dependent in large part upon the
prices of paper and ink, which are the major components of TC Advertising's
products. Pricing is also influenced by shipping costs, operating efficiencies
and the ability to control costs. TC Advertising believes that the introduction
of new technologies and continued excess capacity in this industry sector,
combined with the cost pressures facing its customers resulting from among other
things, the cost of paper and postal rates, have resulted in downward pricing
pressures and increased competition in its core businesses. See "--Additional
Company Information--Raw Materials."
DIRECT MAIL AND OTHER ADVERTISING SERVICES
The Company produces highly-customized direct mail, fragrance samplers,
promotional stamps and commercial games. In addition, the Company produces
non-specialty products such as enhanced envelopes and government forms. The
Company's operating unit in this industry sector, Webcraft, is headquartered in
Horsham, Pennsylvania and has production facilities in Bristol and Chalfont,
Pennsylvania, Newark and North Brunswick, New Jersey and Salisbury, Maryland.
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PRODUCTS AND SERVICES
BACKGROUND
The Company believes that in the individualized direct mail industry sector
in which Webcraft operates, customized direct mail expenditures account for
$20.8 billion per year, with approximately 33% going to the production of direct
mail and the remainder to other services, including agency services, data
analysis and manipulation, and creative development. Media expenditures for
direct mail advertising grew at an average annual rate of 7.1% for the period
1991-1996, compared to an average annual growth rate for overall advertising
spending of 6.5% for the period 1991-1996 according to the 1996 DMA/WEFA Group
Study-- "Economic Impact: U.S. Direct Marketing Today." The Company believes
more advertisers will use personalized direct mail techniques as mailing list
databases grow in both volume of information stored and sophistication.
SPECIALTY PRODUCTION
PERSONALIZED DIRECT MAIL. The majority of the Company's revenues in this
industry sector are derived from the in-line production of personalized
advertising mailings which are produced by ink-jet, laser and electropress
systems, integrated with an advanced data processing capability. Personalized
direct mail enables consumer goods and other marketers to communicate with their
customers on an individual-by-individual basis rather than relying on the broad
non-personalized mailings which typically generate lower response rates. The
Company can process and manipulate databases to enable its customers to target
direct mail recipients based on a combination of more than a dozen attributes,
including the recipient's age, gender, address, spending habits, such as type of
car owned, or whether the recipient is a pet owner. Personalized direct mail is
frequently used in conjunction with larger print, radio or television
promotional campaigns.
The primary users of the Company's personalized direct mail products are
consumer goods and financial services companies and non-profit institutions.
Major customers include Chrysler Corp.; Dean Witter; Publishers Clearing House;
Reader's Digest Association, Inc.; RJR Nabisco Holdings Corp. and U.S. Sales.
FRAGRANCE SAMPLERS. Fragrance samplers are product samples, typically of
perfume, which are distributed to potential purchasers of the fragrance through
magazine inserts or as billing statement stuffers for major department stores.
Webcraft is a leading producer of highly specialized fragrance samplers because
of its ability to produce an accurate rendition of the perfume being marketed
and its technological expertise in the microencapsulation of the fragrance.
Webcraft recently patented technology that allows for multiple uses of a single
magazine scent strip. Webcraft's customers in fragrance samplers include Calvin
Klein, Inc.; Elizabeth Arden, Co. and Estee Lauder, Inc.
COMMERCIAL GAMES. Commercial games are typically used to increase traffic
to retail establishments by offering customers an opportunity to win various
prizes. For example, fast food restaurants give customers scratch-off tickets
which offer prizes ranging from a soft drink to cash. There are no significant
recurring customers in this area of Webcraft's business since commercial games
are used in specific promotional campaigns.
STAMPS. Webcraft's stamp products include booklets and sheets of gummed,
round-hole perforated stamps. Webcraft produces stamps using special in-line
grinders that create the same quality of perforation found in U.S. postage
stamps. Webcraft believes that certain technologies it employs in producing
stamps, such as the ability to generate letters with attached stamp sheets, give
Webcraft a special advantage. Significant customers include The American Lung
Association; National Wildlife Federation; Publishers Clearing House and
Reader's Digest Association, Inc.
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NON-SPECIALTY PRODUCTION
OTHER PRODUCTS AND SERVICES. A significant portion of Webcraft's
non-specialty production involves the production of enhanced envelopes, which
are essentially simple printed products involving the formation of an envelope
such as catalog order forms, film mailers and airline ticket jackets. Webcraft
also produces specialty chemicals, adhesives and coatings. The Company believes
that in 1997, approximately 87% of these products will be sold to industry
customers and the remainder will be used internally.
DIRECT MAIL SECTOR BUSINESS STRATEGY
The Company's business strategy in this industry sector is to increase
revenues and maximize profitability in its core business of direct mail products
and customized advertising products. The cornerstone of this strategy is to
improve the effectiveness of its customers' advertising products by developing
customized formats and offering complex personalization capabilities designed to
increase response rates. The key elements of this strategy include:
TECHNOLOGICAL EXPERTISE. Webcraft believes that the continued development
of its production processes enables it to consistently provide high quality
products and services at competitive prices. Webcraft's technological focus is
on its in-line finishing process that combines the personalizing, folding,
cutting and collecting of several multi-color pieces into a formed envelope in
one step, shortening the time needed to produce complex finished products.
Additionally, its unique combination of format design, multi-stage
personalization and outer wrap (envelope) configurations often provides
customers with superior response rates to their direct marketing programs. These
same processes also enable Webcraft to provide its products more rapidly than
many of its competitors. Webcraft believes that these capabilities are becoming
increasingly important as lead time becomes more compressed and customers demand
faster turn around times to respond to time-sensitive market opportunities. In
addition, with the acquisition of Scanforms, Webcraft's ink-jet technology is
now complemented by Scanforms' laser imaging process. Furthermore, the
conversion of new customers from the more traditional method of laser imaging of
Scanforms to Webcraft's in-line method is made easier because Webcraft will
initially be able to provide services to these new customers in the laser
process they are familiar with before they are converted to Webcraft's in-line
method.
NEW PRODUCTS. Webcraft will continue to work with its customers to develop
new products to meet their advertising needs. Webcraft's in-line process,
coupled with advanced design and personalization capabilities, give Webcraft an
advantage versus its competitors in improving the effectiveness of its
customers' direct mail products. In addition, with the acquisition of Scanforms,
Webcraft now offers short-run direct mail capabilities.
ENTER NEW MARKETS. Webcraft will also continue to develop new customers and
will work with Laser Tech and TC Advertising to target the retail industry.
LEVERAGE DATABASE EXPERTISE. Webcraft intends to use its expertise in
managing database information to work with its customers to design more
cost-effective campaigns.
COST CONTROL AND PRODUCTIVITY IMPROVEMENTS. Webcraft has developed a cost
control program which focuses on minimizing waste, reducing labor-intensive
processes and making its selling effort more efficient. In addition, management
has implemented several programs to improve profitability, including
reorganizing its management information systems and business acquisitions
systems, which allow Webcraft to utilize press time more effectively. Webcraft
has implemented a new order confirmation system that strengthens its
relationships with its customers, by providing accurate and detailed job
specifications and electronic templates for ease of customer formatting.
Webcraft has also instituted a new make-ready program, resulting in significant
reduction of make-ready time. This has resulted in lowering set-up costs and
increasing total production capacity of the installed base of equipment.
Furthermore, the recent
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acquisition of Scanforms strengthens Webcraft's position in the financial
services market because it greatly expands capacity for magnetic ink readable
code checks products.
SALES AND CUSTOMERS
The Company employs 46 sales representatives in this industry sector. They
are based in 14 U.S. sales offices in 11 states and the District of Columbia.
While the majority of these sales are made directly to end users, the Company
also sells its direct mail products and services through advertising agencies,
brokers and other agents. The Company's principal customer groups include
consumer goods manufacturers, mail order and catalog publishers, fragrance
marketers, financial institutions, non-profit organizations and other government
agencies. The Company's ten largest customers in this industry sector (including
Calvin Klein, Inc.; Publishers Clearing House; RJR Nabisco Holdings Corp. and
U.S. Sales), accounted for approximately 32% of its sales in this industry
sector in 1996. On average, these customers had over a nine year relationship
with the Company.
Webcraft has a contract with the United States Postal Service to supply
Express Mail labels through September 1997. This contract provides for a pass
through of paper cost changes over the length of the contract through a formula
provided in the contract.
The balance of Webcraft's sales are typically covered by purchase orders
from the client and signed sales confirmations from Webcraft. These documents
detail the terms and conditions of sale. Prices typically vary from project to
project because each job is unique with its own variables, including run
quantity, dimensions of the printed piece, personalization, special materials
such as scratch off, die cuts and a number of other criteria. The Company does
not believe that the loss of any single customer of Webcraft would have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
COMPETITION
In this industry sector, the Company competes with a number of different
firms in each of its principal lines of direct mail business. The primary
competitive factors in its specialty markets are quality, flexibility, service,
timeliness of delivery and price. However, in certain non-specialty markets,
such as the enhanced envelope and government printing markets, price is often
the dominant factor. In the personalized direct mail product category, the
Company's major competitors are Banta Direct Marketing Group, a division of
Banta Corporation; Moore Response Marketing Services, a division of Moore
Business Forms, Inc.; Communicolor, a division of Standard Register Company; and
World Color Press, Inc. In the fragrance sampler line of business, the Company
believes that its major competitor is Arcade, Inc. The Company's primary
competitor in commercial games products and services is Dittler Brothers, Inc.
In the production of stamps, the Company's major competitors are Fleming-Potter
Co., Connecticut Color, Inc. and Cyril-Scott Company. In the non-specialty
category, the products produced do not have the same complexity as products
produced in Webcraft's specialty printing services. Because of this lack of
complexity, there are a number of printers capable of competing with the Company
in this area. Major competitors in the non-specialty market include Cyril-Scott
Company and Double Envelope Corp. (Convertagraphics). Increases in printing
press capacity in this segment have led to over-capacity in recent years, with
resulting pricing pressures. Webcraft's management has responded to these
pressures by lowering its cost structure for producing non-specialty products.
SALE OF LOTTERY BUSINESS
In December 1996, Webcraft sold the stock of Webcraft Games, Inc., its
lottery production subsidiary. This sale will enable Webcraft's management to
better focus on its core businesses. In addition, the sale has provided
expansion capability for direct mail production at Webcraft's North Brunswick
facility, a portion of which was previously used for lottery production. See
"Management's Discussion and Analysis of
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Financial Condition and Results of Operations" and Note 4 of the Notes to the
December 31, 1996 Consolidated Financial Statements.
PREMEDIA SERVICES
The Company provides a full line of digital premedia services for the
advertising, retail catalog and packaging industries. Services and technology
include digital photography studios, leading-edge desktop publishing and
client/server software and hardware, turnkey catalog and advertising insert
production, electronic retouching systems, large film output, Cyrel photopolymer
platemaking, and digital image management systems for high speed image
retrieval. The Company's operating unit in the premedia sector, Laser Tech, is
headquartered in Irving, Texas and has eleven production facilities in the U.S.
and manages four facilities at client locations.
PRODUCTS AND SERVICES
BACKGROUND. The Company believes that premedia products and services exceed
$5.3 billion annually, with compound annual growth rates approaching 5% over the
past three years. Laser Tech believes that the digital premedia sector will
continue to grow with the emergence of new distribution technologies such as
CD-ROM and the World Wide Web that use digitized images. Furthermore, the
acceleration of digital technologies used in premedia services has necessitated
greater data processing expertise and comparatively greater capital expenditure,
leading many businesses to outsource their premedia requirements.
ELECTRONIC PREMEDIA ("EPM") OPERATIONS. EPM involves the electronic
capture of black and white or full color pictures and image retouching
combined with text and graphics into a page layout suitable for distribution
in a print or new media format such as CD-ROM or the World Wide Web. The
Company's comprehensive line of EPM services include the following:
DIGITAL PHOTOGRAPHY. The Company operates eight fully equipped digital
photography studios capable of capturing images greater than 100 megabytes
for an output print size of up to 20" x 30".
ELECTRONIC RETOUCHING. The Company offers its customers high-end
facilities for electronic creation or retouching of visual images. The
resulting digital image can be output as color transparency or offset film
or distributed for Internet or CD-ROM publication.
DIGITAL IMAGE SCANNING. The Company scans and color corrects
transparencies, photo prints or illustrations, then outputs the digital
image file to a variety of media for print or electronic distribution.
PAGE ASSEMBLY. The Company places digital image files into customer
page layouts to form finished printable advertising materials. These same
digital files can be re-formatted for output to digital media such as
Internet or multi-media. The Company utilizes MacIntosh-TM- and Windows
NT-TM- desktop publishing technologies as well as UNIX-based-TM-
client/server technologies from Silicon Graphics, Inc., Sun Microsystems,
Inc., Digital Equipment Corporation, Inc. and others.
ELECTRONIC OUTPUT. The Company outputs completed digital image files to
a variety of output media, including regular and oversize lithographic
films, color transparency, digital printing plate, digital new media such as
the Internet or CD-ROM as well as direct digital color display graphics.
PROOFING. For each digital image file produced, the Company offers a
variety of color proofing methods from direct digital methods in which the
digital file is output to a color proof prior to final media output, to
conventional analog proofs in which lithographic films are exposed onto
color proofing materials. The Company operates low cost remote digital
proofing facilities at many customer locations to provide the customer
virtually instantaneous access to final digital files.
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<PAGE>
PACKAGING. The Company offers full service specialized services to
packaging customers in image capture, art production, page assembly,
proofing and photopolymer platemaking tailored for both lithographic and
flexographic packaging products. Packaging products require different skill
sets and capabilities than advertising materials due to the varied
manufacturing technologies peculiar to consumer packaging reproduction.
FACILITIES MANAGEMENT. Laser Tech's Facilities Management division
specializes in providing on-site digital premedia services to agencies,
corporate advertisers or printers. Services may include only one or all of
Laser Tech's service offerings. Facilities Management sites typically
involve long-term contracts and minimum annual revenue commitments.
DIGITAL ASSET MANAGEMENT. The digital files that produce printed
advertising materials or digital new media materials must be organized,
stored and made available for re-use. The "file rooms" of yesterday are
giving way to electronic digital asset libraries for storage, retrieval and
reuse of digital files. Laser Tech has developed MAXCESS-TM- (Media Access)
application software to provide a turnkey technology solution to advertisers
who desire to manage their digital assets for re-use or re-sale to third
parties. Laser Tech's Image Technology Group is developing additional
enhancements to MAXCESS-TM- to add advertising production capabilities to
the original storage and retrieval platform. The acquisition of DDI brought
Vision Bank to the Laser Tech asset management offering. Vision Bank is a
low entry cost, scaleable enterprise software solution for digital asset
management.
PREMEDIA SECTOR BUSINESS STRATEGY
The Company's objective in this industry sector is to become the leading
provider of outsourced, digital premedia and content management services to
retailers, advertising agencies, and consumer product companies. Key elements of
this strategy include:
DEVELOP DIGITAL IMAGE MANAGEMENT NETWORKS. Laser Tech continues to develop
systems to provide its customers with greater access to and control over their
advertising images. Accordingly, it has formed the Image Technology Group to
develop an interactive image management system which links advertisers and
graphic designers with a database of images. The database enables them to avoid
re-creation costs and streamline production flows by creating, storing,
retrieving, and editing their advertisements through on-line connections from
their offices. Laser Tech continues to work with TC Advertising to integrate its
digital premedia communications network with TC Advertising's production
facilities.
ENTER NEW MEDIA MARKETS. Laser Tech is leveraging its electronic premedia
services into the emerging technology markets of electronic distribution of
information via the World Wide Web, CD-ROM and other electronic delivery
methods. Laser Tech's traditional customer base is actively seeking to exploit
these emerging media distribution channels. Laser Tech believes that these new
distribution methods, combined with an increasing need for digital archiving and
retrieval of digital images, present significant growth opportunities for Laser
Tech.
EXPAND OUTSOURCING FACILITIES. Laser Tech maintains multiple facilities in
major markets across the country as well as "outsourced services" sites on
customers' premises and at various TC Advertising production sites. Electronic
imaging hubs are being developed to service Laser Tech's regional and national
customer base. These hubs will provide first-line and overflow imaging
manufacturing support for regional and national sales efforts.
LEVERAGE EXISTING MARKETS. In conjunction with TC Advertising, Laser Tech
is focusing on providing services to the substantial retail customer base of TC
Advertising, including electronic premedia services, image storage and retrieval
services, and customized application software for increased production
efficiency for both print and new media distribution channels. Furthermore, the
acquisition of DCS
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enhanced Laser Tech's ability to service its retail customer base with DCS's
significant retail advertising insert and catalog production expertise.
SALES AND CUSTOMERS
The Company's premedia sales force is organized into four market categories
with 55 sales representatives in 13 offices. The Company's principal customer
groups in the premedia sector include magazine, retail catalog and advertising
insert producers, consumer product packaging manufacturers, advertising
agencies, and consumer goods manufacturers and retailers. The largest of these
customers include DDB Needham Worldwide; Kmart; Office Depot; RJR Nabisco
Holdings Corp.; Tyson Foods, Inc. and Wal-Mart. The Company does not believe
that the loss of any single customer of Laser Tech would have a material adverse
effect on the Company's consolidated financial condition or results of
operations.
COMPETITION
The premedia industry sector is highly fragmented and undergoing a period of
consolidation. The Company's major competitors in this sector are Applied
Graphics Technologies, Inc., Wace USA and Schawk, Inc. The major competitive
factors in the premedia business are price, quality of finished products,
distribution capabilities, ongoing customer service and availability of time on
equipment which is appropriate in size and function for a given project. The
consolidation of customers within certain of the Company's premedia businesses
provides both greater competitive pricing pressures and opportunities for
increased volume solicitation.
ADDITIONAL COMPANY INFORMATION
RAW MATERIALS
In 1996, Big Flower spent approximately $610 million on raw materials. The
primary raw materials required in the Company's printing operation are paper,
ink, plates and adhesives and in its premedia operations are film, chemicals,
computer supplies and proofing materials. The Company believes that there are
adequate sources of supply for its primary raw materials and that its
relationships with its suppliers yield improved quality, pricing and overall
service to its customers. Although there can be no assurance that the Company's
sources of supply for its paper will be adequate in all circumstances, in the
event that such sources are not adequate, the Company believes that alternative
sources can be developed in a timely manner.
The Company's results of operations depend to a large extent on the cost of
paper and the ability of the Company to pass along to its customers any
increases in these costs and remain competitive when there are decreases. In
recent years, the Company has substantially reduced the number of its suppliers
of paper and has formed stronger commercial relationships with such suppliers,
resulting in its ability to negotiate favorable price discounts and achieve more
assured sourcing of high quality paper that meets the Company's specifications.
In connection with its acquisition by Big Flower, TC Advertising entered
into a long-term ink supply agreement with a single supplier, effective July 31,
1993, pursuant to which it is obligated to purchase from such supplier a
substantial portion of its annual requirements for ink. The terms of this
agreement are confidential.
Webcraft also has an ink supply agreement with a supplier pursuant to which
Webcraft is obligated until August 1998 to purchase from such supplier not less
than 80% of Webcraft's annual requirements for ink for heatset and flexographic
inks at all plants operated by Webcraft. Price is determined on a price per
pound basis that is subject to adjustments based on competitive pricing. In
addition, Webcraft enjoys an incentive program based on annual purchase levels.
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The Company internally produces most of the adhesives needed for its
printing operations, through its adhesives and coatings subsidiary, Webcraft
Chemicals, Inc. ("Webcraft Chemicals"), but believes that there are other ready
sources for these products. This subsidiary also supplies a variety of specialty
chemicals for unusual format applications. Webcraft Chemicals is currently
working with other Big Flower companies to increase sales of adhesives, coatings
and other specialty chemicals to these potential customers.
TRADE NAMES, TRADEMARKS AND PATENTS
The Company owns certain trade names, trademarks and patents used in its
business. The loss of any such trade name, trademark or patent would not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
SEASONALITY
TC Advertising's advertising insert business is seasonal in nature, with
activity increasing prior to the following advertising periods: Easter (March
15-April 15); Memorial Day (April 15-May 15); Back to School (July 15-August
15); and Thanksgiving/Christmas (October 1-December 15). Sunday comics,
newspaper TV listing guides, other newspaper products and other publications are
not seasonal in nature. Net sales percentages for the Company by quarter for the
twelve months ended December 31, 1996 were 19%, 25%, 26% and 30% of total net
sales for the quarters ended March 31, June 30, September 30 and December 31,
respectively. Based on its historical experience and projected operations, the
Company expects its operating results to be highest in the quarter ended
December 31 and weakest in the quarter ended March 31.
GOVERNMENTAL REGULATIONS
The Company's business is subject to a variety of federal, state and local
laws, rules and regulations. The Company's production facilities are governed by
laws and regulations relating to workplace safety and worker health, primarily
the Occupational Safety and Health Act ("OSHA") and the regulations promulgated
thereunder. Except as described herein, the Company is not aware of any pending
legislation that in its view is likely to affect significantly the operations of
the Company's business. The Company believes that the operations of its
subsidiaries comply substantially with all applicable governmental rules and
regulations.
ENVIRONMENTAL MATTERS
Certain of the Company's operations are subject to federal, state and local
environmental laws and regulations concerning the discharge, storage, handling
and disposal of hazardous or toxic substances. Such laws and regulations provide
for significant fines, penalties and liabilities, in certain cases without
regard to whether the owner or operator of the property knew of, or was
responsible for, the release or presence of such hazardous or toxic substances.
In addition, third parties may make claims against owners or operators of
properties for personal injuries and property damage associated with releases of
hazardous or toxic substances. The Company cannot predict what environmental
legislation or regulations will be enacted in the future or how existing or
future laws or regulations will be administered or interpreted. The Company
therefore cannot predict the amount of future expenditures which may be required
in order to comply with any environmental laws or regulations or to satisfy any
such claims. Based on currently available information, the Company believes that
its operations comply substantially with all applicable environmental laws and
regulations.
The Company's acquisition of Webcraft resulted in certain obligations under
the New Jersey Industrial Site Recovery Act, formerly known as the Environmental
Cleanup Responsibility Act (together, "ISRA"), which is triggered by the
transfer of industrial property. For the four New Jersey sites, the New
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Jersey Department of Environmental Protection ("NJDEP") approved the transfer of
Webcraft's facilities without requiring any further investigatory or cleanup
work under ISRA. At two sites, Webcraft and the NJDEP agreed that Webcraft would
continue to maintain financial guarantees that were previously established
pursuant to ISRA (in the amounts of $30,000 and $1,000,000), continue site
investigations that were already underway, and institute remediation measures as
appropriate, based on its investigations. At the third site, Webcraft
established a nominal financial guarantee which the Company believes will be
sufficient to cover the costs of investigating and remediating contamination
discovered there. At the fourth site, no financial guarantee was required by the
NJDEP, which has subsequently issued a letter confirming that the ISRA matter is
complete. The Company has obtained an indemnification from the selling
shareholders of Webcraft for certain costs resulting from pre-existing
conditions pertaining to Webcraft, including but not limited to environmental
matters. This indemnification is subject to certain limitations, including
threshold requirements and a maximum liability cap of $4.8 million. With respect
to Webcraft's ISRA obligations, the Company believes, based on the
indemnification agreement, as well as potential contribution from a third party
for contamination at one such site, and existing cost estimates for all such
sites, that its liability for such matters will not have a material adverse
effect on the Company's consolidated financial position or results of
operations. However, there can be no assurance that such matters will not
ultimately have such an effect.
TC Advertising and Webcraft have been identified as potentially responsible
parties ("PRPs") for the cleanup of contamination resulting from disposals of
hazardous waste pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA" or "Superfund")
and analogous state laws. Courts have interpreted CERCLA to impose strict, joint
and several liability upon all persons liable for response costs at a cleanup
site if the harm at the site is indivisible. This generally means that each
responsible party could be held liable for the entire costs of the necessary
response actions at a Superfund site. As a practical matter, however, at sites
where there are multiple PRPs for a cleanup, the costs of cleanup typically are
allocated, according to a volumetric or other standard, among the parties.
CERCLA also provides that responsible parties generally may seek contribution
for the costs of cleaning up a site from other responsible parties. Thus, if one
party is required to clean up an entire site, that party can seek reimbursement
or recovery of such costs from other responsible parties.
TC Advertising has been identified as a PRP at two sites pursuant to CERCLA,
and one additional site pursuant to analogous state environmental laws and
regulations, to which sites TC Advertising, among others, sent waste in the
past. TC Advertising believes that, with respect to one site, its liability will
not be material, and the Company has established a nominal reserve to cover any
such liability. With respect to the other two sites, TC Advertising believes
that it is, or may be responsible for a very minor portion, if any, of the total
cleanup costs at each such site. As a result, based on a review of the data
available to the Company regarding each such site, including the number and
viability of other PRPs, the minor volumes of waste which TC Advertising is
alleged to have contributed, the range of likely cleanup costs, and a comparison
of TC Advertising's alleged liability at each such site to settlements
previously reached by TC Advertising in similar cases, the Company believes that
such matters will not result in liabilities or expenditures that will have a
material adverse effect on the Company's consolidated financial position or
results of operations. Nonetheless, because neither the final total cleanup
costs at each of the remaining sites have been ascertained nor TC Advertising's
final proportionate share determined, there can be no assurance that such
matters, or any similar liabilities that arise in the future, will not
ultimately have such an effect.
Webcraft has been identified as a PRP at two sites pursuant to CERCLA and/or
analogous state law, to which site Webcraft, among others, sent waste in the
past. Based on the minor volumes of waste which Webcraft is alleged to have
contributed, the range of likely cleanup costs, and the indemnification
agreement between the Company and the selling shareholders of Webcraft, the
Company believes that this matter will not result in liabilities or expenditures
that will have a material adverse effect on the Company's
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consolidated financial position or results of operations. However, because
neither the final total cleanup costs at these sites have been ascertained nor
Webcraft's final proportionate share determined, there can be no assurance that
such matters, or any similar liabilities that arise in the future, will not
ultimately have such an effect.
In addition, in 1990, the United States Environmental Protection Agency
("EPA") identified Webcraft, among others, as a PRP pursuant to CERCLA for
regional groundwater contamination in the vicinity of Webcraft's Chalfont,
Pennsylvania facility. Webcraft responded to the EPA notice disclaiming any
responsibility for such contamination. As of the present time, Webcraft has
heard nothing further from the EPA regarding this matter. Based on an
indemnification agreement with the prior site owner, as well as the
indemnification agreement with the selling shareholders of Webcraft, the Company
believes that its liability, if any, at this site will not have a material
adverse effect on the Company's consolidated financial position or results of
operations. However, because the nature of the claim has not been ascertained,
there can be no assurance that such matter will not ultimately have such an
effect.
EMPLOYEES
As of May 1, 1997, the Company had approximately 6,419 employees, of which
approximately 1,233 were salaried and 5,186 were hourly. Most of Webcraft's
hourly employees at its North Brunswick and Newark, New Jersey facilities are
represented by the United Paper Workers International Union, AFL-CIO. Webcraft
entered into a new three-year contract with this union on February 1, 1995.
Under this agreement, represented employees will receive an hourly base rate
increase of 3% in 1997. The Company believes it has satisfactory employee and
labor relations.
PROPERTIES
The Company maintains a large number of diverse properties. Management
believes that these properties, taken as a whole, are generally well maintained
and are adequate for current and foreseeable business needs. The majority of
these properties are leased. Substantially all of the Company's materially
important physical properties are being fully utilized. The Company's properties
are covered by all-risk and liability insurance which the Company believes is
customary for the industry.
EXECUTIVE OFFICES
Big Flower, TC Advertising, Webcraft and Laser Tech each lease their
executive offices in New York City, New York; Baltimore, Maryland; Horsham,
Pennsylvania and Irving, Texas, respectively. The lease terms for Big Flower's,
Webcraft's and Laser Tech's facilities expire in November 2006, February 1998
and September 1999, respectively. TC Advertising occupies its executive offices
pursuant to two leases that expire in December 2000 and December 2005,
respectively.
PRODUCTION FACILITIES
As of May 1, 1997, the Company owned 11 and leased 23 production facilities,
with lease terms expiring from September 30, 1997 to May 30, 2006, as set forth
below:
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<TABLE>
<CAPTION>
APPROXIMATE LAND TITLE; IF LEASED,
TC ADVERTISING LOCATIONS SQUARE FOOTAGE LEASE TERM EXPIRATION
- -------------------------------------------------------------------------- -------------- ----------------------
<S> <C> <C>
Atlanta, GA............................................................... 100,057 Fee Ownership
Charlotte, NC............................................................. 105,400 December 31, 2002
City of Industry, CA...................................................... 103,000 September 30, 2001
Columbus, OH.............................................................. 141,185 December 31, 2004
Dallas, TX................................................................ 90,000 September 30, 2002
East Longmeadow, MA....................................................... 159,241 February 3, 2006
Elk Grove Village, IL..................................................... 80,665 August 31, 2002
Greenville, MI............................................................ 130,000 Fee Ownership
Lenexa, KS................................................................ 90,000 Fee Ownership
Manassas, VA.............................................................. 108,120 February 28, 2003
Niles, MI................................................................. 90,000 Fee Ownership
Pomona, CA................................................................ 144,542 May 31, 2006
Portland, OR.............................................................. 125,250 October 31, 2002
Sacramento, CA............................................................ 57,483 Fee Ownership
Saugerties, NY(1)......................................................... 209,000 Fee Ownership
Salt Lake City, UT........................................................ 55,000 October 31, 1997
San Antonio, TX........................................................... 67,900 Fee Ownership
Tampa, FL................................................................. 72,418 October 31, 1999
WEBCRAFT LOCATIONS
Bristol, PA............................................................... 132,000 Fee Ownership
Chalfont, PA.............................................................. 320,000 Fee Ownership
Newark, NJ................................................................ 23,000 Fee Ownership
Newark, NJ................................................................ 22,692 June 30, 1998
North Brunswick, NJ....................................................... 296,000 Fee Ownership
Salisbury, MD............................................................. 66,000 July 7, 1999
LASER TECH LOCATIONS
Atlanta, GA............................................................... 15,588 February, 2001
Carlsbad, CA.............................................................. 8,500 December 1, 1998
Dallas, TX................................................................ 15,000 September 30, 1997
Delray Beach, FL.......................................................... 2,500 February 28, 1998
Irvine, CA................................................................ 13,000 October 9, 1998
Irving, TX................................................................ 62,687 September 1, 1999
Mobile, AL................................................................ 4,200 June 30, 2000
Salt Lake City, UT(2)..................................................... 840 --
San Antonio, TX........................................................... 7,927 October 31, 1997
San Francisco, CA......................................................... 5,260 May 31, 2000
St. Louis, MO(1).......................................................... 38,000 May 30, 2006
</TABLE>
SALES OFFICES AND OTHER FACILITIES
As of May 1, 1997, the Company had 42 sales offices and five other
facilities. All of the sales offices and other facilities are leased, with lease
terms expiring from July 31, 1997 to June 30, 2006, with the exception of one
office which is owned.
- ------------------------
(1) Comprised of two adjacent facilities.
(2) Located within TC Advertising's Salt Lake City facility.
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LEGAL PROCEEDINGS
Certain claims, suits and complaints which arise in the ordinary course of
the Company's business have been filed or are pending against the Company. The
Company believes that all such matters either are adequately reserved for, are
covered by insurance, or would not, after taking into account the reserves
established and/or insurance in place, have a material adverse effect on the
Company's consolidated financial condition or results of operations, if
adversely determined against the Company.
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MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company, all of whom are U.S. citizens.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
R. Theodore Ammon......................... 47 Class III Director; Chairman of the Board
Peter G. Diamandis........................ 65 Class II Director
Robert M. Kimmitt......................... 49 Class I Director
Joan D. Manley............................ 64 Class II Director
Newton N. Minow........................... 71 Class I Director
Edward T. Reilly.......................... 50 Class III Director; President and Chief Executive Officer
Mark A. Angelson.......................... 46 Executive Vice President and General Counsel and Secretary
of the Board of Directors
Richard L. Ritchie........................ 50 Executive Vice President and Chief Financial Officer
</TABLE>
Certain information regarding each person listed above, including such
person's principal occupation during the past five years and current
directorships, is set forth below. Unless indicated otherwise, all directors and
executive officers have had the indicated principal occupations for the past
five years.
R. THEODORE AMMON has been the Chairman of the Board of Big Flower since its
inception and was Chief Executive Officer from that date until April 1997. Mr.
Ammon was a General Partner of Kohlberg Kravis Roberts & Co. (a New York and San
Francisco-based investment firm) from 1990 to 1992, and an executive of such
firm prior to 1990. Mr. Ammon is also a member of the Board of Directors of Host
Marriott Corporation, Culligan Water Technologies, Inc. and Samsonite
Corporation. In addition, Mr. Ammon serves on the Board of Directors of the New
York YMCA, Jazz @ Lincoln Center and the Institute of International Education,
and on the Board of Trustees of Bucknell University.
PETER G. DIAMANDIS has been a Director of Big Flower since September 1994.
Mr. Diamandis was Vice Chairman of Donnelley Marketing, Inc., a marketing
company, from 1991 through 1996. He has also been the Chairman of TVSM, Inc., a
magazine publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served
as President and Chief Executive Officer of Hachette Publications, which
purchased Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr.
Diamandis served as Chairman, President and Chief Executive Officer of Diamandis
Communications Inc., a publisher of special interest magazines. In 1982, Mr.
Diamandis joined CBS Magazines ("CBS") as Vice President, Group Publisher,
Women's Day, and served as President of CBS from September 1983 to 1987. Mr.
Diamandis is a former Chairman of Magazine Publishers of America. Mr. Diamandis
serves on the Board of Trustees of Bucknell University.
ROBERT M. KIMMITT has been a Director of Big Flower since November 1996.
Since May 1997, he has been a partner in the law firm of Wilmer, Cutler &
Pickering. From 1993 to May 1997, Mr. Kimmitt was a managing director of Lehman
Brothers and head of its Washington office. Prior to joining Lehman Brothers,
Mr. Kimmitt served from 1991 to 1993 as American Ambassador to Germany, and from
1989 to 1991 as Under Secretary of State for Political Affairs. He was a partner
in the Washington office of Sidley & Austin from 1987 to 1989. Mr. Kimmitt
served as a member of the National Security Council staff at the White House
from 1978 to 1985 and General Counsel of the Department of the Treasury from
1985 to 1987. Mr. Kimmitt serves on the board of Mannesmann Corporation of
Duesseldorf, Germany, a global industrial, automotive, and telecommunications
company, and on the U.S. Group Council of BMW Corporation of Munich, Germany. He
is also on the Board of the German Marshall Fund.
JOAN D. MANLEY has been a Director of Big Flower since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Aon Corporation, Sara Lee Corporation and Viking Office Products,
Inc. and is a Trustee of the Keystone Center.
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NEWTON N. MINOW has been a Director of Big Flower since September 1996.
Since 1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of Sara
Lee Corporation, Aon Corporation, Manpower, Inc. and True North Communications,
Inc. Mr. Minow is former Chairman of the Carnegie Corporation of New York, a
Trustee and former Chairman of the Board of Trustees of The RAND Corporation,
and former Chairman of the Board of Governors of the Public Broadcasting
Service. Mr. Minow is also a Life Trustee of the University of Notre Dame and a
Life Trustee of Northwestern University.
EDWARD T. REILLY has been Chief Executive Officer of the Company since April
1997, President of Big Flower since March 1996 and a Director of the Company
since June 1996. He was also the Chief Operating Officer of Big Flower from
March 1996 until April 1997. He is also a director of TC Advertising, Laser Tech
and Webcraft. Prior to joining Big Flower, Mr. Reilly held a variety of
executive positions with McGraw-Hill, Inc., a publishing and communications
company, in their Broadcast and Publication groups from 1968 to 1996, and served
as President of McGraw-Hill Broadcasting from 1987 to 1996. Mr. Reilly has been
active in television industry affairs, having served as the Chairman of the
Television Bureau of Advertising, a member of the Board of Directors of the Ad
Council and a member of the Board of Directors of the National Association of
Broadcasters. Mr. Reilly is also a Trustee of Lynchburg College.
MARK A. ANGELSON has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of Big Flower since March 1996. He is also a
director of TC Advertising, Laser Tech and Webcraft. Prior to joining Big
Flower, Mr. Angelson practiced law with Sidley & Austin from 1982 to 1996. Mr.
Angelson was Co-Chair of Sidley's international operations, founder of the
firm's English law practice and manager of the firm's offices in Singapore, New
York and London. Mr. Angelson is admitted to practice law in the State of New
York, and as a solicitor in England and Wales. He is also a Trustee of American
School in London Foundation, Inc., a Fellow of Royal Society of Arts, a member
of the Advisory Board of Jobs for the Future, Inc. and a member of the Pilgrims
of Great Britain.
RICHARD L. RITCHIE has been Executive Vice President and Chief Financial
Officer of Big Flower since January 1997. Prior to joining Big Flower, Mr.
Ritchie served as Senior Vice President and Chief Financial Officer of
Harte-Hanks Communications, Inc. from 1986 to 1996.
The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Kimmitt and Minow; the
Class II directors are Mr. Diamandis and Ms. Manley; and the Class III directors
are Messrs. Ammon and Reilly. The Class I directors were initially elected, in
the case of Mr. Kimmitt, and reelected, in the case of Mr. Minow, at the 1996
Annual Meeting of Stockholders to hold office until the date of the 1999 Annual
Meeting of Stockholders; the initial Class II directors were elected to hold
office until the date of the 1997 Annual Meeting of Stockholders, and were
reelected for a three-year term at that time; and the initial Class III
directors were elected to hold office until the date of the 1998 Annual Meeting
of Stockholders and, in each case, until his or her successor is elected and
qualified and subject to his or her prior death, resignation, retirement,
disqualification or removal. At each annual meeting of stockholders, successors
to the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional directors of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. The term of office of each
executive officer is until the organizational meeting of the Board of Directors
of the Company following the next annual meeting of the Company's stockholders
and until his successor is elected and qualified or until his prior death,
resignation, retirement, disqualification or removal.
56
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership as of July 15, 1997
by each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock (constituting the only class of voting
stock of the Company), each director of the Company, each Named Executive
Officer, and all directors and current executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------
<S> <C> <C>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER (A) OWNERSHIP (B) PERCENTAGE OF CLASS
- ----------------------------------------------------------------------- -------------------- -------------------
R. Theodore Ammon (c).................................................. 2,317,144 12.5%
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
FMR Corp............................................................... 2,217,100 12.0%
82 Devonshire Street
Boston, Massachusetts 02109
EnTrust Capital Inc.................................................... 3,187,438 17.2%
650 Madison Avenue
New York, New York 10022
Peter G. Diamandis (d)................................................. 20,660 *
700 Canal Street
Stamford, Connecticut 06902
Robert M. Kimmitt (d).................................................. 19,561 *
c/o Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Joan D. Manley (e)..................................................... 15,965 *
P.O. Box 1353
Dillon, Colorado 80435
Newton N. Minow (f).................................................... 29,561 *
c/o Sidley & Austin
One First National Plaza
Suite 4800
Chicago, Illinois 60603
Edward T. Reilly (g)................................................... 47,800 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER (A) OWNERSHIP (B) PERCENTAGE OF CLASS
- ----------------------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
(TABLE CONTINUED FROM PRECEDING PAGE)
Mark A. Angelson (h)................................................... 42,700 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Richard L. Ritchie..................................................... -- --
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
All directors and current executive officers as a group (i)............ 2,493,391 13.47%
</TABLE>
- ------------------------
* Less than one percent.
(a) The Company also understands from Goldman, Sachs & Co. that as of such date,
that firm and its affiliates beneficially owned in excess of 5% of the
Common Stock in a combination of market making and investment advisory
capacities, and that its market making positions represented less than 5% of
the Common Stock.
(b) This column includes shares which directors and executive officers have the
right to acquire within 60 days. Except as otherwise indicated, each person
and entity has sole voting and dispositive power with respect to the shares
set forth in the table.
(c) Includes (x) 6,000 shares held by Mr. Ammon as general partner of a
partnership in which certain family members are the limited partners and
have 99% of the economic interests, (y) options to purchase 100,000 shares
of Common Stock which are presently exercisable and (z) 200 shares owned by
Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
ownership. Additionally, Mr. Ammon holds unvested options to purchase
200,000 shares of Common Stock, subject to vesting ratably in November 1997
and November 1998.
(d) Represents options to purchase shares of Common Stock which are presently
exercisable.
(e) Includes options to purchase 14,400 shares of Common Stock which are
presently exercisable.
(f) Includes options to purchase 19,561 shares of Common Stock which are
presently exercisable.
(g) Includes options to purchase 40,000 shares of Common Stock which are
presently exercisable.
(h) Includes options to purchase 37,500 shares of Common Stock which are
presently exercisable.
(i) Includes options to purchase 251,682 shares of Common Stock which are
presently exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 16, 1997, the Company announced the completion of a secondary
offering of 5,958,524 shares of its Common Stock. A further 750,000 shares were
sold on July 15, 1997 pursuant to the underwriters' over-allotment option. On
June 20, 1997, the Company announced the completion of the Private Notes
Offering. Goldman, Sachs & Co. was one of the underwriters in both of these
transactions, and received total compensation of $3,250,000 in the secondary
offering and $1,040,000 in the Private Notes Offering. On June 24, 1997, the
Company commenced the Tender Offer, which expired on July 23, 1997. Goldman,
Sachs & Co. was a dealer manager and solicitation agent in the Tender Offer and
received compensation of $105,570.
58
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Private Notes were, and the Exchange Notes will be, issued under an
indenture (the "Indenture") dated as of June 20, 1997 between the Company and
Fleet National Bank, as trustee (the "Trustee"). The following description of
the material provisions of the Indenture is a summary only, does not purport to
be complete and is qualified in its entirety by reference to all of the
provisions of the Trust Indenture Act of 1939, as amended (the "TIA"), and the
Indenture and the Notes issued thereunder, including the definitions therein of
certain terms. Prospective purchasers of the Notes are referred to the Indenture
and the TIA for a statement of such provisions. Capitalized terms used herein
and not otherwise defined shall have the meanings given to them in the
Indenture. For definitions of certain terms used in this section, see "--Certain
Definitions" below. References in this section to the "Company" include only Big
Flower Press Holdings, Inc. and not its Subsidiaries.
The Notes and the Exchange Notes will be considered collectively to be a
single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and Offers to Purchase.
PRINCIPAL, MATURITY AND INTEREST
The Notes are general unsecured obligations of the Company limited to $350.0
million in aggregate principal amount, of which $250.0 million were issued in
the Private Notes Offering. Additional amounts may be issued in one or more
series from time to time, subject to the limitations set forth under "--Certain
Covenants--Limitation on Additional Indebtedness". The Notes will be issued only
in fully registered form without coupons in denominations of $1,000 and any
integral multiple thereof.
The Notes will mature on July 1, 2007. The Notes bear interest at the rate
of 8 7/8% per annum from the date of issuance, payable semiannually on January 1
and July 1 of each year, commencing January 1, 1998, to the registered holders
of the Notes (the "Holders") at the close of business on the December 15 or June
15 immediately preceding such Interest Payment Date.
Principal, premium, if any, and interest on each of the Notes will be
payable, and the Notes may be presented for registration of transfer or
exchange, at the corporate trust office of the Trustee or such other office or
agency of the Company as may be designated by the Company for such purpose. At
the option of the Company, payment of interest may be made by check mailed to
the Holders at the addresses set forth on the registry books maintained by the
Trustee, who will initially act as registrar for the Notes.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to July 1, 2002
(other than out of the net proceeds of certain issuances of Equity Interests of
the Company or upon a Change of Control as described below). The Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of the principal amount) set forth in the table below,
plus accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning July 1 of the years indicated
in the table below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 104.438%
2003.............................................................................. 102.958%
2004.............................................................................. 101.479%
2005 and thereafter............................................................... 100.000%
</TABLE>
59
<PAGE>
Notwithstanding the foregoing, at any time prior to July 1, 2000, the
Company may also redeem up to 35% of the principal amount of the Notes
originally issued with the net proceeds from issuances of Equity Interests of
the Company (other than Redeemable Stock) at a redemption price equal to
108.875% of the principal amount thereof, plus accrued and unpaid interest to
the redemption date; PROVIDED that at least $162.5 million in aggregate
principal amount of the Notes must remain outstanding after each such
redemption. Any such redemption will be required to occur on or prior to 180
days after the receipt of the proceeds of such issuances of Equity Interests.
In addition, at any time on or prior to July 1, 2002, upon the occurrence of
a Change of Control that has been approved by a majority of the Board of
Directors of the Company as such Board of Directors was constituted immediately
prior to the transaction giving rise to such Change of Control, the Company may
redeem the Notes, in whole but not in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. Notice of redemption of the Notes
pursuant to this paragraph shall be mailed to holders of the Notes not more than
30 days following the occurrence of a Change of Control. The Company may not
redeem Notes pursuant to this paragraph if it has made an offer to repurchase
the Notes with respect to such Change of Control.
"Applicable Premium" means, with respect to a Note, the greater of (i)
4.438% of the then outstanding principal amount of such Note and (ii)(a) the
present value of all remaining required interest and principal payments due on
such Note and all premium payments relating thereto assuming a redemption date
of July 1, 2002, computed using a discount rate equal to the Treasury Rate plus
75 basis points minus (b) the then outstanding principal amount of such Note
minus (c) accrued interest paid on the redemption date.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for redemption (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining term to July 1, 2002; PROVIDED, HOWEVER, that if the then remaining
term to July 1, 2002 is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the then remaining term to July
1, 2002 is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
SELECTION AND NOTICE
In case of a partial redemption, selection of the Notes or portions thereof
for redemption shall be made by the Trustee by lot, pro rata or in such manner
as it shall deem appropriate and fair and in such manner as complies with any
applicable legal requirements. Notes may be redeemed in part in multiples of
$1,000 principal amount only. Notice of redemption will be sent, by first class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption to each Holder whose Notes are to be redeemed at the
last address for such Holder then shown on the registry books. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On and
after any Redemption Date, interest will cease to accrue on the Notes or part
thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
60
<PAGE>
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence being the
"Change of Control Date"), if either (i) the Company does not redeem the Notes
as described under "--Optional Redemption" or (ii) such Change of Control occurs
after July 1, 2002, the Company shall notify the Holders in writing of such
occurrence and shall make an offer to purchase (the "Change of Control Offer"),
on a business day (the "Change of Control Payment Date") not later than 60 days
following the Change of Control Date, all Notes then outstanding at a purchase
price (the "Change of Control Purchase Price") equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the Change of
Control Payment Date. Notice of a Change of Control Offer shall be mailed by the
Company not less than 30 days nor more than 45 days before the Change of Control
Payment Date. The Change of Control Offer is required to remain open from the
time of mailing for at least 20 business days and until the close of business on
the third business day prior to the Change of Control Payment Date. (For the
definition of Change of Control, see "--Certain Definitions--Change of Control"
below.)
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by Holders seeking
to accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing. The Company
shall not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) under the Exchange Act and any other securities laws or
regulations (including Rule 14e-1 under the Exchange Act) in connection with the
repurchase of the Notes pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
"CHANGE OF CONTROL" provisions of the Indenture, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "CHANGE OF CONTROL" provisions of the
Indenture by virtue thereof.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
its property, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require redemption or repurchase of the Notes, and
there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not afford
the Holders of Notes protection in all circumstances from the adverse aspects of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or cash equivalents of all Senior
61
<PAGE>
Indebtedness, whether outstanding on the Issue Date or thereafter incurred,
including any interest accruing subsequent to a bankruptcy or other similar
proceeding whether or not such interest is an allowed claim enforceable against
the Company in a bankruptcy case under Title 11 of the United States Code.
Upon any distribution of assets of the Company of any kind or character,
whether in cash, property or securities upon any dissolution, winding up, total
or partial liquidation or reorganization of the Company (including, without
limitation, in bankruptcy, insolvency, or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshalling of the
Company's assets and liabilities), the holders of Senior Indebtedness shall
first be entitled to receive payment in full in cash or cash equivalents of all
amounts payable under Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Indebtedness whether or not interest is an allowed claim enforceable
against the Company in any such proceeding) before the Holders will be entitled
to receive any payment with respect to the Notes, and until all Obligations with
respect to Senior Indebtedness are paid in full in cash or cash equivalents, any
distribution to which the Holders would be entitled shall be made to the holders
of Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company of principal
of, premium, if any, or interest on the Notes whether pursuant to the terms of
the Notes or upon acceleration or otherwise shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of
principal of, premium, if any, or interest on any Senior Indebtedness, and such
default shall not have been cured or waived or the benefits of this sentence
waived by or on behalf of the holders of Senior Indebtedness. In addition,
during the continuance of any other event of default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated, upon the occurrence of (a) receipt by the Trustee of written notice
from the holders of a majority of the outstanding principal amount of the
Designated Senior Indebtedness or their representative, or (b) if such event of
default results from the acceleration of the Notes, the date of such
acceleration, no such payment may be made by the Company upon or in respect of
the Notes for a period ("Payment Blockage Period") commencing on the earlier of
the date of receipt of such notice or the date of such acceleration and ending
179 days thereafter (unless such Payment Blockage Period shall be terminated by
written notice to the Trustee from the holders of a majority of the outstanding
principal amount of such Designated Senior Indebtedness or their representative
who delivered such notice). Notwithstanding anything herein to the contrary, in
no event will a Payment Blockage Period extend beyond 179 days from the date on
which such Payment Blockage Period was commenced. Not more than one Payment
Blockage Period may be commenced with respect to the Notes during any period of
360 consecutive days. For all purposes of this paragraph, no event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the holders of such
Designated Senior Indebtedness or their representative whether or not within a
period of 360 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or held in
trust) on account of principal of, premium, if any, or interest on the Notes
before all Senior Indebtedness is paid in full in cash or cash equivalents, such
payment or distribution shall be received and held in trust by the Trustee or
such Holder or Paying Agent for the benefit of the holders of the Senior
Indebtedness, or their respective representative, ratably according to the
respective amounts of Senior Indebtedness held or represented by each, and shall
be paid over or delivered to the holders of the Senior Indebtedness remaining
unpaid to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid after giving effect to all concurrent payments and
distributions to or for the holders of such Senior Indebtedness.
62
<PAGE>
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders may recover less ratably than creditors of
the Company who are holders of Senior Indebtedness. The Indenture will limit,
subject to certain financial tests and specific exceptions, the amount of
additional Indebtedness, including Senior Indebtedness, that the Company and its
Subsidiaries can incur. See "-- Certain Covenants--Limitation on Additional
Indebtedness."
The Notes are structurally subordinated to all liabilities, including trade
payables and capitalized lease obligations of the Company's Subsidiaries. Any
right of the Company to receive assets of any Subsidiary upon such Subsidiary's
liquidation or reorganization (and the consequent right of the Holders to
participate in those assets) structurally subordinated to the claims of such
Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, in which case the claims of the
Company would still be subject to any security interests in the assets of such
Subsidiary and any liabilities of such Subsidiary senior to that held by the
Company and may otherwise be challenged in a liquidation or reorganization
proceeding. At March 31, 1997, on a PRO FORMA basis after giving effect to the
Private Notes Offering and the application of the proceeds thereof and the New
Credit Facility, the Company and its Subsidiaries would have had, on a
consolidated basis, approximately $461.8 million of indebtedness (including
capitalized lease obligations) and the aggregate amount of liabilities
(including trade payables and the New Credit Facility) of the Company's
Subsidiaries that effectively ranked senior to the Notes would have been
approximately $274.5 million. In addition, at March 31, 1997, certain
Subsidiaries of the Company had significant commitments under operating leases
and approximately $89.3 million was outstanding under the A/R Securitization.
See Notes 5 and 10 of the Notes to Consolidated Financial Statements. The Notes
will rank PARI PASSU in right of payment with the 10 3/4% Notes.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's Capital Stock or other Equity
Interests (other than dividends or distributions payable in Equity Interests
(other than Redeemable Stock) of the Company), (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or
(iii) make any Investment (other than a Permitted Investment) (the foregoing
actions set forth in clauses (i) through (iii) being referred to as "Restricted
Payments"), if:
(a) a Default or Event of Default shall have occurred and be continuing
at the time of such Restricted Payment or shall occur immediately after
giving effect thereto; or
(b) immediately after such Restricted Payment and after giving effect
thereto on a PRO FORMA basis, the Company could not incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the "LIMITATION
ON ADDITIONAL INDEBTEDNESS" covenant (without giving effect to clauses (i)
through (xvi) of the second paragraph thereof); or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the Issue Date, exceeds the sum of (1) 50% of
the amount of the Adjusted Consolidated Net Income of the Company for the
period (taken as one accounting period) from January 1, 1997 through the end
of the Company's fiscal quarter ending immediately prior to the time of such
Restricted Payment (or, if Adjusted Consolidated Net Income for such period
is a deficit, 100% of such deficit) plus (2) 100% of the aggregate amounts
contributed to the capital of the Company from and after the Issue Date plus
(3) 100% of the aggregate net cash proceeds and the fair market value, as
determined in good faith by the Board of Directors, of property other than
cash received by the Company from and after the Issue Date from the issue or
sale of Equity Interests of the Company (other than such Equity Interests
issued or sold to a Restricted Subsidiary and other than Redeemable Stock)
or any Indebtedness or security convertible into or exchangeable for any
such Equity Interest that has been so converted or exchanged (excluding the
net cash proceeds from issuances and sales of
63
<PAGE>
Equity Interests financed, directly or indirectly, using borrowed funds from
the Company or any Restricted Subsidiary until and to the extent such
borrowing is repaid) plus (4) $75.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration thereof such payment would have complied with the provisions of the
Indenture; (ii) (A) the retirement of any Equity Interests of the Company (the
"Retired Equity Interests") either in exchange for or out of the net proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary) of
other Equity Interests of the Company (the "Refunding Equity Interests") other
than any Redeemable Stock and (B) if the Retired Equity Interest constituted
Qualified Preferred Stock, the declaration and payment of dividends on the
Refunding Equity Interest in an aggregate amount per year no greater than the
aggregate amount of dividends per year that was declarable and payable on such
Retired Equity Interest immediately prior to such retirement to the extent such
Refunding Equity Interest is designated to be Qualified Preferred Stock by the
Company at the time of its issuance; (iii) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company
issued to employees, officers or directors of the Company and its Subsidiaries
pursuant to agreements containing provisions for the repurchase of such Equity
Interests upon death, disability or termination of employment or directorship of
such persons, or in accordance with the Company's insider trading policy, not to
exceed $5.0 million in any fiscal year plus the aggregate cash proceeds from any
reissuance during such fiscal year of Equity Interests by the Company to
employees, officers or directors of the Company and its Subsidiaries plus the
aggregate cash proceeds from any payments on life insurance policies with
respect to any employees, officers or directors of the Company and its
Subsidiaries which proceeds are used to purchase the Equity Interests of the
Company held by any such employees, officers or directors; (iv) the declaration
and payment of dividends to holders of any class or series of the Company's
preferred stock issued after the Issue Date (including, without limitation, the
declaration and payment of dividends on Refunding Equity Interests in excess of
the dividends declarable and payable thereon pursuant to clause (ii) of this
paragraph); PROVIDED that at the time of such issuance the Company's Fixed
Charge Coverage Ratio for the four full fiscal quarters ending immediately prior
to the date of such issuance would have been at least 1.25 to 1, determined on a
PRO FORMA basis as if such issuance was at the beginning of such four-quarter
period, and at the time of issuance, such preferred stock is designated by the
Company to be Qualified Preferred Stock; and (v) an Investment in any
Unrestricted Subsidiary either in exchange for Equity Interests of the Company
(other than Redeemable Stock) or out of the proceeds of the sale (other than to
a Restricted Subsidiary) of Equity Interests of the Company (other than
Redeemable Stock) received by the Company not more than 12 months prior to the
date of such Investment (to the extent such sale of Equity Interests has not
previously been included in any calculation under clause (c) above for purposes
of permitting a Restricted Payment); PROVIDED that in the cases of clauses (iii)
(other than with respect to the repurchase of Equity Interests with insurance
proceeds), (iv) and (v), so long as no Default or Event of Default shall have
occurred and be continuing at the time of such Restricted Payment or shall occur
immediately after giving effect thereto.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) above, (1) no amounts expended under clause (iii)
(only with respect to the use of insurance proceeds to repurchase Equity
Interests) of the immediately preceding paragraph shall be included and (2) 100%
of the amounts expended under clauses (i), (ii), (iii) (other than with respect
to the repurchase of Equity Interests with insurance proceeds), (iv) and (v) of
the immediately preceding paragraph shall be included.
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to any Indebtedness unless the Company's Fixed Charge
Coverage Ratio for its four full fiscal quarters ending immediately prior to the
date such additional Indebtedness is created, incurred, issued, assumed or
guaranteed would have been at least 2.25 to 1, determined on a PRO FORMA basis
(including a PRO FORMA application of the net proceeds of such Indebtedness) as
if the additional
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Indebtedness had been created, incurred, issued, assumed or guaranteed at the
beginning of such four-quarter period.
The foregoing limitations will not apply to the incurrence of (i)
Indebtedness pursuant to the New Credit Facility in an amount equal to $475.0
million; (ii) Existing Indebtedness; (iii) Indebtedness represented by the
Private Notes and the Exchange Notes in an aggregate principal amount equal to
$250.0 million; (iv) Capital Lease Obligations; (v) Indebtedness constituting
purchase money obligations for property acquired in the ordinary course of
business or other similar financing transactions; (vi) Indebtedness incurred in
connection with capital expenditures not to exceed 6% of net sales of the
Company and its Restricted Subsidiaries in any fiscal year; (vii) Indebtedness
constituting reimbursement obligations with respect to letters of credit,
including, without limitation, letters of credit in respect of workers'
compensation claims, issued for the account of the Company or a Restricted
Subsidiary in the ordinary course of business, or other Indebtedness with
respect to reimbursement-type obligations regarding workers' compensation
claims; (viii) additional Indebtedness in an aggregate principal amount up to
$45.0 million at any one time outstanding for the Company and its Restricted
Subsidiaries; (ix) Indebtedness created, incurred, issued, assumed or given in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, substitute or refund any Indebtedness permitted under the Indenture or
any Indebtedness issued to so extend, refinance, renew, replace, substitute or
refund such Indebtedness, including any additional Indebtedness incurred to pay
premiums and fees in connection therewith (the "Refinancing Indebtedness");
PROVIDED that (A) the principal amount of such Refinancing Indebtedness shall
not exceed the outstanding principal amount of Indebtedness (including unused
commitments) so extended, refinanced, renewed, replaced, substituted or refunded
plus any amounts incurred to pay premiums and fees in connection therewith, (B)
in the case of Refinancing Indebtedness for Indebtedness permitted under clause
(ii) of this paragraph (other than Senior Indebtedness), the Refinancing
Indebtedness shall have an Average Life equal to or greater than the Average
Life of the Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded and (C) to the extent such Refinancing Indebtedness
refinances Indebtedness subordinated to the Notes, such Refinancing Indebtedness
is subordinated to the Notes at least to the same extent as the Indebtedness
being extended, refinanced, renewed, replaced, substituted or refunded; (x)
intercompany Indebtedness incurred in connection with Investments in
Unrestricted Subsidiaries; PROVIDED that such Investments are permitted by the
"LIMITATION ON RESTRICTED PAYMENTS" covenant; (xi) Indebtedness under Raw
Material Hedge Agreements; (xii) Indebtedness under Currency Agreements and
Interest Rate Agreements; PROVIDED that in the case of Currency Agreements which
relate to other Indebtedness, such Currency Agreements do not increase the
Indebtedness of the Company outstanding other than as a result of fluctuations
in foreign currency exchange rates; (xiii) Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary course
of business; (xiv) Indebtedness between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries; (xv) guarantees by Restricted
Subsidiaries of Indebtedness of the Company or any Restricted Subsidiary if the
Indebtedness so guaranteed is permitted under the Indenture; and (xvi) the
Company's obligations arising from the repurchase, redemption or other
acquisitions of Equity Interests from employees, officers and directors of the
Company and its Subsidiaries to the extent permitted by the "LIMITATION ON
RESTRICTED PAYMENTS" covenant.
Notwithstanding anything in the Indenture to the contrary, the consummation
of the transactions contemplated by the A/R Securitization shall not be deemed
to be incurrence of Indebtedness by the Company or by any Restricted Subsidiary.
DIVIDENDS AND PAYMENT RESTRICTIONS. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions on its Capital Stock, or any other interest or
participation in, or measured by, its profits, owned by the Company or any of
its Restricted Subsidiaries, or pay any Indebtedness owed to the
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Company or any of its Restricted Subsidiaries, (ii) make loans or advances to
the Company or any of its Restricted Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of: (A)
the terms (as in effect on the Issue Date) of Existing Indebtedness, (B) the
terms (as in effect on the Issue Date) of the New Credit Facility, (C) the terms
of Indebtedness of the Company or any of its Restricted Subsidiaries incurred in
accordance with the "LIMITATION ON ADDITIONAL INDEBTEDNESS" covenant; PROVIDED
that the terms of any such Indebtedness constitute no greater encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends or make
distributions, make loans or advances or transfer properties or assets than the
encumbrances or restrictions imposed by the terms of the New Credit Facility as
in effect on the Issue Date, (D) the [terms of the indentures governing the
10 3/4% Notes, the 10 3/4% Notes, the] Indenture and the Notes, (E) applicable
law, (F) customary non-assignment provisions entered into in the ordinary course
of business and consistent with past practices, (G) the terms of purchase money
obligations for property acquired in the ordinary course of business, but only
to the extent that such purchase money obligations restrict or prohibit the
transfer of the property so acquired, (H) any encumbrance or restriction with
respect to a Restricted Subsidiary that was not a Restricted Subsidiary on the
Issue Date, which encumbrance or restriction is in existence at the time such
person becomes a Restricted Subsidiary or is created on the date it becomes a
Restricted Subsidiary, (I) any encumbrance or restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement which has been entered
into for the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary, (J) the terms of the A/R Securitization
or (K) any encumbrance or restriction existing under any amendment to, and any
agreement which refinances or replaces, the agreements described in clauses (A),
(B), (C), (D), (H) and (J); PROVIDED that the terms and conditions of any such
encumbrances or restrictions contained in any such amendment or agreement as
determined in good faith by the Board of Directors of the Company constitute no
greater encumbrance or restriction on the ability of any Restricted Subsidiary
to pay dividends or make distributions, make loans or advances or transfer
properties or assets than those under or pursuant to the agreement evidencing
the Indebtedness or obligations as amended, refinanced or replaced. Nothing
contained in this covenant shall prevent the Company or a Restricted Subsidiary
from entering into any agreement permitting or providing for the incurrence of
Liens otherwise permitted by the "LIMITATION ON LIENS" covenant.
LIMITATION ON LIENS. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) upon any asset now owned
or hereafter acquired by it, or any income or profits therefrom or assign or
convey any right to receive income therefrom. Notwithstanding the foregoing, the
Company or any Restricted Subsidiary may create or assume any Lien upon its
properties or assets if the Company shall cause the Notes to be equally and
ratably secured with all other Indebtedness secured by such Lien for so long as
such other Indebtedness shall be so secured.
LIMITATION ON ASSET SALES. The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset
Sale that results in Net Proceeds in excess of $1.5 million (including the sale
of any of the Capital Stock of any Restricted Subsidiary) unless such Asset Sale
is for fair market value as determined by the Board of Directors of the Company
acting reasonably and in good faith and the Company or any Restricted Subsidiary
applies the Net Proceeds from such Asset Sale to one or more of the following in
such combination as it shall choose: (a) an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another person) used or useful in businesses
similar or ancillary to the business of the Company or its Restricted
Subsidiaries as conducted at the time of such Asset Sale; PROVIDED that such
investment occurs on or prior to the 366th day following the date of such Asset
Sale (the "Asset Sale Payment Date"); (b) a Net Proceeds Offer (as defined
below) expiring on or prior to the Asset Sale Payment Date; or (c) in the case
of an Asset Sale by the Company, the purchase, redemption or other prepayment or
repayment of outstanding Senior Indebtedness on or prior to the Asset Sale
Payment Date and, in the case of an Asset Sale by any Restricted Subsidiary, the
purchase, redemption or other prepayment or repayment of any
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Indebtedness of such Restricted Subsidiary on or prior to the Asset Sale Payment
Date; PROVIDED that any prepayment or repayment of amounts outstanding under the
New Credit Facility in excess of $20 million in the aggregate after the Issue
Date shall be a permanent reduction in the commitment thereunder.
Notwithstanding the foregoing, in the event such Net Proceeds, after giving
effect to any investment or payment permitted by clause (a) or (c) above (the
"Excess Proceeds"), are less than $15.0 million, the application of the Excess
Proceeds to a Net Proceeds Offer may be deferred until such time as the Excess
Proceeds, plus the aggregate amount of any subsequent Net Proceeds not otherwise
invested or applied to repay amounts outstanding under the Senior Indebtedness
of the Company or under the Indebtedness of any Restricted Subsidiary, as the
case may be, as permitted by clause (a) or (c) above, are at least equal to
$15.0 million, at which time the Company shall apply all the Excess Proceeds to
a Net Proceeds Offer. Upon completion of a Net Proceeds Offer, the amount of
Excess Proceeds shall be reset at zero.
For purposes of clause (b) of the preceding paragraph, the Company will
apply that portion of the Net Proceeds of the Asset Sale required to make a
tender offer in accordance with applicable law (a "Net Proceeds Offer") to
repurchase Notes at a price not less than 100% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase which date shall be
no earlier than 30 days nor later than 45 days after the date of mailing of the
Net Proceeds Offer (the "Net Proceeds Payment Date"). The Company may, at its
option, receive credit against any Net Proceeds Offer for the principal amount
of Notes acquired by the Company or any of its Subsidiaries and surrendered for
cancellation within six months prior to or at any time after the date of such
Asset Sale relating to such Net Proceeds Offer and before the Net Proceeds
Payment Date. Any Net Proceeds Offer will be made by the Company only if and to
the extent permitted under, and subject to prior compliance with, the terms of
any agreement governing Senior Indebtedness of the Company or Indebtedness of a
Restricted Subsidiary, as the case may be. If the Company commences a Net
Proceeds Offer and securities of the Company ranking PARI PASSU in right of
payment with the Notes are outstanding at the commencement of such Net Proceeds
Offer and the terms of such securities provide that a similar offer must be made
with respect thereto, then the Net Proceeds Offer for the Notes shall be made
concurrently with such other offer and securities of each issue will be accepted
PRO RATA in proportion to the aggregate principal amount of securities of each
issue which the holders of securities of such issue elect to have purchased.
After the last date on which Holders are permitted to tender their Notes in a
Net Proceeds Offer, the Company will not be restricted under the "LIMITATION ON
ASSET SALES" covenant of the Indenture as to its use of any remaining Net
Proceeds available to make such Net Proceeds Offer but not used to redeem Notes
pursuant thereto.
Notwithstanding the foregoing, if, at the time of an Asset Sale by the
Company or any Restricted Subsidiary, the Company's Fixed Charge Coverage Ratio
for the four fiscal quarter period ending immediately prior to the date of such
Asset Sale would have been at least 2.75 to 1, determined on a PRO FORMA basis
as if such Asset Sale occurred at the beginning of such four-quarter period,
then any Net Proceeds received will not be subject to the "LIMITATION ON ASSET
SALES" covenant.
Each Net Proceeds Offer will be mailed to the record Holders within 15 days
following the determination by the Company to make such a Net Proceeds Offer and
shall comply with the procedures set forth in the Indenture. The Company will
provide the Trustee with written notice of such determination as soon as such
determination is made by the Company. Upon receiving notice of the Net Proceeds
Offer, Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Holders' PRO RATA share of the Net Proceeds,
Notes of tendering Holders will be repurchased on a PRO RATA basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or integral multiples of $1,000 shall be acquired). A
Net Proceeds Offer shall remain open from the time of mailing for at least 20
business days and until the close of business on the third business day prior to
the Net Proceeds Payment Date.
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The Company will comply, to the extent applicable, with the requirements of
Section 14(e) under the Exchange Act and any other securities laws or
regulations (including Rule 14e-1 under the Exchange Act) in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "LIMITATION
ON ASSET SALES" provision of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "LIMITATION ON ASSET SALES" provisions of the
Indenture by virtue thereof.
TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate,
except for (i) transactions (including any investments, loans or advances by or
to any Affiliate) the terms of which in good faith are fair and reasonable to
the Company or such Restricted Subsidiary, as the case may be, and are at least
as favorable as the terms that could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction made on
an arms-length basis between unaffiliated parties (as determined by the Board of
Directors of the Company acting reasonably and in good faith, as evidenced by a
resolution of the Board Of Directors); PROVIDED that, in the case of any
transaction with an Affiliate involving aggregate consideration in excess of
$10.0 million, either (A) such transaction is entered into in the ordinary
course of the business of the Company or its Restricted Subsidiaries, (B) a
majority of the directors of the Company unaffiliated with such Affiliate or, if
there are no such directors, a majority of the directors of the Company approve
such transaction or (C) the Company or such Restricted Subsidiary, as the case
may be, delivers to the Trustee and the Holders a written opinion of a
nationally recognized investment banking firm stating that such transaction is
fair to the Company or such Restricted Subsidiary from a financial point of
view, (ii) payments by the Company or any of its Restricted Subsidiaries made
pursuant to any financial advisory, financing, underwriting or placement
agreement; PROVIDED that the terms of any such arrangement or agreement shall be
on terms which in good faith are fair and reasonable to the Company or such
Restricted Subsidiary, as the case may be (as determined by the Board of
Directors of the Company acting reasonably and in good faith, as evidenced by a
resolution of the Board of Directors of the Company), (iii) any Restricted
Payment not otherwise prohibited under the "LIMITATION ON RESTRICTED PAYMENTS"
covenant, (iv) the payment of reasonable and customary regular fees to directors
of the Company and its Subsidiaries who are not employees of the Company or its
Subsidiaries, (v) advances or loans to employees, officers and directors of the
Company and its Subsidiaries permitted by clauses (iii) and (iv) of the
definition of Permitted Investments and (vi) transactions between or among any
of the Company and its Restricted Subsidiaries.
LIMITATION ON MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. The Company shall
not in a single transaction or a series of related transactions consolidate
with, or merge with or into another person, or directly or indirectly sell,
transfer, lease or convey substantially all of its properties and assets, to
another person (except any Restricted Subsidiary; PROVIDED that in connection
with any merger of the Company with any such Restricted Subsidiary, no
consideration (other than common stock in the surviving corporation or the
Company) shall be issued or distributed to the stockholders of the Company), or
permit any person to merge with or into it unless: (i) the Company shall be the
continuing person, or the person (if other than the Company) formed by such
consolidation or into which the Company is merged or to which the properties and
assets of the Company are transferred shall be a corporation or partnership
organized and existing under the laws of the United States or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all of the obligations of the Company under the
Notes and the Indenture; (ii) immediately before and immediately after giving
effect to such transaction or series of transactions, no Default or Event of
Default under the Indenture shall have occurred and be continuing; and (iii)
immediately before and immediately after giving effect to such transaction or
series of transactions on a PRO FORMA basis (including, without limitation, any
Indebtedness incurred or assumed in anticipation of or
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in connection with such transaction or series of transactions), the Company
could incur $1.00 of additional Indebtedness under the first paragraph of the
"LIMITATION ON ADDITIONAL INDEBTEDNESS" covenant described above (without giving
effect to clauses (i) through (xvi) of the second paragraph thereof).
LIMITATION ON CREATION OF SENIOR SUBORDINATED DEBT. The Indenture will
provide that the Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is expressly by its terms
subordinate or junior in right of payment to any Senior Indebtedness and senior
in any respect in right of payment to the Notes.
SUPPLEMENTAL INDENTURES
The Indenture permits the Company and the Trustee, without notice to or the
consent of the Holders, to enter into one or more indentures supplemental
thereto for certain specified purposes, including, without limitation, (i) to
cure ambiguities, defects or inconsistencies; (ii) to add additional covenants
for the benefit of the Holders or to surrender any right or power conferred upon
the Company in the Indenture or to make any other change that does not adversely
affect the rights of any Holder; PROVIDED that in making such change, the
Trustee may rely upon an Opinion of Counsel stating that such change does not
adversely affect the rights of any Holder, (iii) to provide for collateral for
the Notes, (iv) to evidence the succession of another person to the Company and
the assumption by any such successor of the obligations of the Company in
accordance with Article V of the Indenture and the Notes, (v) to provide for
uncertificated Notes and (vi) to effect or maintain the qualification of the
Indenture under the TIA. Subject to the absolute and unconditional right of
Holders to receive principal, premium, if any, and interest, other
modifications, amendments or supplements to the Indenture or the Notes may be
made with the consent of the Holders of not less than a majority in aggregate
principal amount of the then outstanding Notes, and such modifications,
amendments or supplemental indentures will be binding on every Holder whether or
not such Holder has consented thereto; PROVIDED that no such modification,
amendment or supplemental indenture shall, without the consent of Holders of
each outstanding Note affected thereby, among other things, (i) reduce the
percentage of principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver of any provision of the Indenture or the Notes;
(ii) reduce the rate or extend the time for payment of interest on any Note;
(iii) reduce the principal amount of any Note or reduce the redemption or
repurchase price of any Note; (iv) change the Maturity Date, the Net Proceeds
Payment Date or the Change of Control Payment Date; (v) alter the purchase price
in connection with any repurchase of Notes described in the "LIMITATION ON ASSET
SALES" covenant or under the "CHANGE OF CONTROL" provisions in any manner
adverse to any Holder; (vi) make any changes in the provisions concerning
waivers of Defaults or Events of Default by Holders or the rights of Holders to
recover the principal of, or premium, if any, or interest on, or redemption
payment with respect to, any Note; (vii) make any changes relating to (a) the
right of the Trustee to file proof of claim in any bankruptcy or similar
proceeding, or (b) the limitation on the right of Holders to direct the Trustee
to institute legal proceedings with respect to the Indenture or to such
provision; (viii) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes or that resulted from
a failure to make the payments required by the "LIMITATION ON ASSET SALES"
covenant or the "CHANGE OF CONTROL" provisions; (ix) make the principal of, or
the interest on, any Note payable with anything or in any manner other than as
provided for in the Indenture and the Notes as in effect on the Issue Date; or
(x) make any change in the subordination provisions of the Indenture and the
Notes in a manner that adversely affects the Holders.
EVENTS OF DEFAULT AND REMEDIES
Events of Default under the Indenture include the following: (a) default in
the payment of interest on any Notes when the same shall become due and payable
and the continuance of such default for a period of 30 days; (b) default in the
payment of all or any part of the principal of, or premium, if any, on, any
Notes when and as the same shall become due and payable at maturity, or upon
acceleration, redemption
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or otherwise, including default in the payment of the purchase price required to
be offered in a Net Proceeds Offer or a Change of Control Offer; (c) a failure
by the Company and its Subsidiaries to comply with any of the other agreements
or covenants in or provisions of the Notes or the Indenture which failure
continues for a period of 45 days after written notice specifying such failure
and demanding that the Company remedy the same has been given to the Company by
the Trustee or to the Company and the Trustee by Holders of at least 25% in
aggregate principal amount of Notes then outstanding; (d) default under any
mortgage, indenture or instrument under which there may be issued or evidenced
any Indebtedness for borrowed money by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee is now existing
or hereafter created if either (x) such default results from the failure to pay
the final scheduled principal installment in an amount of at least $15.0 million
in respect of any such Indebtedness on the stated maturity date thereof (after
giving effect to any applicable grace periods) or (y) as a result of such
default the maturity of such Indebtedness has been accelerated prior to its
express maturity, and the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness with respect to which the
principal amount remains unpaid upon its final maturity (after giving effect to
any extension of such maturity date by the holder of such Indebtedness and the
expiration of any applicable grace period) or the maturity of which has been so
accelerated, aggregates $15.0 million or more; (e) a final judgment or final
judgments for the payment of money, or the issuance of any warrant of attachment
against any portion of the property or the assets of the Company or any of its
Restricted Subsidiaries, that in the aggregate, equal or exceed $15.0 million at
any one time shall be entered against the Company or any of its Restricted
Subsidiaries and such judgment or judgments or warrant of attachment shall not
be discharged, satisfied, stayed, annulled or rescinded within 60 days of being
entered, or in the case of any final judgment which provides for payment over
time, from any applicable payment date; or (f) certain events of bankruptcy,
insolvency or reorganization with respect to the Company or a Significant
Restricted Subsidiary.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Holder a notice of the
Default or Event of Default within 30 days after it occurs or, if later, within
10 days after such Default or Event of Default becomes known to the Trustee,
unless such Default or Event of Default has been cured. Except in the case of a
Default or Event of Default in the payment of principal of, premium, if any, or
interest on, any Note, the Trustee may withhold the notice if and so long as a
committee of its trust officers in good faith determines that withholding the
notice is in the interest of the Holders.
If an Event of Default (other than an Event of Default described in clause
(f) of the second preceding paragraph with respect to the Company) shall occur
and be continuing, then, and in every such case, unless the principal of all the
Notes shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the then
outstanding Notes, by notice in writing to the Company (and to the Trustee if
given by Holders) may declare all of the unpaid principal of, premium, if any,
and accrued interest thereon to be due and payable immediately. In the event of
a declaration of acceleration because of an Event of Default described in clause
(d) of the second preceding paragraph has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if such payment
default is cured or waived or the holders of the Indebtedness which is the
subject of such Event of Default have rescinded their declaration of
acceleration in respect of such Indebtedness within 60 days thereof and the
Trustee has received written notice of such cure, waiver or rescission and no
other Event of Default described in clause (d) of the second preceding paragraph
has occurred that has not been cured or waived within 60 days of the declaration
of such acceleration in respect thereof and if (i) the repayment of Indebtedness
or annulment of such acceleration, as the case may be, would not conflict with
any judgment or decree of a court of competent jurisdiction and (ii) all
existing Events of Default, except non-payment of principal or interest which
have become due solely due to such acceleration, have been cured or waived. If
an Event of Default specified in clause (f) of the second preceding paragraph
with respect to the Company occurs, all unpaid principal of, premium, if any,
applicable to, and accrued interest due and payable on all
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the outstanding Notes shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The provisions described in the preceding paragraphs, however, are subject
to the condition that if, at any time after a declaration of acceleration has
been made and before a judgment or decree for payment of the money due has been
obtained, the Holders of a majority in aggregate principal amount of the then
outstanding Notes, by written notice to the Company and the Trustee, may waive,
on behalf of all Holders, a Default or an Event of Default if: (a) the Company
has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue
interest on all Notes, (ii) the principal of and premium, if any, applicable to
any Notes which would become due otherwise than by such declaration of
acceleration, and interest thereon at the rate borne by the Notes, (iii) to the
extent that payment of such interest is lawful, interest on overdue interest at
the rate borne by the Notes and (iv) all sums paid or advanced by the Trustee
under the Indenture and the compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and (b) all Events of Default, other
than the nonpayment of the principal of the Notes which have become due solely
by such declaration of acceleration, have been cured or waived. Notwithstanding
the previous sentence, no waiver shall be effective for any Default or Event of
Default in the payment of the principal of, premium, if any, or interest on any
Note held by a nonconsenting Holder or any Default or Event of Default with
respect to any covenant or provision which cannot be modified or amended without
the consent of the Holder of each then outstanding Note, unless all such
affected Holders agree, in writing, to waive such Default or Event of Default.
No such waiver shall cure or waive any subsequent default or impair any right
consequent thereon.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holder or Holders of not less than a majority in aggregate principal amount of
the Notes at the time outstanding by written notice to the Company and the
Trustee may waive on behalf of all the Holders any past default under the
Indenture and its consequence, except a default in the payment of principal of,
premium, if any, or interest on any Note or a default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Note affected. The Trustee is under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders unless such Holders have offered to the
Trustee reasonable security or indemnity. Subject to all the provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Notes at the time outstanding have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee.
The Company is required to furnish the Trustee, forthwith upon becoming
aware of any Default or Event of Default under the Indenture, an Officers'
Certificate specifying such default and within 120 days after the end of each
fiscal year, an Officers' Certificate to the effect that the officers executing
the same have conducted, or supervised, a review of the activities of the
Company and its Subsidiaries and of performance under the Indenture and that, to
such officers' knowledge, based on their review, the Company has fulfilled all
of its obligations under the Indenture, or, if there has been a failure to
comply with such obligations, describing such failure with particularity.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders to receive payments in respect of
the principal of, premium, if any, and interest on the Notes when and to the
extent such payments are due, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payments, (iii) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith and (iv) the Legal
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Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"Events of Default and Remedies" will no longer constitute an Event of Default
with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound; (vi) the Company shall have delivered to
the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; (vii) the Company shall
have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance have been complied with; (viii)
the Company shall have delivered to the Trustee an opinion of counsel to the
effect that (A) the trust funds will not be subject to any rights of holders of
Senior Indebtedness, including, without limitation, those arising under the
Indenture and (B) after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and (ix)
certain other customary conditions precedent are satisfied. Notwithstanding the
foregoing, the opinion of counsel required by clause (ii) above need not be
delivered if all Notes not theretofore delivered to the Trustee for cancellation
(x) have become due and payable, (y) will become due and payable on the maturity
date within one year or (z) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all
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outstanding Notes when (i) either (a) all the Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Indenture or the Notes or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed. See
"Book Entry; Delivery and Form."
The registered Holder of a Note will be treated as the owner of it for all
purposes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within ninety days, apply to the Commission for
permission to continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his or her own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any of the Holders, unless they shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
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ADDITIONAL INFORMATION
The Indenture provides that the Company will deliver to the Trustee within
15 days after the filing of the same with the Commission, copies of the
quarterly and annual report and of the information, documents and other reports,
if any, which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. The Indenture further provides that,
notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the Commission, to the extent permitted, and provide the Trustee and
Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of TIA Section 314(a).
CERTAIN DEFINITIONS
"ADJUSTED CONSOLIDATED NET INCOME" means, with respect to any person for any
period, (i) the Consolidated Net Income of such person for such period plus (ii)
in the case of the Company and its Restricted Subsidiaries, (A) all cash
received during such period by the Company or any Restricted Subsidiary from its
Unrestricted Subsidiaries but only to the extent that the Company elects to so
include such cash payments (in whole or in part) in Adjusted Consolidated Net
Income and not as a reduction in the carrying value of the Investment in such
Unrestricted Subsidiary (whether or not in accordance with GAAP), such election
to be made prior to the making of a Restricted Payment based upon such cash
received and (B) amortization, depreciation and other non-cash charges relating
to acquisitions by the Company since its formation, including goodwill,
non-compete agreements, the stepped-up basis on assets acquired and deferred
financing costs, in each case to the extent such items reduced Consolidated Net
Income. Each item of Adjusted Consolidated Net Income will be determined in
conformity with GAAP, except as set forth in this definition and except that,
for purposes of the application of Accounting Principles Board Opinions Nos. 16
and 17, such person may select an amortization practice allowable by GAAP up to
40 years, notwithstanding the use of a different amortization in such person's
consolidated financial statements. Any designation of a Subsidiary of the
Company as a Restricted Subsidiary or Unrestricted Subsidiary at or prior to the
time of the calculation of Adjusted Consolidated Net Income of a Subsidiary will
be treated as if it had occurred at the beginning of the applicable period.
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. A person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another person if the controlling person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies, of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"A/R SECURITIZATION" means the receivables facility in effect on the Issue
Date in the amount of $150 million, pursuant to which (x) the Company's
Subsidiaries from time to time sell or otherwise transfer accounts receivable
and related assets to a special-purpose corporation (the "Receivables
Subsidiary") and (y) the Receivables Subsidiary sells or otherwise transfers
accounts receivable and related assets (or interests therein) to the purchasers,
as the same may be amended, modified, supplemented, extended, renewed, refunded,
refinanced, restructured or replaced from time to time (including, without
limitation, any extension of maturity thereof, or the inclusion of additional
purchasers thereunder).
"ASSET SALE" means, with respect to any person, in one or a series of
related transactions, the sale, lease, conveyance, disposition or other transfer
by the referent person of any of its assets (including by way of sale and
leaseback and including the sale or other transfer or issuance of any of the
Capital Stock of any Subsidiary of the referent person); PROVIDED that
notwithstanding the foregoing, the term "Asset Sale" shall not include the sale,
lease, conveyance, disposition or other transfer of (i) all or substantially all
of the
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assets of the Company, as permitted pursuant to the "LIMITATION ON MERGERS,
CONSOLIDATIONS OR SALES OF ASSETS" covenant, (ii) any assets between the Company
and any Restricted Subsidiary, (iii) (A) cash and cash equivalents, (B)
inventory and (C) any other tangible or intangible asset, in each case in the
ordinary course of business of the Company or its Restricted Subsidiaries, (iv)
the sale of accounts receivable pursuant to the A/R Securitization or (v) the
sale or discount, in each case without recourse, of accounts receivable arising
in the ordinary course of business, but only in connection with the compromise
or collection thereof.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal payment or, in the case of Redeemable Stock,
each successive scheduled mandatory redemption payment of such security or
instrument multiplied by the amount of such principal payment or, in the case of
Redeemable Stock, mandatory redemption payment by (ii) the sum of all such
principal payments or, in the case of Redeemable Stock, mandatory redemption
payment.
"CAPITAL LEASE OBLIGATION" means, with respect to any person, at the time
any determination thereof is to be made, the amount of the liability in respect
of a capital lease which would at such time be required to be capitalized on the
balance sheet of such person in accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"CHANGE OF CONTROL" means (i) an event or series of events by which any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner (as defined under Rule 13d-3 under the Exchange
Act) directly or indirectly of more than 50% of the combined voting power of the
then outstanding securities of the Company ordinarily (and apart from rights
accruing under certain circumstances) having the right to vote in the election
of directors or (ii) the replacement of a majority of the Board of Directors of
the Company over a one-year period from the directors who constituted the Board
of Directors at the beginning of such period, which replacement shall not have
been approved by the Board of Directors as so constituted at the beginning of
such period or (a) by directors whose nomination for election by the
stockholders of the Company was approved by such Board of Directors or (b) by
directors elected by such Board of Directors or (c) by directors approved in the
same manner as (a) or (b) above that were nominated or elected by directors
approved as set forth in (a) or (b) above. Notwithstanding the foregoing, a
Change of Control shall not be deemed to have occurred if one or more of the
above events occurs or circumstances exist and, after giving effect to the
transaction giving rise to such events or circumstances, the Company's Fixed
Charge Coverage Ratio is 3.0 to 1 or greater.
"CONSOLIDATED EBITDA" means, with respect to any person for any period and
without duplication, the Adjusted Consolidated Net Income of such person for
such period plus (a) provision for taxes based on income or profits to the
extent such provision for taxes was included in computing Adjusted Consolidated
Net Income, plus (b) consolidated Interest Expense, whether paid or accrued, to
the extent such expense was deducted in computing Adjusted Consolidated Net
Income (including amortization of original issue discount and non-cash interest
payments), plus (c) depreciation, amortization and other non-cash charges to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing Adjusted Consolidated Net Income (including amortization of
goodwill and other intangibles).
"CONSOLIDATED FIXED CHARGES" means, with respect to any person for any
period, the (a) consolidated Interest Expense, whether paid or accrued, to the
extent such expense was deducted in computing Adjusted Consolidated Net Income
(including amortization of original issue discount and non-cash interest
payments) and (b) aggregate amount of all dividends paid or accumulated by such
person during
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such period on Qualified Preferred Stock and all cash dividend payments by such
person during such period on all series of other preferred stock of such person
and its Subsidiaries, other than dividends paid by such person during such
period on preferred stock of Unrestricted Subsidiaries dividends paid to such
person or its Subsidiaries (other than in the case of the Company and its
Restricted Subsidiaries, Unrestricted Subsidiaries) times a fraction, the
numerator of which is one and the denominator of which is one minus the then
Current Effective Consolidated Tax Rate of such person during such period.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate net income (or loss) of such person and its Subsidiaries (other
than, in the case of the Company and its Subsidiaries, Unrestricted
Subsidiaries) for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the net income (or loss) of any person which is not
a Subsidiary of the referent person or is accounted for by the equity method of
accounting by such referent person shall be included only to the extent of the
amount of cash dividends or distributions (including tax sharing payments) paid
to the referent person during such period or a Subsidiary of the referent person
(other than, in the case of the Company and its Restricted Subsidiaries,
Unrestricted Subsidiaries), (ii) except to the extent includible pursuant to the
foregoing clause (i), the income (or loss) of any person accrued prior to the
date it becomes a Subsidiary of such person or is merged into or consolidated
with such person or any of its Subsidiaries or that person's assets are acquired
by such person or any of its Subsidiaries shall be excluded, (iii) any gains or
losses of such person for such period attributable to Asset Sales net of related
tax costs or tax benefits, as the case may be, shall be excluded and (iv) all
extraordinary gains or losses of such person for such period shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any person, at any date of
determination, the sum of the Capital Stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of such person and its
Subsidiaries on a consolidated basis, less amounts attributable to Redeemable
Stock of such person, each item to be determined in conformity with GAAP
(excluding the effects of (i) foreign currency exchange adjustments under
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52 and (ii) the application of Accounting Principles Board Opinions Nos. 16
and 17 and related interpretations).
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any person, at any
time, the total consolidated assets of such person less the consolidated assets
of such person which constitute goodwill, in each case as set forth on such
person's most recent balance sheet.
"CURRENCY AGREEMENT" means the obligations of any person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its Subsidiaries against
fluctuations in currency values.
"CURRENT EFFECTIVE CONSOLIDATED TAX RATE" means, with respect to any person
for any period, cash income taxes paid or payable by such person for such period
DIVIDED by the amount of income used in determining the amount of such cash
income taxes paid or payable, in each case without giving effect to any gains on
Asset Sales.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) all Senior Indebtedness under the
New Credit Facility and (ii) any Senior Indebtedness permitted under the
Indenture having a principal amount of at least $15.0 million that is designated
as "Designated Senior Indebtedness" by written notice from the Company to the
Trustee.
"EQUITY INTERESTS" means Capital Stock, warrants, options or other rights to
acquire Capital Stock (but excluding any debt security which is convertible
into, or exchangeable for, Capital Stock).
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Issue Date.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any person for any
period, the ratio of Consolidated EBITDA for such person for such period to
Consolidated Fixed Charges for such person for such period. For purposes of the
foregoing computation, in calculating Consolidated EBITDA and Consolidated Fixed
Charges, (a) the transaction giving rise to the need to calculate the Fixed
Charge Coverage Ratio shall be assumed to have occurred on the first day of the
four-quarter period for which the Fixed Charge Coverage Ratio is being
determined (the "Reference Period"), (b) any acquisition or divestiture of
assets or the Capital Stock of any Subsidiary of such person (Restricted
Subsidiary, in the case of the Company) which occurred during the Reference
Period or subsequent to the Reference Period and prior to the date of the
transaction referenced in clause (a) above (the "Transaction Date") shall be
assumed to have occurred on the first day of the Reference Period, excluding, in
the case of an acquisition of assets or Capital Stock, any operating expense or
cost reduction of such person or the person to be acquired which, in the good
faith estimate of management, will be eliminated or realized, as the case may
be, as a result of such acquisition, as if such acquisition of assets or Capital
Stock (including the incurrence of any Indebtedness in connection with any such
acquisition and the application of the proceeds thereof) took place on the first
day of the Reference Period and as if the elimination of such operating expense
and the realization of such cost reductions were achieved on the first day of
the Reference Period; PROVIDED that the foregoing eliminations of operating
expenses and realizations of cost reductions shall be of the types permitted to
be given effect to in accordance with Article 11 of Regulation S-X under the
Exchange Act as in effect on the Issue Date, (c) the incurrence of any
Indebtedness during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of the Reference
Period, (d) Consolidated Fixed Charges attributable to any Indebtedness (whether
existing or being incurred) computed on a pro forma basis and bearing a floating
interest rate shall be computed as if the rate in effect on the Transaction Date
had been the applicable rate for the entire period, unless such person or any of
its Subsidiaries (Restricted Subsidiaries, in the case of the Company) is party
to an Interest Rate Agreement which will remain in effect for the twelve-month
period after the Transaction Date and which has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used and (e) there shall be excluded from Consolidated
Fixed Charges any portion of such Consolidated Fixed Charges related to any
amount of Indebtedness that was outstanding during or subsequent to the
Reference Period but is not outstanding on the Transaction Date, except for
Consolidated Fixed Charges actually incurred with respect to Indebtedness
borrowed (as adjusted pursuant to clause (d)) under a revolving credit or
similar arrangement to the extent the commitment thereunder remains in effect on
the Transaction Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or in such other statements by
such other entity as approved by a significant segment of the accounting
profession which are in effect in the United States at the time and for the
period as to which such accounting principles are to be applied; PROVIDED,
HOWEVER, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles as in
effect as of the Issue Date.
"HOLDER" means a person in whose name a Note is registered. The Holder of a
Note will be treated as the owner of such Note for all purposes.
"INDEBTEDNESS" means, with respect to any person, any indebtedness, in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion
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thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet of
such person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock or preferred stock of
any Subsidiary (Restricted Subsidiary, in the case of the Company) of such
person (except, with respect to the Company, to the extent such Restricted
Subsidiary guarantees the obligations under the Notes), indebtedness secured by
a Lien to which the property or assets owned or held by such person are subject,
whether or not the obligations secured thereby shall have been assumed, and
guarantees of items that would be included within this definition to the extent
of such guarantees (exclusive of whether such items would appear upon such
balance sheet). For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Stock or preferred stock of any Restricted
Subsidiary of such person which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Stock or such
preferred stock as if such Redeemable Stock or such preferred stock were
repurchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture; PROVIDED that if such Redeemable Stock or such
preferred stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Redeemable Stock or such preferred stock. The
amount of Indebtedness of any person at any date shall be, in the case of
Indebtedness of others secured by a Lien to which the property or assets owned
or held by such person are subject, the lesser of the fair market value at such
date of any asset subject to a Lien securing the Indebtedness of others and the
amount of the Indebtedness secured.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking or consulting firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the board of directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"INTEREST EXPENSE" means, with respect to any person, for any period, the
aggregate amount of interest in respect of Indebtedness (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and the net cost (benefit)
associated with Interest Rate Agreements, and excluding amortization of deferred
finance fees) and all but the principal component of rentals in respect of
Capital Lease Obligations, paid, accrued or scheduled to be paid or accrued by
such person during such period.
"INTEREST RATE AGREEMENTS" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
Subsidiaries against fluctuations in interest rates.
"INVESTMENT" means any direct or indirect advance, loan (other than advances
to customers in the ordinary course of business, which are recorded as accounts
receivable on the balance sheet of any person or its Subsidiaries) or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by any other person; in each
case, other than as result of the issuance of Capital Stock of such person or
the delivery of Capital Stock of such person's direct or indirect parent. For
the purposes of the "LIMITATION ON RESTRICTED PAYMENTS" covenant, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary and shall exclude the fair market value
of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the
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amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions (including tax sharing payments) in
connection with such Investment to the extent such distribution constitutes a
return on capital in accordance with GAAP; provided, however, that in the case
of an Investment in an Unrestricted Subsidiary, the Company may elect to include
such cash payments (in whole or in part) in Adjusted Consolidated Net Income and
not as a reduction in the carrying value of the Investment in such Unrestricted
Subsidiary (whether or not in accordance with GAAP), such election to be made
prior to the making of a Restricted Payment based upon such dividend or
distribution.
"ISSUE DATE" means the date of first issuance of the Notes under the
Indenture.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MATURITY DATE" means, when used with respect to any Note, the date
specified in such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to provisions of the Indenture regarding acceleration of
Indebtedness or any Net Proceeds Offer or Change of Control Offer).
"NET PROCEEDS" means, with respect to any Asset Sale, the aggregate amount
of U.S. Legal Tender (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in each such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of (i) the cash
expenses of such sale (including, without limitation, the payment of principal,
premium, if any, and interest on Indebtedness required to be paid as a result of
such Asset Sale (other than pursuant to the "LIMITATION ON ASSET SALE" covenant)
and legal, accounting and investment banking fees and sales commissions), (ii)
taxes paid or payable as a result thereof, (iii) any portion of cash proceeds
which the Company determines in good faith should be reserved for post-closing
adjustments, it being understood and agreed that on the day that all such
post-closing adjustments have been determined, the amount (if any) by which the
reserved amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Subsidiaries shall constitute
Net Proceeds on such date and (iv) any relocation expenses and pension,
severance and shutdown costs incurred as a result thereof.
"NEW CREDIT FACILITY" means that certain credit agreement dated as of June
12, 1997, by and among the Company, certain financial institutions parties
thereto and Bankers Trust Company and Credit Suisse First Boston, as agents,
initially providing for up to a $475.0 million revolving credit facility,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, supplemented, extended, renewed, refunded, refinanced, restructured or
replaced from time to time (including, without limitation, any extension of
maturity thereof, or the inclusion of additional borrowers or guarantors
thereunder), in each case in whole or in part, whether by the same or any other
lender or group of lenders.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"PERMITTED INVESTMENTS" means (i) cash or Cash Equivalents, (ii) Investments
that are in persons (including Unrestricted Subsidiaries) who derive substantial
revenues from operations similar or ancillary to the business of the Company or
its Restricted Subsidiaries as conducted at the time of such Investment and that
have the purpose of furthering the operations of the Company and its Restricted
Subsidiaries; PROVIDED that Investments of the type described in this clause
(ii) shall not exceed $25.0 million at any one time outstanding in the case of
persons which are not Restricted Subsidiaries or which do not in connection with
such Investment become a Restricted Subsidiary, (iii) advances to employees and
officers of the Company and its Subsidiaries not in excess of $1.0 million at
any one time outstanding, (iv) loans to employees, officers and directors of the
Company and its Subsidiaries to finance the purchase of Equity Interests in the
Company, (v) accounts receivable created or acquired in the ordinary course of
business, (vi) obligations or shares of Capital Stock received in connection
with any good faith settlement or bankruptcy proceeding involving a claim
relating to a Permitted Investment, (vii) Currency Agreements and Interest Rate
Agreements and other similar agreements designed to hedge against fluctuations
in foreign exchange rates and interest rates entered into in the ordinary course
of business in connection with the operation of the Company's or its Restricted
Subsidiaries' businesses and (viii) agreements designed to hedge against
fluctuations in the cost of raw materials entered into in the ordinary course of
business in connection with the operation of the Company's and its Restricted
Subsidiaries' business ("Raw Material Hedge Agreements").
"PERMITTED LIEN" means (i) Liens for taxes, assessments, governmental
charges or claims not yet due or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (ii) statutory Liens of
landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business,
deposits made to obtain the release of such Liens, and with respect to amounts
not yet delinquent for a period of more than 60 days or being contested in good
faith by appropriate proceedings, if a reserve or other appropriate provision,
if any, as shall be required in conformity with GAAP shall have been made
therefor; (iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return of money bonds and
other obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, zoning or other restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the business of the Company or any of its Restricted Subsidiaries
incurred in the ordinary course of business; (vi) Liens (including extensions,
renewals and replacements thereof) upon real or tangible personal property
acquired after the date of the Indenture whether or not such Lien existed on the
date of acquisition of such property; PROVIDED that (a) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction) of
the item of property subject thereto, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost, (c) such
Lien does not extend to or cover any other property other than such item of
property and any improvements on such item and (d) the incurrence of such
Indebtedness is permitted by the "LIMITATION ON ADDITIONAL INDEBTEDNESS"
covenant; (vii) Liens securing reimbursement obligations with respect to letters
of credit which encumber documents and other property relating to such letters
of credit and the products and proceeds thereof; (viii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (ix) judgment and
attachment Liens not giving rise to an Event of Default; (x) leases or subleases
granted to others not interfering in any material respect with the business of
the Company or any of its Restricted Subsidiaries; (xi) Liens encumbering
customary initial deposits and margin deposits, and other Liens incurred in the
ordinary course of business and which are within the general parameters
customary in the industry, in each case securing Indebtedness under Interest
Rate Agreements, Currency
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Agreements and Raw Material Hedge Agreements; (xii) Liens encumbering deposits
made to secure obligations arising from statutory, regulatory, contractual or
warranty requirements of the Company or its Subsidiaries; (xiii) Liens arising
out of consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business of the Company and its Restricted Subsidiaries; (xiv) any interest or
title of a lessor in the property subject to any Capital Lease Obligations or
operating lease; (xv) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xvi) Liens permitted or required by the
New Credit Facility as in effect on the Issue Date; (xvii) Liens securing Senior
Indebtedness and Liens on assets of Restricted Subsidiaries securing
Indebtedness of such Restricted Subsidiaries; (xviii) Liens between the Company
and any Restricted Subsidiary or between Restricted Subsidiaries; (xix) Liens on
assets of Restricted Subsidiaries securing letters of credit issued in the
ordinary course of business of such Restricted Subsidiaries; (xx) additional
Liens at any one time outstanding with respect to assets of the Company and its
Restricted Subsidiaries the fair market value of which does not exceed $15.0
million on the date of determination; (xxi) Liens existing on the Issue Date and
any extensions, renewals or replacements thereof; (xxii) Liens deemed to arise
from the A/R Securitization; and (xxiii) the Lien granted to the Trustee under
the Indenture and any substantially equivalent Lien granted to any trustee or
similar institution under any indenture for Indebtedness permitted by the terms
of the Indenture.
"QUALIFIED PREFERRED STOCK" means preferred stock of the Company that is
designated as such pursuant to clause (ii) or (v) of the second paragraph of the
"LIMITATION ON RESTRICTED PAYMENTS" covenant.
"REDEEMABLE STOCK" means any Equity Interest which, by its terms (or by
terms of any security into which it is convertible or for which it is
exchangeable before the stated maturity of the Notes), or upon the happening of
any event, matures or is mandatorily redeemable (other than for Capital Stock
not constituting Redeemable Stock), in whole or in part, prior to the Maturity
Date, or is, by its terms or upon the happening of any event, redeemable at the
option of the holder thereof, in whole or in part, at any time prior to the
Maturity Date, except for Equity Interests of the Company issued to employees,
officers and directors of the Company and its Subsidiaries pursuant to
agreements containing provisions for the repurchase of such Equity Interest upon
death, disability or termination of employment or directorship of such persons;
PROVIDED that any Equity Interest that is considered to be Redeemable Stock
solely because it is redeemable upon the occurrence of the same events that
would require a redemption or repurchase of the Notes shall not be deemed to be
Redeemable Stock; PROVIDED, FURTHER, that such Equity Interest is not
convertible or exchangeable into debt.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which at the
time of determination is not an Unrestricted Subsidiary. The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if, immediately after giving effect to such designation, the
Company could incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the "LIMITATION ON ADDITIONAL INDEBTEDNESS" covenant (without
giving effect to clauses (i) through (xvi) of the second paragraph thereof), on
a pro forma basis taking into account such designation.
"SENIOR INDEBTEDNESS" means any Indebtedness permitted to be incurred under
the terms of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include (a) Indebtedness that is
expressly subordinate or junior in right of payment to any Indebtedness of the
Company, (b) Indebtedness that is represented by Redeemable Stock, (c) any
liability for Federal, state, local or other taxes owed or owing by the Company,
(d) Indebtedness of the Company to any Subsidiary of the Company, (e) trade
payables and (f) Indebtedness that is incurred in violation of the Indenture
(but, as to any such Indebtedness, no such violation shall be deemed to exist
for purposes of this definition if the holder(s) of such obligation or their
representative or the Company shall have furnished to the Trustee an opinion of
counsel unqualified in all
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material respects, addressed to the Trustee (which legal counsel may, as to
matters of fact, rely upon an officers' certificate of the Company) to the
effect that the incurrence of such Indebtedness does not violate the provisions
of the Indenture).
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary which
accounted for more than 10% of the Company's Consolidated Tangible Assets or
more than 10% of the Company's consolidated revenues or more than 10% of the
Company's Consolidated EBITDA, in each case as of the end of the Company's most
recent fiscal year.
"SUBSIDIARY" with respect to any person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such person or (ii) any other
person of which at least a majority of the voting interest under ordinary
circumstances is at such time, directly or indirectly, owned by such person.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination is an Unrestricted Subsidiary (as designated by the
Board of Directors of the Company, as provided below) and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary, unless such Subsidiary owns any
Capital Stock of, or owns, or holds any Lien on, any property of, any other
Subsidiary of the Company which is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED THAT (a) the Company certifies that such designation
complies with the "LIMITATION ON RESTRICTED PAYMENTS" covenant and (b) each
Subsidiary to be so designated and each of its Subsidiaries has not at the time
of designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any of its Restricted Subsidiaries. The Board of Directors of the
Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary
only if, immediately after giving effect to such designation, the Company could
incur at least $1.00 of additional Indebtedness pursuant to the first paragraph
of the "LIMITATION ON ADDITIONAL INDEBTEDNESS" covenant (without giving effect
to clauses (i) through (xvi) of the second paragraph thereof) on a PRO FORMA
basis taking into account such designation.
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BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will be represented by one or more fully registered
global notes (collectively, the "Global Notes"), and will be deposited upon
issuance with the Depositary and registered in the name of the Depositary or a
nominee of the Depositary. Except as set forth below, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
THE GLOBAL NOTES. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Exchange
Notes of the individual beneficial interests represented by such Global Notes to
the respective accounts of persons who have accounts with such depositary and
(ii) ownership of beneficial interests in the Global Notes will be shown on, and
the transfer of such ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold the interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Notes for all
purposes under the Indenture. No beneficial owner of an interest in the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the Exchange Notes.
Payments of the principal of, premium (if any), and interest on, the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practice, as is the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in the same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
participants to whose account the DTC interests in the Global Notes are credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Indenture,
DTC will exchange the Global Notes for certificated securities, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants,
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thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC system
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
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DESCRIPTION OF THE NEW CREDIT FACILITY
On June 12, 1997, the Company entered into a Credit Agreement (as amended to
date, the " New Credit Facility") with a syndicate of banks and Bankers Trust
Company as Administrative Agent and Collateral Agent and Credit Suisse First
Boston as Documentation Agent pursuant to which the Company may borrow, subject
to certain conditions, up to $475.0 million on a revolving credit basis, of
which up to $25.0 million is available as swingline loans and up to $45.0
million is available as letters of credit. The Company's initial borrowing under
the New Credit Facility in the amount of $321.8 million was made on June 12,
1997 and was used to repay the outstanding borrowings under the Old Credit
Facility which was terminated upon closing of the New Credit Facility.
Borrowings under the New Credit Facility are available for general corporate
purposes, permitted acquisitions and investments.
The New Credit Facility provides that the revolving credit facility
terminates and all loans thereunder must be repaid on June 12, 2002. Under the
New Credit Facility, outstanding loans (other than swingline loans) bear
interest at the Applicable Margin described below over, at the Company's option,
(i) Base Rate or (ii) LIBOR. Base Rate is defined as the higher of (x) 1/2 of 1%
in excess of the Federal Funds Rate (as defined in the New Credit Facility) and
(y) the prime lending rate of Bankers Trust Company in effect from time to time.
The Applicable Margin varies depending on the Company's leverage ratio, as
tested on a rolling four quarter basis, and defined generally as the ratio of
debt to earnings, less interest, taxes, depreciation and amortization (the
"Leverage Ratio"). The Applicable Margin for LIBOR loans ranges from 0.50% to
1.75%. For Base Rate loans the Applicable Margin varies from 0.00% to 0.75%.
Swingline loans bear interest at the Applicable Margin over Base Rate and letter
of credit fees are charged at a rate, varying with the Leverage Ratio, from
0.50% to 1.75%.
The Company may voluntarily terminate the banks' commitments under the New
Credit Facility at any time, subject to three Business Days' notice. The New
Credit Facility also provides for mandatory reductions of the banks' commitments
in the event the Company incurs debt or issues preferred stock (other than
certain permitted debt or preferred stock).
The Company's obligations under the New Credit Facility are guaranteed by
each domestic subsidiary of the Company and are secured by a first priority
security interest in all capital stock and intercompany notes owned by the
Company and its subsidiaries, with certain exceptions.
The New Credit Facility contains restrictions that include limitations on
the Company and its subsidiaries with respect to (i) the incurrence, creation
and maintenance of liens (other than permitted liens), (ii) the incurrence and
maintenance of additional debt, subject to certain exceptions and an available
basket amount, (iii) mergers, acquisitions, purchases and sales of assets,
subject to certain exceptions and an available basket amount, (iv) sale and
leaseback transactions, (v) changes in business conducted and (vi) dividends and
other restricted payments (subject to available baskets). In addition, the New
Credit Facility contains a Leverage Ratio requirement of no greater than 4.25 to
1.0 until December 31, 1999 and thereafter no greater than 4.00 to 1.0. The
minimum net interest coverage ratio is 2.25 to 1.0.
The New Credit Facility contains customary events of default, including (i)
failure by the Company to make principal payments or interest and fee payments
within certain grace periods, (ii) inaccuracy of representations and warranties
in any material respects when made, (iii) breach of covenants (in certain cases,
subject to grace periods), (iv) failure by the Company to make payments in
respect of certain indebtedness, (v) bankruptcy, insolvency or similar events
with respect to the Company or its significant subsidiaries, (vi) certain ERISA
defaults, (vii) material judgments that remain unsatisfied or unstayed for
certain time periods or (viii) a change in control (as defined in the New Credit
Facility) of the Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Private Notes for Exchange Notes should not be treated as a
taxable transaction for United States Federal income tax purposes because the
Exchange Notes will not be considered to differ
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materially in kind or in extent from the Private Notes. Rather, the Exchange
Notes received by a holder of Private Notes should be treated as a continuation
of such holder's investment in the Private Notes. As a result, there should be
no material United States Federal income tax consequences to holders exchanging
Private Notes for Exchange Notes.
PERSONS CONSIDERING THE EXCHANGE OF THE PRIVATE NOTES FOR EXCHANGE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING
UNDER STATE, LOCAL, OR FOREIGN LAWS OF SUCH AN EXCHANGE.
PLAN OF DISTRIBUTION
This Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with resales of any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each such broker-dealer
that receives Exchange Notes for its own account in exchange for such Private
Notes pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company has
agreed that for a period of up to 180 days after the Registration Statement is
declared effective, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer that requests copies of this Prospectus in
the Letter of Transmittal for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions or through the writing of options on the Exchange Notes, or a
combination of such methods of resale, at market prices prevailing at the time
of resale or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired by such broker-dealer as a result
of market-making or other trading activities and any broker-dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Private Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act.
VALIDITY OF THE EXCHANGE NOTES
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Sullivan & Cromwell, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for the year ended December 31, 1996, the six months ended December
31, 1995, the year ended June 30, 1995 and the 323 days ended June 30, 1994
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated by reference.
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NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE MAKING OF THE EXCHANGE OFFER
PURSUANT TO THIS PROSPECTUS NOR THE ACCEPTANCE OF PRIVATE NOTES FOR SURRENDER
FOR EXCHANGE PURSUANT THERETO SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Notice to Investors............................. 2
Incorporation of Certain Documents by
Reference..................................... 3
Available Information........................... 4
Special Note Regarding Forward-Looking
Statements.................................... 4
Summary......................................... 5
Risk Factors.................................... 17
No Cash Proceeds to the Company................. 20
Price Range of the Private Notes................ 21
Capitalization.................................. 21
The Exchange Offer.............................. 22
Selected Historical Financial and Other
Operating Data................................ 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 31
Business........................................ 37
Management...................................... 55
Principal Stockholders.......................... 57
Certain Relationships and Related
Transactions.................................. 58
Description of the Notes........................ 59
Book-Entry; Delivery and Form................... 83
Description of the New Credit Facility.......... 85
Certain United States Federal Income Tax
Considerations................................ 85
Plan of Distribution............................ 86
Validity of the Exchange Notes.................. 86
Independent Auditors............................ 86
</TABLE>
BIG FLOWER PRESS
HOLDINGS, INC.
OFFER TO EXCHANGE
8 7/8% SENIOR SUBORDINATED NOTES
DUE JULY 1, 2007
FOR ALL OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES
DUE JULY 1, 2007
[LOGO]
July , 1997
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware empowers
a Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. A Delaware corporation may indemnify directors, officers, employees
and other agents of such corporation in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the person to be indemnified has been
adjudged to be liable to the corporation. Where a director, officer, employee or
agent of the corporation is successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to above or in defense of any claim,
issue or matter therein, the corporation must indemnify such person against the
expenses (including attorneys' fees) which he or she actually and reasonably
incurred in connection therewith.
The Bylaws contain provisions that provide for indemnification of officers
and directors and their heirs and distributees to the fullest extent permitted
by, and in the manner permissible under, the General Corporation Law of the
State of Delaware.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, the Company's Certificate contains a provision eliminating
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, subject to certain
exceptions.
The Company maintains policies insuring its officers and directors against
certain civil liabilities, including liabilities under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company has agreed to
indemnify holders of registrable Notes against certain liabilities. Also
pursuant to the Registration Rights Agreement, the Company and certain
broker-dealers, including certain persons associated with such broker-dealers,
have agreed to indemnify each other against certain liabilities.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
<TABLE>
<C> <S>
(a) Exhibits
4.1 Form of Exchange Note (included in Exhibit 4.2)
4.2 Indenture, dated as of June 20, 1997, between Big Flower Press Holdings, Inc, as
Issuer, and State Street Bank and Trust Company (formerly Fleet National Bank), as
Trustee.
4.3 Registration Rights Agreement, dated as of June 20, 1997, between the Company and BT
Securities Corporation, Credit Suisse First Boston Corporation and Goldman, Sachs and
Co.
*5.1 Opinion of Sullivan & Cromwell regarding the validity of the Exchange Notes.
23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included on signature page)
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as Trustee
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
*99.3 Form of Exchange Agent Agreement
</TABLE>
ITEM 22. UNDERTAKINGS
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
offered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
3. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
- ------------------------
* To be filed by amendment.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on July 25, 1997.
<TABLE>
<S> <C> <C>
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ R. THEODORE AMMON
--------------------------------------
R. Theodore Ammon
Chairman
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints R. Theodore Ammon and Edward T. Reilly,
and each and either of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and all
amendments (including, without limitation, post-effective amendments) to this
Registration Statement, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ R. THEODORE AMMON Chairman and Director
- ------------------------------ (Principal Executive July 25, 1997
R. Theodore Ammon Officer)
II-3
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ EDWARD T. REILLY President, Chief Executive
- ------------------------------ Officer and Director July 25, 1997
Edward T. Reilly
Executive Vice President
/s/ RICHARD L. RITCHIE and
- ------------------------------ Chief Financial Officer July 25, 1997
Richard L. Ritchie (Principal Financial and
Accounting Officer)
/s/ PETER G DIAMANDIS Director
- ------------------------------ July 25, 1997
Peter G Diamandis
/s/ ROBERT M. KIMMITT Director
- ------------------------------ July 25, 1997
Robert M. Kimmitt
/s/ JOAN D. MANLEY Director
- ------------------------------ July 25, 1997
Joan D. Manley
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ----------- ------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
4.1 Form of Exchange Note (included in Exhibit 4.2)
4.2 Indenture, dated as of June 20, 1997, between Big Flower Press Holdings, Inc, as Issuer, and
State Street Bank and Trust Company (formerly Fleet National Bank), as Trustee.
4.3 Registration Rights Agreement, dated as of June 20, 1997, between the Company and BT Securities
Corporation, Credit Suisse First Boston Corporation and Goldman, Sachs and Co.
*5.1 Opinion of Sullivan & Cromwell regarding the validity of the Exchange Notes.
*23.1 Consent of Sullivan & Cromwell (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
24.1 Power of Attorney (included on signature page)
*25.1 Statement of Eligibility of State Street Bank and Trust Company, as Trustee
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
*99.3 Form of Exchange Agent Agreement
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 4.2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BIG FLOWER PRESS HOLDINGS, INC.
as Issuer
and
FLEET NATIONAL BANK
as Trustee
----------------------
INDENTURE
Dated as of June 20, 1997
----------------------
up to $350,000,000
8-7/8% Senior Subordinated Notes due 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Section Indenture Section
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10; 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . 11.3
(c) . . . . . . . . . . . . . . . . . . . . . . 11.3
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1). . . . . . . . . . . . . . . . . . . . . 7.6
(b)(2). . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . 7.6; 11.2
(d) . . . . . . . . . . . . . . . . . . . . . . 7.6
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . 4.6; 4.7; 11.2
(b) . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . 11.4
(c)(2). . . . . . . . . . . . . . . . . . . . . 11.4
(c)(3). . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . N.A.
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . 7.5; 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . 6.11
Section 316(a) (last sentence) . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . 6.4
(a)(2). . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . 9.4
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2). . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . 2.4
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . 11.1
(c) . . . . . . . . . . . . . . . . . . . . . . 11.1
- --------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of this Indenture.
i
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions..................................................1
SECTION 1.2 Incorporation by Reference of Trust Indenture Act...........23
SECTION 1.3 Rules of Construction.......................................23
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.............................................24
SECTION 2.2 Execution and Authentication................................24
SECTION 2.3 Registrar and Paying Agent..................................26
SECTION 2.4 Paying Agent To Hold Money in Trust.........................27
SECTION 2.5 Securityholder Lists........................................27
SECTION 2.6 Transfer and Exchange.......................................27
SECTION 2.7 Replacement Securities......................................28
SECTION 2.8 Outstanding Securities......................................28
SECTION 2.9 Treasury Securities.........................................29
SECTION 2.10 Temporary Securities........................................29
SECTION 2.11 Cancellation................................................30
SECTION 2.12 Defaulted Interest..........................................30
SECTION 2.13 CUSIP Number................................................30
SECTION 2.14 Book-Entry Provisions for Global Securities.................31
SECTION 2.15 Special Transfer Provisions.................................32
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee..........................................34
SECTION 3.2 Selection of Securities To Be Redeemed......................35
SECTION 3.3 Notice of Redemption........................................35
SECTION 3.4 Effect of Notice of Redemption..............................36
SECTION 3.5 Deposit of Redemption Price.................................37
SECTION 3.6 Securities Redeemed in Part.................................37
ii
<PAGE>
Page
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities.......................................37
SECTION 4.2 Maintenance of Office or Agency.............................38
SECTION 4.3 Corporate Existence.........................................38
SECTION 4.4 Payment of Taxes and Other Claims...........................39
SECTION 4.5 Maintenance of Properties; Books and Records; Compliance
with Law....................................................39
SECTION 4.6 Compliance Certificates; Notice of Default..................40
SECTION 4.7 Reports.....................................................41
SECTION 4.8 Limitation on Restricted Payments...........................42
SECTION 4.9 Limitation on Additional Indebtedness.......................44
SECTION 4.10 Dividends and Payment Restrictions..........................46
SECTION 4.11 Limitation on Liens.........................................47
SECTION 4.12 Limitation on Asset Sales...................................48
SECTION 4.13 Transactions With Affiliates................................52
SECTION 4.14 Limitation on Creation of Senior Subordinated Debt..........53
SECTION 4.15 Change of Control...........................................53
SECTION 4.16 Waiver of Stay; Extension of Usury Laws.....................55
SECTION 4.17 Maintenance of Insurance....................................56
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Limitation on Mergers, Consolidations or Sales of Assets....56
SECTION 5.2 Successor Entity Substituted................................57
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default...........................................57
SECTION 6.2 Acceleration................................................60
SECTION 6.3 Other Remedies..............................................61
SECTION 6.4 Waiver of Past Default......................................62
SECTION 6.5 Control by Majority.........................................62
SECTION 6.6 Limitation on Suits.........................................62
SECTION 6.7 Rights of Holders To Receive Payment........................63
SECTION 6.8 Collection Suit by Trustee..................................63
SECTION 6.9 Trustee May File Proofs of Claim............................63
SECTION 6.10 Priorities..................................................64
SECTION 6.11 Undertaking for Costs.......................................64
iii
<PAGE>
Page
SECTION 6.12 Rights and Remedies Cumulative..............................65
SECTION 6.13 Delay or Omission Not Waiver................................65
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee...........................................65
SECTION 7.2 Rights of Trustee...........................................67
SECTION 7.3 Individual Rights of Trustee................................68
SECTION 7.4 Trustee's Disclaimer........................................68
SECTION 7.5 Notice of Defaults..........................................68
SECTION 7.6 Reports by Trustee to Holders...............................68
SECTION 7.7 Compensation and Indemnity..................................69
SECTION 7.8 Replacement of Trustee......................................70
SECTION 7.9 Successor Trustee by Merger, Etc............................71
SECTION 7.10 Eligibility; Disqualification...............................71
SECTION 7.11 Preferential Collection of Claims Against Company...........71
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of the Company's Obligations....................72
SECTION 8.2 Legal Defeasance and Covenant Defeasance....................73
SECTION 8.3 Conditions to Legal Defeasance or Covenant Defeasance.......75
SECTION 8.4 Application of Trust Money..................................77
SECTION 8.5 Repayment to the Company....................................78
SECTION 8.6 Reinstatement...............................................78
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders..................................79
SECTION 9.2 With Consent of Holders.....................................79
SECTION 9.3 Compliance with Trust Indenture Act.........................81
SECTION 9.4 Revocation and Effect of Consents...........................81
SECTION 9.5 Notation on or Exchange of Securities.......................82
SECTION 9.6 Trustee To Sign Amendments, Etc.............................82
iv
<PAGE>
Page
ARTICLE X
SUBORDINATION
SECTION 10.1 Securities Subordinated to Senior Indebtedness..............83
SECTION 10.2 No Payment on Securities in Certain Circumstances...........83
SECTION 10.3 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Company..................................................85
SECTION 10.4 Holders To Be Subrogated to Rights of Holders of Senior
Indebtedness................................................86
SECTION 10.5 Obligations of the Company Unconditional....................87
SECTION 10.6 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice...........................................88
SECTION 10.7 Subordination Rights Not Impaired by Acts or Omissions of
Company or Holders of Senior Indebtedness...................88
SECTION 10.8 Holders Authorize Trustee to Effectuate Subordination of
Securities..................................................89
SECTION 10.9 Right of Trustee to Hold Senior Indebtedness................90
SECTION 10.10 Article X Not to Prevent Events of Default..................90
SECTION 10.11 No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness................................................90
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls................................90
SECTION 11.2 Notices.....................................................91
SECTION 11.3 Communications by Holders with Other Holders................92
SECTION 11.4 Certificate and Opinion of Counsel as to Conditions
Precedent...................................................92
SECTION 11.5 Statements Required in Certificate and Opinion of Counsel...93
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar...................93
SECTION 11.7 Legal Holidays..............................................93
SECTION 11.8 Governing Law...............................................93
SECTION 11.9 No Recourse Against Others..................................94
SECTION 11.10 Successors..................................................94
v
<PAGE>
Page
SECTION 11.11 Counterparts................................................94
SECTION 11.12 Severability................................................94
SECTION 11.13 Table of Contents, Headings, Etc............................94
SECTION 11.14 No Adverse Interpretation of Other Agreements...............94
SECTION 11.15 Benefits of Indenture.......................................95
SECTION 11.16 Independence of Covenants...................................95
Exhibit A-1 - Form of Series A Security
Exhibit A-2 - Form of Series B Security
Exhibit B - Form of Legend for Global Securities
Exhibit C - Transferee Certificate for Non-QIB Accredited Investors
Exhibit D - Transferee Certificate for Transfers Pursuant Regulation S
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
vi
<PAGE>
INDENTURE dated as of June 20, 1997, between BIG FLOWER PRESS HOLDINGS,
INC., a corporation duly organized and existing under the laws of the State
of Delaware, as Issuer (the "Company"), and FLEET NATIONAL BANK, a national
banking association duly organized and existing under the laws of the United
States, as Trustee (the "Trustee").
The parties hereto agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Accrued Bankruptcy Interest" means all interest accruing subsequent
to the occurrence of any events specified in Section 6.1(vi) or (vii) or
which would have accrued but for any such event.
"Adjusted Consolidated Net Income" means, with respect to any Person
for any period, (i) the Consolidated Net Income of such Person for such
period plus (ii) in the case of the Company and its Restricted Subsidiaries,
(A) all cash received during such period by the Company or any Restricted
Subsidiary from its Unrestricted Subsidiaries but only to the extent that the
Company elects to so include such cash payments (in whole or in part) in
Adjusted Consolidated Net Income and not as a reduction in the carrying value
of the Investment in such Unrestricted Subsidiary (whether or not in
accordance with GAAP), such election to be made prior to the making of a
Restricted Payment based upon such cash received and (B) amortization,
depreciation and other non-cash charges relating to acquisitions by the
Company since its formation, including goodwill, non-compete agreements, the
stepped-up basis on assets acquired and deferred financing costs, in each
case to the extent such items reduced Consolidated Net Income. Each item of
Adjusted Consolidated Net Income will be determined in conformity with GAAP,
except as set forth in this definition and except that, for purposes of the
application of Accounting Principles Board Opinions Nos. 16 and 17, such
Person may select an amortization practice allowable by GAAP up to 40 years,
notwithstanding the use of a different amortization in such Person's
consolidated financial statements. Any designation of a Subsidiary of the
Company as a Restricted Subsidiary or Unrestricted Subsidiary at or prior to
the time of the calculation
<PAGE>
-2-
of Adjusted Consolidated Net Income of a Subsidiary will be treated as if it
had occurred at the beginning of the applicable period.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. A Person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled
by," and "under common control with") another Person if the controlling
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies, of the controlled Person, whether
through ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Agent Bank" means Bankers Trust Company and/or any successor agent or
agents pursuant to the Credit Agreement.
"Agent Members" has the meaning provided in Section 2.14.
"Asset Sale" means, with respect to any Person, in one or a series
of related transactions, the sale, lease, conveyance, disposition or other
transfer by the referent Person of any of its assets (including by way of
sale and leaseback and including the sale or other transfer or issuance of
any of the Capital Stock of any Subsidiary of the referent Person); provided
that notwithstanding the foregoing, the term "Asset Sale" shall not include
the sale, lease, conveyance, disposition or other transfer of (i) all or
substantially all of the assets of the Company, as permitted pursuant to
Section 5.1, (ii) any assets between the Company and any Restricted
Subsidiary, (iii)(A) cash and cash equivalents, (B) inventory and (C) any
other tangible or intangible asset, in each case in the ordinary course of
business of the Company or the Restricted Subsidiaries, (iv) the sale of
accounts receivable pursuant to the Receivables Financing or (v) the sale or
discount, in each case without recourse, of accounts receivable arising in
the ordinary course of business, but only in connection with the compromise
or collection thereof.
"Asset Sale Payment Date" has the meaning provided in Section 4.12.
<PAGE>
-3-
"Average Life" means, as of the date of determination, with respect
to any security or instrument, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment or, in the case of
Redeemable Stock, each successive scheduled mandatory redemption payment of
such security or instrument multiplied by the amount of such principal
payment or, in the case of Redeemable Stock, mandatory redemption payment by
(ii) the sum of all such principal payments or, in the case of Redeemable
Stock, mandatory redemption payments.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means with respect to the Company or any Person,
the board of directors of the Company or such Person or any committee of such
board of directors duly authorized to act for it hereunder.
"Board Resolution" means with respect to the Company or any Person, a
copy of a resolution certified by the Secretary or an Assistant Secretary of the
Company or such Person to have been duly adopted by the Board of Directors of
the Company or such Person and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, a Sunday or any day on
which banking institutions in New York, New York, Hartford, Connecticut or any
city in which the principal trust office of the Trustee is located are required
or authorized by law, regulation or other governmental action to be closed.
"Capital Lease Obligation" means, with respect to any Person, at the
time any determination thereof is to be made, the amount of the liability in
respect of a capital lease which would at such time be required to be
capitalized on the balance sheet of such Person in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of one year or less from the date of acquisition
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof; provided that the full faith
and credit of the United States of America or any agency or instrumentality
<PAGE>
-4-
thereof is pledged in support thereof; (ii) bank deposits of, or certificates of
deposit or acceptances with a maturity of one year or less from the date of
acquisition of, any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; (iii) commercial paper with a maturity of one year or
less from the date of acquisition issued by a corporation (except an Affiliate
of the Company) organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by Standard & Poor's Corporation
or at least P-1 by Moody's Investors Service, Inc.; (iv) repurchase agreements
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depositary Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985; and (v) money market funds and mutual funds, the assets of which are
solely invested in (i) through (iv) above.
"Change of Control" means (i) an event or series of events by which
any Person (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the beneficial owner (as defined under Rule 13d-3 under the
Exchange Act) directly or indirectly of more than 50% of the combined voting
power of the then outstanding securities of the Company ordinarily (and apart
from rights accruing under certain circumstances) having the right to vote in
the election of directors or (ii) the replacement of a majority of the Board of
Directors over a one-year period from the directors who constituted the Board of
Directors at the beginning of such period, which replacement shall not have been
approved by the Board of Directors as so constituted at the beginning of such
period or (a) by directors whose nomination for election by the stockholders of
the Company was approved by such Board of Directors or (b) by directors elected
by such Board of Directors or (c) by directors approved in the same manner as
(a) or (b) above that were nominated or elected by directors approved as set
forth in (a) or (b) above. Notwithstanding the foregoing, a Change of Control
shall not be deemed to have occurred if one or more of the above events occurs
or
<PAGE>
-5-
circumstances exist and, after giving effect to the transaction giving rise
to such events or circumstances, the Company's Fixed Charge Coverage Ratio is
3.0 to 1 or greater.
"Change of Control Date" has the meaning provided in Section 4.15.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Change of Control Purchase Price" has the meaning provided in Section
4.15.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such Person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"Consolidated EBITDA" means, with respect to any Person for any period
and without duplication, the Adjusted Consolidated Net Income of such Person for
such period plus (a) provision for taxes based on income or profits to the
extent such provision for taxes was included in computing Adjusted Consolidated
Net Income, plus (b) consolidated Interest Expense, whether paid or accrued, to
the extent such expense was deducted in computing Adjusted Consolidated Net
Income (including amortization of original issue discount and non-cash interest
payments), plus (c) depreciation, amortization and other non-cash charges to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing Adjusted Consolidated Net Income (including amortization of
goodwill and other intangibles).
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the (a) consolidated Interest Expense, whether paid or accrued, to the
extent such expense was deducted in computing Adjusted Consolidated Net Income
(including amortization of original issue discount and non-cash
<PAGE>
-6-
interest payments) and (b) aggregate amount of all dividends paid or
accumulated by such Person during such period on Qualified Preferred Stock
and all cash dividend payments by such Person during such period on all
series of other preferred stock of such Person and its Subsidiaries, other
than dividends paid by such Person during such period on preferred stock of
Unrestricted Subsidiaries and dividends paid to such Person or its
Subsidiaries (other than in the case of the Company and its Restricted
Subsidiaries, Unrestricted Subsidiaries) times a fraction, the numerator of
which is one and the denominator of which is one minus the then Current
Effective Consolidated Tax Rate of such Person during such period.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate net income (or loss) of such Person and its
Subsidiaries (other than, in the case of the Company and its Subsidiaries,
Unrestricted Subsidiaries) for such period, on a consolidated basis,
determined in accordance with GAAP; provided that (i) the net income (or
loss) of any Person which is not a Subsidiary of the referent Person or is
accounted for by the equity method of accounting by such referent Person
shall be included only to the extent of the amount of cash dividends or
distributions (including tax sharing payments) paid to the referent Person
during such period or a Subsidiary of the referent Person (other than, in the
case of the Company and its Restricted Subsidiaries, Unrestricted
Subsidiaries), (ii) except to the extent includible pursuant to the foregoing
clause (i), the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of such Person or is merged into or consolidated with
such Person or any of its Subsidiaries or that Person's assets are acquired
by such Person or any of its Subsidiaries shall be excluded, (iii) any gains
or losses of such Person for such period attributable to Asset Sales net of
related tax costs or tax benefits, as the case may be, shall be excluded and
(iv) all extraordinary gains or losses of such Person for such period shall
be excluded.
"Consolidated Net Worth" means, with respect to any Person, at any
date of determination, the sum of the Capital Stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of such Person
and its Subsidiaries on a consolidated basis, less amounts attributable to
Redeemable Stock of such Person, each item to be determined in conformity
with GAAP (excluding the effects of (i) foreign currency exchange adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52 and
<PAGE>
-7-
(ii) the application of Accounting Principles Board Opinions Nos. 16 and 17
and related interpretations).
"Consolidated Tangible Assets" means, with respect to any Person, at
any time, the total consolidated assets of such Person less the consolidated
assets of such Person which constitute goodwill, in each case as set forth on
such Person's most recent balance sheet.
"Covenant Defeasance" has the meaning provided in Section 8.2.
"Credit Agreement" means that certain credit agreement dated as of
June 12, 1997, as amended as of the Issue Date, by and among the Company,
certain financial institutions parties thereto and Bankers Trust Company and
Credit Suisse First Boston, as agents, initially providing for up to a $475.0
million revolving credit facility, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, supplemented, extended,
renewed, refunded, refinanced, restructured or replaced from time to time
(including, without limitation, any extension of maturity thereof, or the
inclusion of additional borrowers or guarantors thereunder), in each case in
whole or in part, whether by the same or any other lender or group of lenders.
"Currency Agreement" means the obligations of any Person pursuant to
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in currency values.
"Current Effective Consolidated Tax Rate" means, with respect to any
Person for any period, cash income taxes paid or payable by such Person for
such period divided by the amount of income used in determining the amount of
such cash income taxes paid or payable, in each case without giving effect to
any gains on Asset Sales.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official charged with maintaining possession or
control over property for one or more creditors.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
<PAGE>
-8-
"Depository" means The Depositary Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Credit Agreement and (ii) any Senior Indebtedness permitted under
this Indenture having a principal amount of at least $15.0 million that is
designated as "Designated Senior Indebtedness" by written notice from the
Company to the Trustee.
"Equity Interests" means Capital Stock, warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" has the meaning provided in Section 6.1.
"Excess Proceeds" has the meaning provided in Section 4.12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and the
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Issue Date.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors
of the Company acting reasonably and in good faith and shall, in the case of
any assets or property the fair market value of which exceeds $1.5 million,
be evidenced by a Board Resolution (certified by the Secretary or Assistant
Secretary of the Company) delivered to the Trustee.
"Fixed Charge Coverage Ratio" means, with respect to any Person for
any period, the ratio of Consolidated EBITDA for such Person for such period
to Consolidated Fixed Charges for such Person for such period. For purposes
of the foregoing computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (a) the transaction giving rise to the need to
calculate the Fixed Charge Coverage Ratio shall be
<PAGE>
-9-
assumed to have occurred on the first day of the four-quarter period for
which the Fixed Charge Coverage Ratio is being determined (the "Reference
Period"), (b) any acquisition or divestiture of assets or the Capital Stock
of any Subsidiary of such Person (Restricted Subsidiary, in the case of the
Company) which occurred during the Reference Period or subsequent to the
Reference Period and prior to the date of the transaction referenced in
clause (a) above (the "Transaction Date") shall be assumed to have occurred
on the first day of the Reference Period, excluding, in the case of an
acquisition of assets or Capital Stock, any operating expense or cost
reduction of such Person or the Person to be acquired which, in the good
faith estimate of management, will be eliminated or realized, as the case may
be, as a result of such acquisition, as if such acquisition of assets or
Capital Stock (including the incurrence of any Indebtedness in connection
with any such acquisition and the application of the proceeds thereof) took
place on the first day of the Reference Period and as if the elimination of
such operating expense and the realization of such cost reductions were
achieved on the first day of the Reference Period; provided that the
foregoing eliminations of operating expenses and realizations of cost
reductions shall be of the types permitted to be given effect to in
accordance with Article 11 of Regulation S-X under the Exchange Act as in
effect on the Issue Date, (c) the incurrence of any Indebtedness during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date and the application of the proceeds therefrom shall be
assumed to have occurred on the first day of the Reference Period, (d)
Consolidated Fixed Charges attributable to any Indebtedness (whether existing
or being incurred) computed on a pro forma basis and bearing a floating
interest rate shall be computed as if the rate in effect on the Transaction
Date had been the applicable rate for the entire period, unless such Person
or any of its Subsidiaries (Restricted Subsidiaries, in the case of the
Company) is party to an Interest Rate Agreement which will remain in effect
for the twelve-month period after the Transaction Date and which has the
effect of fixing the interest rate on the date of computation, in which case
such rate (whether higher or lower) shall be used and (e) there shall be
excluded from Consolidated Fixed Charges any portion of such Consolidated
Fixed Charges related to any amount of Indebtedness that was outstanding
during or subsequent to the Reference Period but is not outstanding on the
Transaction Date, except for Consolidated Fixed Charges actually incurred
with respect to Indebtedness borrowed (as adjusted pursuant to clause (d))
under a revolving credit or similar arrangement to the extent the commitment
thereunder remains in effect on the Transaction Date.
<PAGE>
-10-
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board ("FASB") or in
such other statements by such other entity as approved by a significant
segment of the accounting profession which are in effect in the United States
at the time and for the period as to which such accounting principles are to
be applied; provided, however, that, for purposes of determining compliance
with covenants in this Indenture, "GAAP" means such generally accepted
accounting principles as in effect as of the Issue Date.
"Global Security" has the meaning provided in Section 2.2.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part
of all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical or legal effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
a non-performance) of all or any part of such obligation, including, without
limitation, the payment of amounts drawn down by letters of credit.
"Holder" or "Securityholder" means a Person in whose name a Security
is registered. The Holder of a Security will be treated as the owner of such
Security for all purposes.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become directly or indirectly
liable in respect of such Indebtedness or other obligation or the recording,
as required pursuant to generally accepted accounting principles or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable" and "incurring"
shall have meanings correlative to the foregoing).
"Indebtedness" means, with respect to any Person, any indebtedness
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement obligations with respect thereto) or
<PAGE>
-11-
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any
of the foregoing indebtedness would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP (except that any such
balance that constitutes a trade payable and/or an accrued liability arising
in the ordinary course of business shall not be considered Indebtedness), and
shall also include, to the extent not otherwise included, any Capital Lease
Obligations, the maximum fixed repurchase price of any Redeemable Stock or
preferred stock of any Subsidiary (Restricted Subsidiary, in the case of the
Company) of such Person (except, with respect to the Company, to the extent
such Restricted Subsidiary guarantees the obligations under the Securities),
indebtedness secured by a Lien to which the property or assets owned or held
by such Person are subject, whether or not the obligations secured thereby
shall have been assumed and guarantees of items that would be included within
this definition to the extent of such guarantees (exclusive of whether such
items would appear upon such balance sheet). For purposes of the preceding
sentence, the maximum fixed repurchase price of any Redeemable Stock or
preferred stock of any Restricted Subsidiary of such Person which does not
have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Stock or such preferred stock as if such Redeemable
Stock or such preferred stock were repurchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture;
provided that if such Redeemable Stock or such preferred stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock or such preferred stock. The amount of Indebtedness of
any Person at any date shall be, in the case of Indebtedness of others
secured by a Lien to which the property or assets owned or held by such
Person are subject, the lesser of the fair market value at such date of any
asset subject to a Lien securing the Indebtedness of others and the amount of
the Indebtedness secured.
"Indenture" means this Indenture as amended or supplemented from time
to time pursuant to the terms hereof.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking or consulting firm of nationally recognized standing that
is, in the reasonable and good faith judgment of the Board of Directors of
the Company, qualified to perform the task for which such firm has been
engaged and disinterested and independent with respect to the Company and its
Affiliates.
<PAGE>
-12-
"Initial Purchasers" means BT Securities Corporation, Credit Suisse
First Boston Corporation and Goldman, Sachs & Co.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"interest," when used with respect to any Security, means the amount
of all interest accruing on such Security, including all interest accruing
subsequent to the occurrence of any events specified in Sections 6.1(a)(vi)
and (vii) or which would have accrued but for any such event.
"Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest in respect of Indebtedness
(including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and the net
cost (benefit) associated with Interest Rate Agreements, and excluding
amortization of deferred finance fees) and all but the principal component of
rentals in respect of Capital Lease Obligations, paid, accrued or scheduled
to be paid or accrued by such Person during such period.
"Interest Payment Date," when used with respect to any Security,
means the stated maturity of an installment of interest specified in such
Security.
"Interest Rate Agreements" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect such Person or
any of its Subsidiaries against fluctuations in interest rates.
"Investment" means any direct or indirect advance, loan (other than
advances to customers in the ordinary course of business which are recorded
as accounts receivable on the balance sheet of any Person or its
Subsidiaries) or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities
issued by any other Person; in each case, other than as a result of the
issuance of Capital Stock of such Person or the delivery of Capital Stock of
such Person's direct or indirect parent. For the purpose of Section 4.8, (i)
"Investment" shall include and be valued at the fair market value of the net
assets of any Restricted
<PAGE>
-13-
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions (including tax sharing payments) in
connection with such Investment to the extent such distribution constitutes a
return on capital in accordance with GAAP; provided, however, that in the
case of an Investment in an Unrestricted Subsidiary, the Company may elect to
include such cash payments (in whole or in part) in Adjusted Consolidated Net
Income and not as a reduction in the carrying value of the Investment in such
Unrestricted Subsidiary (whether or not in accordance with GAAP), such
election to be made prior to the making of a Restricted Payment based upon
such dividend or distribution.
"Issue Date" means June 20, 1997.
"Legal Defeasance" has the meaning provided in Section 8.2.
"Legal Holiday" means any day other than a Business Day.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give any security interest in and any filing or other
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Maturity Date" means, when used with respect to any Security, the
date specified in such Security as the fixed date on which the final
installment of principal of such Security is due and payable (in the absence
of any acceleration thereof pursuant to Section 6.2 or any Net Proceeds Offer
or Change of Control Offer).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate
amount of U.S. Legal Tender (including any cash
<PAGE>
-14-
received by way of deferred payment pursuant to a note receivable issued in
connection with such Asset Sale, other than the portion of such deferred
payment constituting interest, and including any amounts received as
disbursements or withdrawals from any escrow or similar account established
in connection with any such Asset Sale, but, in each such case, only as and
when so received) received by the Company or any of its Restricted
Subsidiaries in respect of such Asset Sale, net of (i) the cash expenses of
such sale (including, without limitation, the payment of principal, premium,
if any, and interest on Indebtedness required to be paid as a result of such
Asset Sale (other than pursuant to Section 4.12) and legal, accounting and
investment banking fees and sales commissions), (ii) taxes paid or payable as
a result thereof, (iii) any portion of cash proceeds which the Company
determines in good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Subsidiaries shall
constitute Net Proceeds on such date and (iv) any relocation expenses and
pension, severance and shutdown costs incurred as a result thereof.
"Net Proceeds Offer" has the meaning provided in Section 4.12.
"Net Proceeds Payment Date" has the meaning provided in Section 4.12.
"Non-U.S. Person" means a Person who is not a U.S. Person, as defined
in Regulation S.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated June 16,
1997 pursuant to which $250.0 million of the Securities were offered, and any
supplement thereto.
"Officer" means the Chairman, the President, any Vice President, the
Chief Financial Officer, the Chief Executive Officer, the Chief Operating
Officer, the Treasurer, the Secretary or the Controller of the Company.
<PAGE>
-15-
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company.
"Offshore Physical Securities" has the meaning provided in Section
2.2.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee, which may include outside or in-house
counsel to the Company.
"Outstanding Notes" means the Company's 10-3/4% Senior Subordinated
Notes due 2003 outstanding on the Issue Date.
"Paying Agent" has the meaning provided in Section 2.3.
"Payment Blockage Period" has the meaning provided in Section 10.2.
"Permitted Investments" means (i) cash or Cash Equivalents, (ii)
Investments that are in Persons (including Unrestricted Subsidiaries) who
derive substantial revenues from operations similar or ancillary to the
business of the Company or its Restricted Subsidiaries as conducted at the
time of such Investment and that have the purpose of furthering the
operations of the Company and its Restricted Subsidiaries; provided that
Investments of the type described in this clause (ii) shall not exceed $25.0
million at any one time outstanding in the case of Persons which are not
Restricted Subsidiaries or which do not in connection with such Investment
become a Restricted Subsidiary, (iii) advances to employees and officers of
the Company and its Subsidiaries not in excess of $1.0 million at any one
time outstanding, (iv) loans to employees, officers and directors of the
Company and its Subsidiaries to finance the purchase of Equity Interests in
the Company, (v) accounts receivable created or acquired in the ordinary
course of business, (vi) obligations or shares of Capital Stock received in
connection with any good faith settlement or bankruptcy proceeding involving
a claim relating to a Permitted Investment, (vii) Currency Agreements and
Interest Rate Agreements and other similar agreements designed to hedge
against fluctuations in foreign exchange rates and interest rates entered
into in the ordinary course of business in connection with the
<PAGE>
-16-
operation of the Company's or its Restricted Subsidiaries' businesses and
(viii) agreements designed to hedge against fluctuations in the cost of raw
materials entered into in the ordinary course of business in connection with
the operation of the Company's and the Restricted Subsidiaries' business
("Raw Material Hedge Agreements").
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims not yet due or which are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted and if a reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor; (ii)
statutory Liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business, deposits made to obtain the release of such
Liens, and with respect to amounts not yet delinquent for a period of more
than 60 days or being contested in good faith by appropriate proceedings, if
a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (v) easements, rights-of-way, zoning or other
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any of the Restricted Subsidiaries incurred in the
ordinary course of business; (vi) Liens (including extensions, renewals and
replacements thereof) upon real or tangible personal property acquired after
the date of this Indenture whether or not such Liens existed on the date of
acquisition of such property; provided that (a) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including the cost of construction)
of the item of property subject thereto, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost, (c) such
Lien does not extend to or cover any other property other than such item of
property and any improvements on such item and (d) the incurrence of such
Indebtedness is permitted by Section 4.9; (vii) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and
other property relating to such letters of credit and the products and
proceeds thereof; (viii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure
<PAGE>
-17-
payment of customs duties in connection with the importation of goods; (ix)
judgment and attachment Liens not giving rise to an Event of Default; (x)
leases or subleases granted to others not interfering in any material respect
with the business of the Company or any of its Restricted Subsidiaries; (xi)
Liens encumbering customary initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business and which are within the
general parameters customary in the industry, in each case securing
Indebtedness under Interest Rate Agreements, Currency Agreements and Raw
Material Hedge Agreements; (xii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company or its Subsidiaries, (xiii) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business of the Company and its Restricted Subsidiaries; (xiv) any interest
or title of a lessor in the property subject to any Capital Lease Obligations
or operating lease; (xv) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xvi) Liens permitted or required by
the Credit Agreement as in effect on the Issue Date; (xvii) Liens securing
Senior Indebtedness and Liens on assets of Restricted Subsidiaries securing
Indebtedness of such Restricted Subsidiaries; (xviii) Liens between the
Company and any Restricted Subsidiary or between Restricted Subsidiaries;
(xix) Liens on assets of Restricted Subsidiaries securing letters of credit
issued in the ordinary course of business of such Restricted Subsidiaries;
(xx) additional Liens at any one time outstanding with respect to assets of
the Company and its Restricted Subsidiaries the fair market value of which
does not exceed $15.0 million on the date of determination; (xxi) Liens
existing on the Issue Date and any extensions, renewals or replacements
thereof; (xxii) Liens deemed to arise from the Receivables Financing; and
(xxiii) the Lien granted to the Trustee under this Indenture and any
substantially equivalent Lien granted to any trustee or similar institution
under any indenture for Indebtedness permitted by the terms of this Indenture.
"Person" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof or other entity of any kind.
"Physical Security" means, collectively, the Offshore Physical
Securities and the U.S. Physical Securities.
<PAGE>
-18-
"principal" of a debt security means the principal amount of the
security plus, when appropriate, the premium, if any, on the security.
"preferred stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person (other than Common Stock of such Person)
of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.
"Private Placement Legend" means the legend initially set forth on
the Series A Securities in the form set forth on Exhibit A-1.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Qualified Preferred Stock" means preferred stock of the Company
that is designated as such pursuant to clause (ii) or (iv) of the second
paragraph of Section 4.8.
"Raw Material Hedge Agreements" has the meaning provided in the
definition of "Permitted Investments."
"Receivables Financing" means the receivables facility in effect on
the Issue Date in the amount of $150.0 million, pursuant to which (x) the
Company's Subsidiaries from time to time sell or otherwise transfer accounts
receivable and related assets to a special-purpose corporation (the
"Receivables Subsidiary") and (y) the Receivables Subsidiary sells or
otherwise transfers accounts receivable and related assets (or interests
therein) to the purchasers, as the same may be amended, modified,
supplemented, extended, renewed, refunded, refinanced, restructured or
replaced from time to time (including, without limitation, any extension of
maturity thereof, or the inclusion of additional purchasers thereunder).
"Redeemable Stock" means any Equity Interest which, by its terms (or
by terms of any security into which it is convertible or for which it is
exchangeable before the Stated Maturity of the Securities) or upon the
happening of any event,
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matures or is mandatorily redeemable (other than for Capital Stock not
constituting Redeemable Stock), in whole or in part, prior to the Maturity
Date, or is, by its terms or upon the happening of any event, redeemable at
the option of the holder thereof, in whole or in part, at any time prior to
the Maturity Date, except for Equity Interests of the Company issued to
employees, officers and directors of the Company and its Subsidiaries
pursuant to agreements containing provisions for the repurchase of such
Equity Interest upon death, disability or termination of employment or
directorship of such Persons; provided that any Equity Interest that is
considered to be Redeemable Stock solely because it is redeemable upon the
occurrence of the same events that would require a redemption or repurchase
of the Securities shall not be deemed to be Redeemable Stock; provided,
further, that such Equity Interest is not convertible or exchangeable into
debt.
"Redemption Date" means, with respect to any Security, the Maturity
Date of such Security or the date on which such Security is to be redeemed by
the Company pursuant to the terms of the Securities.
"Refinancing Indebtedness" has the meaning provided in clause (ix)
of the second paragraph of Section 4.9.
"Refunding Equity Interests" has the meaning provided in clause
(ii)(A) of the second paragraph of Section 4.8.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with
the Registration Rights Agreement.
"Registrar" has the meaning provided in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company and the Initial Purchasers, relating to
$250.0 million of the Securities and dated the Issue Date, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
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"Restricted Payment" has the meaning provided in Section 4.8.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; provided that the Trustee shall be entitled to
request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company which at
the time of determination is not an Unrestricted Subsidiary. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if, immediately after giving effect to such designation, the
Company could incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of Section 4.9 (without giving effect to clauses (i) through
(xvi) of the second paragraph thereof), on a pro forma basis taking into
account such designation.
"Retired Equity Interests" has the meaning provided in clause
(ii)(A) of the second paragraph of Section 4.8.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and Series B Securities
as amended or supplemented from time to time in accordance with the terms
hereof that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" means Holder.
"Senior Indebtedness" means any Indebtedness permitted to be
incurred under the terms of this Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the Securities. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness shall not
include (a) Indebtedness that is expressly subordinate or junior in right of
payment to any Indebtedness of the Company, (b) Indebtedness that is
represented by Redeemable Stock, (c) any liability for Federal, state, local
or other taxes owed or owing by the Company, (d) Indebtedness of the Company
to any
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Subsidiary of the Company, (e) trade payables and (f) Indebtedness that is
incurred in violation of this Indenture (but, as to any such Indebtedness, no
such violation shall be deemed to exist for purposes of this definition if
the holder(s) of such obligation or their representative or the Company shall
have furnished to the Trustee an opinion of counsel unqualified in all
material respects, addressed to the Trustee (which legal counsel may, as to
matters of fact, rely upon an officers' certificate of the Company) to the
effect that the incurrence of such Indebtedness does not violate the
provisions of this Indenture).
"Series A Securities" means the 8-7/8% Senior Subordinated Notes due
2007, Series A, issued, authenticated and delivered under this Indenture, as
amended or supplemented from time to time pursuant to the terms of this
Indenture substantially in the form set forth in Exhibit A-1.
"Series B Securities" means the 8-7/8% Senior Subordinated Notes due
2007, Series B (the terms of which are identical to the Series A Securities
except that the Series B Securities shall be registered under the Securities
Act, and shall not contain the restrictive legend on the face of the form of
the Series A Securities), to be issued in exchange for the Series A
Securities pursuant to the Registered Exchange Offer and this Indenture
substantially in the form set forth in Exhibit A-2.
"Significant Restricted Subsidiary" means any Restricted Subsidiary
which accounted for more than 10% of the Company's Consolidated Tangible
Assets or more than 10% of the Company's consolidated revenues or more than
10% of the Company's Consolidated EBITDA, in each case as of the end of, or
for, the Company's most recent fiscal year.
"Stated Maturity" means, with respect to any security or
Indebtedness, the date specified in such security or Indebtedness as the
fixed date on which the principal of such security or Indebtedness is due and
payable, including pursuant to any mandatory redemption provision (other than
pursuant to any provision providing for the repurchase of such security at
the option of the holder thereof).
"Subsidiary" with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or
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(ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at such time, directly or indirectly, owned
by such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means an officer of the Trustee assigned to the
Corporate Trustee Administration Department or similar department performing
corporate trust work, or any successor to such department or, in the case of
a successor trustee, an officer assigned to the department, division or group
performing the corporate trust work of such successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
which at the time of determination is an Unrestricted Subsidiary (as
designated by the Board of Directors, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary, unless such
Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated; provided that (a) the Company certifies
that such designation complies with Section 4.8 and (b) each Subsidiary to be
so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the assets
of the Company or any of its Restricted Subsidiaries. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only
if, immediately after giving effect to such designation, the Company could
incur at least $1.00 of additional Indebtedness pursuant to the first
paragraph of Section 4.9 (without giving effect to clauses (i) through (xvi)
of the second paragraph thereof) on a pro forma basis taking into account
such designation.
"U.S. Government Obligations" means direct non-callable obligations
of, or non-callable obligations guaranteed
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by, the United States of America for the payment of which guarantee or
obligation the full faith and credit of the United States is pledged.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Physical Securities" means Securities issued in the form of
certificated Securities in registered form in substantially the form set
forth in Exhibit A-1 or Exhibit A-2.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
(c) "indenture security holder" means a Securityholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee" means the Trustee;
and
(f) "obligor" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings so assigned to them therein.
SECTION 1.3 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is exclusive;
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(c) words in the singular include the plural, and words in the
plural include the singular;
(d) provisions apply to successive events and transactions;
(e) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
Subdivision; and
(f) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall
be prepared in accordance with GAAP as in effect from time to time, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
The Series A Securities and the Series B Securities and the
Trustee's certificate of authentication with respect thereto shall be
substantially in the form set forth in Exhibits A-1 and A-2 annexed hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
rule, usage or agreement to which the Company is subject. Each Security
shall be dated the date of its issuance and shall show the date of its
authentication. The terms and provisions contained in the Securities shall
constitute, and are expressly made, a part of this Indenture.
SECTION 2.2 Execution and Authentication.
Two Officers shall execute the Securities on behalf of the Company
by either manual or facsimile signature.
If a Person whose signature is on a Security as an Officer no longer
holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security.
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The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Series A Securities for original
issue on the Issue Date in the aggregate principal amount not to exceed
$250,000,000, upon receipt of an Officers' Certificate. In addition, on or
prior to the date of consummation of the Registered Exchange Offer, the
Trustee or an authenticating agent shall authenticate Series B Securities
and, if required by the Registration Rights Agreement, Private Exchange Notes
(as defined in the Registration Rights Agreement) to be issued at the time of
consummation of the Registered Exchange Offer in the aggregate principal
amount of up to $250,000,000 upon receipt of an Officers' Certificate. In
addition, the Trustee shall authenticate Securities issued in one or more
series (such Securities to be substantially in the form of Exhibit A-1 or
Exhibit A-2 (and if in the form of Exhibit A-1, the same principal amount of
Securities in the form of Exhibit A-2 in exchange therefor upon consummation
of a registered exchange offer)) in an aggregate principal amount not to
exceed $100,000,000 upon receipt of an Officers' Certificate. In each case,
the Officers' Certificate shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated
and shall be signed by two Officers directing the Trustee to authenticate the
Securities and certifying that all conditions precedent to the issuance of
the Securities contained herein have been complied with. The aggregate
principal amount of Securities outstanding at any time may not exceed
$350,000,000 except as provided in Section 2.7.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent
shall have the same authenticating rights and duties as the Trustee in any
dealings hereunder with the Company or with any Affiliate of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Securities in
registered form, substantially in the form
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set forth in Exhibit A-1 ("Global Securities"), deposited with the Trustee,
as custodian for the Depository, and shall bear the legend set forth on
Exhibit B. The aggregate principal amount of any Global Security may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Securities in
registered form set forth in Exhibit A-1 ("Offshore Physical Securities").
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York) where Securities may be presented for registration of transfer or for
exchange (the "Registrar"), an office or agency (which shall be located in
the Borough of Manhattan, City of New York, State of New York) where
Securities may be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company
may have one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. The Company
may act as its own Paying Agent, except that for the purposes of payments on
account of principal on the Securities pursuant to Sections 4.12 and 4.15,
neither the Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.7.
The Company initially appoints the Trustee as Registrar and Paying
Agent and agent for service of notices and demands in connection with the
Securities.
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SECTION 2.4 Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities, and shall notify the
Trustee of any default by the Company in making any such payment. Money held
in trust by the Paying Agent need not be segregated except as required by law
and in no event shall the Paying Agent be liable for any interest on any
money received by it hereunder. The Company at any time may require the
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed and the Trustee may at any time during the continuance of any
Event of Default specified in Section 6.1(i) or (ii), upon written request to
the Paying Agent, require such Paying Agent to pay forthwith all money so
held by it to the Trustee and to account for any funds disbursed. Upon
making such payment, the Paying Agent shall have no further liability for the
money delivered to the Trustee.
SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses
of the Securityholders and otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish or cause the
Registrar to furnish to the Trustee before each Interest Payment Date, and at
such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Securityholders.
SECTION 2.6 Transfer and Exchange.
Subject to the provisions of Sections 2.14 and 2.15, when Securities
are presented to the Registrar or a co-Registrar with a request from the
Holder of such Securities to register the transfer or to exchange them for an
equal principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested;
provided that every Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorneys duly authorized in
writing. To permit registrations of transfers and exchanges, the Company
shall issue and execute and the Trustee shall authenticate new Securities
evidencing such transfer or
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exchange. No service charge shall be made to the Securityholder for any
registration of transfer or exchange. The Company may require from the
Securityholder payment of a sum sufficient to cover any transfer taxes or
other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to
Sections 2.10, 4.12, 4.15 or 9.5 (in which events the Company will be
responsible for the payment of such taxes). The Registrar or co-Registrar
shall not be required to register the transfer of or exchange of any Security
(i) during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of Securities and ending at the close of
business on the day of such mailing and (ii) selected for redemption in whole
or in part pursuant to Article III, except the unredeemed portion of any
Security being redeemed in part.
SECTION 2.7 Replacement Securities.
If a mutilated Security is surrendered to the Registrar or the
Trustee or if the Holder of a Security of any series claims that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Holder of such
Security furnishes to the Company and to the Trustee evidence reasonably
acceptable to them of the ownership and the destruction, loss or theft of
such Security. If required by the Trustee or the Company, an indemnity bond
shall be posted, sufficient in the judgment of the Company or the Trustee, as
the case may be, to protect the Company, the Trustee or any Agent from any
loss that any of them may suffer if such Security is replaced. The Company
may charge such Holder for the Company's expenses in replacing such Security
and the Trustee may charge the Company for the Trustee's expenses in
replacing such Security. Every replacement Security shall constitute an
additional obligation of the Company and shall be entitled to the benefits of
this Indenture.
SECTION 2.8 Outstanding Securities.
The Securities outstanding at any time are all Securities that have
been authenticated by the Trustee except for (a) those canceled by it, (b)
those delivered to it for cancellation, (c) those described in this Section
2.8 as not outstanding. A Security does not cease to be outstanding because
the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee receives proof sat-
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isfactory to it that the replaced Security is held by a bona fide purchaser
in whose hands such Security is a legal, valid and binding obligation of the
Company.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional redemption date money sufficient to pay all accrued
interest and principal with respect to such Securities payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant
to the terms of this Indenture, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9 Treasury Securities.
In determining whether the Holders of the required principal amount
of Securities have concurred in any declaration of acceleration or notice of
default or direction, waiver or consent or any amendment, modification or
other change to this Indenture, Securities owned by the Company or any
Subsidiary or an Affiliate of the Company shall be deemed not to be
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent or any
amendment, modification or other change to this Indenture, only Securities
that the Trustee knows are so owned shall be so disregarded. The Company
shall notify the Trustee, in writing, when it or any of its Affiliates
repurchases or otherwise acquires Securities, of the aggregate principal
amount of such Securities so repurchased or otherwise acquired.
SECTION 2.10 Temporary Securities.
Until definitive Securities are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company reasonably considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until such exchange, such temporary
Securities shall be entitled to the same rights, benefits and privileges as
the definitive Securities.
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SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall (subject to the record-retention requirements of the
Exchange Act) dispose of canceled Securities unless the Company directs the
Trustee to return such Securities to the Company, and, if so disposed, shall
deliver a certificate of disposition thereof to the Company. The Company may
not reissue or resell, or issue new Securities to replace, Securities that
the Company has redeemed or paid, or that have been delivered to the Trustee
for cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest, plus, to the extent permitted by law,
any interest payable on the defaulted interest, to the Persons who are
Securityholders on a subsequent special record date. Such record date shall
be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest, whether or not such day is a Business Day. At
least 15 days before the subsequent special record date, the Company shall
mail (or cause to be mailed) to each Securityholder a notice that states the
record date, the payment date and the amount of defaulted interest to be
paid. Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.1(i) shall be paid to
Holders of Securities as of the regular record date for the interest payment
date for which interest has not been paid. Notwithstanding the foregoing, the
Company may make payment of any defaulted interest in any other lawful manner
not inconsistent with the requirements of any securities exchange on which
the Securities may be listed, and upon such notice as may be required by such
exchange.
SECTION 2.13 CUSIP Number.
The Company in issuing the Securities may use a "CUSIP" number, and
if so, such CUSIP number shall be included in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities, and that re-
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liance may be placed only on the other identification numbers printed on the
Securities. The Company will promptly notify the Trustee of any change in
the CUSIP number.
SECTION 2.14 Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit B.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Security, and the Depository may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner
of the Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent
of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. U.S. Physical Securities shall be transferred to all beneficial
owners in exchange for their beneficial interests in Global Securities, in
accordance with the rules and procedures of the Depository, only if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a
request from the Depository to issue U.S. Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b), the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Securities, an equal
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aggregate principal amount of U.S. Physical Securities of authorized
denominations.
(d) Any U.S. Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.15, bear the legend regarding transfer restrictions
applicable to the U.S. Physical Securities set forth in Exhibit A-1.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.15 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Security constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to
any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears
the Private Placement Legend, if (x) the requested transfer is after
June 20, 1999 or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit D
hereto, together, in the case of clause (i)(x) with such other
certifications, legal opinions or other information as the Company or
the Trustee may reasonably require to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Security, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and (y)
instructions given
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in accordance with the Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Securities) a decrease in the principal amount of a Global Security in an
amount equal to the principal amount of the beneficial interest in a Global
Security to be transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of like tenor
and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Security stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Securities which after
transfer are to be evidenced by an interest in the Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal
amount of the Global Security in an amount equal to the principal amount
of the Physical
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Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that
bear the Private Placement Legend unless (i) the circumstances contemplated
by paragraph (a)(i)(x) of this Section 2.15 exist, (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company
and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with
the provisions of the Securities Act or (iii) such Security has been sold
pursuant to an effective registration statement under the Securities Act.
(d) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Security
only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section
2.15. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 5 of
the Securities, it shall notify the Trustee and the Paying Agent in writing
of the Redemption Date and the principal amount of Securities to be redeemed.
The Company shall give each notice provided for in this Section 3.1
at least 45 days before the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), together with an Officers' Certificate stating
that such re-
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demption will comply with the conditions contained herein and in the Securities.
SECTION 3.2 Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select Securities to be so redeemed in compliance with applicable legal
requirements and the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities
are not listed on a national securities exchange, by lot, pro rata or in such
other fair and reasonable manner chosen at the discretion of the Trustee;
provided that, with respect to redemptions made with net proceeds of
issuances of Equity Interests of the Company as described in the second
paragraph of Section 5 of each of the Securities, such redemptions shall be
made on a pro rata basis (to the extent permitted by the Depository).
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption. Securities in denominations of
$1,000 may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal
of Securities that have denominations larger than $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall promptly
notify the Company in writing of the Securities selected for redemption and,
in the case of any Security selected for partial redemption, the principal
amount of each certificate selected for redemption.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause the mailing of a notice of redemption by
first-class mail, postage prepaid, to each Holder of Securities to be
redeemed at such Holder's address as it appears on the Securities register
maintained by the Registrar with a copy to the Trustee and any Paying Agent.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the Redemption Date;
(b) the redemption price to be paid;
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(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price and accrued interest, if any;
(e) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the
Holders of such Securities is to receive payment of the redemption price
upon surrender to the Paying Agent of the Securities to be redeemed;
(f) if any Security is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of
such Security to be redeemed and that, on or after the Redemption Date,
upon surrender of such Security, a new Security or Securities in
aggregate principal amount equal to the unredeemed portion thereof will
be issued without charge to the Securityholder;
(g) if less than all of the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed; and
(h) the CUSIP number, if any.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the
redemption price. Upon surrender to the Paying Agent, such Securities shall
be paid at the redemption price plus accrued interest to the Redemption Date,
but interest installments whose Interest Payment Date is on or prior to such
Redemption Date will be payable on the relevant Interest Payment Dates to the
Holders of record at the close of business on the relevant record dates
referred to in the Securities.
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SECTION 3.5 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with
the Paying Agent in immediately available funds U.S. Legal Tender sufficient
to pay the redemption price of and accrued interest on all Securities or
portions thereof to be redeemed on that date.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure
of the Company to deposit sufficient funds with the Paying Agent, interest
will continue to accrue from and including the Redemption Date until such
payment is made on the unpaid principal and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the date and in
the manner provided in the Securities.
SECTION 3.6 Securities Redeemed in Part.
Upon surrender to the Paying Agent of a Security that is redeemed in
part, the Company shall execute and the Trustee shall authenticate for the
Holder a new Security equal in principal amount to the unredeemed portion of
the Security surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and this
Indenture.
An installment of principal or interest shall be considered paid on
the date due if the Trustee or Paying Agent (other than the Company or any
Subsidiary of the Company or any Affiliate of any thereof) holds on such date
immediately available funds designated for and sufficient to pay such
installment.
The Company shall pay interest (including Accrued Bankruptcy
Interest) on overdue principal and on overdue installments of interest, in
each case at the rate per annum specified in the Securities, to the extent
lawful.
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SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency, where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 11.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve
the Company of its obligation to maintain an office or agency in the Borough
of Manhattan, the City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby initially designates the corporate trust office
of the Trustee set forth in Section 11.2 as an agency of the Company in
accordance with Section 2.3.
SECTION 4.3 Corporate Existence.
Subject to Article V hereof, the Company shall do or cause to be
done, at its own cost and expense, all things necessary to, and will cause
each of its Restricted Subsidiaries to, preserve and keep in full force and
effect the corporate existence and rights (charter and statutory), licenses
and/or franchises of the Company and each of its Restricted Subsidiaries;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the corporate existence of any of its Restricted
Subsidiaries, if in the judgment of the Board of Directors or management of
the Company (i) such preservation or existence is not desirable in the
conduct of business of the Company or such Restricted Subsidiary and (ii) the
loss of such right, license or franchise or the dissolution of such
Restricted Subsidiary is not adverse in any material respect to the Holders.
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SECTION 4.4 Payment of Taxes and Other Claims.
The Company shall and shall cause each of its Subsidiaries to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all material taxes, assessments and governmental charges
levied or imposed upon its or its Subsidiaries' income, profits or property
and (b) all material lawful claims for labor, materials and supplies which,
if unpaid, would be reasonably likely to by law become a Lien upon its
property or the property of any of its Subsidiaries; provided that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
negotiations or proceedings and for which disputed amounts adequate reserves
(in the good faith judgment of the Board of Directors or management of the
Company) have been made in accordance with GAAP.
SECTION 4.5 Maintenance of Properties; Books and Records;
Compliance with Law.
(a) The Company shall and shall cause each of its Restricted
Subsidiaries to, at all times cause all properties used or useful in the
conduct of its business to be maintained and kept in good condition, repair
and working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereto; provided that
nothing in this Section 4.5 shall prevent the Company or any Restricted
Subsidiary from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal
is either (i) in the ordinary course of business, (ii) in the reasonable and
good faith judgment of the Board of Directors or management of the Company or
the Restricted Subsidiary concerned, as the case may be, desirable in the
conduct of the business of the Company or such Restricted Subsidiary, as the
case may be, or (iii) otherwise permitted by this Indenture.
(b) The Company shall and shall cause each of its Restricted
Subsidiaries to keep proper and true books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Company and each Restricted Subsidiary, and reflect
on its financial statements adequate accruals and appropriations to re-
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serves, all in accordance with GAAP consistently applied to the Company and
its Subsidiaries taken as a whole.
(c) The Company shall and shall cause each of its Subsidiaries to
comply in all material respects with all statutes, laws, ordinances, or
government rules and regulations to which it is subject, non-compliance with
which would materially adversely affect the business, earnings, properties,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
SECTION 4.6 Compliance Certificates; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of its fiscal year, an Officers' Certificate complying with Section
314(a)(4) of the TIA stating (i) that a review of the activities of the
Company and the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view
to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture and the Securities and (ii)
that, to the best knowledge of such Officer after due inquiry, the Company
has kept, observed, performed and fulfilled, in each case in all material
respects, each and every covenant and other obligation contained in this
Indenture and the Securities and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof and has not
failed to comply with any other obligation hereunder (or, if a Default, Event
of Default or failure to comply with any other obligation hereunder shall
have occurred, describing with particularity all such Defaults, Events of
Default or failures to comply with any other obligation hereunder of which
such Officer may have knowledge, including, but not limited to, their status
and what action the Company is taking or proposes to take with respect
thereto).
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the Company shall
deliver to the Trustee within 120 days after the end of each fiscal year a
written statement by the Company's independent certified public accountants
stating (A) that their audit examination has included a reading of the
relevant provisions of this Indenture and the Securities as they relate to
accounting matters, and (B) whether, in connection with their audit
examination, any Default or Event of Default has come to their attention as
they relate to accounting
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matters and if such a Default or Event of Default has come to their
attention, specifying the nature and period of existence thereof; provided
that, without any restriction as to the scope of the audit examination, such
independent certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default that
would not be disclosed in the course of an audit examination conducted in
accordance with generally accepted auditing standards.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto.
SECTION 4.7 Reports.
(a) The Company shall deliver to the Trustee and mail to each
Holder, within 15 days after the filing of the same with the SEC, copies of
its annual report and of the information, documents and other reports, if
any, which the Company is required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act. The Company shall also comply with the
other provisions of TIA Section 314(a).
(b) If the Company ceases to be subject to the requirements of such
Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC,
to the extent permitted, and distribute to the Trustee and to each Holder
copies of the quarterly and annual financial information that would have been
required to be filed with the SEC pursuant to the Exchange Act had the
Company been subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act. All such financial information shall include consolidated
financial statements (including footnotes) prepared in accordance with GAAP.
Such annual financial information shall also include an opinion thereon
expressed by an independent accounting firm of established national
reputation. All such consolidated financial statements shall be accompanied
by a "Management's Discussion and Analysis of Financial Condition and Results
of Operations." The financial information to be distributed to Holders shall
be filed with the Trustee and mailed to the Holders at their respective
addresses appearing in the register of the Securities maintained by the
Registrar, within 120 days after the end of the Company's fiscal year and
within 60 days after the end of each of the first three quarters of each such
fiscal year.
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SECTION 4.8 Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or
make any distribution on account of the Company's Capital Stock or other
Equity Interests (other than dividends or distributions payable in Equity
Interests (other than Redeemable Stock) of the Company), (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or (iii) make any Investment (other than a Permitted Investment) (the
foregoing actions set forth in clauses (i) through (iii) being referred to as
"Restricted Payments"), if:
(a) a Default or Event of Default shall have occurred and be
continuing at the time of such Restricted Payment or shall occur
immediately after giving effect thereto; or
(b) immediately after such Restricted Payment and after giving
effect thereto on a pro forma basis, the Company could not incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph
of Section 4.9 (without giving effect to clauses (i) through (xvi) of
the second paragraph thereof); or
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made after the Issue Date, exceeds the sum of
(1) 50% of the amount of the Adjusted Consolidated Net Income of the
Company for the period (taken as one accounting period) from January 1,
1997 through the end of the Company's fiscal quarter ending immediately
prior to the time of such Restricted Payment (or, if Adjusted
Consolidated Net Income for such period is a deficit, 100% of such
deficit) plus (2) 100% of the aggregate amounts contributed to the
capital of the Company from and after the Issue Date plus (3) 100% of
the aggregate net cash proceeds and the fair market value, as determined
in good faith by the Board of Directors of the Company, of property
other than cash received by the Company from and after the Issue Date
from the issue or sale of Equity Interests of the Company (other than
such Equity Interests issued or sold to a Restricted Subsidiary and
other than Redeemable Stock) or any Indebtedness or security convertible
into or exchangeable for any such Equity Interest that has been so
converted or exchanged (excluding the net cash proceeds from
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issuances and sales of Equity Interests financed, directly or
indirectly, using borrowed funds from the Company or any Restricted
Subsidiary until and to the extent such borrowing is repaid) plus (4)
$75.0 million.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at the date
of declaration thereof such payment would have complied with the provisions
of this Indenture; (ii)(A) the retirement of any Equity Interests of the
Company (the "Retired Equity Interests") either in exchange for or out of the
net proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary) of other Equity Interests of the Company (the "Refunding Equity
Interests") other than any Redeemable Stock and (B) if the Retired Equity
Interest constituted Qualified Preferred Stock, the declaration and payment
of dividends on the Refunding Equity Interest in an aggregate amount per year
no greater than the aggregate amount of dividends per year that was
declarable and payable on such Retired Equity Interest immediately prior to
such retirement to the extent such Refunding Equity Interest is designated to
be Qualified Preferred Stock by the Company at the time of its issuance;
(iii) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company issued to employees, officers or
directors of the Company and its Subsidiaries pursuant to agreements
containing provisions for the repurchase of such Equity Interests upon death,
disability or termination of employment or directorship of such Persons, or
in accordance with the Company's insider trading policy, not to exceed $5.0
million in any fiscal year plus the aggregate cash proceeds from any
reissuance during such fiscal year of Equity Interests by the Company to
employees, officers or directors of the Company and its Subsidiaries plus the
aggregate cash proceeds from any payments on life insurance policies with
respect to any employees, officers or directors of the Company and its
Subsidiaries which proceeds are used to purchase the Equity Interests of the
Company held by any such employees, officers or directors; (iv) the
declaration and payment of dividends to holders of any class or series of the
Company's preferred stock issued after the Issue Date (including, without
limitation, the declaration and payment of dividends on Refunding Equity
Interests in excess of the dividends declarable and payable thereon pursuant
to clause (ii) of this paragraph); provided that at the time of such issuance
the Company's Fixed Charge Coverage Ratio for the four full fiscal quarters
ending immediately prior to the date of such issuance would have been at
least 1.25 to 1, determined on a pro forma basis as if such issuance was at
the beginning of such four-quarter period, and
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at the time of issuance, such preferred stock is designated by the Company to
be Qualified Preferred Stock; and (v) an Investment in any Unrestricted
Subsidiary either in exchange for Equity Interests of the Company (other than
Redeemable Stock) or out of the proceeds of the sale (other than to a
Restricted Subsidiary) of Equity Interests of the Company (other than
Redeemable Stock) received by the Company not more than 12 months prior to
the date of such Investment (to the extent such sale of Equity Interests has
not previously been included in any calculation under clause (c) above for
purposes of permitting a Restricted Payment); provided that, in the cases of
clauses (iii) (other than with respect to the repurchase of Equity Interests
with insurance proceeds), (iv) and (v), no Default or Event of Default shall
have occurred and be continuing at the time of such Restricted Payment or
shall occur immediately after giving effect thereto.
In determining the aggregate amount expended for Restricted Payments
in accordance with clause (c) above, (1) no amounts expended under clause
(iii) (only with respect to the use of insurance proceeds to repurchase
Equity Interests) of the immediately preceding paragraph shall be included
and (2) 100% of the amounts expended under clauses (i), (ii), (iii) (other
than with respect to the repurchase of Equity Interests with insurance
proceeds), (iv) and (v) of the immediately preceding paragraph shall be
included.
SECTION 4.9 Limitation on Additional Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to
any Indebtedness unless the Company's Fixed Charge Coverage Ratio for its
four full fiscal quarters ending immediately prior to the date such
additional Indebtedness is created, incurred, issued, assumed or guaranteed
would have been at least 2.25 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds of such Indebtedness)
as if the additional Indebtedness had been created, incurred, issued, assumed
or guaranteed at the beginning of such four-quarter period.
The foregoing limitations will not apply to the incurrence of (i)
Indebtedness pursuant to the Credit Agreement in an amount equal to $475.0
million; (ii) Existing Indebtedness, including any Outstanding Notes; (iii)
Indebtedness represented by $250.0 million aggregate principal amount of the
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Securities issued on the Issue Date; (iv) Capital Lease Obligations; (v)
Indebtedness constituting purchase money obligations for property acquired in
the ordinary course of business or other similar financing transactions; (vi)
Indebtedness incurred in connection with capital expenditures not to exceed
6% of the Company's consolidated net sales (as set forth in the Company's
consolidated statement of operations, as determined in accordance with GAAP)
in any fiscal year; (vii) Indebtedness constituting reimbursement obligations
with respect to letters of credit, including, without limitation, letters of
credit in respect of workers' compensation claims, issued for the account of
the Company or a Restricted Subsidiary in the ordinary course of business, or
other Indebtedness with respect to reimbursement-type obligations regarding
workers' compensation claims; (viii) additional Indebtedness in an aggregate
principal amount up to $45.0 million at any one time outstanding for the
Company and its Restricted Subsidiaries; (ix) Indebtedness created, incurred,
issued, assumed or given in exchange for, or the proceeds of which are used,
to extend, refinance, renew, replace, substitute or refund any Indebtedness
permitted under this Indenture or any Indebtedness issued to so extend,
refinance, renew, replace, substitute or refund such Indebtedness, including
any additional Indebtedness incurred to pay premiums and fees in connection
therewith (the "Refinancing Indebtedness"); provided that (A) the principal
amount of such Refinancing Indebtedness shall not exceed the outstanding
principal amount of Indebtedness (including unused commitments) so extended,
refinanced, renewed, replaced, substituted or refunded plus any amounts
incurred to pay premiums and fees in connection therewith, (B) in the case of
Refinancing Indebtedness for Indebtedness permitted under clause (ii) of this
paragraph (other than Senior Indebtedness), the Refinancing Indebtedness
shall have an Average Life equal to or greater than the Average Life of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded and (C) to the extent such Refinancing Indebtedness refinances
Indebtedness subordinated to the Securities, such Refinancing Indebtedness is
subordinated to the Securities at least to the same extent as the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded; (x) intercompany Indebtedness incurred in connection with
Investments in Unrestricted Subsidiaries; provided that such Investments are
permitted by Section 4.8; (xi) Indebtedness under Raw Material Hedge
Agreements; (xii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided that in the case of Currency Agreements which relate to
other Indebtedness, such Currency Agreements do not increase the Indebtedness
of the Company outstanding other than as a result of fluctuations in foreign
currency exchange rates; (xiii)
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Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business; (xiv)
Indebtedness between the Company and any Restricted Subsidiary or between
Restricted Subsidiaries; (xv) guarantees by Restricted Subsidiaries of
Indebtedness of the Company or any Restricted Subsidiary if the Indebtedness
so guaranteed is permitted under this Indenture; and (xvi) the Company's
Obligations arising from the repurchase, redemption or other acquisition of
Equity Interests from employees, officers or directors of the Company and its
Subsidiaries to the extent permitted by Section 4.8.
Notwithstanding anything in this Indenture to the contrary, the
consummation of the transactions contemplated by the Receivables Financing
shall not be deemed to be the incurrence of Indebtedness by the Company or by
any Restricted Subsidiary.
SECTION 4.10 Dividends and Payment Restrictions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock, or any other interest or participation
in, or measured by, its profits, owned by the Company or any of its
Restricted Subsidiaries, or pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of: (A) the terms
(as in effect on the Issue Date) of Existing Indebtedness, (B) the terms (as
in effect on the Issue Date) of the Credit Agreement, (C) the terms of
Indebtedness of the Company or any of its Restricted Subsidiaries incurred in
accordance with Section 4.9; provided that the terms of any such Indebtedness
constitute no greater encumbrance or restriction on the ability of any
Restricted Subsidiary to pay dividends or make distributions, make loans or
advances or transfer properties or assets than the encumbrances or
restrictions imposed by the terms of the Credit Agreement as in effect on the
Issue Date, (D) the terms of the indentures governing the Outstanding Notes,
the Outstanding Notes, this Indenture and the Securities, (E) applicable law,
(F) customary non-assignment provi-
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sions entered into in the ordinary course of business and consistent with
past practices, (G) the terms of purchase money obligations for property
acquired in the ordinary course of business, but only to the extent that such
purchase money obligations restrict or prohibit the transfer of the property
so acquired, (H) any encumbrance or restriction with respect to a Restricted
Subsidiary that was not a Restricted Subsidiary on the Issue Date, which
encumbrance or restriction is in existence at the time such Person becomes a
Restricted Subsidiary or is created on the date it becomes a Restricted
Subsidiary, (I) any encumbrance or restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement which has been entered into for
the sale or disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary, (J) the terms of the Receivables
Financing or (K) any encumbrance or restriction existing under any amendment
to, and any agreement which refinances or replaces, the agreements described
in clauses (A), (B), (C), (D), (H) and (J); provided that the terms and
conditions of any such encumbrances or restrictions contained in any such
amendment or agreement as determined in good faith by the Board of Directors
constitute no greater encumbrance or restriction on the ability of any
Restricted Subsidiary to pay dividends or make distributions, make loans or
advances or transfer properties or assets than those under or pursuant to the
agreement evidencing the Indebtedness or obligations so amended, refinanced
or replaced. Nothing contained in this covenant shall prevent the Company or
a Restricted Subsidiary from entering into any agreement permitting or
providing for the incurrence of Liens otherwise permitted by Section 4.11.
SECTION 4.11 Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) upon any asset now owned or
hereafter acquired by it, or any income or profits therefrom or assign or
convey any right to receive income therefrom. Notwithstanding the foregoing,
the Company or any Restricted Subsidiary may create or assume any Lien upon
its properties or assets if the Company shall cause the Securities to be
equally and ratably secured with all other Indebtedness secured by such Lien
for so long as such other Indebtedness shall be so secured.
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SECTION 4.12 Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate any Asset Sale that
results in Net Proceeds in excess of $1.5 million (including the sale of any
of the Capital Stock of any Restricted Subsidiary) unless such Asset Sale is
for fair market value as determined by the Board of Directors acting
reasonably and in good faith and the Company or any Restricted Subsidiary
applies the Net Proceeds from such Asset Sale to one or more of the following
in such combination as it shall choose: (a) an investment in assets
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another Person) used or useful in
businesses similar or ancillary to the business of the Company or its
Restricted Subsidiaries as conducted at the time of such Asset Sale; provided
that such investment occurs on or prior to the 366th day following the date
of such Asset Sale (the "Asset Sale Payment Date"); (b) a Net Proceeds Offer
(as defined below) expiring on or prior to the Asset Sale Payment Date; or
(c) in the case of an Asset Sale by the Company, the purchase, redemption or
other prepayment or repayment of outstanding Senior Indebtedness on or prior
to the Asset Sale Payment Date and, in the case of an Asset Sale by any
Restricted Subsidiary, the purchase, redemption or other prepayment or
repayment of any Indebtedness of such Restricted Subsidiary on or prior to
the Asset Sale Payment Date; provided that any prepayment or repayment of
amounts outstanding under the Credit Agreement in excess of $20.0 million in
the aggregate after the Issue Date shall be a permanent reduction in the
commitment thereunder in the amount of such excess. Notwithstanding the
foregoing, in the event such Net Proceeds, after giving effect to any
investment or payment permitted by clause (a) or (c) above (the "Excess
Proceeds"), are less than $15.0 million, the application of the Excess
Proceeds to a Net Proceeds Offer may be deferred until such time as the
Excess Proceeds, plus the aggregate amount of any subsequent Net Proceeds not
otherwise invested or applied to repay amounts outstanding under the Senior
Indebtedness of the Company or under the Indebtedness of any Restricted
Subsidiary, as the case may be, as permitted by clause (a) or (c) above, are
at least equal to $15.0 million, at which time the Company shall apply all
the Excess Proceeds to a Net Proceeds Offer. Upon completion of a Net
Proceeds Offer, the amount of Excess Proceeds shall be reset at zero.
For purposes of clause (b) of the preceding paragraph, the Company
will apply that portion of the Net Proceeds
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of the Asset Sale required to make a tender offer in accordance with
applicable law (a "Net Proceeds Offer") to repurchase Securities at a price
not less than 100% of the principal amount thereof plus accrued and unpaid
interest to the date of repurchase, which date shall be no earlier than 30
days nor later than 45 days after the date of mailing of the Net Proceeds
Offer (the "Net Proceeds Payment Date"). The Company may, at its option,
receive credit against any Net Proceeds Offer for the principal amount of
Securities acquired by the Company or any of its Subsidiaries and surrendered
for cancellation within six months prior to or at any time after the date of
such Asset Sale relating to such Net Proceeds Offer and before the Net
Proceeds Payment Date. Any Net Proceeds Offer will be made by the Company
only if and to the extent permitted under, and subject to prior compliance
with, the terms of any agreement governing Senior Indebtedness of the Company
or Indebtedness of a Restricted Subsidiary, as the case may be. If the
Company commences a Net Proceeds Offer and securities of the Company ranking
pari passu in right of payment with the Securities are outstanding at the
commencement of such Net Proceeds Offer and the terms of such securities
provide that a similar offer must be made with respect thereto, then the Net
Proceeds Offer for the Securities shall be made concurrently with such other
offer and securities of each issue will be accepted pro rata in proportion to
the aggregate principal amount of securities of each issue which the holders
of securities of such issue elect to have purchased. After the last date on
which Holders are permitted to tender their Securities in a Net Proceeds
Offer, the Company will not be restricted under this Section 4.12 as to its
use of any remaining Net Proceeds available to make such Net Proceeds Offer
but not used to redeem Securities pursuant hereto.
Notwithstanding the foregoing, if, at the time of an Asset Sale by
the Company or any Restricted Subsidiary, the Company's Fixed Charge Coverage
Ratio for the four fiscal quarter period ending immediately prior to the date
of such Asset Sale would have been at least 2.75 to 1, determined on a pro
forma basis as if such Asset Sale occurred at the beginning of such
four-quarter period, then any Net Proceeds received will not be subject to
this Section 4.12.
At such time as the Company determines to make a Net Proceeds Offer,
it shall so notify the Trustee in writing. Within 15 days thereafter, it
shall mail or cause the Trustee to mail (in the Company's name and at its
expense) notice of a Net Proceeds Offer to the Holders of the Securities at
their last registered addresses with a copy to the Trustee and the
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Paying Agent. The Net Proceeds Offer shall remain open from the time of
mailing for at least 20 Business Days and until the close of business on the
third Business Day prior to the Net Proceeds Payment Date. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Net Proceeds Offer. The notice, which
shall govern the terms of the Net Proceeds Offer, shall state:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.12;
(ii) the purchase price (including the amount of accrued and unpaid
interest, if any) for each Security and the Net Proceeds Payment Date;
(iii) that any Security not tendered or accepted for payment
will continue to accrue interest in accordance with the terms thereof;
(iv) that any Security accepted for payment pursuant to the Net
Proceeds Offer shall cease to accrue interest after the Net Proceeds
Payment Date unless the Company shall fail to make payment therefor;
(v) that Holders electing to have Securities purchased pursuant
to a Net Proceeds Offer will be required to surrender their Securities to
the Paying Agent at the address specified in the notice prior to 5:00
p.m., New York City time, on the third Business Day immediately preceding
the Net Proceeds Payment Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and the
Paying Agent;
(vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the third Business Day immediately preceding the Net Proceeds Payment
Date, a telex or facsimile transmission (confirmed by overnight delivery
of the original thereof) or letter setting forth the name of the Holder,
the principal amount of Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Securities purchased;
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(vii) that if Securities in a principal amount in excess of the
Holders' pro rata share of the Net Proceeds are tendered pursuant to a
Net Proceeds Offer, the Company shall purchase Securities on a pro rata
basis among the Securities tendered (with such adjustments as may be
deemed appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000 shall be
acquired);
(viii) that Holders whose Securities are purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(ix) the instructions that Holders must follow in order to tender
their Securities.
On or before the Net Proceeds Payment Date, the Company shall (i)
accept for payment, on a pro rata basis among the Securities, Securities or
portions thereof tendered pursuant to the Net Proceeds Offer, (ii) deposit
with the Paying Agent money, in immediately available funds, in an amount
sufficient to pay the purchase price of all Securities or portions thereof so
tendered and accepted and (iii) deliver to the Paying Agent the Securities so
accepted together with an Officers' Certificate setting forth the Securities
or portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Net Proceeds Offer on the first Business Day
following the Net Proceeds Payment Date. To the extent the Holders' pro rata
portion of a Net Proceeds Offer is not fully subscribed to by such Holders,
the Company may retain such unutilized portion of the Net Proceeds. The
Paying Agent shall promptly deliver to the Company the balance of any moneys
held by the Paying Agent after payment to the Holders of Securities as
aforesaid.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations (including Rule 14e-1 under the Exchange Act) in
connection with the repurchase of
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Securities pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Section 4.12, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under this Section 4.12 by virtue thereof.
SECTION 4.13 Transactions With Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate, except for (i)
transactions (including any investments, loans or advances by or to any
Affiliate) the terms of which in good faith are fair and reasonable to the
Company or such Restricted Subsidiary, as the case may be, and are at least
as favorable as the terms that could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction made
on an arm's length basis between unaffiliated parties (as determined by the
Board of Directors of the Company acting reasonably and in good faith, as
evidenced by a resolution of such Board of Directors); provided that, in the
case of any transaction with an Affiliate involving aggregate consideration
in excess of $10.0 million, either (A) such transaction is entered into in
the ordinary course of the business of the Company or its Restricted
Subsidiaries, (B) a majority of the directors of the Company unaffiliated
with such Affiliate or, if there are no such directors, a majority of the
directors of the Company approve such transaction or (C) the Company or such
Restricted Subsidiary, as the case may be, delivers to the Trustee and the
Holders a written opinion of a nationally recognized investment banking firm
stating that such transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view, (ii) payments by the Company or
any of its Restricted Subsidiaries made pursuant to any financial advisory,
financing, underwriting or placement agreement; provided that the terms of
any such arrangement or agreement shall be on terms which in good faith are
fair and reasonable to the Company or such Restricted Subsidiary, as the case
may be (as determined by the Board of Directors of the Company acting
reasonably and in good faith, as evidenced by a resolution of such Board of
Directors), (iii) any Restricted Payment not otherwise prohibited under
Section 4.8, (iv) the payment of reasonable and customary regular fees to
directors of the Company and its Subsidiaries who are not employees of the
Company or its Subsidiaries, (v) advances or loans to employees, officers and
direc-
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tors of the Company and its Subsidiaries permitted by clauses (iii) and (iv)
of the definition of Permitted Investments and (vi) transactions between or
among any of the Company and its Restricted Subsidiaries.
SECTION 4.14 Limitation on Creation of Senior Subordinated Debt.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is expressly by its terms
subordinate or junior in right of payment to any Senior Indebtedness and
senior in any respect in right of payment to the Securities.
SECTION 4.15 Change of Control.
In the event of a Change of Control (the date of such occurrence
being the "Change of Control Date"), if either (i) the Company does not
redeem Securities pursuant to the third paragraph of Paragraph 5 of the
Securities or (ii) such Change of Control occurs after July 1, 2002, the
Company shall notify the Holders in writing of such occurrence and shall make
an offer to purchase (the "Change of Control Offer"), on a Business Day (the
"Change of Control Payment Date") not later than 60 days following the Change
of Control Date, all Securities then outstanding at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Payment Date.
Notice of a Change of Control Offer shall be mailed by the Company
not less than 30 days nor more than 45 days before the Change of Control
Payment Date to the Holders of Securities at their last registered addresses
with a copy to the Trustee and the Paying Agent. The Change of Control Offer
shall remain open from the time of mailing for at least 20 Business Days and
until 5:00 p.m., New York City time, on the third Business Day prior to the
Change of Control Payment Date. The notice, which shall govern the terms of
the Change of Control Offer, shall include such disclosures as are required
by law and shall state:
(a) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Securities will be accepted for payment;
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(b) the purchase price (including the amount of accrued and unpaid
interest, if any) for each Security and the Change of Control Payment
Date;
(c) that any Security not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(d) that any Security accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of
Control Payment Date unless the Company shall fail to make payment
therefor;
(e) that Holders electing to have Securities purchased pursuant to
a Change of Control Offer will be required to surrender their Securities
to the Paying Agent at the address specified in the notice prior to 5:00
p.m., New York City time, on the third Business Day prior to the Change
of Control Payment Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the third Business Day prior to the Change of Control
Payment Date, a telex or facsimile transmission (confirmed by overnight
delivery of the original thereof) or letter setting forth the name of the
Holder, the principal amount of Securities the Holder delivered for
purchase, the Security certificate number (if any) and a statement that
such Holder is withdrawing his election to have such Securities purchased;
(g) that Holders whose Securities are purchased only in part will
be issued Securities equal in principal amount to the unpurchased portion
of the Securities surrendered;
(h) the instructions that Holders must follow in order to tender
their Securities; and
(i) a brief description of the events resulting in such Change of
Control (including, but not limited to, information with respect to pro
forma historical financial information after giving effect to such Change
of Control, information regarding the Persons acquiring control and such
Person's business plans going forward, in each such
<PAGE>
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case to the extent available and not subject to confidentiality
restrictions).
On the Change of Control Payment Date, the Company shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so tendered and accepted
and (iii) deliver to the Trustee the Securities so accepted together with an
Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in
an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer not later than the first Business Day
following the Change of Control Payment Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities
laws or regulations (including Rule 14e-1 under the Exchange Act) in
connection with the purchase of Securities pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.15, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.15 by virtue
thereof.
SECTION 4.16 Waiver of Stay; Extension of Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Securities as
contemplated herein or in the Securities, wherever enacted, now or at any
time hereafter in force, or that may affect the covenants or the performance
of this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execu-
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tion of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.17 Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to, keep
at all times all of their respective properties and assets which are of an
insurable nature (as determined by reference to industry standards) insured
reasonably and appropriately as prudent business judgment would require
against loss or damage and shall obtain such other reasonable and appropriate
insurance as is required or so appropriate for the nature of the business and
other risks encountered by the Company and its Subsidiaries, in each case
with insurers reasonably and in good faith believed by the Company to be
responsible and financially sound, to the extent that insurance of a similar
character and nature is usually so obtained by corporations similarly
situated and that are at any such time conducting business substantially
similar to that of the Company and its Subsidiaries in accordance with
prudent business practices.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Limitation on Mergers, Consolidations
or Sales of Assets.
The Company shall not in a single transaction or a series of related
transactions consolidate with or merge with or into another Person, or
directly or indirectly sell, transfer, lease or convey substantially all of
its properties and assets to another Person (except any Restricted
Subsidiary; provided that in connection with any merger of the Company with
any such Restricted Subsidiary, no consideration (other than common stock in
the surviving corporation or the Company) shall be issued or distributed to
the stockholders of the Company), or permit any Person to merge with or into
it unless: (i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company are
transferred shall be a corporation or partnership organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed
and delivered to the Trustee, in form reasonably satisfactory to the
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Trustee, all of the obligations of the Company under the Securities and this
Indenture; (ii) immediately before and immediately after giving effect to
such transaction or series of transactions, no Default or Event of Default
under this Indenture shall have occurred and be continuing; and (iii)
immediately before and immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without limitation,
any Indebtedness incurred or assumed in anticipation of or in connection with
such transaction or series of transactions), the Company could incur $1.00 of
additional Indebtedness under the first paragraph of Section 4.9 (without
giving effect to clauses (i) through (xvi) of the second paragraph thereof).
SECTION 5.2 Successor Entity Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section
5.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been
named as the Company herein; and thereafter, except in the case of a lease,
the Company shall be discharged from all obligations and covenants under this
Indenture and the Securities.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.
"Event of Default", whenever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
or not it shall be occasioned or prohibited by the provisions of Article X
and whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(i) a default in the payment of interest on any Security when the
same shall become due and payable and the continuance of such default for
a period of 30 days or more; or
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(ii) a default in the payment of all or any part of the principal of
any Security when and as the same shall become due and payable at
maturity, or upon acceleration, redemption, or otherwise, including
default in the payment of the purchase price required to be offered in a
Net Proceeds Offer and a Change of Control Offer; or
(iii) a failure by the Company and its Subsidiaries to comply
with any of the other agreements or covenants in or provisions of the
Securities or this Indenture which failure continues for the period and
after the notice specified below;
(iv) a default under any mortgage, indenture or instrument under
which there may be issued or evidenced any Indebtedness for borrowed
money by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee is now existing or
hereafter created if either (x) such default results from the failure to
pay the final scheduled principal installment in an amount of at least
$15.0 million in respect of any such Indebtedness on the stated maturity
date thereof (after giving effect to any applicable grace periods) or (y)
as a result of such default the maturity of such Indebtedness has been
accelerated prior to its express maturity, and the principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness with respect to which the principal amount remains unpaid
upon its final maturity (after giving effect to any extension of such
maturity date by the holder of such Indebtedness and the expiration of
any applicable grace period) or the maturity of which has been so
accelerated, aggregates $15.0 million or more;
(v) a final judgment or final judgments for the payment of money,
or the issuance of any warrant of attachment against any portion of the
property or the assets of the Company or any of its Restricted
Subsidiaries, that in the aggregate, equal or exceed $15.0 million at any
one time shall be entered against the Company or any of its Restricted
Subsidiaries and such judgment or judgments or warrant of attachment
shall not be discharged, satisfied,
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stayed, annulled or rescinded within 60 days of being entered, or in the
case of any final judgment which provides for payment over time, from any
applicable payment date;
(vi) the Company or any Significant Restricted
Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its property;
(D) makes a general assignment for the benefit of
its creditors;
(E) files an answer or consent seeking
reorganization or relief; or
(F) shall generally not pay its debts as such
debts become due or shall admit in writing its inability
to pay its debts generally; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Restricted Subsidiary as a debtor in an involuntary case or
proceeding;
(B) appoints a Custodian of the Company or any Significant
Restricted Subsidiary or a Custodian for all or substantially all
of their respective properties; or
(C) orders the liquidation of the Company or any Significant
Restricted Subsidiary;
and in each case the order or decree remains unstayed and in effect for
60 days.
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A Default under clause (iii) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal
amount of the then outstanding Securities notify the Company and the Trustee,
in writing of the Default and the Company does not cure the Default within 45
days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.1(vi) or (vii) above with respect to the Company) occurs and is
continuing, then, and in every such case, unless the principal of all the
Securities shall have already become due and payable, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of the then
outstanding Securities, by notice in writing to the Company (and to the
Trustee if given by Holders), may declare all of the unpaid principal of and
accrued interest thereon to be due and payable immediately. In the event of
a declaration of acceleration because of an Event of Default described in
clause (iv) of Section 6.1 above has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if such payment
default is cured or waived or the holders of the Indebtedness which is the
subject of such event of default have rescinded their declaration of
acceleration in respect of such Indebtedness within 60 days thereof and the
Trustee has received written notice of such cure, waiver or rescission and no
other Event of Default described in clause (iv) of Section 6.1 above has
occurred that has not been cured or waived within 60 days of the declaration
of such acceleration in respect thereof and if (i) the repayment of
Indebtedness or annulment of such acceleration, as the case may be, would not
conflict with any judgment or decree of a court of competent jurisdiction and
(ii) all existing Events of Default, except non-payment of principal or
interest which have become due solely due to such acceleration, have been
cured or waived. If an Event of Default specified in Section 6.1(vi) or
(vii) with respect to the Company occurs, all unpaid principal of and accrued
interest due and payable on all the outstanding Securities shall ipso facto
become and be immediately due and payable without any declaration, notice or
other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained,
the Holders of a majority in ag-
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gregate principal amount of the then outstanding Securities, by written
notice to the Company and the Trustee, may waive, on behalf of all Holders, a
Default or an Event of Default if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all overdue interest on all Securities,
(ii) the principal of any Securities which would become due
otherwise than by such declaration of acceleration, and interest
thereon at the rate borne by the Securities, (iii) to the extent
that payment of such interest is lawful, interest on overdue
interest at the rate borne by the Securities and (iv) all sums
paid or advanced by the Trustee under this Indenture and the
compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the
principal of the Securities which have become due solely by such
declaration of acceleration, have been cured or waived.
Notwithstanding the previous sentence, no waiver shall be
effective for any Default or Event of Default in the payment of
the principal of or interest on any Security held by a
nonconsenting Holder or any Default or Event of Default with
respect to any covenant or provision which cannot be modified or
amended without the consent of the Holder of each then outstanding
Security, unless all such affected Holders agree, in writing, to
waive such Default or Event of Default. No such waiver shall cure
or waive any subsequent default or impair any right consequent
thereon.
In the event that the maturity of the Securities is accelerated
pursuant to this Section 6.2, 100% of the principal amount thereof plus
accrued interest to the date of payment shall become due and payable.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding, and
any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an
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express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.7 and 9.2, prior to the declaration of
acceleration of the maturity of the Securities, the Holder or Holders of not
less than a majority in aggregate principal amount of the Securities at the
time outstanding by written notice to the Company and the Trustee may waive
on behalf of all the Holders any past default under this Indenture and its
consequence, except a default in the payment of principal of or interest on
any Security or a default with respect to any covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Security affected pursuant to Section 9.2.
SECTION 6.5 Control by Majority.
The Holders of a majority in aggregate principal amount of the then
outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any
trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.3. However, the Trustee may refuse to follow any
direction that conflicts with law, the Securities or this Indenture, or that
the Trustee determines may be unduly prejudicial to the rights of another
Securityholder or that may involve the Trustee in personal liability.
SECTION 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Securities make a written request to the Trustee
to pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
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(d) the Trustee does not comply with the request within 30
days after receipt of the request and the offer of indemnity; and
(e) during such 30-day period the Holders of at least a
majority in principal amount of the then outstanding Securities do
not give the Trustee a direction which is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such
other Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(i) or (ii) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company or any other obligor on the
Securities for the whole amount of principal and accrued interest remaining
unpaid, together with interest overdue on principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the interest rate and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Securityholders allowed in any judicial proceedings
relative to the Company or any of its Subsidiaries (or any other obligor upon
the Securities), its creditors or
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its property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Securityholder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.7. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article VI, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section
7.7;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Article VI.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the
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claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7,
or a suit by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the outstanding Securities.
SECTION 6.12 Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy,
and every remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of
any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.13 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article VI or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture or the TIA and no
others and no implied covenants or
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obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificate or opinions
which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) This paragraph does not limit the effect of
paragraph (b) of this Section 7.1.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Sections 6.4 and 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in
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writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document reasonably believed by it
to be genuine and to have been signed or presented by the proper
Person. The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit.
(b) Before the Trustee acts or refrains from acting with
respect to any matter contemplated by this Indenture, it may
require an Officers' Certificate or an Opinion of Counsel, which
shall conform to the provisions of Section 11.5. The Trustee
shall not be liable for any action it takes or omits to take in
good faith in reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any
agent (other than the negligence or willful misconduct of an agent
who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith and without negligence which it
reasonably believes to be authorized or within its rights or
powers conferred upon it by this Indenture or the TIA.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders, pursuant to the
provisions of this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein
or thereby.
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SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company, or its Subsidiaries and Affiliates with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities, and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture, or any
statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and is known to a Trust Officer, the Trustee shall
mail to each Holder a notice of the Default or Event of Default within 30
days after it occurs or, if later, within 10 days after such Default or Event
of Default becomes known to the Trustee, unless such Default or Event of
Default has been cured. Except in the case of a Default or Event of Default
in the payment of principal of or interest on any Security, including an
acceleration, and the failure to make payment when required by Sections 4.12
and 4.15, the Trustee may withhold the notice to the Holders if and so long
as a committee of its Trust Officers determines in good faith that
withholding the notice is in the interest of the Holders.
SECTION 7.6 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with May 15, 1998, the
Trustee shall transmit to each Securityholder a report dated as of May 15 of
the relevant year that complies with the requirements of TIA Section 313(a).
The Trustee also shall comply with TIA Section 313(b) and TIA Section
313(c) and (d). A copy of such report at the time of its transmission to
Securityholders shall be filed with the SEC, if required, with each stock
exchange, if any, on which the Securities are listed and with the Company.
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The Company shall promptly notify the Trustee if the Securities
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee, the Paying Agent and the
Registrar from time to time reasonable compensation for their respective
services rendered hereunder. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable out-of-pocket
disbursements, expenses and advances (including reasonable fees and expenses
of counsel) incurred or made by each of them in connection with the
performance of its duties under this Indenture. Such expenses shall include
the reasonable compensation, reasonable out-of-pocket disbursements and
reasonable expenses of the Trustee's agents and counsel.
The Company shall indemnify and hold harmless the Trustee and its
agents, employees, officers, directors and shareholders against any claim,
demand, expense (including but not limited to attorneys' fees and expenses),
loss or liability incurred by it arising out of or in connection with the
administration of its duties under this Indenture. The Trustee shall notify
the Company promptly of any claim asserted against it for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's expense in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel; provided that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense and there is
no conflict of interest between the Company and the Trustee in connection
with such defense. The Company need not pay for any settlement made without
its written consent. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through the Trustee's
own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property
held or collected by it in its capacity as Trustee, except money or property
held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(vi) or (vii)
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occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee in writing and
may appoint a successor Trustee with the Company's consent which consent
shall not be unreasonably withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee (subject to the lien provided in Section 7.7), the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 25% in
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principal amount of then outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation or national banking association, the resulting, surviving
or transferee corporation or national banking association without any further
act shall be the successor Trustee; provided such corporation shall be
otherwise qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); provided that there shall be excluded from the operation
of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities,
of the Company are outstanding if the requirements for such exclusion set
forth in TIA Section 310(b)(1) are met. The provisions of TIA Section 310
shall apply to the Company, as obligor of the Securities.
SECTION 7.11 Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
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ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of the Company's Obligations.
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.1, if all Securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities which have been
replaced or paid or Securities for whose payment U.S. Legal Tender has
theretofore been deposited with the Trustee or the Paying Agent in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company, as provided in Section 8.5) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:
(a) either (i) pursuant to Article III, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Securities under arrangements satisfactory to
the Trustee for the giving of such notice or (ii) all Securities have
otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, U.S. Legal Tender in such amount as is
sufficient without consideration of reinvestment of interest, to pay
principal of, premium, if any, and interest on the outstanding Securities
to maturity or redemption; provided that the Trustee shall have been
irrevocably instructed to apply such U.S. Legal Tender to the payment of
said principal, premium, if any, and interest with respect to the
Securities and, provided, further, that from and after the time of deposit,
the money deposited shall not be subject to the rights of holders of Senior
Indebtedness pursuant to the provisions of Article X;
(c) no Default or Event of Default with respect to this Indenture or
the Securities shall have occurred and be continuing on the date of such
deposit or shall occur
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immediately after giving effect to such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any
other instrument to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for or relating to the termination of the Company's
obligations under the Securities and this Indenture have been complied
with. Such Opinion of Counsel shall also state that such satisfaction and
discharge does not result in a default under the Credit Agreement (if then
in effect) or any other material agreement or material instrument then
known to such counsel that binds or affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.5, 2.6, 2.7, 4.1, 4.2, 7.7, 8.5 and 8.6 shall survive until the
Securities are no longer outstanding pursuant to the last paragraph of
Section 2.8. After the Securities are no longer outstanding, the Company's
obligations in Sections 7.7, 8.5 and 8.6 shall survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Securities and this Indenture except for those surviving obligations
specified above.
SECTION 8.2 Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution of the Board
of Directors, at any time, elect to have either paragraph (b) or (c) below be
applied to all outstanding Securities upon compliance with the conditions set
forth in Section 8.3.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3, be deemed to have
been discharged from its obligations with respect to all outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid
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and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.4 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Securities and any amounts
deposited under Section 8.3 hereof shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Indebtedness under
Article X or otherwise, except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights
of Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.4 hereof, and as more fully set forth in such Section,
payments in respect of the principal of and interest on such Securities when
and to the extent such payments are due, (ii) the Company's obligations with
respect to such Securities under Article II and Section 4.2 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Company's obligations in connection therewith, including Section 7.7
hereof and (iv) this Article VIII. Subject to compliance with this Article
VIII, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released
from its obligations under the covenants contained in Sections 4.8 through
4.15 and Article V hereof with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Securities shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Securities
shall not be deemed outstanding for accounting purposes) and Holders of the
Securities and any amounts deposited under Section 8.3 hereof shall cease to
be subject to any obligations to, or the rights of, any holder of Senior
Indebtedness under Article X or otherwise. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set
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forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document
and such omission to comply shall not constitute a Default or an Event or
Default under Section 6.1(iii) hereof, but, except as specified above, the
remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), subject to the satisfaction of the
conditions set forth in Section 8.3 hereof, Sections 6.1(iii), 6.1(iv) and
6.1(v) shall not constitute Events of Default.
SECTION 8.3 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2(b) or 8.2(c) hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms, will provide, not later
than one day before the due date of any payment on the Securities, U.S.
Legal Tender, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the Securities on the stated date for payment thereof or on the
applicable redemption date, as the case may be, of such principal or
installment of principal of or interest on the Securities; provided that
the Trustee shall have received an irrevocable written order from the
Company instructing the Trustee to apply such U.S. Legal Tender or the
proceeds of such U.S. Government Obligations to said payments with respect
to the Securities;
(b) in the case of an election under Section 8.2(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Inter-
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nal Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.2(c) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from
the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Securities pursuant to this Article VIII
concurrently with such incurrence) or insofar as Sections 6.1(vi) and
6.1(vii) hereof are concerned, at any time in the period ending on the 91st
day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
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(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of any holders of Senior Indebtedness, including, without
limitation, those arising under this Indenture, and (ii) assuming no
intervening bankruptcy or insolvency of the Company between the date of
deposit and the 91st day following the deposit and that no Holder is an
insider of the Company, after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable Bankruptcy Law.
Notwithstanding the foregoing, the Opinion of Counsel required by
clause (b) above of this Section 8.3 need not be delivered if all Securities
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable, (ii) will become due and payable on the Maturity Date within one
year or (iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.
SECTION 8.4 Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to this Article VIII,
and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Securities. The Trustee shall be under no
obligation to invest said U.S. Legal Tender or U.S. Government Obligations
except as it may agree with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.3 hereof or the
principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Securities.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company
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from time to time upon the Company's request any U.S. Legal Tender or U. S.
Government Obligations held by it as provided in Section 8.3 hereof which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.5 Repayment to the Company.
Subject to this Article VIII, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years;
provided that the Trustee or such Paying Agent, before being required to make
any payment, may at the expense of the Company cause to be published once in
a newspaper of general circulation in the City of New York or mail to each
Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein which shall be at least 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company,
Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.6 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Article VIII by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to this Article VIII until such time as the Trustee or
Paying Agent is permitted to apply all such U.S. Legal Tender or U.S.
Government Obligations in accordance with this Article VIII; provided that if
the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall
be subrogated to the rights of the Holders of such Securities to receive such
payment from the U.S. Legal Tender or
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U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
resolutions of its Board of Directors (copies of which shall be delivered to
the Trustee) and the Trustee may amend or supplement this Indenture or the
Securities without notice to any Holder for any of the following purposes:
(a) to cure any ambiguity, defect or inconsistency herein;
(b) to add to the covenants of the Company for the benefit of the
Holders, or surrender any right or power herein conferred upon the Company;
(c) to provide for collateral for the Securities;
(d) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(e) to effect or maintain the qualification of this Indenture under
the TIA;
(f) to evidence the succession in accordance with Article V hereof of
another Person to the Company and the assumption by any such successor of
the covenants of the Company herein and in the Securities; or
(g) to make any other change that does not adversely affect the
rights of any Holder; provided that in making such change, the Trustee may
rely upon an Opinion of Counsel stating that such change does not adversely
affect the rights of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this Section 9.2, the
Company, when authorized by resolution of its Board of Directors (copies of
which shall be delivered to the Trustee), and the Trustee may amend or
supplement this Indenture with the written consent of the Holders of at least
a ma-
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jority in aggregate principal amount of the Securities then outstanding.
Subject to Section 6.7 and the provisions of this Section 9.2, the Holders
of, in the aggregate, at least a majority in principal amount of the then
outstanding Securities affected may waive compliance by the Company with any
provision of this Indenture without notice to any other Securityholder.
However, without the consent of each Securityholder affected, an amendment,
supplement or waiver, including a waiver pursuant to Section 6.4 may not:
(a) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any provision
of this Indenture or the Securities;
(b) reduce the rate or extend the time for payment of interest on any
Security;
(c) reduce the principal amount of any Security, or reduce the
redemption price or the repurchase price pursuant to Section 4.12 or 4.15;
(d) change the Maturity Date, the Net Proceeds Payment Date (other
than in accordance with Section 4.12) or Change of Control Payment Date
(other than in accordance with Section 4.15) of any Security;
(e) alter the redemption provisions of Article III in a manner
adverse to any Holder;
(f) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Securities or the rights of Holders
to recover the principal of, interest on, or redemption payment with
respect to, any Security;
(g) make any changes in Section 6.4, 6.7 or this clause (g);
(h) make the principal of, or the interest on, any Security payable
with anything or in any manner other than as provided for in this Indenture
and the Securities as in effect on the Issue Date;
(i) waive a Default or an Event of Default in the payment of
principal of or interest on the Securities or that resulted from failure to
make the payments required by Section 4.12 or 4.15;
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(j) make any change to the subordination provisions of this Indenture
and the Securities in a manner that adversely affects the Holders; or
(k) make any changes relating to (i) the right of the Trustee to file
proof of claim in any bankruptcy or similar proceeding, or (ii) the
limitation on the right of Holders to direct the Trustee to institute legal
proceedings with respect to this Indenture or to such provision.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Notwithstanding the foregoing, no amendment shall modify any
provision of Article X of the Indenture without the consent of each holder of
any then outstanding Designated Senior Indebtedness.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all
Holders, consideration for such Holder's consent to such amendment,
supplement or waiver.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of that Security or portion of that Security that evidences
the same debt as the consenting Holder's Security, even if notation of the
consent is
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not made on any Security. However, any such Holder or subsequent Holder may
revoke the consent as to his Security or portion of a Security. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. Notwithstanding the above, nothing in this paragraph shall impair
the right of any Securityholder under Section 316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver which record date shall be at least 10 days
prior to the first solicitation of such consent. If a record date is fixed,
then notwithstanding the second and third sentences of the immediately
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only those Persons, shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after
such record date. Such consent shall be effective only for actions taken
within 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder unless it makes a change described in any of
clauses (a) through (k) of Section 9.2. In that case the amendment,
supplement or waiver shall bind each Holder of a Security who has consented
to it.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may (in accordance with the specific direction of the
Company) request the Holder of the Security to deliver it to the Trustee.
The Trustee may (in accordance with the specific direction of the Company)
place an appropriate notation on the Security about the changed terms and
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 Trustee To Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment,
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supplement or waiver does not adversely affect the rights, duties or
immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing any amendment, supplement or waiver, the Trustee shall be
entitled to receive, if requested, an indemnity reasonably satisfactory to it
and to receive, and shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture. The Company may not sign an
amendment until its Board of Directors approves it.
ARTICLE X
SUBORDINATION
SECTION 10.1 Securities Subordinated to Senior Indebtedness.
The Company, for itself and its successors, and each Holder, by his
acceptance of Securities, agrees that the payment of the principal of and
interest on the Securities is subordinated, to the extent and in the manner
provided in this Article X, to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness, whether outstanding on the Issue Date
or thereafter incurred, including any interest accruing subsequent to a
bankruptcy or other similar proceeding whether or not such interest is an
allowed claim enforceable against the Company in a bankruptcy case under
Title 11 of the United States Code.
This Article X shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of
the holders of Senior Indebtedness, and such holders are made obligees
hereunder and any one or more of them may enforce such provisions.
SECTION 10.2 No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of the Company of
principal of or interest on the Securities whether pursuant to the terms of
the Securities or upon acceleration or otherwise shall be made if, at the
time of such payment, there exists a default in the payment of all or any
portion of principal of or interest on any Senior Indebtedness, and such
default shall not have been cured or waived or the
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benefits of this sentence waived by or on behalf of the holders of the Senior
Indebtedness. In addition, during the continuance of any other event of
default with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated, upon the occurrence of (a) receipt
by the Trustee of written notice from the holders of a majority of the
outstanding principal amount of the Designated Senior Indebtedness or their
Representative, or (b) if such event of default results from the acceleration
of the Securities, the date of such acceleration, no such payment may be made
by or on behalf of the Company upon or in respect of the Securities for a
period ("Payment Blockage Period") commencing on the earlier of the date of
receipt of such notice or the date of such acceleration and ending 179 days
thereafter (unless such Payment Blockage Period shall be terminated by
written notice to the Trustee from the holders of a majority of the
outstanding principal amount of the Designated Senior Indebtedness or their
Representative who delivered such notice). Notwithstanding anything herein to
the contrary, in no event will a Payment Blockage Period extend beyond 179
days from the date on which such Payment Blockage Period was commenced. Not
more than one Payment Blockage Period may be commenced with respect to the
Securities during any period of 360 consecutive days. For all purposes of
this paragraph, no event of default which existed or was continuing on the
date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period shall
be, or be made, the basis for the commencement of a second Payment Blockage
Period by the holders of such Designated Senior Indebtedness or their
Representative whether or not within a period of 360 consecutive days unless
such event of default shall have been cured or waived for a period of not
less than 90 consecutive days.
(b) In furtherance of the provisions of Section 10.1, in the event
that, notwithstanding the foregoing provisions of this Section 10.2, any
payment on account of principal of or interest on the Securities or to redeem
(or make a deposit in redemption of), defease or acquire any of the
Securities shall be made by or on behalf of the Company and received by the
Trustee, by any Holder or by any Paying Agent (or, if the Company is acting
as its own Paying Agent, money for any such payment shall be segregated and
held in trust), at a time when such payment was prohibited by the provisions
of this Section 10.2, then, unless and until such payment is no longer
prohibited by this Section 10.2, such payment (subject to the provisions of
Section 10.6) shall be received and held in trust by the Trustee or such
Holder or Paying Agent for the
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benefit of the holders of Senior Indebtedness or their Representative,
ratably according to the respective amounts of the Senior Indebtedness held
or represented by each, and shall be paid over or delivered to the holders
of the Senior Indebtedness remaining unpaid to the extent necessary to enable
payment in full in cash and cash equivalents to the holders of Senior
Indebtedness of all Senior Indebtedness remaining unpaid, after giving effect
to all concurrent payments and such distributions to or for the holders of
Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
default or event of default, and any cure or waiver thereof, or any
acceleration under any Senior Indebtedness or under any agreement pursuant to
which Senior Indebtedness may have been issued.
SECTION 10.3 Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or
Reorganization of Company.
Upon any distribution of assets of the Company of any kind or
character, whether in cash, property or securities upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company
(including, without limitation, in bankruptcy, insolvency or receivership
proceedings or upon any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full in cash or cash equivalents of all amounts payable
under Senior Indebtedness (including interest after the commencement of any
such proceeding at the rate specified in the applicable Senior Indebtedness
whether or not such interest is an allowed claim against the Company in any
such proceeding), before the Holders or the Trustee on behalf of the
Holders are entitled to receive any payment on account of the principal of
or interest on the Securities;
(b) any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities,
to which the Holders or the Trustee on behalf of the Holders would be
entitled except for the provisions of this Article X, shall be paid by the
Company or by any liquidating trustee or agent or other Person making such
a payment or distribution, directly to the holders of Senior Indebtedness
or their Representa-
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tive, ratably according to the respective amounts of Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
full in cash or cash equivalents of all Senior Indebtedness remaining
unpaid after giving effect to all concurrent payments and distributions to
or for the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, shall be received by
the Trustee or the Holders or any Paying Agent (or, if the Company is
acting as its own Paying Agent, money for any such payment or distribution
shall be segregated or held in trust) on account of principal of or
interest on the Securities before all Senior Indebtedness is paid in full
in cash or cash equivalents, such payment or distribution (subject to the
provisions of Section 10.6) shall be received and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of the holders of
the Senior Indebtedness or their Representative, ratably according to the
respective amounts of Senior Indebtedness held or represented by each, and
shall be paid over or delivered to the holders of the Senior Indebtedness
remaining unpaid to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid after giving effect to all concurrent
payments and distributions to or for the holders of such Senior
Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or
assignment for the benefit of creditors by the Company.
SECTION 10.4 Holders To Be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full in cash or cash equivalents of all
Senior Indebtedness, the Holders of Securities shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders
of Senior Indebtedness by or on behalf of the Company, or by or behalf of the
Holders by virtue of this Article X, which otherwise would have been made to
the Holders,
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shall, as between the Company and the Holders, be deemed to be payment by
the Company to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article X are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and
the holders of Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article X shall have been
applied, pursuant to the provisions of this Article X, to the payment of
amounts payable under the Senior Indebtedness, then the Holders shall be
entitled to receive from the holders of such Senior Indebtedness any payments
or distributions received by such holders of Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of the
Senior Indebtedness in full in cash or cash equivalents.
SECTION 10.5 Obligations of the Company Unconditional.
Nothing contained in this Article X or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company
and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Securities as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of
the Holders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article X, of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Upon any distribution of assets or securities of the Company referred to in
this Article X, the Trustee, subject to the provisions of Sections 7.1 and
7.2, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of
the liquidating trustee or agent or other Person making any distribution to
the Trustee or to the Holders for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts per-
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tinent thereto or to this Article X. Nothing in this Section 10.5 shall
apply to the claims of, or payments to, the Trustee under or pursuant to
Section 7.7.
SECTION 10.6 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee or any Paying Agent shall not at any time be charged
with the knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee or Paying Agent, unless and until
the Trustee or Paying Agent shall have received written notice thereof from
the Company or one or more holders of Senior Indebtedness or from any trustee
or agent therefor, and, prior to the receipt of any such written notice, the
Trustee or paying agent shall be entitled to assume conclusively that no such
facts exist. Unless at least three Business Days prior to the date on which
by the terms of this Indenture any moneys are to be deposited by the Company
with the Trustee or any Paying Agent (whether or not in trust) for any
purpose (including, without limitation, the payment of the principal, the
interest or other amounts due on any Security), the Trustee or Paying Agent
shall have received with respect to such moneys the notice provided for in
the preceding sentence, the Trustee or Paying Agent shall have full power and
authority to receive such moneys and to apply the same to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such date. The foregoing
shall not apply to the Paying Agent if the Company is acting as Paying Agent.
Nothing contained in this Section 10.6 shall limit the right of the holders
of Senior Indebtedness to recover payments as contemplated by Section 10.2.
SECTION 10.7 Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness.
(a) No right of any present or future holders of any Senior
Indebtedness to enforce subordination provisions contained in this Article X
shall at any time in any way be prejudiced or impaired by any act or failure
to act on the part of the Company or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by the Company with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with.
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(b) Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the holders of any Indebtedness
of the Company, without incurring responsibility to the holders of any
Indebtedness of the Company and without impairing or releasing the
subordination provisions contained in this Article X, or the obligations
hereunder of the holders of the Indebtedness of the Company do any one or
more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior
Indebtedness or fail to perfect or delay the perfection of any such lien;
(iii) release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 10.8 Holders Authorize Trustee to Effectuate
Subordination of Securities.
Each Holder of the Securities by his acceptance thereof authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article X and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors
or any other marshalling of assets and liabilities of the Company) tending
towards liquidation of the business and assets of the Company, the immediate
filing of a claim for the unpaid balance of his securities in the form
required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file
such claim or claims, then the holders of the Senior Indebtedness or their
Representative are or is hereby authorized to have the right to file and are
or is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, ar-
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rangement, adjustment or composition affecting the Securities or the rights
of any Holder thereof, or to authorize the Trustee or the holders of Senior
Indebtedness or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.9 Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article X in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 10.10 Article X Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the securities by reason of any provision of this Article X shall not be
construed as preventing the occurrence of a Default or an Event of Default
under Section 6.1.
SECTION 10.11 No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good
faith mistakenly pay over or distribute to the Holders of Securities or the
Company or any other Person, cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article X
or otherwise. Nothing in this Section 10.11 shall affect the obligation of
any other such Person to hold such payment for the benefit of, and to pay
such payment over to, the holders of Senior Indebtedness or their
Representative.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls.
The provisions of TIA Sections 310 through 317 that impose duties
on any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture)
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are a part of and govern this Indenture, whether or not physically contained
herein.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by the above paragraph, the imposed duties shall
control.
SECTION 11.2 Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in Person or mailed by first-class mail or by
telecopier, followed by first-class mail, or by overnight service
guaranteeing next-day delivery, addressed as follows:
(a) if to the Company:
BIG FLOWER PRESS HOLDINGS, INC.
3 East 54th Street
17th Floor
New York, New York 10022
Attention: Secretary
Telecopier Number: (212) 521-1640
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Robert E. Buckholz, Jr., Esq.
Telecopier Number: (212) 558-3588
(b) if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
Telecopier Number: (860) 986-7920
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Securityholder, including
any notice delivered in connection with TIA Section 310(b), TIA Section
313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to such
Holder, first-class postage prepaid, at his address as it appears on the
registration books of the Registrar and shall be sufficiently given to such
Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given
only when received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 11.3 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA Section 312(c).
SECTION 11.4 Certificate and Opinion of Counsel as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the
Trustee at the request of the Trustee (a) an Officers' Certificate in form
and substance reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with
(which officer signing such certificate may rely, as to matters of law, on an
Opinion of Counsel), (b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the opinion of
counsel, all such conditions have been complied with (which counsel, as to
factual matters, may rely on an Officers' Certificate and certificates of
public officials) and (c) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee that
complies with TIA Section 314(c).
<PAGE>
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SECTION 11.5 Statements Required in Certificate and Opinion
of Counsel.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or rendering
such Opinion of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate or
Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 11.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.8 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN ANY
<PAGE>
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ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE
SECURITIES.
SECTION 11.9 No Recourse Against Others.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Securities.
SECTION 11.10 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 11.11 Counterparts.
The parties may sign any number of counterparts of this Indenture.
Each such counterpart shall be an original, but all of them together represent
the same agreement.
SECTION 11.12 Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby, and a Holder shall have no claim therefor against any
party hereto.
SECTION 11.13 Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no
way modify or restrict any of the terms or provisions hereof.
SECTION 11.14 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its
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Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.15 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture or the Securities.
SECTION 11.16 Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
BIG FLOWER PRESS HOLDINGS, INC.,
as Issuer
By: /s/ Irene B. Fisher
----------------------------
Name: Irene B. Fisher
Title: Vice President
FLEET NATIONAL BANK,
as Trustee
By: /s/ Kathy Larimore
----------------------------
Name: Kathy Larimore
Title: Assistant Vice President
<PAGE>
Exhibit 4.3
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 20, 1997
By and Among
BIG FLOWER PRESS HOLDINGS, INC.
and
BT SECURITIES CORPORATION,
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.,
as Initial Purchasers
8-7/8% Senior Subordinated Notes due 2007
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions..............................................................1
2 Exchange Offer ..........................................................5
3. Shelf Registration.......................................................9
4. Additional Interest.....................................................11
5. Registration Procedures.................................................13
6. Registration Expenses...................................................24
7. Indemnification.........................................................25
8. Rules 144 and 144A......................................................30
9. Underwritten Registrations..............................................30
10. Miscellaneous...........................................................31
(a) No Inconsistent Agreements.........................................31
(b) Adjustments Affecting Registrable Notes............................31
(c) Amendments and Waivers.............................................31
(d) Notices............................................................32
(e) Successors and Assigns.............................................33
(f) Counterparts.......................................................33
(g) Headings...........................................................33
(h) Governing Law......................................................33
(i) Severability.......................................................33
(j) Securities Held by the Company or its Affiliates...................34
(k) Third Party Beneficiaries..........................................34
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
June 20, 1997, by and among BIG FLOWER PRESS HOLDINGS, INC., a Delaware
corporation (the "Company"), and BT SECURITIES CORPORATION, CREDIT SUISSE FIRST
BOSTON CORPORATION and GOLDMAN, SACHS & CO. (collectively, the "Initial
Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of June 16, 1997, by and among the Company and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $250,000,000 aggregate principal amount of
its 8-7/8% Senior Subordinated Notes due 2007 (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and any subsequent holder or holders of
the Notes. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Company: See the introductory paragraphs hereto.
Effectiveness Date: With respect to (i) the Exchange Offer
Registration Statement, the 120th day after the Issue Date and (ii) any Shelf
Registration Statement, the 60th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
<PAGE>
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Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a) hereof.
Filing Date: (A) If no Registration Statement has been filed by the
Company pursuant to this Agreement, the 60th day after the Issue Date; and
(B) in any other case (which may be applicable notwithstanding the consummation
of the Exchange Offer), the 30th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of June 20, 1997, among the
Company and Fleet National Bank, as Trustee thereunder, pursuant to which the
Notes are issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: June 20, 1997, the date of original issuance of the
Notes.
NASD: See Section 5(s) hereof.
Notes: See the introductory paragraphs hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
<PAGE>
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Person: An individual, trustee, corporation, partnership, joint stock
company, trust, unincorporated association, union, business association, firm or
other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
under the Securities Act and any term sheet filed pursuant to Rule 434 under the
Securities Act), as amended or supplemented by any prospectus supplement, and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereto.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under federal securities
laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the Company
that covers any of the Notes, the Exchange Notes or the Private Exchange Notes
<PAGE>
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or the Private Exchange Notes filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the Company of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(b) hereof.
Shelf Registration: See Section 3(b) hereof.
Shelf Registration Statement: Any Registration Statement relating to
a Shelf Registration.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
<PAGE>
-5-
2. Exchange Offer
(a) To the extent not prohibited by applicable laws, rules,
regulations or applicable interpretations of the staff of the SEC, the Company
shall file with the SEC, no later than the Filing Date, a Registration Statement
(the "Exchange Offer Registration Statement") on an appropriate registration
form with respect to a registered offer (the "Exchange Offer") to exchange any
and all of the Registrable Notes for the same aggregate principal amount of
notes (the "Exchange Notes") of the Company that are identical in all material
respects to the Notes except that the Exchange Notes shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all applicable
tender offer rules and regulations under the Exchange Act and other applicable
laws. The Company shall use its reasonable best efforts to (x) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for not less than 20 business days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer on or prior to the 45th day following the date
on which the Exchange Offer Registration Statement is declared effective by the
SEC. If, after the Exchange Offer Registration Statement is initially declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be required
to represent that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, solely with
respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as
to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating
Broker-Dealers, and the Company shall have no
<PAGE>
-6-
further obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which clause
2(c)(iv) hereof applies) pursuant to this Agreement. No securities other
than the Exchange Notes shall be included in the Exchange Offer Registration
Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Holders, which shall contain such information as
the Initial Purchasers shall reasonably request.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 180 days after such
Exchange Offer Registration Statement is declared effective (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Company upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "Private Exchange") for such Notes held by any
such Holder, the same principal amount of notes (the "Private Exchange Notes")
of the Company that are identical in all material respects to the Exchange Notes
(except that they may bear a customary legend with respect to restrictions on
transfer). The Private Exchange Notes shall be issued pursuant to the same
indenture as the Exchange Notes and bear the same CUSIP number as the Exchange
Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
<PAGE>
-7-
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment or (B) if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 20 business days
after the date that notice of the Exchange Offer is mailed to Holders (or
longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver to each Holder of
Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal
in principal amount to the Notes of such Holder so accepted for exchange.
<PAGE>
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The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
would be reasonably likely to materially impair the ability of the Company to
proceed with the Exchange Offer or the Private Exchange, and no material adverse
development shall have occurred in any existing action or proceeding with
respect to the Company and (iii) all governmental approvals shall have been
obtained, which approvals the Company deems necessary for the consummation of
the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
of the Issue Date, (iii) the Initial Purchasers or any holder of Private
Exchange Notes so requests in writing to the Company at any time after the
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Company within the meaning of the Securities Act) and so
notifies the Company within 30 days after such Holder first becomes aware of
such restrictions, in the case of each of clauses (i) to and including (iv) of
this sentence, then the Company shall promptly deliver to the Holders and the
Trustee written notice thereof (the "Shelf Notice") and as promptly as possible
shall file a Shelf Registration pursuant to Section 3 hereof.
<PAGE>
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3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Company shall as promptly as possible
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable Notes not
permitted to be exchanged in the Exchange Offer in accordance with the terms of
this Agreement, Private Exchange Notes and Exchange Notes as to which Section
2(c)(iv) is applicable (the "Initial Shelf Registration"). The Company shall
use its reasonable best efforts to file with the SEC the Initial Shelf
Registration on or before the applicable Filing Date. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).
The Company shall use its reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is the
earlier of two years after the Issue Date (the "Effectiveness Period"), or such
shorter period ending when all Registrable Notes covered by the Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or, if applicable, a Subsequent Shelf Registration;
provided, however, that the Effectiveness Period in respect of the Initial Shelf
Registration shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements of Rule 174 under
the Securities Act and as otherwise provided herein and shall be subject to
reduction to the extent that the applicable provisions of Rule 144(k) are
amended or revised to reduce the two year holding period set forth therein.
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Company in writing, within 15 business days
after receipt of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf Registration
<PAGE>
-10-
Statement or Prospectus or preliminary prospectus included therein. No
holder of Registrable Notes shall be entitled to Additional Interest pursuant
to Section 4 hereof unless and until such holder shall have provided all such
reasonably requested information. Each holder of Registrable Notes as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make information previously furnished to the Company by such Holder not
materially misleading.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within 30 days of such
cessation of effectiveness amend the Initial Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional Shelf Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Company
shall use its reasonable best efforts to cause the Subsequent Shelf Registration
to be declared effective under the Securities Act as soon as practicable after
such filing and to keep such subsequent Shelf Registration continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf Registration or
any Subsequent Shelf Registration was previously continuously effective. As
used herein the term "Shelf Registration" means the Initial Shelf Registration
and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
(c) Withdrawal of Stop Orders. If the Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of
<PAGE>
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all of the securities registered thereunder), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
4. Additional Interest
(a) The Company and the Initial Purchasers agree that the Holders
will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing Date
applicable thereto (i.e., 60 days after the Issue Date) or
(B) notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration and
such Shelf Registration is not filed on or prior to the Filing Date
applicable thereto, then, commencing on the day after any such Filing Date,
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days immediately following such
applicable Filing Date, and such Additional Interest rate shall increase by
an additional 0.25% per annum at the beginning of each subsequent 90-day
period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date applicable thereto (i.e., 120 days after the Issue
Date) or (B) notwithstanding that the Company has consummated or will
consummate the Exchange Offer, the Company is required to file a Shelf
Registration and such Shelf Registration is not declared effective by the
SEC on or prior to the Effectiveness Date applicable to such Shelf
Registration, then, commencing on the day after such Effectiveness Date,
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days immediately following the day
after such Effectiveness Date, and such Additional Interest rate shall
increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
<PAGE>
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(iii) if (A) the Company has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 45th day after the date on which the Exchange Offer
Registration Statement relating thereto was declared effective or (B) if
applicable, a Shelf Registration has been declared effective and such Shelf
Registration ceases to be effective at any time during the Effectiveness
Period, then Additional Interest shall accrue on the principal amount of
the Notes at a rate of 0.50% per annum for the first 90 days commencing on
the (x) 46th day after such effective date, in the case of (A) above, or
(y) the day such Shelf Registration ceases to be effective in the case of
(B) above, and such Additional Interest rate shall increase by an
additional 0.25% per annum at the beginning of each such subsequent 90-day
period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.0% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable in cash semi-annually on each January 1 and July 1 (to
the holders of record on the December 15 and June 15 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such
<PAGE>
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Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof. The Company shall effect such registrations to
permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder the
Company shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its reasonable best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein; provided, however, that, if (1) such filing is pursuant to
Section 3 hereof or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period relating thereto,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of
the Registrable Notes covered by such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each
case at least five business days prior to such filing, or such later date
as is reasonable under the circumstances). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement, their counsel, or
the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the
<PAGE>
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case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period or until consummation of the Exchange Offer, as the case may be;
cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to it with respect to
the disposition of all securities covered by such Registration Statement
as so amended or in such Prospectus as so supplemented and with respect
to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto from whom
the Company has received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but
in any event within two business days), and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or
any post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference therein and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Notes or resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Company
<PAGE>
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contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct in all
material respects, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation or threatening of
any proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known that makes
any statement made in such Registration Statement or related Prospectus
or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of
any changes in or amendments or supplements to such Registration
Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
and (vi) of any of the Company's determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, use its reasonable best
efforts to prevent the issuance of any order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the
use of a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer, for sale in any jurisdiction, and,
if any such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible date.
<PAGE>
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(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly as commercially practicable incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such Holders, any
Participating Broker-Dealer or counsel for any of them reasonably request
to be included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as commercially
practicable after the Company has received notification of the matters to
be incorporated in such prospectus supplement or post-effective amendment,
and (iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if any, at
the sole expense of the Company, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment
thereto, including financial statements and schedules, and, if requested,
all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters, if any, at
the sole expense of the Company, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and,
<PAGE>
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subject to the last paragraph of this Section 5, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers (if any), in connection with the offering and
sale of the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its reasonable best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters reasonably request in writing;
provided, however, that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform
Blue Sky investigations and file registrations and qualifications required
to be filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of the dollar amount in any such
jurisdiction where it is not then so subject.
<PAGE>
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(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its reasonable best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be reasonably
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Company will cooperate in
all reasonable respects with the filing of such Registration Statement and
the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as commercially practicable prepare and (subject to Section 5(a) hereof)
file with the SEC, at the sole expense of the Company, a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE>
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(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes in form and substance reasonably satisfactory to the Company and take
all such other actions as are reasonably requested by the managing
underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in such
connection, (i) make such representations and warranties to, and covenants
with, the underwriters with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes, and confirm
the same in writing if and when requested in form and substance reasonably
satisfactory to the Company; (ii) obtain the written opinion of counsel to
the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered in
opinions reasonably requested in underwritten offerings of debt securities
similar to the Notes and such other matters as may be reasonably requested
by the managing underwriter or underwriters; (iii) use its reasonable best
efforts to obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to the underwriter, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings of debt securities
similar to
<PAGE>
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the Notes and such other matters as reasonably requested by the managing
underwriter or underwriters as permitted by the Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no less
favorable to the sellers and underwriters, if any, than those set forth
in Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement and the managing underwriter
or underwriters or agents, if any). The above shall be done at each
closing under such underwriting agreement, or as and to the extent
required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and their
subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement and Prospectus.
Each Inspector shall agree in writing that it will keep the Records
confidential and that it will not disclose any of the Records unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement or Prospectus,
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) disclosure of such
information is necessary or advisable, in the opinion of counsel for any
Inspector, in connection with any action, claim, suit or proceeding,
directly or indirectly, involving
<PAGE>
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or potentially involving such Inspector and arising out of, based upon,
relating to, or involving this Agreement or the Purchase Agreement, or
any transactions contemplated hereby or thereby or arising hereunder or
thereunder, or (iv) the information in such Records has been made
generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as
the basis for any market transactions in the securities of the Company
unless and until such is made generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company
to undertake appropriate action to prevent disclosure of the Records
deemed confidential at the Company's expense.
(o) Provide the Trustee for the Registrable Notes or the Exchange
Notes, as the case may be, and cause the Indenture or the trust indenture
provided for in Section 2(a) hereof, as the case may be, to be qualified
under the TIA not later than the effective date of the first Registration
Statement relating to the Registrable Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the Holders of the
Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm
<PAGE>
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commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(r) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement or the Exchange Notes, as the case may be, or
the managing underwriter or underwriters, if any.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(t) Use its reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the Exchange Notes
and/or Registrable Notes covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes of any seller so long as such
seller fails to furnish such information within a
<PAGE>
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reasonable time after receiving such request. Each seller as to which any
Shelf Registration is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, that, upon actual
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer Registration Statement or any Shelf
Registration Statement is filed or becomes effective or the Exchange Offer is
consummated, including, without limitation, (i) all registration and filing
fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the Registrable Notes
or Exchange Notes and determination of the eligibility of the Registrable
Notes or Exchange Notes for investment
<PAGE>
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under the laws of such jurisdictions (x) where the holders of Registrable
Notes are located, in the case of the Exchange Notes, or (y) as provided in
Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be
sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
reasonable printing expenses, including, without limitation, reasonable
expenses of printing certificates for Registrable Notes or Exchange Notes in
a form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any
Registration Statement or in respect of Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) reasonable messenger, telephone and delivery expenses, (iv) reasonable
fees and disbursements of counsel for the Company and, in the case of a Shelf
Registration, reasonable fees and disbursements of one special counsel for
all of the sellers of Registrable Notes (exclusive of any counsel retained
pursuant to Section 7 hereof), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi)
Securities Act liability insurance, if the Company desires such insurance,
(vii) fees and expenses of all other Persons retained by the Company, (viii)
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees of the Company performing legal or
accounting duties), (ix) the expense of any annual audit, (x) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, and (xi) the reasonable expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, indentures and any other documents
necessary in order to comply with this Agreement.
7. Indemnification
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers, directors, employees and agents of
each such Person, and each Person, if any, who controls any such Person within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a
<PAGE>
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"Participant"), from and against any and all losses, claims, damages,
judgments, liabilities and expenses (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out
of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment
thereto) or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by, arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the case of the
Prospectus in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by, arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Participant furnished to the Company in
writing by such Participant expressly for use therein; provided, however,
that the Company will not be liable if such untrue statement or omission or
alleged untrue statement or omission was contained or made in any preliminary
prospectus and corrected in the final Prospectus or any amendment or
supplement thereto and any such loss, liability, claim, or damage or expense
suffered or incurred by the Participants resulted from any action, claim or
suit by any Person who purchased Registrable Notes or Exchange Notes which
are the subject thereof from such Participant and it is established in the
related proceeding that such Participant failed to deliver or provide a copy
of the final Prospectus (as amended or supplemented) to such Person with or
prior to the confirmation of the sale of such Registrable Notes or Exchange
Notes sold to such Person if required by applicable law, unless such failure
to deliver or provide a copy of the Prospectus (as amended or supplemented)
was a result of noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and its employees and agents and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Participant, but only with reference to information
relating to such Participant furnished to the Company in writing by such
Participant expressly for use in any Registration Statement or Prospectus,
<PAGE>
-26-
any amendment or supplement thereto, or any preliminary prospectus. The
liability of any Participant under this paragraph shall in no event exceed
the proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Persons shall not relieve any of them of any obligation or
liability which any of them may have hereunder or otherwise except to the extent
it is materially prejudiced by such failure. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Persons and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed
within a reasonable period of time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both any Indemnifying Person and the
Indemnified Person or any affiliate thereof and representation of both parties
by the same counsel would be inappropriate due to actual or potential
conflicting interests between them. It is understood that, unless there exists
a conflict among Indemnified Persons, the Indemnifying Persons shall not, in
connection with such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and any such separate firm for the
Company, its directors, its officers
<PAGE>
-27-
and such control Persons of the Company shall be designated in writing by the
Company and shall be reasonably acceptable to the Holders. The Indemnifying
Persons shall not be liable for any settlement of any proceeding effected
without its prior written consent (which consent shall not be unreasonably
withheld or delayed), but if settled with such consent or if there be a final
non-appealable judgment for the plaintiff for which the Indemnified Person is
entitled to indemnification pursuant to this Agreement, each of the
Indemnifying Persons agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of
the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to
the date of such settlement; provided, however, that the Indemnifying Person
shall not be liable for any settlement effected without its consent pursuant
to this sentence if the Indemnifying Person is contesting, in good faith, the
request for reimbursement. No Indemnifying Person shall, without the prior
written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party, or indemnity could have been sought hereunder
by such Indemnified Person, unless such settlement (A) includes an
unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all
liability on claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in clauses (a) and (b) of
this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such
<PAGE>
-28-
Indemnified Person as a result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect (i) the relative benefits
received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the relative
fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements
or omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Participants on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (net of
discounts and commissions but before deducting expenses) of the Notes
received by the Company bears to the total proceeds received by such
Participant from the sale of Registrable Notes or Exchange Notes, as the case
may be, in each case as set forth in the table on the cover page of the
Offering Memorandum dated June 13, 1997 in respect of the sale of the Notes.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such Participant or
such other Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such
<PAGE>
-29-
Participant from sales of Registrable Notes or Exchange Notes, as the case
may be, exceeds the amount of any damages that such Participant has otherwise
been required to pay or has paid by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Company and its directors, officers, employees or agents or any
person controlling the Company, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Company covenants and agrees that, so long as Registrable Notes
remain outstanding, it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time the Company is not
permitted to file such reports, the Company will, upon the request of any Holder
or beneficial owner of Registrable Notes, make publicly available annual reports
and such information, documents and other reports of the type specified in
Sections 13 and 15(d) of the Exchange Act. The Company further covenants for so
long as any Registrable Notes remain outstanding, to make available to any
Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such Holder
or beneficial owner the information required by Rule 144A(d)(4) under the
Securities
<PAGE>
-30-
Act in order to permit resales of such Registrable Notes pursuant to Rule
144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. As of the date hereof, the Company
has not entered into any agreement with respect to any of its securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of any of the Company's
other issued and outstanding securities. As of the date hereof, the Company has
not entered into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to any
Registration Statement required to be filed by the Company pursuant to this
Agreement.
(b) Adjustments Affecting Registrable Notes. The Company shall not
knowingly, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof
<PAGE>
-31-
may not be given, otherwise than with the prior written consent of (I) the
Company and (II)(A) the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes and (B) in
circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may
not be amended, modified or supplemented without the prior written consent of
each Holder and each Participating Broker-Dealer (including any person who
was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange
Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
BT Securities Corporation,
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
<PAGE>
-32-
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
(ii) if to the Initial Purchasers, at the address specified in Section
10(d)(1);
(iii) if to the Company, at the address as follows:
Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Facsimile No.: (212) 521-1640
Attention: Secretary
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Facsimile No.: (212) 558-3588
Attention: Robert E. Buckholz, Jr.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and upon receiving
confirmation receipt by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers, provided that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Notes in violation of the terms of the Purchase Agreement or the
Indenture.
<PAGE>
-33-
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or any of its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Irene B. Fisher
________________________________
Name: Irene B. Fisher
Title: Vice President
BT SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.,
as Initial Purchasers
By: BT Securities Corporation
By: /s/ Brian Tully
_______________________________
Name: B. Tully
Title: MD
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Big Flower Press Holdings, Inc. on Form S-4 of our reports dated February 14,
1997 appearing in the Annual Report on Form 10-K of Big Flower Press Holdings,
Inc. for the year ended December 31, 1996 and to the reference to us under the
heading "Independent Auditors" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
July 25, 1997
