<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998
REGISTRATION NO. 333-42745
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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. / /
------------------------
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
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 MARCH 13,
1998 UNLESS EXTENDED.
Big Flower Press Holdings, Inc., a Delaware corporation ("Big Flower Press"
or 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 $100,000,000 in aggregate principal
amount was issued on October 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 and Outstanding 8 7/8% Notes (as defined)
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 and Outstanding 8 7/8%
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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 be issued under the same indentures as, and will rank PARI PASSU
in right of payment with, the Outstanding 8 7/8% Notes 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
September 30, 1997, on a PRO FORMA basis after giving effect to (a) the
consummation of the offering of the Private Notes (the "Private Notes Offering")
and the application of the proceeds thereof, (b) the concurrent offering of
2,300,000 shares of 6% Convertible Subordinated Quarterly Income Preferred
Securities (the "Convertible Preferred Securities") by a special purpose
subsidiary of the new parent company of Big Flower Press, and the application of
the proceeds thereof and (c) the Acquisitions (as defined) (the "Pro Forma
Basis"), the Company would have had approximately $258.7 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 September 30, 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 (as
defined), the Company's subsidiaries would have had approximately $513.1 million
of liabilities (including trade payables and the New Credit Facility).
SEE "RISK FACTORS", ON PAGES 20 TO 23, FOR A DISCUSSION OF CERTAIN FACTORS
THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
---------------------
THESE 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 February 11, 1998
<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 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 and the amendments thereto 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;
(iv) The Company's Current Report on Form 8-K dated June 12, 1997, filed
with the Commission on June 16, 1997;
(v) The Company's Current Report on Form 8-K dated June 20, 1997, filed
with the Commission on July 14, 1997;
(vi) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, filed with the Commission on August 14, 1997;
(vii) The Company's Current Report on Form 8-K dated September 18, 1997,
filed with the Commission on October 3, 1997;
(viii) The Company's Current Report on Form 8-K dated October 3, 1997,
filed with the Commission on October 6, 1997;
(ix) The Company's Current Report on Form 8-K dated October 17, 1997,
filed with the Commission on October 20, 1997;
(x) The Company's Current Report on Form 8-K dated October 15, 1997,
filed with the Commission on October 29, 1997;
(xi) The Company's Amendment to Current Report on Form 8-K/A dated
September 18, 1997, filed with the Commission on November 24, 1997; and
(xii) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, filed with the Commission on November 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.
3
<PAGE>
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.
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 Big Flower Holdings, Inc.
("Big Flower Holdings"), the parent of Big Flower Press, is currently traded on
The New York Stock Exchange (the "NYSE"), and such reports, proxy statements and
other information concerning Big Flower Holdings also can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
Big Flower Press was incorporated in Delaware in 1993. The Company'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," 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 AND OTHER ECONOMIES, 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 PRESS" REFER TO BIG FLOWER PRESS
HOLDINGS, INC. AND ITS SUBSIDIARIES. ON OCTOBER 17, 1997, AS A RESULT OF A
HOLDING COMPANY REORGANIZATION BIG FLOWER HOLDINGS, INC. BECAME THE PARENT OF
BIG FLOWER PRESS. SEE "RECENT DEVELOPMENTS."
THE COMPANY
Big Flower Press is a leading advertising and marketing services company
which provides integrated advertising solutions through its three principal
operating units as of September 30, 1997: Treasure Chest Advertising Company,
Inc. ("TC Advertising"), Webcraft, Inc., formerly known as Webcraft
Technologies, Inc. ("Webcraft") and Laser Tech Color, Inc. ("Laser Tech"). As of
September 30, 1997, the Company and its subsidiaries 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 Press 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.
5
<PAGE>
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 Press' 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 Press 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 Press 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 Press has responded to this
trend in all of its businesses:
- TC ADVERTISING'S Target 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 15,000 newspaper delivery zones
in the nation's top 200 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 Press has established
employee incentive compensation programs to promote cross-selling of the entire
Big Flower Press product and services lines. For example, TC Advertising
provides 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 makes available 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
6
<PAGE>
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. On June 30, 1997, the Company's digital
network connected 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 Press 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. See "--Recent Developments." In addition, Big Flower Press
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 Press 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>
TC Advertising KTB Associates, Inc., and April 1994 - Increased TC Advertising's capacity and
Retail Graphics Holding broadened its customer base in the advertising
Company insert industry sector
PrintCo., Inc. October 1996 - Added significant retail accounts and new
production capacity
Riverside County October 1997 - Expanded presence in the Western United States
Publishing Company
- Broadened its customer base in the advertising
insert industry sector
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
Olwen Direct Mail, Limited September 1997 - Established international platform for the
Company
- Provided multinational direct mail expertise
- Enhanced database management capabilities
IMPCO Enterprises, Inc. November 1997 - Expanded direct marketing capabilities to
include database services and response
management
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
BUSINESS UNIT BUSINESS ACQUIRED DATE STRATEGIC SIGNIFICANCE
- ---------------- -------------------------- ------------------ ------------------------------------------------
<S> <C> <C> <C>
Laser Tech Pacific Color Connection, October 1996 - Enhanced expertise in digital premedia
Inc. services
- Expanded presence in California
- Added internet production services
- Expanded product lines to include large format
advertising products
Designer Color Systems, December 1996 - Added capability to produce interactive
Ltd. multimedia systems for electronic catalogs and
ordering systems
Digital Dimensions, Inc. December 1996 - Enhanced digital imaging services platform
- Added capability to provide Web site design
and execution
Gamma One, Inc. October 1997 - Provided strategic Northeast presence
- Enhanced digital image management and
facilitated management capabilities
Columbine Columbine JDS Systems, October 1997 - Diversified Big Flower Press into broadcast
Inc. media industry
- Provided strategic coordination between
digital moving images and digital still images
- Offered software and technology expertise that
can be leveraged throughout Big Flower Press
Broadcast Systems Software November 1997 - Expands Columbine's presence in the United
Limited Kingdom
- Provides PC-based software for television
programming
</TABLE>
ACQUISITION DEVELOPMENTS
In September 1997, the Company acquired Olwen Direct Mail, Limited
("Olwen"). In October 1997, the Company acquired Columbine JDS Systems, Inc.
("Columbine"), certain assets and liabilities of Brown Printing Company,
operating as Riverside County Publishing Company ("RCPC") and substantially all
of the assets of Gamma One, Inc. ("Gamma One") (hereinafter referred to
collectively as the "Acquisitions"). Total consideration for the Acquisitions,
including the assumption and/or repayment of debt, transaction fees and expenses
and the net issuance of approximately 1.2 million shares of common stock of Big
Flower Holdings, Inc. was approximately $290.0 million. In November 1997, the
Company acquired Broadcast Systems Software Limited ("BSS") and substantially
all of the assets of IMPCO Enterprises, Inc. ("IMPCO").
OLWEN DIRECT MAIL LIMITED
In September 1997, the Company formed a wholly-owned subsidiary, Big Flower
Limited ("BGF Limited"), and BGF Limited acquired 100% of the capital stock of
Olwen. Headquartered in South London, Olwen provides comprehensive, full service
direct mail production services to more than 150 clients in the financial
services, advertising and publishing industries. Services include all aspects of
direct
8
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mail preparation, including prepress, printing, personalization, finishing and
mailing. In addition, Olwen provides a variety of higher value-added database
management services such as response analysis and target customer profiling. In
addition to its UK headquarters, Olwen also operates a database management and
international direct mail group in Baltimore, Maryland.
Olwen, the Company's first acquisition outside of the United States, will
provide international advertising and marketing services to the Company's
multinational customers. Olwen's operations will be coordinated with Webcraft's.
The Company believes that Olwen's highly refined short-run capabilities, which
are necessary to satisfy Europe's differentiated language and culture-specific
markets, will be applicable in several markets throughout the United States. In
addition, Olwen establishes an international presence that the Company will seek
to use as a platform to position the Company to provide advertising and
marketing services across a broader spectrum of media in international markets.
COLUMBINE JDS SYSTEMS, INC.
On October 31, 1997, the Company acquired Columbine, a Denver, Colorado
based company that is a leading provider of software products and related
services to the cable, satellite and terrestrial broadcast industries in both
the United States and international markets. Columbine's proprietary suite of
software products manages the placement of broadcast advertisements, programming
material and sales information data for television stations, radio stations,
group operators, broadcast and cable networks, cable operators and direct
broadcast satellite providers. Columbine's software also assists advertising
agencies and media representation firms in the buying and selling of advertising
time. Columbine's systems track and time commercials, produce sales analysis and
proposals, offer master control automation and provide program management and
accounting and finance functions. Columbine has begun the introduction of its
Paradigm Integrated Broadcast System ("Paradigm"), a next generation software
system which integrates and automates all information management activities and
day-to-day operating support for digital, multi-channel broadcasting
environments.
In addition, Columbine provides management consulting services, temporary
personnel, custom software development, on-site training and 24-hour technical
support to its customers. Columbine is also a value-added reseller of hardware
and software technologies complementary with its products for major technology
providers including IBM, Tektronix, Hewlett Packard and Microsoft. Columbine
operates out of four domestic and three international offices in Denver, New
York City, Memphis, San Francisco, London, Sydney and Hong Kong.
Big Flower Press formed a wholly-owned subsidiary, Big Flower Digital
Services, Inc. ("Big Flower Digital"). Big Flower Digital is the parent company
to Columbine and Laser Tech. The Company believes that there are strategic
benefits to coordinating Laser Tech's expertise in the digital management of
still images, use of server technology and capacity of broadband
telecommunications networks with Columbine's expertise in the digital management
of moving images used in advertising and programming services.
RIVERSIDE COUNTY PUBLISHING COMPANY
On October 15, 1997, the Company acquired RCPC, a California-based provider
of retail advertising insert programs. RCPC became an operating unit of TC
Advertising. RCPC adds significant grocery, drug store, and home improvement
merchant accounts. RCPC's two California locations add capacity to TC
Advertising's nationwide network of offset press facilities, enabling TC
Advertising to provide its customers with a highly cost-efficient and effective
method of producing multiple versions of inserts for their growing demand for
store-specific, targeted advertising.
GAMMA ONE, INC.
On October 31, 1997, Big Flower Press acquired Gamma One, a New
England-based provider of digital premedia services which became an operating
unit of Laser Tech. Gamma One's Northeast facilities will significantly increase
Laser Tech's presence in the New York and New England markets. Gamma One's
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<PAGE>
proprietary digital image database management system, strong customer base and
facilities management services will add scope and reach to Laser Tech's
operations.
BROADCAST SYSTEMS SOFTWARE LIMITED
On November 6, 1997, Big Flower Press acquired BSS, a UK-based provider of
specialist software to the broadcast industry. BSS became an operating unit of
Columbine. BSS specializes in software programs that address electronic
operations such as long-term planning, program scheduling, acquisitions, library
management and commercial sales and bookings. The flagship product of BSS, the
Broadcast Master software suite, was the first fully integrated suite of
PC-based software for television programming. BSS' Broadcast Master software
system complements Columbine's systems and offers the Company's domestic and
international customers enhanced resources for the acquisition, analysis and
sale of advertising-supported programming in the terrestrial and satellite band
media markets.
IMPCO ENTERPRISES, INC.
On November 18, 1997, Big Flower Press acquired IMPCO, a privately-owned
marketing services company based in Rochester, New York. IMPCO became a
subsidiary of Webcraft. IMPCO specializes in telemarketing, strategic response
management and database management for the communications, healthcare,
advertising agency and financial services industries. The additions of IMPCO's
database management expertise and response management capabilities are important
steps in the Company's strategy of transforming Webcraft into a fully integrated
direct marketing provider. IMPCO supplements the Company's direct response
capabilities.
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.
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
Press' 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 20, 1997, the Company completed an offering of $250.0 million of its
8 7/8 Senior Subordinated Notes due July 1, 2007 (the "Outstanding 8 7/8%
Private Notes"). On September 25, 1997, all of the Outstanding 8 7/8% Private
Notes were exchanged for a like amount of the Company's 8 7/8% Senior
Subordinated Notes due July 1, 2007 (the "Outstanding 8 7/8% Notes"). The form
and terms of the Outstanding 8 7/8% Notes are identical in all material respects
to those of the Outstanding 8 7/8% Private Notes, except for certain transfer
restrictions and registration rights relating to the Outstanding 8 7/8% Private
Notes.
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 approximately $126.7 million (representing substantially all
of the then outstanding 10 3/4% Notes) was tendered by holders of the 10 3/4%
Notes and
10
<PAGE>
accepted for payment by the Company, the funding for which came from borrowings
under the New Credit Facility.
On September 18, 1997, the Company's wholly-owned subsidiary, BGF Limited,
entered into a 27.0 million pounds (approximately $45.0 million) revolving
credit facility (the "UK Facility") and the Company guaranteed payment of BGF
Limited's obligations thereunder. Proceeds from the UK Facility were used (i) to
fund the acquisition of Olwen (see "--Acquisition Developments"), (ii) to repay
certain indebtedness of Olwen, and (iii) for working capital and general
corporate purposes of BGF Limited and Olwen. The UK Facility terminates in
February 1998. The Company intends to replace the UK Facility with additional
borrowings under the New Credit Facility and will seek to amend the New Credit
Facility to allow borrowings denominated in one or more foreign currencies.
On October 17, 1997, the Company completed a reorganization of its legal
structure pursuant to Section 251 (g) of the Delaware General Corporation Law,
Big Flower Holdings, Inc. became the new parent holding company of Big Flower
Press, which became a wholly-owned subsidiary, and the common stock of Big
Flower Press was automatically exchanged for common stock of the new holding
company. The purpose of the reorganization was to facilitate the concurrent
offer of the Convertible Preferred Securities. The business operations of Big
Flower Press Holdings, Inc. did not change as a result of implementing the new
legal structure. The reorganization was structured in a manner that did not
require action by the stockholders of Big Flower Press Holdings, Inc., whose
rights, privileges and interest remained the same with respect to the new parent
corporation. The Company's name, charter, by-laws and board of directors did not
change as a result of the reorganization, and the new holding company has the
same board of directors as the Company had immediately prior to the
reorganization. The common stock of the new parent company trades under the
ticker symbol "BGF" on the NYSE.
The following chart sets forth the organizational structure of Big Flower
Holdings, Inc. and the Company, after taking into account the Acquisitions, the
acquisitions of BSS and IMPCO and the restructuring described above.
[CHART SHOWING ORGANIZATIONAL STRUCTURE
OF BIG FLOWER HOLDINGS, INC. AFTER
THE ACQUISITION, THE ACQUISITION OF BSS AND
IMPCO, AND THE RESTRUCTURING]
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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
$100,000,000 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>
12
<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
October 20, 1997 to BT Alex. Brown
Incorporated, Credit Suisse First Boston
Corporation and Goldman, Sachs & Co.
(collectively, the "Initial Purchasers")
pursuant to a Purchase Agreement, dated
October 15, 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 October 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 March 13, 1998, 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
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Agent"), at the address set forth herein. By
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>
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<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>
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<PAGE>
THE NOTES
The Exchange Offer applies to $100,000,000 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........................... $100,000,000 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, which commenced 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 and
Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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, and Outstanding 8 7/8% 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 and Outstanding
8 7/8% 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 and Outstanding 8 7/8% 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
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
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.
Ranking...................................... The Notes are unsecured, senior subordinated
obligations of the Company and will be issued
under the same indenture as the Outstanding
8 7/8% Notes and rank PARI PASSU with them,
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). At September
30, 1997, on a Pro Forma Basis, the Company
would have had approximately $608.8 million
of indebtedness, $258.7 million of which
would have been Senior Indebtedness and
$350.1 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 September 30,
1997, on a Pro Forma Basis the Company's
subsidiaries would have had approximately
$513.1 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 Notes will be issued under the same
indenture (the "Indenture") as the
Outstanding 8 7/8% Notes and 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 20, for a discussion of certain
factors that should be considered in evaluating an investment in the Notes.
17
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth summary financial data of predecessor TC
Advertising prior to its acquisition by Big Flower Press ("Predecessor TC
Advertising") and of Big Flower Press and its subsidiaries (including TC
Advertising) following Big Flower Press' acquisition of TC Advertising. On March
21, 1996, Big Flower Press' 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 Press 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 Press. The summary financial data for the nine-month periods ended
September 30, 1996 and 1997 were derived from the Company's unaudited condensed
consolidated interim financial statements for such periods. On October 4, 1996,
Big Flower Press consummated the acquisition of Scanforms, Inc. ("Scanforms") in
a transaction accounted for as a pooling of interests. Accordingly, the Big
Flower Press 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
incorporated by reference herein. The summary financial data should also be read
in conjunction with "Unaudited Pro Forma Condensed Combined Financial Data."
<TABLE>
<CAPTION>
PREDECESSOR TC ADVERTISING BIG FLOWER PRESS
-------------------------------- ------------------------------------------------------
SIX MONTH
TRANSITION
PERIOD
YEAR ENDED 42 DAYS 323 DAYS YEAR ENDED YEAR
JUNE 30, ENDED ENDED ENDED DECEMBER DECEMBER
------------------ AUGUST 11, JUNE 30, JUNE 30, 31, 31,
1992 1993 1993 1994 1995 1995 1996
-------- -------- ---------- --------- --------- ---------- -----------
(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
and extraordinary item........... 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
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................... $ 4,567 $ (3,597) $ 25,198 $ 34,173 $ 29,797 $ (30,821)(f)
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>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1997
-------- --------
<S> <C> <C>
OPERATING DATA:
Net sales.......................... $844,286 $955,918
Operating income................... 40,321 59,543
Interest expense (a)............... 25,496 29,309
Income (loss) before income taxes
and extraordinary item........... 2,969 23,595
Income (loss) before extraordinary
item............................. 1,168 12,134
Extraordinary item, net (b)........ (1,892) (13,463)
Net income (loss).................. (724) (1,329)
Average shares outstanding......... 18,358 19,379
Ratio of earnings to fixed charges
(c).............................. --(d) 1.6x
OTHER DATA:
EBITDA(e).......................... $ 77,383 $106,775
Capital expenditures............... 38,180 60,071
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................... $ (3,706)(f) $(23,710)(f)
Net property, plant and
equipment........................ 250,325 325,033
Total assets....................... 705,778 814,507
Long-term debt, net of current
portion.......................... 200,987 496,092
Redeemable preferred stock of a
subsidiary.......................
Common stockholders' equity........ 88,311 92,083
</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 Press' net loss for the six months ended December 31, 1995
includes an extraordinary loss, net of tax, of $19.2 million on early
extinguishment of debt and termination of a swap agreement. Big Flower
Press' net loss for the nine months ended September 30, 1996 includes an
extraordinary loss, net of tax, of $1.9 million on early extinguishment of
debt and Big Flower Press' net loss for the year ended December 31, 1996
includes an extraordinary loss, net of tax, of $2.1 million on early
extinguishment of debt. Big Flower Press' net loss for the nine months ended
September 30, 1997 includes an extraordinary loss, net of tax, of $13.5
million 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).
18
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(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 $3.1 million for Big Flower Press for the 323 days ended June
30, 1994 and the nine months ended September 30, 1996, respectively.
Adjusted to eliminate non-cash charges of depreciation and amortization of
$28.8 million and $36.5 million for the 323 days ended June 30, 1994 and the
nine months ended September 30, 1996, respectively, such earnings would have
exceeded fixed charges by $27.9 million and $33.4 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. The Company's
definition of EBITDA might not be the same as that of other companies.
(f) 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.
19
<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 September 30, 1997, on a Pro Forma Basis, the Company would have had, on
a consolidated basis, approximately $608.8 million of indebtedness, including
capitalized lease obligations. The Company may also borrow an additional amount
of up to $137.8 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 September 30, 1997, the Company had significant commitments under operating
leases and approximately $90.7 million was outstanding under the A/R
Securitization (as defined). In addition, on October 20, 1997, the newly created
parent of the Company issued debentures (the "Debentures") in connection with
the issuance of the Convertible Preferred Securities. See Notes 5 and 10 of the
Notes to the Consolidated Financial Statements and "Unaudited Pro Forma
Condensed Consolidated Financial Data."
The level of the Company's (and the new parent 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 (including debt service on the Debentures) 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 and to pay dividends to Big Flower Holdings, Inc. which enable
Big Flower Holdings, Inc. to make interest payments on the Debentures. 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 September 30,
1997, on a Pro Forma Basis, the Company's subsidiaries would have had
approximately $513.1 million of liabilities (including trade payables and the
New Credit Facility). In addition, at September 30, 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.
20
<PAGE>
RAW MATERIALS--PAPER
The cost of paper is a principal factor in the TC Advertising's pricing to
certain customers. As TC Advertising is the Company's largest operating unit,
the cost of paper significantly affects the Company's net sales. TC Advertising
is generally able to pass increases in the cost of paper to its customers, while
decreases 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. 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 16 acquisitions to increase and diversify
its industry 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, the Indenture, and the Company's other outstanding
debt instruments 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.
21
<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 and Outstanding 8 7/8% Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest thereon. The New Credit Facility prohibits the Company from purchasing
any Notes or Outstanding 8 7/8% 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
and Outstanding 8 7/8% Notes. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing Notes
and Outstanding 8 7/8% Notes. In such case, the Company's failure to purchase
tendered Notes and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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."
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
Columbine must continually change and improve its products in response to
changes in operating systems, application and networking software, computer and
communications hardware, programming tools and computer language technology. The
future operating results of the Company may be affected by Columbine's ability
to enhance its current products and to develop and introduce new products on a
timely
22
<PAGE>
basis that address the increasingly sophisticated needs of its customers and
that keep pace with technological developments, new competitive product
offerings and emerging industry standards. If Columbine does not respond
adequately to the need to develop and introduce new products or enhancements of
existing products in a timely manner, the Company's business, operating results
and financial condition may be materially adversely affected.
LACK OF PUBLIC MARKET FOR SECURITIES
The Exchange Notes are new securities for which there is currently no
market. 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 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.
23
<PAGE>
PRICE RANGE OF THE PRIVATE NOTES
The Private Notes were designated for trading in the PORTAL market of the
NASD effective October 15, 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 Alex. Brown Incorporated, a market maker for the Private
Notes:
<TABLE>
<CAPTION>
HIGH LOW
---------- ---------
<S> <C> <C>
Quarter Ending December 31, 1997 (beginning October 20, 1997
and through December 31, 1997)............................................................ $ 1,027.50 $ 1,000
Quarter Ending March 31, 1998 (beginning January 1, 1998
and through February 2, 1998)............................................................. 1,030 1,020
</TABLE>
Such reported quotations may not reflect actual transactions. On February 2,
1998, the closing bid quotation for the Private Notes was $1,022.50 per $1,000
principal amount (representing approximately 102% of principal amount). As of
February 5, 1998 there was 1 record holder of the Private Notes and 14
participants in the Global Note deposited with the Depositary.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, on a historical basis and on a Pro Forma Basis.
This table should be read in conjunction with the Company's consolidated
financial statements incorporated by reference in this Prospectus, and the
Summary Financial Data and Unaudited Pro Forma Condensed Combined Financial Data
contained elsewhere in the document.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Short-term debt:
Current portion of long-term debt................................................... $ 473 $ $ 473
-------- ----------- ---------
-------- ----------- ---------
Long-term debt:
New Credit Facility................................................................. $241,624 $ 12,137(a) $253,761
Outstanding 8 7/8% Notes and the Notes.............................................. 250,000 100,125(b) 350,125
Other long-term debt................................................................ 4,468 4,468
-------- ----------- ---------
Total long-term debt................................................................ 496,092 112,262 608,354
Total stockholders' equity............................................................ 92,083 111,000(c) 173,468
27,244(d)
(56,859)(e)
-------- ----------- ---------
Total capitalization................................................................ $588,175 $ 193,647 $781,822
-------- ----------- ---------
-------- ----------- ---------
</TABLE>
- ------------------------
(a) Represents additional net borrowings under the New Credit Facility used to
fund the acquisitions completed in October, 1997 and fees related to the
Notes.
(b) Represents the proceeds from the Private Note Offering, including premium,
the net proceeds of which were used to repay borrowings under the New Credit
Facility incurred to fund the Acquisitions.
(c) Represents the Capital Contribution (as defined).
(d) Represents the contribution by Big Flower Holdings, Inc. of its common stock
and options in connection with the Acquisitions.
(e) Stockholders' equity reflects the write-off of in-process technology
(approximately $55.7 million) and other expenses ($1.1 million net of taxes)
which represent one-time non-recurring items in connection with the
Acquisitions.
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial data is based
on, and should be read in conjunction with, the consolidated financial
statements of Big Flower Press which are incorporated by reference in this
Prospectus. The pro forma information has been prepared to illustrate the effect
of (a) the Acquisitions, all accounted for under the purchase method of
accounting, (b) the completion of the Private Notes Offering and (c) the capital
contribution by Big Flower Holdings to Big Flower Press of $111.0 million (the
"Capital Contribution").
The unaudited pro forma condensed combined balance sheet as of September 30,
1997 assumes that the acquisitions completed in October, 1997, the Private Notes
Offering and the Capital Contribution occurred on September 30, 1997 and the
unaudited pro forma condensed combined statements of operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996 assume that
the Acquisitions, the Private Notes Offering and the Capital Contribution were
consummated as of the first day of the periods presented. Since the acquisition
of Olwen was completed on September 18, 1997, its balance sheet and the effects
of financing its acquisition are reflected in the Company's September 30, 1997,
balances. The unaudited pro forma condensed combined financial data does not
reflect the fourth quarter 1997 acquisitions of BSS and IMPCO, as the assets and
operations acquired were not significant, individually or in the aggregate.
In the following unaudited pro forma condensed combined financial data the
acquisitions of Webcraft, PrintCo., Inc., Pacific Color Connection, Inc.,
Designer Color Systems, Ltd. and Digital Dimensions, Inc., all accounted for
under the purchase method, are included in the historical consolidated financial
statements from the dates of such respective acquisitions (See Note 2 of the
Notes to the Consolidated Financial Statements).
The pro forma adjustments are based on preliminary estimates which are
derived from available information and certain assumptions. In accordance with
GAAP, the amount allocated to in-process technology, approximately $55.7
million, was charged to expense at the time Big Flower Press completed the
acquisition of Columbine. This adjustment has been excluded from the unaudited
pro forma condensed combined statements of operations as it is a one-time
non-recurring item. While Big Flower Press believes, based on available
information, that the fair values and allocations included in the unaudited pro
forma condensed combined financial statements are reasonable estimates, final
purchase accounting adjustments will be made at the completion of the
evaluations and estimates as of the actual purchase dates. As a result, the
final allocation of costs related to the Acquisitions may differ materially from
that presented herein.
The unaudited pro forma condensed combined financial data excludes any
potential benefits that might result from the Acquisitions due to synergies that
may be derived and from the elimination of certain costs. The unaudited pro
forma condensed combined financial data does not purport to represent what Big
Flower Press' results of operations actually would have been if the
Acquisitions, the Private Notes Offering and the Capital Contribution had
occurred on the date or for the periods indicated or what such results will be
for any future date or future periods.
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
BIG FLOWER PRO FORMA
PRESS COLUMBINE RCPC GAMMA ONE ADJUSTMENTS PRO FORMA
---------- --------- ------- --------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 3,804 $ 3,297 $ 6 $ 17 $ 7,124
Accounts receivable, net............................... 102,591 7,480 21,102 4,742 135,915
Inventories............................................ 40,136 285 6,480 1,511 48,412
Prepaid expenses and other assets...................... 6,764 388 204 135 7,491
Deferred income taxes.................................. 17,240 601 17,841
---------- --------- ------- --------- -----------
Total current assets................................. 170,535 12,051 27,792 6,405 216,783
Property, plant and equipment, net....................... 325,033 4,334 25,763 2,102 357,232
Intangibles and other assets, net........................ 318,939 36,465 812 $ 3,000(c) 322,327
(36,889)(g)
Acquired technology...................................... 16,969(a) 16,969
Excess purchase cost over net assets acquired............ 123,359(a) 123,359
55,715(a)
(55,715)(f)
---------- --------- ------- --------- ----------- -----------
TOTAL ASSETS......................................... $814,507 $52,850 $54,367 $8,507 $ 106,439 $1,036,670
---------- --------- ------- --------- ----------- -----------
---------- --------- ------- --------- ----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Accounts payable....................................... $124,943 $ 477 $ 9,119 $ 988 $ 135,527
Accrued liabilities.................................... 68,829 5,736 2,791 2,182 $ 1,144(f) 84,974
4,292(a)
Current portion of long-term debt...................... 473 3,729 1,860 (5,589)(a) 473
---------- --------- ------- --------- ----------- -----------
Total current liabilities............................ 194,245 9,942 11,910 5,030 (153) 220,974
Long-term debt, net of current portion................... 254,468 9,499 2,019 (11,518)(a) 354,593
100,125(b)
New Credit Facility...................................... 241,624 203,155(a)(b) 253,761
17,107(a)(b)
(211,125)(b)
3,000(c)
Deferred income taxes.................................... 18,244 1,665 76 19,985
Other long-term liabilities.............................. 13,843 46 13,889
---------- --------- ------- --------- ----------- -----------
Total liabilities.................................... 722,424 21,152 11,910 7,125 100,591 863,202
---------- --------- ------- --------- ----------- -----------
Stockholders' equity:
Preferred stock........................................ -- 3,344 (3,344)(e) --
Common stock and additional paid in capital............ 116,020 24,431 (252) (24,179)(e) 254,264
27,244(a)(d)
111,000(b)
Retained earnings (accumulated deficit)................ (22,843) 3,923 42,457 1,634 (48,014)(e) (79,702)
(55,715)(a)(f)
(1,144)(f)
Other.................................................. (1,094) (1,094)
---------- --------- ------- --------- ----------- -----------
Total stockholders' equity........................... 92,083 31,698 42,457 1,382 5,848 173,468
---------- --------- ------- --------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $814,507 $52,850 $54,367 $8,507 $ 106,439 $1,036,670
---------- --------- ------- --------- ----------- -----------
---------- --------- ------- --------- ----------- -----------
</TABLE>
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(a) The acquisition of Olwen was completed on September 18, 1997. Consequently,
the historical balance sheet includes Olwen's assets and liabilitites, as
well as the borrowings and goodwill related to its acquisition. The pro
forma purchase cost of the acquisitions completed in October, 1997 and the
determination of the remaining estimated excess purchase cost over the book
value of the assets acquired are as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
PURCHASE COST:
Cash paid.................................................................... $ 203,155
Debt assumed and repaid...................................................... 17,107
Common stock and options of Big Flower Holdings, Inc. (see note (d) below)... 27,244
Estimated fees, costs and expenses........................................... 4,292
-------------
Total purchase cost............................................................ 251,798
-------------
Assets acquired:
Current...................................................................... 46,248
Property, plant and equipment and other (1).................................. 32,587
Liabilities assumed (net of debt acquired in the acquisitions)............... (23,080)
-------------
Net assets acquired............................................................ 55,755
-------------
Excess of purchase cost over net assets acquired............................... 196,043
Less identified intangibles:
Existing technology........................................................ 16,969
In-process technology...................................................... 55,715
-------------
Remaining estimated excess of purchase cost over net assets acquired........... $ 123,359
-------------
-------------
</TABLE>
The remaining estimated excess purchase cost over the book value of net
assets acquired has not been fully allocated to individual assets or
liabilities acquired. Big Flower Press believes a portion will be allocated
to property, plant and equipment and identifiable intangibles and the
remainder will be allocated to goodwill. The actual allocation will be based
on the estimated fair value of the tangible and intangible assets and
liabilities of the acquired companies at consummation of the purchase
transactions.
- ------------------------
(1) For purposes of this pro forma, fair value of acquired property, plant
and equipment is assumed to approximate carrying value.
(b) Big Flower Press initially funded $220.3 million for the acquisitions
completed in October, 1997 (including the repayment of previously existing
debt) through borrowings under the New Credit Facility. The proceeds from
the Private Notes Offering and the Capital Contribution were used to repay,
in part, such borrowings.
<TABLE>
<S> <C>
Borrowings under New Credit Facility for the acquisitions
completed in October 1997...................................... $ 220,262
Capital Contribution............................................. (111,000)
Notes including premium on issuance.............................. (100,125)
---------
Net change to borrowings under New Credit Facility............... $ 9,137
---------
---------
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(c) Estimated fees and expenses of $3.0 million incurred in connection with the
Notes were capitalized and will be amortized over the life of the Notes.
Such fees and expenses were paid using borrowings under the New Credit
Facility.
(d) Represents the issuance of 1,041,000 shares of common stock of Big Flower
Holdings, Inc. at market value of $22.9 million, based on a per share price
of $22, and options to purchase 396,000 shares of common stock of Big Flower
Holdings, Inc. valued at estimated market value of $4.3 million (totaling
$27.2 million). Such shares and options are assumed to be contributed by Big
Flower Holdings, Inc. to the Company.
(e) Represents the elimination of the historical capital and retained
earnings/accumulated deficit of the companies acquired in October, 1997.
(f) The following non-recurring charges are excluded from the unaudited pro
forma condensed combined statements of operations but are reflected in the
unaudited pro forma condensed combined balance sheet:
Write-off of in-process technology -- approximately $55.7 million
Accrual of $1.1 million of one-time, stay-on bonuses to certain key
employees, net of income taxes
(g) Represents the elimination of historical goodwill and certain intangibles
for the companies acquired in October 1997.
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
BIG FLOWER PRO FORMA
PRESS COLUMBINE RCPC OLWEN GAMMA ONE ADJUSTMENTS PRO FORMA
---------- --------- -------- ------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $1,201,860 $61,233 $143,940 $29,632 $18,874 $1,455,539
---------- --------- -------- ------- --------- ----------
Operating expenses:
Costs of production................... 971,789 13,065 123,560 16,075 11,268 1,135,757
Selling, general and administrative... 108,969 37,202 10,208 7,459 6,021 $ (4,872)(d) 164,987
Depreciation and amortization of
intangibles......................... 51,759 5,748 5,695 1,604 1,424 3,277(b) 69,507
---------- --------- -------- ------- --------- ----------- ----------
1,132,517 56,015 139,463 25,138 18,713 (1,595) 1,370,251
---------- --------- -------- ------- --------- ----------- ----------
Operating income........................ 69,343 5,218 4,477 4,494 161 1,595 85,288
---------- --------- -------- ------- --------- ----------- ----------
Other expense (income):
Interest expense...................... 34,965 1,448 888 478 410 9,328(c) 47,517
Amortization of deferred financing
costs............................... 3,002 300(c) 3,302
Interest income....................... (712) (28) (740)
Sale of Webcraft Games, Inc........... 14,277 14,277
Other, net............................ 12,813 143 (30) 12,926
---------- --------- -------- ------- --------- ----------- ----------
64,345 1,591 830 478 410 9,628 77,282
---------- --------- -------- ------- --------- ----------- ----------
Income (loss) before income taxes....... 4,998 3,627 3,647 4,016 (249) (8,033) 8,006
Income tax expense...................... 8,283 1,690 1,373 (1) (2,105)(e) 9,240
---------- --------- -------- ------- --------- ----------- ----------
Income (loss) before extraordinary item
(f)(g)................................ $ (3,285) $ 1,937 $ 3,647 $ 2,643 $ (248) $ (5,928) $ (1,234)
---------- --------- -------- ------- --------- ----------- ----------
---------- --------- -------- ------- --------- ----------- ----------
</TABLE>
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
BIG FLOWER PRO FORMA
PRESS COLUMBINE RCPC OLWEN(A) GAMMA ONE ADJUSTMENTS PRO FORMA
---------- --------- -------- -------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................... $955,918 $45,942 $103,899 $ 21,936 $17,282 $1,144,977
---------- --------- -------- -------- --------- ----------
Operating expenses:
Costs of production................... 752,981 8,341 86,895 12,138 9,776 870,131
Selling, general and administrative... 96,162 28,272 8,570 5,101 4,113 $(6,489)(d) 135,729
Depreciation and amortization of
intangibles......................... 47,232 4,848 3,804 985 1,143 2,341(b) 60,353
---------- --------- -------- -------- --------- ----------- ----------
896,375 41,461 99,269 18,224 15,032 (4,148) 1,066,213
---------- --------- -------- -------- --------- ----------- ----------
Operating income........................ 59,543 4,481 4,630 3,712 2,250 4,148 78,764
---------- --------- -------- -------- --------- ----------- ----------
Other expense (income):
Interest expense...................... 29,309 913 520 192 327 7,463(c) 38,724
Amortization of deferred financing
costs............................... 1,277 255(c)
Interest income....................... (257) (10) (267)
Other, net............................ 5,619 (151) (836) 4,632
---------- --------- -------- -------- --------- ----------- ----------
35,948 762 (326) 192 327 7,688 44,591
---------- --------- -------- -------- --------- ----------- ----------
Income (loss) before income taxes....... 23,595 3,719 4,956 3,520 1,923 (3,540) 34,173
Income tax expense...................... 11,461 1,646 1,245 848 680(e) 15,880
---------- --------- -------- -------- --------- ----------- ----------
Income (loss) before extraordinary item
(f)(g)................................ $ 12,134 $ 2,073 $ 4,956 $ 2,275 $ 1,075 $(4,220) $ 18,293
---------- --------- -------- -------- --------- ----------- ----------
---------- --------- -------- -------- --------- ----------- ----------
</TABLE>
30
<PAGE>
NOTES TO THE UNAUDITED CONDENSED COMBINED STATEMENTS
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(a) Represents the historical statement of operations for Olwen for the period
from January 1, 1997 to its acquisition on September 18, 1997.
(b) The pro forma adjustments to depreciation and amortization of intangibles
include the amortization of the estimated excess purchase cost over book
value and the amortization of the purchased technology less amortization
previously incurred on various intangibles. The excess purchase price over
net assets acquired is being amortized over periods between 15 and 40 years
and the existing technology is being amortized over 7 years.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Amortization of estimated excess purchase price over
book value........................................... $ 5,109 $ 3,832
Amortization of existing technology.................... 2,424 1,818
Eliminate amortization of pre existing intangibles..... (4,256) (3,309)
------- -------
$ 3,277 $ 2,341
------- -------
------- -------
</TABLE>
(c) The pro forma adjustments reflect (i) the estimated interest on the Notes
and estimated interest on additional borrowings under the New Credit
Facility which were used to finance the Acquisitions, (ii) the elimination
of interest incurred by the Acquisitions on debt that was repaid and (iii)
the amortization of deferred issuance costs in connection with the Notes.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Eliminate interest expense on:
Debt repaid on the Acquisitions....................... $ (3,224) $ (1,952)
Additional interest expense on:
New Credit Facility borrowings (including borrowings
for the Olwen acquisition) of $54.7 million at an
assumed rate of 6.75%............................... 3,690 2,768
Notes at 8 7/8%, net of amortization of premium....... 8,862 6,647
------- -------
$ 9,328 $ 7,463
------- -------
------- -------
Amortization of Notes issuance costs.................... $ 300 $ 225
------- -------
------- -------
</TABLE>
(d) The pro forma adjustments to selling, general and administrative expense
represent the elimination of excess management allocations to the
Acquisitions from the prior owners. The adjustments for the nine months
ended September 30, 1997 also reflect the elimination of $3.2 million of
one-time stay-on bonuses paid to certain key employees of Olwen at the time
of acquisition, which are included in the historical financial statements.
(e) Pro forma tax adjustments reflect applying the Company's effective tax rate
of 48% to all pro forma adjustments for the respective periods and applying
such tax rates to the pre-tax income of RCPC (formerly a division with no
income taxes allocated).
(f) Amounts allocated to acquired in-process technology and one time stay-on
bonuses to certain key employees have been written off in the unaudited pro
forma condensed combined balance sheet. These after-tax charges of
approximately $55.7 million and $1.1 million (in addition to the bonuses
adjusted for in footnote (d)) have been excluded from the unaudited pro
forma condensed combined statements of operations as they represent
non-recurring items.
(g) In addition to the Company's debt service requirements, the Company intends
to pay dividends to Big Flower Holdings, Inc. sufficient to enable its
subsidiary trust to pay annual dividends of approximately $6.9 million on
the Convertible Preferred Securities.
31
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on October 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 October 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, $100,000,000 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 February 5, 1998 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
32
<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 March
13, 1998, 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
October 20, 1997, payable semi-annually in arrears on January 1 and July 1 of
each year, which commenced 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
33
<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
34
<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 certificated
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 its 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
35
<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.
36
<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 "--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 Department
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>
37
<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
registration 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.
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<PAGE>
BUSINESS
ORGANIZATIONAL STRUCTURE
The following chart sets forth the current organizational structure of Big
Flower Holdings, Inc., after taking into account the Acquisitions, the
acquisition of BSS and IMPCO and the reorganization described above. See
"Summary--Acquisition Developments" and "Summary--Recent Developments." Big
Flower Holdings, Inc. directly or indirectly owns 100% of all of its
subsidiaries. Any reference to TC Advertising, Webcraft, Inc. or Laser Tech
includes their respective subsidiaries unless the context clearly dictates
otherwise.
[CHART SHOWING ORGANIZATIONAL STRUCTURE
OF BIG FLOWER HOLDINGS, INC. AND PRODUCTS
AND SERVICES PROVIDED BY TREASURE
CHEST ADVERTISING COMPANY, INC.,
WEBCRAFT, INC., BIG FLOWER
DIGITAL SERVICES, INC. AND THEIR SUBSIDIARIES]
INTRODUCTION
The Company is a leading advertising and marketing services company with
three principal operating units as of September 30, 1997: 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. As of September 30, 1997, the Company and its
subsidiaries operated in the advertising and marketing services 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 Press 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 Press' 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 Press 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 Press presented the customer
with a five-piece plan that combined
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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 Press has responded to this
trend in all of its businesses:
- TC ADVERTISING'S Target 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 Press has established
employee incentive compensation programs to promote cross-selling of the entire
Big Flower Press 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. At June 30, 1997, the Company's digital network connected
customers and the production centers at all Laser Tech facilities and 14 of the
TC Advertising products 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 Press 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 Press adds value to strategic
acquisitions by identifying operating synergies, effective cost savings and
improving efficiency. Since its initial acquisitions of TC Advertising, Laser
Tech and Webcraft, Big Flower Press has expanded its products and services
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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.
- In September 1997, the Company formed BGF Limited, and BGF Limited
acquired 100% of the capital stock of Olwen. Headquartered in South
London, Olwen provides comprehensive, full service direct mail production
services to more than 150 clients in the financial services, advertising
and publishing industries. Services include all aspects of direct mail
preparation, including prepress, preprinting, personalization, finishing
and mailing. In addition, Olwen provides a variety of higher value-added
database management services such as response analysis and target customer
profiling. In addition to its UK headquarters, Olwen also operates a
database management and international direct mail group in Baltimore,
Maryland.
Olwen, the Company's first acquisition outside of the United States, will
provide international advertising and marketing services to the Company's
multinational customers. Olwen's operations will be coordinated with
Webcraft's. The Company believes that Olwen's highly refined short-run
capabilities, which are necessary to satisfy Europe's differentiated
language and culture-specific markets, will be applicable in several
markets throughout the United States. In addition, Olwen establishes an
international presence that the Company will seek to use as a platform to
position the Company to provide advertising and marketing services across
a broader spectrum of media in international markets.
- On October 31, 1997, the Company acquired Columbine, a Denver, Colorado
based company that is a leading provider of software products and related
services to the cable, satellite and terrestrial
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<PAGE>
broadcast industries in both the United States and international markets.
Columbine's proprietary suite of software products manage the placement of
broadcast advertisements, programming material and sales information data
for television stations, radio stations, group operators, broadcast and
cable networks, cable operators and direct broadcast satellite providers.
Columbine's software also assists advertising agencies and media
representation firms in the buying and selling of advertising time.
Columbine's systems track and time commercials, produce sales analysis and
proposals, offer master control automation and provide program management
and accounting and finance functions. Columbine has begun the introduction
of Paradigm, a next--generation software system which integrates and
automates all information management activities and day to day operating
support for digital, multi-channel broadcasting environments.
In addition, Columbine provides management consulting services, temporary
personnel, custom software development, on-site training, custom business
forms, and 24-hour technical support to its customers. Columbine is also a
value added reseller of hardware and software technologies for major
technology partners including IBM, Tektronix, Hewlett Packard and
Microsoft. Columbine operates out of four domestic and three international
offices in Denver, New York City, Memphis, San Francisco, London, Sydney
and Hong Kong.
Big Flower Press formed a wholly-owned subsidiary, Big Flower Digital,
which is the parent company to Columbine and Laser Tech. The Company
believes that there are strategic benefits to coordinating Laser Tech's
expertise in the digital management of still images, use of server
technology and capacity of broadband telecommunications networks with
Columbine's expertise in the digital management of moving images used in
advertising and programming services.
In connection with the acquisition of Columbine, the Company expects to
write-off approximately $55.7 million of acquired in-process technology.
- On October 15, 1997, the Company acquired RCPC, a California-based
provider of retail advertising insert programs. RCPC became an operating
unit of TC Advertising. RCPC adds significant grocery, drug store, and
home improvement merchant accounts. RCPC's two California locations add
capacity to TC Advertising's nationwide network of offset press
facilities, enabling TC Advertising to provide its customers with the most
cost-efficient and effective method of producing multiple versions of
inserts for their growing demand for store-specific, targeted advertising.
- On October 31, 1997, Big Flower Press acquired Gamma One, a New
England-based provider of digital premedia services. Gamma One became an
operating unit of Laser Tech. Gamma One's Northeast facilities will
significantly increase Laser Tech's presence in the New York and New
England markets. Gamma One's proprietary digital image database management
system, strong customer base and facilities management services will add
scope and reach to Laser Tech's operations.
- On November 6, 1997, Big Flower Press acquired BSS, a UK-based provider of
specialist software to the broadcast industry. BSS became an operating
unit of Columbine. BSS specializes in software programs that address
electronic operations such as long-term planning, program scheduling,
acquisitions, library management and commercial sales and bookings. The
flagship product of BSS, the Broadcast Master software suite, was the
first fully integrated suite of PC-based software for television
programming. BSS' Broadcast Master software system complements Columbine's
systems and offers the Company's domestic and international customers
enhanced resources for the acquisition, analysis and sale of
advertising-supported programming in the terrestrial and satellite band
media markets.
- On November 18, 1997, Big Flower Press acquired IMPCO, a privately-owned
marketing services company based in Rochester, New York. IMPCO became a
subsidiary of Webcraft. IMPCO specializes in telemarketing, strategic
response management and database management for the
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communications, healthcare, advertising agency and financial services
industries. The additions of IMPCO's database management expertise and
response management capabilities are important steps in the Company's
strategy of transforming Webcraft into a fully integrated direct marketing
provider. IMPCO supplements the Company's direct response capabilities.
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 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.
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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 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.
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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.
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
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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, Salisbury, Maryland and
Croyden, England.
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.
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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.
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.
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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, gives 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.
Webcraft will also target domestic and foreign clients with multinational direct
mail needs.
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 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 an understanding with the United States Postal Service to
supply Express Mail labels on an order by order basis.
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
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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 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, 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".
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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.
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
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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 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 16 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 Press 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
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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 Press, 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.
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 Press 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
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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 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.
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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 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. The EPA has recently initiated
discussions with Webcraft and other PRPs regarding the Chalfont, Pennsylvania
facility. Because these discussions are at an early stage, no conclusions can be
drawn at this time. Based on information currently available to the Company, and
a number of factors, including the possibility of indemnification from the prior
site owner, as well as indemnification from 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 September 18, 1997, the Company had approximately 6,800 employees, of
which approximately 1,400 were salaried and 5,400 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
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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 Press, 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
Press', 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 September 18, 1997, the Company owned 11 and leased 27 production
facilities, with lease terms expiring from October 31, 1998 to December 25,
2013, 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
Salt Lake City, UT........................................................ 55,000 October 21, 2002
San Antonio, TX........................................................... 67,900 Fee Ownership
Saugerties, NY(1)......................................................... 209,000 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
Baltimore, MD............................................................. 1,868 October 31, 1998
Croyden, England.......................................................... 45,000 December 25, 2013
LASER TECH LOCATIONS
Atlanta, GA............................................................... 15,588 February, 2001
Carlsbad, CA.............................................................. 8,500 December 1, 1998
Dallas, TX................................................................ 15,000 September 30, 2002
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, 1998
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 September 18, 1997, the Company had 45 sales offices and five other
facilities. All of the sales offices and other facilities are leased, with lease
terms expiring from October 31, 1998 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 Big Flower Press, all of whom are U.S. citizens.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
R. Theodore Ammon................... 48 Director; Chairman of the Board
Edward T. Reilly.................... 50 Director; President and Chief Executive Officer
Mark A. Angelson.................... 46 Director; Executive Vice President, 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 Press
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.
EDWARD T. REILLY has been Chief Executive Officer of the Company since April
1997, President of Big Flower Press 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 Press, 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, General Counsel and
Secretary of the Board of Directors of Big Flower Press since March 1996 and a
Director of the Company since 1997. He is also a director of TC Advertising,
Laser Tech and Webcraft. Prior to joining Big Flower Press, 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 Press since January 1997. Prior to joining Big Flower
Press, 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 were elected to hold office until his or her
successor is elected and qualified and subject to his or her prior death,
resignation, retirement, disqualification or removal. The term of office of each
executive officer is until the organizational meeting of the Board of Directors
of Big Flower Press following the next annual meeting of the stockholder of Big
Flower Press and until his successor is elected and qualified or until his prior
death, resignation, retirement, disqualification or removal.
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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") (as supplemented by the First
Supplemental Indenture thereto dated as of August 14, 1997, the "Indenture").
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.
PRINCIPAL, MATURITY AND INTEREST
The Notes are general unsecured obligations of the Company limited to $100.0
million in aggregate principal amount. Outstanding 8 7/8% Notes in the aggregate
principal amount of $250.0 million were previously issued under the Indenture.
No further initial issuances of Notes may be made under the Indenture. The Notes
and the Outstanding 8 7/8% 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, as described below.
However, unless and until the Notes are registered under the Securities Act, the
Notes will not trade interchangeably with the Outstanding 8 7/8% Notes in the
secondary market. 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 (together with the registered holders of the Outstanding 8 7/8%
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>
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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 and
Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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.
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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
and Outstanding 8 7/8% 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
and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8%
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 and Outstanding 8 7/8% 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
Outstanding 8 7/8% 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
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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.
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<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) is 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 September 30, 1997, on a Pro Forma Basis, the Company and its
Subsidiaries would have had, on a consolidated basis, approximately $608.8
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 $513.1 million. In addition, at September
30, 1997, certain Subsidiaries of the Company had significant commitments under
operating leases and approximately $90.7 million was outstanding under the A/R
Securitization. See Notes 5 and 10 of the Notes to Consolidated Financial
Statements. The Notes will be issued under the same Indenture as the Outstanding
8 7/8% Notes and will rank PARI PASSU in right of payment with them. The Notes
are structurally senior to the Debentures issued by Big Flower Holdings, Inc. in
connection with the issuance of the Convertible Preferred Securities.
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 Payments 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 Payments, 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
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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 Indebtedness had been created, incurred, issued, assumed or
guaranteed at the beginning of such four-quarter period.
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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
Outstanding 8 7/8% Notes, the Private Notes and the Exchange Notes in an
aggregate principal amount equal to $350.0 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 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)
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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
Outstanding 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 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.
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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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and
Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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
and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 in connection with such
transaction or series of transactions), the Company could incur $1.00 of
additional
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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 and
Outstanding 8 7/8% 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
Outstanding 8 7/8% 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 and
Outstanding 8 7/8% Note affected thereby, among other things, (i) reduce the
percentage of principal amount of Notes and Outstanding 8 7/8% Notes whose
Holders must consent to an amendment, supplement or waiver of any provision of
the Indenture or the Notes and Outstanding 8 7/8% Notes; (ii) reduce the rate or
extend the time for payment of interest on any Note or Outstanding 8 7/8% Note;
(iii) reduce the principal amount of any Note or Outstanding 8 7/8% Note or
reduce the redemption or repurchase price of any Note or Outstanding 8 7/8%
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 and Outstanding 8 7/8% 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 or Outstanding 8 7/8% 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
Outstanding 8 7/8% 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 or
Outstanding 8 7/8% Note payable with anything or in any manner other than as
provided for in the Indenture and the Notes and Outstanding 8 7/8% Notes as in
effect on the Issue Date; or (x) make any change in the subordination provisions
of the Indenture and the Notes and the Outstanding 8 7/8% 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 or Outstanding 8 7/8% 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 or Outstanding 8 7/8% Notes when and as the same
shall become due and
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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 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 or Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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
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unpaid principal of, premium, if any, applicable to, and accrued interest due
and payable on all the outstanding Notes and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8%
Notes, (ii) the principal of and premium, if any, applicable to any Notes and
Outstanding 8 7/8% 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 and
Outstanding 8 7/8% 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 or Outstanding
8 7/8% 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 and Outstanding
8 7/8% 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 and
Outstanding 8 7/8% Notes, the Holder or Holders of not less than a majority in
aggregate principal amount of the Notes and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding
8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% Notes when and to the extent
such payments are due, (ii) the Company's obligations with respect to the
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Notes and Outstanding 8 7/8% Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and Outstanding 8 7/8% 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 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8%
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.
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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 outstanding Notes
Outstanding 8 7/8% Notes when (i) either (a) all the Notes and Outstanding
8 7/8% Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes Outstanding 8 7/8% Notes which have been replaced or paid and
Notes and Outstanding 8 7/8% 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 and Outstanding 8 7/8% 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 and Outstanding 8 7/8% Notes not theretofore delivered
to the Trustee for cancellation, for principal of, premium, if any, and interest
on the Notes and Outstanding 8 7/8% 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
and Outstanding 8 7/8% 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 and the Outstanding 8 7/8%
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
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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, 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, the date of issuance of the Outstanding
8 7/8% Notes.
"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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"OUTSTANDING 8 7/8% NOTES" means the $250 million aggregate principal amount
of the Company's 8 7/8% Senior Subordinated Notes due 2007 originally issued on
September 25, 1997 upon consummation of the Company's registered exchange offer.
"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
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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 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 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,
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(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 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 materially in kind or in extent
from the Private Notes. Rather, the Exchange Notes received by a holder of
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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.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated by reference, and have been so incorporated in reliance upon
the reports of such firm given their authority as experts in accounting and
auditing.
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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
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<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.................................... 20
No Cash Proceeds to the Company................. 23
Price Range of the Private Notes................ 24
Capitalization.................................. 24
Unaudited Pro Forma Condensed Combined Financial
Data.......................................... 25
The Exchange Offer.............................. 32
Business........................................ 39
Management...................................... 59
Description of the Notes........................ 60
Book-Entry; Delivery and Form................... 84
Description of the New Credit Facility.......... 86
Certain United States Federal Income Tax
Considerations................................ 87
Plan of Distribution............................ 87
Validity of the Exchange Notes.................. 87
Experts......................................... 87
</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]
February 11, 1998
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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.
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ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
<TABLE>
<C> <S>
(a) Exhibits
4.1 Form of Exchange Note (1).
4.2 Indenture, dated as of June 20, 1997 (the "Indenture"), between Big Flower Press
Holdings, Inc., as Issuer, and State Street Bank and Trust Company (formerly Fleet
National Bank), as Trustee.(1)
4.3 First Supplemental Indenture, dated as of August 14, 1997, to the Indenture.(1)
4.4 Registration Rights Agreement, dated as of October 20, 1997, between the Company and
BT Alex. Brown Incorporated, 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 Page II-4 of this Registration Statement).*
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>
* Filed herewith
(1) Incorporated by reference to Big Flower Press Holdings, Inc.'s Registration
Statement (File #333-32141)
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
II-2
<PAGE>
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.
4. The undersigned registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
(ii) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof;
(iii) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unexchanged at the termination
of the offering.
II-3
<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 February 11, 1998.
<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 February 11, 1998
R. Theodore Ammon Officer)
/s/ EDWARD T. REILLY President, Chief Executive
- ------------------------------ Officer and Director February 11, 1998
Edward T. Reilly
Executive Vice President
/s/ RICHARD L. RITCHIE and
- ------------------------------ Chief Financial Officer February 11, 1998
Richard L. Ritchie (Principal Financial and
Accounting Officer)
/s/ MARK A. ANGELSON Director
- ------------------------------ February 11, 1998
Mark A. Angelson
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Form of Exchange Note (1).
4.2 Indenture, dated as of June 20, 1997 (the "Indenture"), between Big Flower Press Holdings, Inc., as
Issuer, and State Street Bank and Trust Company (formerly Fleet National Bank), as Trustee.(1)
4.3 First Supplemental Indenture, dated as of August 14, 1997, to the Indenture.(1)
4.4 Registration Rights Agreement, dated as of October 20, 1997, between the Company and BT Alex. Brown
Incorporated, 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 Page II-4 of this Registration Statement).*
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>
* Filed herewith
(1) Incorporated by reference to Big Flower Press Holdings, Inc.'s Registration
Statement (File #333-32141)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
Dated as of October 20, 1997
By and Among
BIG FLOWER PRESS HOLDINGS, INC.
and
BT ALEX. BROWN INCORPORATED,
CREDIT SUISSE FIRST BOSTON CORPORATION
GOLDMAN, SACHS & CO.,
as Initial Purchasers
8 7/8% Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
1. Definitions............................................................................................. 2
2. Exchange Offer.......................................................................................... 4
3. Shelf Registration...................................................................................... 6
4. Additional Interest..................................................................................... 8
5. Registration Procedures................................................................................. 9
6. Registration Expenses................................................................................... 14
7. Indemnification......................................................................................... 15
8. Rules 144 and 144A...................................................................................... 18
9. Underwritten Registrations.............................................................................. 18
10. Miscellaneous........................................................................................... 18
(a) No Inconsistent Agreements................................................................... 18
(b) Adjustments Affecting Registrable Notes...................................................... 19
(c) Amendments and Waivers....................................................................... 19
(d) Notices...................................................................................... 19
(e) Successors and Assigns....................................................................... 20
(f) Counterparts................................................................................. 20
(g) Headings..................................................................................... 20
(h) Governing Law................................................................................ 20
(i) Severability................................................................................. 20
(j) Securities Held by the Company or its Affiliates............................................. 20
(k) Third Party Beneficiaries.................................................................... 20
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of October
20, 1997, by and among BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation
(the "Company"), and BT ALEX. BROWN INCORPORATED, 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 October 15, 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 $100,000,000 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.
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.
2
<PAGE>
Indenture: The Indenture, dated as of June 20, 1997, as amended by the First
Supplemental Indenture, dated as of August 14, 1997, among the Company and State
Street Bank and Trust Company (as successor in interest to 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: October 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.
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 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.
3
<PAGE>
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.
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
4
<PAGE>
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 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 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
<PAGE>
(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.
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.
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
6
<PAGE>
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 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.
(d) 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 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.
7
<PAGE>
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
(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
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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 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 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
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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 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.
(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
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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, 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.
(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
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<PAGE>
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.
(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 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
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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 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 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
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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 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
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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 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 "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
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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, 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 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
16
<PAGE>
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 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 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
17
<PAGE>
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 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.
18
<PAGE>
(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 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 Alex. Brown Incorporated
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
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
19
<PAGE>
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.
(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.
(g) 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.
20
<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
Initial Purchasers:
BT ALEX. BROWN INCORPORATED
By: /s/ JEFFREY A. BAKER
------------------------------------------
Name: Jeffrey A. Baker
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ JOSEPH D. FASHANO
------------------------------------------
Name: Joseph D. Fashano
Title: Director
GOLDMAN, SACHS & CO.
By: /s/ GOLDMAN, SACHS & CO.
------------------------------------------
Name:
Title:
21
<PAGE>
EXHIBIT 5.1
SULLIVAN & CROMWELL
New York Telephone: (212) 558-4000
Telex: 62694 (International) 127816 (Domestic) 125 Broad Street, New York
10004-2498
Cable Address: Ladycourt, New York
Facsimile: (212) 558-3588 (125 Broad Street) 375 Park Avenue, New York 10152
1701 Pennsylvania Ave., N.W. Washington, D.C. 20006-5805
444 South Flower Street, Los Angeles 90071-2901
8, Place Vendome, 75001 Paris
St. Olave's House, 9a Ironmonger Lane, London EC2V 8EY
101 Colllins Street, Melbourne 300D
2-1, Marunouchi I-Chome, Chiyoda-Ku, Tokyo 100
Nine Queen's Road, Central, Hong Kong
February 4, 1998
Big Flower Press Holdings, Inc.,
3 East 54th Street, 17th Floor,
New York, NY 10022.
Dear Sirs:
In connection with the registration under the Securities Act of 1933 (the
"Act") of $100 million aggregate principal amount of 8 7/8% Senior Subordinated
Notes due 2007 (the "Exchange Notes") of Big Flower Press Holdings, Inc. (the
"Company") to be issued in exchange for the Company's outstanding 8 7/8% Senior
Subordinated Notes due 2007 pursuant to (i) the Indenture, dated as of June 20,
1997, between the Company and State Street Bank and Trust Company (as successor
in interest to Fleet National Bank), as trustee (the "Trustee"), as amended to
date (the "Indenture") and (ii) the Registration Rights Agreement, dated as of
October 20, 1997 (the "Registration Rights Agreement"), by and among the Company
and BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and
Goldman, Sachs & Co., we, as your special counsel, have examined such corporate
records, certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion, the
Exchange Notes have been duly authorized by the Company; and when the Securities
and Exchange Commission declares the Company's Registration Statement on Form
S-4 (File No. 333-42745) effective and the Exchange Notes have been duly
executed, authenticated, issued and delivered in accordance with the terms of
the Registration Rights Agreement and the Indenture, the Exchange Notes will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware, and we are expressing no opinion as to the effect of the laws of
any other jurisdiction.
In connection with the foregoing, we have assumed that at the time of the
issuance and delivery of the Exchange Notes there will not have occurred any
change in law affecting the validity, legally binding character or
enforceability of the Exchange Notes and that the issuance and delivery of the
Exchange Notes, all of the terms of the Exchange Notes and the performance by
the Company of its obligations thereunder will comply with applicable law and
with each requirement or restriction imposed by any court or governmental body
having jurisdiction over the Company and will not result in a default under or a
breach of any agreement or instrument then binding upon the Company.
<PAGE>
Big Flower Press Holdings, Inc.
In rendering the foregoing opinion, we have relied as to certain matters on
information obtained from public officials, officers of the Company and other
sources believed by us to be responsible, and we have assumed (i) that the
Indenture has been duly authorized, executed and delivered by the Trustee, (ii)
that the Exchange Notes will conform to the specimens thereof examined by us,
(iii) that the Trustee's certificates of authentication of the Exchange Notes
will be manually signed by one of the Trustee's authorized officers and (iv)
that the signatures on all documents examined by us are genuine, assumptions
which we have not independently verified.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
the Exchange Notes" in the Prospectus. In giving such consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
Sullivan & Cromwell
<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 and incorporated by reference 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 "Experts" in the Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
February 6, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
------------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) / /
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<CAPTION>
MASSACHUSETTS 04-1867445
- --------------------------------------------- ---------------------------------------------
<S> <C>
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
</TABLE>
JOHN R. TOWERS, ESQ. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
225 FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
------------------------
BIG FLOWER PRESS HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 13-3768322
- --------------------------------------------- ---------------------------------------------
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
3 EAST 54TH STREET,
17TH FLOOR
NEW YORK, NY 10022
(Address of principal executive offices) (Zip Code)
------------------------
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
1
<PAGE>
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 11th day of February, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
--------------------------------------
Name: Kathy A. Larimore
Title: Assistant Vice President
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issuance by Big Flower Press
Holdings, Inc. of its 8 7/8% Senior Subordinated Notes due 2007, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
----------------------------------------
Name: Kathy A. Larimore
Title: Assistant Vice President
Dated: February 11, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1997, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
THOUSANDS
OF
ASSETS DOLLARS
-----------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........................ 1,842,337
Interest-bearing balances................................................. 8,771,397
Securities...................................................................... 10,596,119
Federal funds sold and securities purchased under agreements to resell
in domestic offices of the bank and its Edge subsidiary................... 5,953,036
Loans and lease financing receivables:
</TABLE>
<TABLE>
<S> <C> <C>
Loans and leases, net of unearned income............... 5,769,090
Allowance for loan and lease losses.................... 74,031
Allocated transfer risk reserve........................ 0
</TABLE>
<TABLE>
<S> <C>
Loans and leases, net of unearned income and allowances................... 5,695,059
Assets held in trading accounts................................................. 916,608
Premises and fixed assets....................................................... 374,999
Other real estate owned......................................................... 755
Investments in unconsolidated subsidiaries...................................... 28,992
Customers' liability to this bank on acceptances outstanding.................... 99,209
Intangible assets............................................................... 229,412
Other assets.................................................................... 1,589,526
-----------
Total assets.................................................................... 36,097,449
-----------
-----------
LIABILITIES
Deposits:
In domestic offices....................................................... 11,082,135
</TABLE>
<TABLE>
<S> <C> <C>
Noninterest-bearing.............................. 8,932,019
Interest-bearing................................. 2,150,116
</TABLE>
<TABLE>
<S> <C>
In foreign offices and Edge subsidiary.................................... 13,811,677
</TABLE>
<TABLE>
<S> <C> <C>
Noninterest-bearing.............................. 112,281
Interest-bearing................................. 13,699,396
</TABLE>
<TABLE>
<S> <C>
Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge subsidiary................ 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities................ 755,676
Other borrowed money............................................................ 716,013
Subordinated notes and debentures............................................... 0
Bank's liability on acceptances executed and outstanding........................ 99,605
Other liabilities............................................................... 841,566
-----------
Total liabilities............................................................... 34,091,935
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................... 0
Common stock.................................................................... 29,931
Surplus......................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses).... 1,542,695
Cumulative foreign currency translation adjustments............................. (4,295)
Total equity capital............................................................ 2,005,514
-----------
Total liabilities and equity capital............................................ 36,097,449
-----------
-----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
8 7/8% SENIOR SUBORDINATED NOTES
OF
BIG FLOWER PRESS HOLDINGS, INC.
PURSUANT TO THE
EXCHANGE OFFER
IN RESPECT OF
ALL OF ITS OUTSTANDING 8 7/8% SENIOR SUBORDINATED
NOTES DATED OCTOBER 20, 1997
DUE JULY 1, 2007
FOR
8 7/8% SENIOR SUBORDINATED NOTES DUE JULY 1, 2007
---------------------
PURSUANT TO THE PROSPECTUS DATED FEBRUARY 11, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
MARCH 13, 1998 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). TENDERS OF PRIVATE NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR
TO THE EXPIRATION DATE.
TO: STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<CAPTION>
By Facsimile:
(For Eligible
By Mail: Institutions Only) By Hand or Overnight Courier:
<S> <C> <C>
State Street Bank and Trust (617) 664-5232 State Street Bank and Trust
Company Confirm by Telephone: Company
Corporate Trust Department (617) 664-5314 Corporate Trust Department
P.O. Box 778 4th Floor
Boston, MA 02102-0078 Two International Place
Attention: Sandra Szczsponik Boston, MA 02110
Attention: Sandra Szczsponik
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA
TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR PRIVATE
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR PRIVATE NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated February 11, 1998, of Big Flower Press Holdings, Inc.,
a Delaware corporation (the "Company"), and this Letter of Transmittal and the
instructions hereto (the "Letter of Transmittal").
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its sole discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Private Notes of any
extension by means of a press release or other public announcement prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter of Transmittal is to be completed by a holder of Private Notes
either if certificates are to be forwarded herewith or if a tender of
certificates for Private Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus.
Holders of Private Notes whose certificates are not immediately available, or
who are unable to deliver their certificates or confirmation of the book-entry
tender of their Private Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Private Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Private Notes must
complete this letter in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR PRIVATE NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
2
<PAGE>
List below the Private Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Private Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<S> <C> <C>
DESCRIPTION OF PRIVATE NOTES
<CAPTION>
CERTIFICATE
NUMBER(S)* AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACH SIGNED AMOUNT TENDERED (IF
(PLEASE FILL IN, IF BLANK) LIST IF NECESSARY) LESS THAN ALL)**
<S> <C> <C>
TOTAL PRINCIPAL AMOUNT OF PRIVATE NOTES TENDERED
</TABLE>
* Need not be completed by holders tendering by book-entry transfer.
** Need not be completed by holders who wish to tender with respect to all
Private Notes listed. See Instruction 2.
3
<PAGE>
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE AGENT'S ACCOUNT
AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
DTC Book-Entry Account No.:
Transaction Code No.:
</TABLE>
If holders desire to tender Private Notes pursuant to the Exchange Offer and (i)
certificates representing such Private Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Private Notes or other required documents to
reach the Exchange Agent prior to the Expiration Date or (iii) the procedures
for book-entry transfer cannot be completed prior to the Expiration Date, such
holders may effect a tender of such Private Notes in accordance with the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Private Notes:
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Name of Tendering Institution:
DTC Book-Entry Account No.:
Transaction Code No.:
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS PRIVATE NOTES ACQUIRED FOR YOUR OWN ACCOUNT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE COPIES OF THE PROSPECTUS
AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF
EXCHANGE NOTES RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH PRIVATE NOTES.
Name:
Address:
Aggregate Principal Amount of Private Notes so held: $
</TABLE>
4
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Big Flower Press Holdings, Inc., a
Delaware corporation (the "Company") the aggregate principal amount of Private
Notes indicated in this Letter of Transmittal, upon the terms and subject to the
conditions set forth in the Company's Prospectus dated February 11, 1998 (the
"Prospectus"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 8 7/8% Senior Subordinated
Notes due July 1, 2007, which have been registered under the Securities Act of
1933, as amended (the "Exchange Notes"), for each $1,000 principal amount of its
issued and outstanding 8 7/8% Senior Subordinated Notes due July 1, 2007, of
which $100,000,000 aggregate principal amount was outstanding on the date of the
Prospectus (the "Private Notes" and, together with the Exchange Notes, the
"Notes"). The capitalized terms not defined herein are used herein as defined in
the Prospectus.
Subject to, and effective upon, the acceptance for exchange of the Private
Notes tendered hereby, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Company all right, title and interest in and to such
Private Notes as are being tendered hereby and hereby irrevocably constitutes
and appoints the Exchange Agent as attorney-in-fact of the undersigned with
respect to such Private Notes, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to:
(a) deliver such Private Notes in registered certificated form, or
transfer ownership of such Private Notes through book-entry transfer at the
Book-Entry Transfer Facility, to or upon the order of the Company, upon
receipt by the Exchange Agent, as the undersigned's agent, of the same
aggregate principal amount of Exchange Notes; and
(b) receive, for the account of the Company, all benefits and otherwise
exercise, for the account of the Company, all rights of beneficial ownership
of the Private Notes tendered hereby in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Private Notes
tendered hereby and that the Company will acquire good, marketable and
unencumbered title thereto, free and clear of all security interests, liens,
restrictions, charges, encumbrances, conditional sale agreements or other
obligations relating to their sale or transfer, and not subject to any adverse
claim when the same are accepted by the Company. The undersigned hereby further
represents that any Exchange Notes acquired in exchange for Private Notes
tendered hereby will have been acquired in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
undersigned, that neither the holder of such Private Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and that neither the holder of such Private
Notes nor any such other person is an "affiliate", as defined in Rule 405 under
the Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned has read and agrees to all of the terms of the Exchange Offer.
The undersigned also acknowledges that this Exchange offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued in exchange for the Private Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the provisions
of the Securities Act), provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes.
However, the Company does not intend to request the SEC to consider, and the SEC
has not considered, the Exchange Offer in the context of a no-action letter, and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in other circumstances.
5
<PAGE>
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes and has no arrangement or understanding to participate in a distribution
of Exchange Notes. If any holder is an affiliate of the Company, is engaged in
or intends to engage in or has any arrangement or understanding with respect to
the distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such holder (i) could not rely on the applicable interpretations of the
staff of the SEC and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Private Notes acquired as a result of
market-making or other trading activities (a "Participating Broker-Dealer"), it
represents that the Private Notes to be exchanged for the Exchange Notes were
acquired by it as a result of market-making or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, such Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Private Notes which were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities, for a period ending 180 days after
the Expiration Date or, if earlier, when all such Exchange Notes have been
disposed of by such Participating Broker-Dealer. In that regard, each
Participating Broker-Dealer by tendering such Private Notes and executing this
Letter of Transmittal, agrees that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in the Prospectus untrue in any
material respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
therein, in light of the circumstances under which they were made, not
misleading, such Participating Broker-Dealer will suspend the sale of Exchange
Notes pursuant to the Prospectus until the Company has amended or supplemented
the Prospectus to correct such misstatement or omission and has furnished copies
of the amended or supplemented Prospectus to the Participating Broker-Dealer or
the Company has given notice that the sale of the Exchange Notes may be resumed,
as the case may be. If the Company gives such notice to suspend the sale of the
Exchange Notes, it shall extend the 180-day period referred to above during
which Participating Broker-Dealers are entitled to use the Prospectus in
connection with the resale of Exchange Notes by the number of days during the
period from and including the date of the giving of such notice to and including
the date when Participating Broker-Dealers shall have received copies of the
supplemented or amended Prospectus necessary to permit resales of the Exchange
Notes or to and including the date on which the Company has given notice that
the sale of Exchange Notes may be resumed, as the case may be.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Private Notes tendered hereby. All
authority conferred or agreed to be conferred in this Letter of Transmittal and
every obligation of the undersigned hereunder shall be binding upon the
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Private Notes for any Private Notes not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Private Notes, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the Exchange
Notes (and, if applicable, substitute certificates representing Private Notes
for any Private Notes not exchanged) to the undersigned at the address shown
above in the box entitled "Description of Private Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF PRIVATE
NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE PRIVATE NOTES AS SET FORTH IN SUCH BOX ABOVE.
6
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF
PRIVATE NOTES REGARDLESS OF WHETHER PRIVATE NOTES ARE
BEING PHYSICALLY DELIVERED HEREWITH)
If a holder is tendering any Private Notes, this Letter of Transmittal must
be signed by the holder(s) as the name(s) appear(s) on the certificate(s) for
the Private Notes or on a securities position listing or by any person(s)
authorized to become (a) holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity, please
set forth full title. See Instruction 3.
<TABLE>
<S> <C>
X Date:
X Date:
SIGNATURE(S) OF OWNER
Name(s): Address:
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity: Area Code and Telephone No.:
Social Security No.:
</TABLE>
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
- --------------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(PRINTED NAME)
- --------------------------------------------------------------------------------
(TITLE)
Date:
- --------------------------------------
7
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Private Notes not exchanged and/or
Exchange Notes are to be issued in the name of and sent to someone other than
the person or persons whose signature(s) appear(s) above on this Letter of
Transmittal, or if Private Notes delivered by book-entry transfer which are not
accepted for exchange are to be returned by credit to an account maintained at
the Book-Entry Transfer Facility other than the account indicated above.
Issue: Exchange Notes and/or Private Notes to:
Name(s): _______________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address: _______________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
Zip Code
Credit unexchanged Private Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
________________________________________________________________________________
(Book Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Private Notes not exchanged and/or
Exchange Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) above on this Letter of Transmittal or to such person or
persons at an address other than shown above in the box entitled "Description of
Private Notes" on this Letter of Transmittal.
Mail: Exchange Notes and/or Private Notes to:
Name(s): _______________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address: _______________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
Zip Code
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER OF BIG FLOWER PRESS
HOLDINGS, INC. TO EXCHANGE ITS 8 7/8% SENIOR SUBORDINATED NOTES DATED OCTOBER
20, 1997 DUE JULY 1, 2007 FOR ALL OF ITS OUTSTANDING 8 7/8% SENIOR SUBORDINATED
NOTES DUE JULY 1, 2007
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES; GUARANTEED DELIVERY
PROCEDURES
This Letter of Transmittal is to be completed by holders of Private Notes
either if certificates are to be forwarded herewith or if tenders are to be made
pursuant to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Certificates for
all physically tendered Private Notes, or Book-Entry Confirmation of tendered
Private Notes, as the case may be, as well as a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile hereof) and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Private Notes may only be tendered in a principal
amount of $1,000 and any integral multiple thereof.
Holders of Private Notes whose certificates for Private Notes are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Private Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the holder of Private
Notes and the amount of Private Notes tendered, stating that the tender is being
made thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the Expiration Date, the certificates for all physically
tendered Private Notes, or a Book-Entry Confirmation of such Private Notes, and
any other documents required by this Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) a properly executed
Letter of Transmittal, as well as the certificates for all physically tendered
Private Notes in proper form for transfer or Book-Entry Confirmation of such
Private Notes, as the case may be, and all other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within five NYSE
trading days after the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE PRIVATE NOTES AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING
HOLDERS, BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR
CONFIRMED BY THE EXCHANGE AGENT. 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 PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT
SEND THIS LETTER OF TRANSMITTAL OR ANY PRIVATE NOTES TO THE COMPANY.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF PRIVATE NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER); WITHDRAWAL RIGHTS
Tenders of Private Notes will be accepted only in the principal amount of
$1,000 and integral multiples thereof. If less than all of the Private Notes
evidenced by a submitted certificate are to be tendered, the tendering holder(s)
should fill in the aggregate principal amount of Private Notes to be tendered in
the box above entitled "Description of Private Notes--Aggregate Principal Amount
Tendered." A reissued certificate representing the balance of nontendered
Private Notes will be sent to such tendering holder, unless otherwise provided
in the appropriate box on this Letter of Transmittal, promptly after the
Expiration Date. ALL OF THE PRIVATE NOTES DELIVERED TO THE EXCHANGE AGENT WILL
BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
9
<PAGE>
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date. In order for a withdrawal to
be effective prior to that time, a written or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent at one of its addresses
set forth above prior to the Expiration Date. Any such notice of withdrawal must
specify the name of the person having deposited the Private Notes to be
withdrawn, the aggregate principal amount of Private Notes to be withdrawn and
(if certificates for such Private Notes have been tendered) the name of the
registered holder of the Private Notes as set forth on the certificate for the
Private Notes, if different from that of the person who tendered such Private
Notes. If certificates for the Private Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
certificates for the Private Notes, the tendering holder must submit the serial
numbers shown on the particular certificates for the Private Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Private Notes tendered for the
account of an Eligible Institution. If Private Notes have been tendered pursuant
to the procedures for book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus, the notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawal of Private Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written or facsimile transmission. Withdrawals of tenders of Private Notes may
not be rescinded. Private Notes properly withdrawn will not be deemed 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 at any
subsequent time on or prior to the Expiration Date by following the procedures
described in the Prospectus under "The Exchange Offer--Procedures for
Tendering."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any employees, agents, affiliates or assigns of the
Company, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give such notification. Any Private Notes which have
been tendered but which are withdrawn will be returned to the holder thereof
without cost to such holder as promptly as practicable after withdrawal.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the holder of the Private Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates or on a securities position listing without any
change whatsoever.
If any tendered Private Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter of Transmittal.
If any tendered Private Notes are registered in different names on several
certificates or securities positions listings, it will be necessary to complete,
sign and submit as many separate copies of this Letter as there are different
registrations.
When this Letter of Transmittal is signed by the holder or holders of the
Private Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any nontendered Private Notes are to be reissued, to
a person other than the holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
In connection with any tender of Private Notes in definitive certificated
form, if this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the certificate(s), and the signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates 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.
10
<PAGE>
ENDORSEMENTS ON CERTIFICATES FOR PRIVATE NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, PROVIDED THE PRIVATE NOTES ARE TENDERED: (I) BY A HOLDER
OF PRIVATE NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH PRIVATE NOTES) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER OR (II) FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Private Notes should indicate in the applicable box the
name and address to which Exchange Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Private Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the Employer
Identification or Social Security Number of the person named must also be
indicated. A holder of Private Notes tendering Private Notes by book-entry
transfer may request that Private Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such holder may
designate hereon. If no such instructions are given, such Private Notes not
exchanged will be returned to the name or address of the person signing this
Letter of Transmittal or credited to the account listed beneath the box entitled
"Description of Private Notes", as the case may be.
11
<PAGE>
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose
Private Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which, in the case of a tendering holder who is an individual, is his
or her Social Security Number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of Exchange Notes may be subject to backup withholding
in an amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Private Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Private Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Private Notes are in more than one name or are not in the name of the actual
owner, such holder should consult the W-9 Guidelines for information on which
TIN to report. If such holder does not have a TIN, such holder should consult
the W-9 Guidelines for instructions on applying for a TIN, check the box in Part
3 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Private Notes to it or its order pursuant to the Exchange Offer. If, however,
Exchange Notes and/or substitute Private Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
holder of the Private Notes tendered hereby, or if tendered Private Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
transfer of Private Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the 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
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE PRIVATE NOTES SPECIFIED IN THIS LETTER
OF TRANSMITTAL.
12
<PAGE>
7. DETERMINATION OF VALIDITY.
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Private Notes, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for which, may, in the view of counsel to
the Company, be unlawful. The Company also reserves the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer set
forth in the Prospectus under the caption "The Exchange Offer" or any conditions
or irregularity in any tender of Private Notes of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Private Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Private Notes, neither the Company,
any employees, agents, affiliates or assigns of the Company, the Exchange Agent,
nor any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Private Notes, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of their
Private Notes for exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES.
Any holder whose Private Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent, at the address and telephone number indicated
above.
13
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY
<TABLE>
<S> <C> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ------------------------------
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW OR Social Security Number
------------------------------
Employer Identification Number
Department of the Treasury PART 2--Certification--Under Penalties of Perjury, I certify that:
Internal Revenue Service
Payer's Request for Taxpayer (1) The number shown on this form is my correct Taxpayer Identifi- PART 3--
Identification Number (TIN) cation Number (or I am waiting for a number to be issued to Awaiting TIN / /
me) and
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, (b) I have not been notified
by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified me that I
am no longer subject to backup withholding.
Certificate instructions--You must cross out item (2) in Part 2 above if you have been notified by
the IRS that you are subject to backup withholding because of under-reporting interest or
dividends on your tax return. However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE ------------------------------------ DATE ------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF NEW NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number within 60 days, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------ ------------------------------------------
Signature Date
</TABLE>
14
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
8 7/8% SENIOR SUBORDINATED NOTES DUE JULY 1, 2007
OF
BIG FLOWER PRESS HOLDINGS, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Big Flower Press Holdings, Inc., a Delaware corporation (the
"Company"), made pursuant to the Prospectus, dated February 11, 1998 (the
"Prospectus"), if certificates for the outstanding 8 7/8% Senior Subordinated
Notes dated October 20, 1997 due July 1, 2007 of the Company (the "Private
Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach State Street Bank and Trust Company (the "Exchange
Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date of
the Exchange Offer. This Notice of Guaranteed Delivery may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery to
the Exchange Agent as set forth below. See "The Exchange Offer-- Procedures for
Tendering" in the Prospectus. Capitalized terms used herein but not defined
herein have the respective meanings given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 13,
1998 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF PRIVATE
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Facsimile: By Hand or Overnight Courier:
<S> <C> <C>
State Street Bank and Trust Company (For Eligible Institutions Only) State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 (617) 664-5232 4th Floor
Boston, MA 02102-0078 Two International Place
Attention: Sandra Szczsponik Confirm by Telephone: Boston, MA 02110
(617) 664-5314
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM,
TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Private Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
<TABLE>
<S> <C>
Signature(s) of Owner(s) or Authorized Signatory: Name(s) of Holder(s):
Principal Amount of Private Notes Tendered:* Address:
Certificate No(s). of Private Notes (if available): Area Code and Telephone No.:
If Private Notes will be delivered by book-entry
transfer at The Depository Trust Company, insert
Date: Depository Account No.:
</TABLE>
This Notice of Guaranteed Delivery must be signed by the holder(s) of Private
Notes exactly as its (their) name(s) appear on certificates for Private Notes or
on a security position listing as the owner of Private Notes, or by person(s)
authorized to become holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
Please print name(s) and address(es)
Name(s): _____________________________________________________________________
_______________________________________________________________________
Capacity: ____________________________________________________________________
Address(es): ___________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Do not send Private Notes with this form. Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby (a) represents that each holder of Private Notes on whose behalf this
tender is being made "own(s)" the Private Notes covered hereby within the
meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b)
represents that such tender of Private Notes complies with such Rule 14e-4, and
(c) guarantees that, within five New York Stock Exchange trading days after the
Expiration Date, a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof), together with certificates representing the Private
Notes covered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Private Notes into the Exchange Agent's account at
The Depository Trust Company, pursuant to the procedure for book-entry transfer
set forth in the Prospectus) and required documents will be deposited by the
undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Private Notes tendered hereby to the Exchange Agent within the time period
set forth above and that failure to do so could result in financial loss to the
undersigned.
<TABLE>
<S> <C>
Name of Firm: Authorized Signature
Address: Name:
Title:
Area Code and Telephone No.: Date:
</TABLE>
- ------------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
2
<PAGE>
EXHIBIT 99.3
February 11, 1998
EXCHANGE AGENT AGREEMENT
State Street Bank and Trust Company
Corporate Trust Department
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Attention: Kathy Larimore
Assistant Vice President
Dear Ms. Larimore:
Big Flower Press Holdings, Inc., a Delaware corporation (the "Company"),
proposes to make an offer (the "Exchange Offer") to exchange up to $100,000,000
aggregate principal amount of its 8 7/8% Senior Subordinated Notes due July 1,
2007 (the "Exchange Notes"), for a like principal amount of its outstanding
8 7/8% Senior Subordinated Notes due July 1, 2007 (the "Private Notes"). The
terms and conditions of the Exchange Offer are set forth in a prospectus (the
"Prospectus") included in the Company's registration statement on Form S-4 (File
No. 333-42745), as amended (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "SEC"), and proposed to be distributed
to all record holders of the Private Notes. The Private Notes and the Exchange
Notes are collectively referred to herein as the "Notes." Capitalized terms used
herein and not defined shall have the respective meanings ascribed to them in
the Prospectus or accompanying Letter of Transmittal.
The Company hereby appoints State Street Bank and Trust Company to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to State Street Bank and Trust
Company.
The Exchange Offer is expected to be commenced by the Company on or about
February 12, 1998. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Private Notes to accept the Exchange Offer and
contains instructions with respect to the delivery of certificates for Private
Notes tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on March
13, 1998, or on such later date or time to which the Company may extend the
Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set
forth in the Prospectus, the Company expressly reserves the right to extend the
Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Company expressly reserves the right, in its sole discretion, to amend
or terminate the Exchange Offer, and not to accept for exchange any Private
Notes not theretofore accepted for exchange. The Company will give oral
(confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The
Exchange Offer", in the Letter of Transmittal accompanying the Prospectus or
as specifically set forth herein; provided, however, that in no way will
your general duty to act in good faith and without gross negligence or
willful misconduct be limited by the foregoing.
2. You will establish an account with respect to the Private Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of
the Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Private Notes by causing
<PAGE>
the Book-Entry Transfer Facility to transfer such Private Notes into your
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Private Notes (and confirmation of book-entry transfers of
Private Notes into your account at the Book-Entry Transfer Facility) and any
other documents delivered or mailed to you by or for holders of the Private
Notes, to ascertain whether: (i) the Letters of Transmittal, certificates
and any such other documents are duly executed and properly completed in
accordance with instructions set forth therein and that such book-entry
confirmations are in due and proper form and contain the information
required to be set forth therein, and (ii) the Private Notes have otherwise
been properly tendered. In each case where the Letter of Transmittal or any
other document has been improperly completed or executed, or where
book-entry confirmations are not in due and proper form or omit certain
information, or any of the certificates for Private Notes are not in proper
form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to
be corrected.
4. With the approval of the Chairman, the President and Chief Executive
Officer, any of the Executive Vice Presidents or Irene B. Fisher (such
approval, if given orally, to be confirmed in writing) or any other person
designated by such an officer in writing, you are authorized to waive any
irregularities in connection with any tender of Private Notes pursuant to
the Exchange Offer.
5. Tenders of Private Notes may be made only as set forth in the Letter
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer--Procedures for Tendering", and Private Notes shall be considered
properly tendered to you only when tendered in accordance with the
procedures set forth therein. Notwithstanding the provisions of this
paragraph 5, Private Notes which the Chairman, the President and Chief
Executive Officer, any of the Executive Vice Presidents or Irene B. Fisher
or any other officer of the Company designated by any such person shall
approve as having been properly tendered shall be considered to be properly
tendered (such approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Private Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Private Notes.
7. You shall accept tenders:
(a) in cases where the Private Notes are registered in two or more
names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only
when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Private Notes
provided that customary transfer requirements, including those regarding
any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Private Notes when so indicated and
as permitted in the Letter of Transmittal and deliver certificates for
Private Notes to the transfer agent for split-up and return any untendered
Private Notes to the holder (or such other person as may be designated in
the Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date,
of all Private Notes properly tendered and you, on behalf of the Company,
will exchange such Private Notes for Exchange Notes and cause such Private
Notes to be canceled. Delivery of Exchange Notes will be made on behalf of
the Company by you at the rate of $1,000
2
<PAGE>
principal amount of Exchange Notes for each $1,000 principal amount of the
Private Notes tendered promptly after notice (such notice if given orally,
to be confirmed in writing) of acceptance of said Private Notes by the
Company; provided, however, that in all cases, Private Notes tendered
pursuant to the Exchange Offer will be exchanged only after timely receipt
by you of certificates for such Private Notes (or confirmation of book-entry
transfer into your account at the Book-Entry Transfer Facility), a properly
completed and, except as described in the section of the Prospectus
captioned "The Exchange Offer--Procedures for Tendering", duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees and any other required documents. Unless otherwise instructed by
the Company, you shall issue Exchange Notes only in denominations of $1,000
or any integral multiple thereof.
9. Tenders, pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, Private Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time on or prior to the
Expiration Date in accordance with the terms of the Exchange Offer.
10. The Company shall not be required to exchange any Private Notes
tendered if any of the conditions set forth in the Exchange Offer are not
met. Notice of any decision by the Company not to exchange any Private Notes
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Private Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus
or otherwise, you shall as soon as practicable after the expiration or
termination of the Exchange Offer return those certificates for unaccepted
Private Notes (or effect appropriate book-entry transfer), together with any
related required documents and the Letters of Transmittal relating thereto
that are in your possession, to the persons who deposited them (or effected
such book-entry transfer).
12. All certificates for reissued Private Notes, unaccepted Private
Notes or for Exchange Notes (other than those effected by book-entry
transfer) shall be forwarded by (a) first-class certified mail, return
receipt requested, under a blanket surety bond obtained by you protecting
you and the Company from loss or liability arising out of the nonreceipt or
nondelivery of such certificates or (b) by registered mail insured by you
separately for the replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or other solicitation fees to any broker, dealer, commercial
bank, trust company or other nominee or to engage or use any person to
solicit tenders.
14. As Exchange Agent hereunder, you:
(a) shall have no duties or obligations other than those specifically
set forth in the Prospectus, the Letter of Transmittal or herein or as
may be subsequently agreed to in writing by you and the Company;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
any of the certificates for the Private Notes deposited with you pursuant
to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange
Offer;
(c) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability,
unless you shall have been furnished with reasonable indemnity;
3
<PAGE>
(d) may reasonably rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to you and reasonably
believed by you to be genuine and to have been signed by the proper party
or parties;
(e) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution
and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall
in good faith believe to be genuine or to have been signed or represented
by a proper person or persons;
(f) may rely on and shall be protected in acting upon written or oral
instructions from any officer of the company;
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you
hereunder in good faith and in accordance with the written opinion of
such counsel; and
(h) shall not advise any person tendering Private Notes pursuant to
the Exchange Offer as to whether to tender or refrain from tendering all
or any portion of Private Notes or as to the market value, decline or
appreciation in market value of any Private Notes that may or may not
occur as a result of the Exchange Offer or as to the market value of the
Exchange Notes; provided, however, that in no way will your general duty
to act in good faith and without gross negligence or willful misconduct
be limited by the foregoing.
15. You shall take such action as may from time to time be requested by
the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and
the Notice of Guaranteed Delivery (as defined in the Prospectus) or such
other forms as may be approved from time to time by the Company to all
persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer. The Company will furnish you with
copies of such documents at your request.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Michael S. Kraus of the Company
(telephone number (212) 521-1605, facsimile number (212) 223-4074) and such
other person or persons as the Company may request, daily (and more
frequently during the week immediately preceding the Expiration Date and if
otherwise requested), up to and including the Expiration Date, as to the
aggregate principal amount of Private Notes which have been duly tendered
pursuant to the Exchange Offer and the items received by you pursuant to the
Exchange Offer and this Agreement, separately reporting and giving
cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making
available to, the Company or any such other person or persons upon oral
request made from time to time prior to the Expiration Date of such other
information as it or he or she reasonably requests. Such cooperation shall
include, without limitation, the granting by you to the Company and such
person as the Company may request of access to those persons on your staff
who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date the Company shall have received
information in sufficient detail to enable it to decide whether to extend
the Exchange Offer. You shall prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Private Notes
tendered, the aggregate principal amount of Private Notes accepted and the
identity of any Participating Broker-Dealers and the aggregate principal
amount of Exchange Notes delivered to each, and deliver said list to the
Company.
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<PAGE>
17. Letters of Transmittal, book-entry confirmations and Notices of
Guaranteed Delivery received by you shall be preserved by you for a period
of time at least equal to the period of time you preserve other records
pertaining to the transfer of securities, or one year, whichever is longer,
and thereafter shall be delivered by you to the Company. You shall dispose
of unused Letters of Transmittal and other surplus materials as instructed
by the Company.
18. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for
the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus
and the Letter of Transmittal (as they may be amended from time to time), on
the other hand, shall be resolved in favor of the latter two documents,
except with respect to the duties, liabilities and indemnification of you as
Exchange Agent, which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you harmless
in your capacity as Exchange Agent hereunder against any loss, liability,
cost or expense, including attorneys' fees and expenses arising out of or in
connection with any act, omission, delay or refusal made by you in reliance
upon any signature, endorsement, assignment, certificate, order, request,
notice, instruction or other instrument or document reasonably believed by
you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Private Notes reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept
any tenders or effect any transfer of Private Notes; provided, however, that
anything in this Agreement to the contrary notwithstanding, the Company
shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your gross
negligence or willful misconduct. In no case shall the Company be liable
under this indemnity with respect to any claim against you unless the
Company shall be notified by you, by letter or cable or by facsimile which
is confirmed by letter, of the written assertion of a claim against you or
of any other action commenced against you, promptly after you shall have
received any such written assertion or notice of commencement of action. The
Company shall be entitled to participate, at its own expense, in the defense
of any such claim or other action, and, if the Company so elects, the
Company may assume the defense of any pending or threatened action against
you in respect of which indemnification may be sought hereunder, in which
case the Company shall not thereafter be responsible for the subsequently
incurred fees and disbursements of legal counsel for you under this
paragraph so long as the Company shall retain counsel reasonably
satisfactory to you to defend such suit; provided, that the Company shall
not be entitled to assume the defense of any such action if the named
parties to such action include both you and the Company and representation
of both parties by the same legal counsel would, in the written opinion of
your counsel, be inappropriate due to actual or potential conflicting
interests between you and the Company. You understand and agree that the
Company shall not be liable under this paragraph for the fees and expenses
of more than one legal counsel for you.
22. You shall arrange to comply with all requirements under the tax laws
of the United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service. The Company understands that you are required, in certain
instances, to deduct thirty-one percent (31%) with respect to interest paid
on the Exchange Notes and proceeds from the sale, exchange, redemption or
retirement of the Exchange Notes from holders who
5
<PAGE>
have not supplied their correct Taxpayer Identification Numbers or required
certification. Such funds will be turned over to the Internal Revenue
Service in accordance with applicable regulations.
23. You shall notify the Company of the amount of any transfer taxes
payable in respect of the exchange of Private Notes and, upon receipt of a
written approval from the Company, shall deliver or cause to be delivered,
in a timely manner to each governmental authority to which any transfer
taxes are payable in respect of the exchange of Private Notes, your check in
the amount of all transfer taxes so payable, and the Company shall reimburse
you for the amount of any and all transfer taxes payable in respect of the
exchange of Private Notes; provided, however, that you shall reimburse the
Company for amounts refunded to you in respect of your payment of any such
transfer taxes, at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of
New York applicable to agreements made and to be performed entirely within
such state, and without regard to conflicts of law principles.
25. This Agreement shall be binding upon and inure solely to the benefit
of each party hereto and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
Without limitation of the foregoing, the parties hereto expressly agree that
no holder of Private Notes or Exchange Notes shall have any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
26. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, and all of which taken together
shall constitute one and the same agreement.
27. In case any provision of this Agreement 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.
28. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party
to be charged.
29. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed to
it, at its address or telecopy number set forth below:
If to the Company, to:
Big Flower Press Holdings, Inc.
3 East 54th Street, 17th Floor
New York, New York 10022
Telephone: (212) 521-1621
Telecopy: (212) 521-1640
Attention: Mark A. Angelson,
Executive Vice President and
General Counsel
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Telephone: (212) 558-3876
Telecopy: (212) 558-3588
Attention: Robert E. Buckholz, Jr.
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<PAGE>
If to the Exchange Agent, to:
State Street Bank and Trust Company
Corporate Trust Department
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Telephone: (860) 986-7835
Telecopy: (860) 986-7920
Attention: Kathy Larimore
Assistant Vice President
30. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, paragraphs 17, 19, 21 and 23 shall survive the termination of
this Agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Company any certificates for Notes, funds or property then
held by you as Exchange Agent under this Agreement.
31. This Agreement shall be binding and effective as of the date hereof.
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
<TABLE>
<S> <C> <C>
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ IRENE FISHER
-----------------------------------------
Name: Irene Fisher
Title: Vice President
</TABLE>
Accepted as of the date
first above written:
STATE STREET BANK AND TRUST
COMPANY, as Exchange Agent
<TABLE>
<S> <C> <C> <C>
By: /s/ KATHY A. LARIMORE
-------------------------
Name: Kathy A. Larimore
Title: Assistant Vice
President
</TABLE>
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<PAGE>
SCHEDULE I
FEE SCHEDULE FOR
EXCHANGE AGENT SERVICES
<TABLE>
<CAPTION>
I. ACCEPTANCE FEE Waived
<C> <S> <C>
Our Acceptance Fee includes review of all relevant documentation, closing
of transaction, setting up records and opening accounts.
II. ADMINISTRATIVE FEE $1,500
Our administrative fee covers all duties of the Agent including
distributing exchange offer documents to DTC, receipt and examination of
required exchange offer documentation, reporting to the Company,
calculation of and delivery to participants and DTC. Fees shall be billed
upon closing.
III. OUT OF POCKET EXPENSES As Incurred
All out-of-pocket expenses including but not limited to postage, express
mail, telecopier, long distance telephone, wire transfer charges, courier
expenses, or other expense incurred by the State Street Bank and Trust
Company during its acceptance and administration shall be billed at cost
as incurred.
IV. EXTRAORDINARY SERVICES
Charges for the performance of any service not of a routine administrative
nature or not contemplated at closing and specifically covered elsewhere
in this schedule of fees will be determined by appraisal in amounts
commensurate with the service rendered.
</TABLE>
8
